Docstoc

LUCID S-1/A Filing

Document Sample
LUCID  S-1/A Filing Powered By Docstoc
					Use these links to rapidly review the document
TABLE OF CONTENTS
TABLE OF CONTENTS
Table of Contents

                                         As filed with the Securities and Exchange Commission on July 29, 2011

                                                                                                                                                     Registration No. 333-173555




                                       UNITED STATES
                           SECURITIES AND EXCHANGE COMMISSION
                                                                             Washington, D.C. 20549




                                                                       Amendment No. 2
                                                                             to
                                                                          Form S-1
                                                                       REGISTRATION STATEMENT
                                                                               UNDER
                                                                      THE SECURITIES ACT OF 1933




                                                                             LUCID, INC.
                                                            (Exact name of registrant as specified in its charter)

                     New York                                                               3841                                                          16-1406957
           (State or other jurisdiction of                                      (Primary standard industrial                                           (I.R.S. Employer
          incorporation or organization)                                        classification code number)                                         Identification Number)

                                                                       2320 Brighton Henrietta Town Line Road
                                                                              Rochester, New York, 14623
                                                                                      (585) 239-9800
                                                               (Address, including zip code, and telephone number, including
                                                                   area code, of registrant's principal executive offices)




                                                                                  Jay M. Eastman, Ph.D.
                                                                                  Chief Executive Officer
                                                                                         Lucid, Inc.
                                                                        2320 Brighton Henrietta Town Line Road
                                                                              Rochester, New York, 14623
                                                                                      (585) 239-9800
                                             (Name, address, including zip code, and telephone number, including area code, of agent for service)
                                                                                             Copies to:

                                    Thomas E. Willett                                                                                          Steven Skolnick
                                     Harris Beach PLLC                                                                                       Lowenstein Sandler PC
                                      99 Garnsey Road                                                                                        65 Livingston Avenue
                                Pittsford, New York 14534                                                                                Roseland, New Jersey 07068
                                  (585) 419-8646 (phone)                                                                                    (973) 597-2500 (phone)
                                (585) 419-8818 (facsimile)                                                                                (973) 597-2477 (facsimile)

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

       If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following
box.     

       If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act
registration statement number of the earlier effective registration statement for the same offering. 

       If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. 

       If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. 

      Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large
accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

       Large accelerated filer                  Accelerated filer                                 Non-accelerated filer                                     Smaller reporting company 
                                                                                                        (Do not check if a
                                                                                                   smaller reporting company)

       The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file an amendment
which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration
statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
Table of Contents

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is
not soliciting an offer to buy these securities in any state where the offer and sale is not permitted.

                                              SUBJECT TO COMPLETION, DATED JULY 29, 2011

PROSPECTUS




                                                                     • Shares

                                                                Lucid, Inc.
                                                                Common Stock




     This is the initial public offering of   •   shares of common stock of Lucid, Inc.

     We are offering • of the shares to be sold in the offering. The selling stockholders identified in this prospectus are offering an
additional • shares. We will not receive any of the proceeds from the sale of the shares being sold by the selling stockholders.

      We expect the public offering price to be between $ • and $ • per share. There presently is no public market for our securities. We
have applied to list our common stock on the Nasdaq Capital Market under the symbol "LUCD." We may effect a • for • reverse stock
split prior to the consummation of this offering.

    Investing in our common stock is highly speculative and involves a high degree of risk. See "Risk Factors"
beginning on page 15.




                                                                                                       Per Share           Total
               Public offering price                                                               $               •   $           •
               Underwriting discounts and commissions(1)                                           $               •   $           •
               Proceeds, before expenses, to Lucid, Inc.                                           $               •   $           •
               Proceeds, before expenses, to the selling stockholders                              $               •   $           •


               (1)
                       Does not include a corporate finance fee in the amount of 2.5% of the gross proceeds of the offering or $ • per share,
                       payable to the representative of the underwriters. See "Underwriting" for a description of the compensation to be received
                       by the underwriters.

     The underwriters have the option to purchase up to an additional • shares from us at the public offering price less the underwriting
discounts and commissions, within 45 days from the date of this prospectus to cover over-allotments, if any.

     The underwriters expect to deliver the shares on or about     • , 2011.

      Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these
securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.
                     Roth Capital Partners
Ladenburg Thalmann & Co. Inc.                                      Maxim Group LLC
                     The date of this prospectus is   •   , 2011
Table of Contents


                                                            TABLE OF CONTENTS

              Prospectus Summary                                                                                                  3
              Risk Factors                                                                                                       15
              Special Note Regarding Forward-Looking Statements                                                                  39
              Use of Proceeds                                                                                                    39
              Dividend Policy                                                                                                    40
              Capitalization                                                                                                     41
              Dilution                                                                                                           42
              Management's Discussion and Analysis of Financial Condition and Results of Operations                              45
              Our Business                                                                                                       58
              Management                                                                                                         85
              Related Party Transactions                                                                                         99
              Principal and Selling Stockholders                                                                                103
              Description of Capital Stock                                                                                      105
              Shares Eligible for Future Sale                                                                                   110
              Underwriting                                                                                                      113
              Legal Matters                                                                                                     118
              Experts                                                                                                           118
              Where You Can Find Additional Information                                                                         118

     You should rely only on the information contained in this prospectus. We and the selling stockholders have not authorized anyone to
provide you with information different from that contained in this prospectus. We and the selling stockholders are offering to sell shares of our
common stock and seeking offers to buy shares of our common stock only in jurisdictions where offers and sales are permitted. The
information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus
or any sale of the common stock.

     For investors outside the U.S.: Neither we, the selling stockholders, nor any of the underwriters have done anything that would permit this
offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the U.S. You
are required to inform yourselves about, and to observe any restrictions relating to, this offering and the distribution of this prospectus.

     We obtained statistical data and certain other industry forecasts used throughout this prospectus from market research, publicly available
information and industry publications. Industry publications generally state that they obtain their information from sources that they believe to
be reliable. While we believe that the statistical and industry data and forecasts and market research used herein are reliable, we have not
independently verified such data. We have not sought the consent of the sources to refer to their reports in this prospectus.

                                                                         2
Table of Contents


                                                              Prospectus Summary

       This summary highlights information contained elsewhere in this prospectus. It does not contain all of the information you should
consider before buying shares of our common stock. You should read this entire prospectus carefully, especially the "Risk Factors" section and
our financial statements and the related notes appearing at the end of this prospectus, before deciding to invest in shares of our common stock.
Unless otherwise stated or the context otherwise requires, (i) references in this prospectus to "Lucid," "we," "us," "our" and similar references
refer to Lucid, Inc., and (ii) the information in this prospectus assumes no exercise of the underwriters' over-allotment option.

Our Business

     We are a medical device and information technology company that designs, manufactures and sells non-invasive imaging devices, known
as the VivaScope® 1500 and VivaScope® 3000 confocal imagers. We designed these imaging devices to assist physicians in the early
detection and diagnosis of melanoma, basal cell carcinoma, and squamous cell carcinoma, thereby frequently eliminating biopsies of benign
lesions. VivaScopes use a non-invasive technique to produce high-resolution cellular images of a skin lesion (i.e. a "virtual biopsy") for
subsequent diagnostic review by pathologists. These devices have received FDA 510(k) clearance as the VivaScope System.

      We have sold over 300 VivaScopes worldwide to academic medical centers and research customers using both direct and international
distribution channels. Many of our VivaScopes are now used in academic medical centers in the U.S., Europe and Australia for evaluation of
lesions suspicious for skin cancer. We believe these sales have begun to establish the brands "Lucid" and "VivaScope" in the dermatology
community.

      VivaNet® is our telepathology server that transfers virtual biopsy images typically from a dermatologist's office to a pathologist for near
real-time diagnosis and reporting. In addition, VivaNet stores the virtual biopsy images and the pathology report as a part of the patient's
permanent medical record. VivaNet is registered with the FDA as a Class I medical image storage device. Although we have not yet derived
revenue from our VivaNet Solution, our sales of VivaScope products and accessories ($2.3 million in 2010) to academic medical centers have
provided us with relevant experience in the skin cancer diagnostic market.

     The primary components of our VivaNet Solution™ comprise:

     •
            The VivaScope System—which includes either an arm-mounted VivaScope 1500 imaging head or a hand-held VivaScope 3000
            imaging head, or both—that uses a low power laser to clearly visualize thin layers of individual cells in the skin, without the need
            for an invasive biopsy; and

     •
            The VivaNet server that seamlessly transfers, stores, and retrieves VivaScope virtual biopsy images for use by dermatologists and
            pathologists; and

     •
            The VivaNet workstation that displays virtual biopsy images for interpretation, diagnosis and reporting by pathologists.

    To date, we have not realized revenue from our VivaNet Solution. We intend to expand our U.S. based sales and technical support teams
immediately following this offering in order to support the U.S. launch of our VivaNet Solution. We also intend to continue selling our
VivaScopes as stand alone devices to academic medical centers and research customers as we have in the past. We estimate that the aggregate
annual U.S. market for skin cancer diagnosis is approximately $2.5 billion, of which we believe $0.85 million is an addressable market for
Lucid.

     The VivaNet Solution is designed to emulate the current clinical practice for the diagnosis of suspicious skin lesions. The primary
difference between the current standard of care and the use of our system is that rather than surgically excising a suspicious specimen of skin
tissue and shipping it for

                                                                        3
Table of Contents



subsequent microscopic examination by a pathologist, a dermatologist using a VivaScope simply images the lesion and sends a high resolution
virtual biopsy through VivaNet to a pathologist for diagnosis. The immediate benefit of this procedure is that it does not require surgical
excision of a lesion that is often benign and a pathologist's report can be rendered more quickly than it can in the traditional biopsy model. A
VivaNet pathology report can be conveyed to the patient in near real-time, thus eliminating the days to weeks of waiting and patient anxiety
often associated with traditional biopsy assessments, and potentially allows for an earlier onset of treatment.

     Following this offering, we plan to begin providing our VivaNet Solution to pathologists on a per procedure fee basis and to begin leasing
our VivaScope confocal imagers to dermatology practices that are connected to VivaNet. We believe the strategy of providing our VivaNet
Solution on a per procedure fee basis will provide us with a recurring revenue stream directly related to:

     (i)
             the average per procedure fee billed for each virtual biopsy provided to pathologists through VivaNet;

     (ii)
             the total number of VivaScopes leased to dermatology practices connected to VivaNet; and

     (iii)
             the average number of lesions imaged annually in these practices using our VivaScopes.

     We refer to this strategy as our VivaNet Business Model™ and believe it will become our primary source of revenue in the future.

     We believe the VivaNet Business Model will allow us to provide our VivaNet workstations and VivaScope confocal imagers without a
significant up front capital investment by the participating physicians, facilitating adoption of our technology by dermatologists and driving the
per procedure revenue stream for pathologists and us. Moreover, we believe that since our VivaNet Solution potentially eliminates the need to
receive and process tissue specimens on microscope slides for subsequent review, pathologists will be able to interpret more specimens per day,
enhancing the revenue of their practices, potentially reducing the cost of their laboratory services, and expanding the geographic reach of their
practice.

     Our business model anticipates that both dermatologists and pathologists can expand practice revenue using our VivaNet Solution due to
the efficiencies created by avoiding unnecessary biopsies and the shipment of human tissue. We believe that dermatologists should use our
VivaScopes to differentiate their practices from those of other dermatologists and to attract new patients due to the non-invasive nature of the
VivaScope diagnostic imaging procedure. This, in turn, should drive an increase in the number of VivaScope cases available for interpretation
by pathologists on VivaNet. We conducted a 245 respondent market survey that indicated the respondents have a nearly 14:1 preference for
non-invasive skin cancer diagnostic procedures such as the VivaScope imaging procedure as compared to surgical biopsy procedures.

      VivaScopes are currently installed at 15 dermatology sites, and VivaNet workstations are currently installed and online at 13 pathology
sites. We are in the process of establishing additional imaging and reading sites. Over 1,200 virtual biopsy image sets have been transmitted
and stored during the testing phase of our VivaNet Solution in these clinical settings.

      To date, we have not recorded revenue from sales of our VivaNet Solution. We recorded net losses of approximately $4.3 million and
$1.9 million for fiscal 2010 and the first quarter of fiscal 2011, respectively. As of March 31, 2011 we had an accumulated deficit of
$29.5 million. Moreover, as discussed in greater detail below under "Risk Factors", our independent registered public accounting firm indicated
in its report with respect to our financial statements appearing at the end of this prospectus that conditions exist that raise substantial doubt
about our ability to continue as a going concern. We expect to continue to incur losses for the foreseeable future.

                                                                        4
Table of Contents

The Market

      Skin cancer is the most common form of cancer in the United States. Based on data from the American Cancer Society and in a 2010
paper by Rogers, et al. published in the Archives of Dermatology , we estimate that skin cancer, which includes melanoma and non-melanoma
skin cancers ("NMSCs," that include basal cell carcinoma and squamous cell carcinoma), accounts for approximately 70% of all new cancer
cases each year in the U.S., comprised of 3.6 million NMSCs and melanomas diagnosed in the 2006 U.S. population. The three most common
skin cancers, in rank order, are: (i) basal cell carcinoma, accounting for approximately 78% of skin cancers; (ii) squamous cell carcinoma,
totaling approximately 19% of skin cancers; and (iii) melanoma, which accounts for an estimated 3% of skin cancer cases, but is responsible
for the majority of all skin cancer deaths. The American Cancer Society projected that approximately 11,790 deaths occurred from all types of
skin cancer in 2010. Melanoma alone accounted for about 8,700 of these deaths, or roughly one death per hour. According to the Skin Cancer
Foundation's "Skin Cancer Facts," melanoma is the most deadly skin cancer and is responsible for approximately 75% of skin cancer fatalities.
There is no known effective cure for late stage metastatic melanoma, but early detection, diagnosis and excision of an early stage melanoma
can lead to nearly a 99% cure rate.

     Limitations of Current Melanoma and Non-Melanoma Cancer Diagnosis. Melanomas and non-melanoma skin cancers are diagnosed
by pathologists based on gross and microscopic examination of biopsy tissue specimens of clinically suspicious lesions generally provided to
them by other physicians. In the United States, these physicians rely primarily on visual clinical examination of skin lesions in order to
determine which lesions to surgically biopsy for subsequent pathologic examination. Visual clinical examination is limited to the surface
appearance of the suspicious skin lesion and has low diagnostic accuracy for melanoma. According to a 2005 paper by Welch, et al. in the
British Journal of Dermatology , U.S. physicians typically biopsy more than 40 suspicious lesions to find one melanoma.

     In a similar manner, basal cell and squamous cell carcinoma are also visually examined by a physician. Since most NMSCs cases are
considerably less lethal than melanoma, they are subject to a substantially lower over-biopsy rate, which we believe is in the range of
approximately 2 biopsies for each NMSC found.

     Our internal market research suggests that while early detection and diagnosis of melanoma is a dominant concern of dermatologists, they
are also interested in accurate diagnosis of basal cell and squamous cell carcinomas. Our data suggests dermatologists are significantly more
likely to adopt a technology that can assist in the diagnosis of all three of these skin cancers, as opposed to a technology that can only diagnose
melanoma.

      The Cost of Skin Cancer Diagnosis in the U.S. Medical System. We estimate that approximately 4.6 million biopsy specimens per year
are examined annually by U.S. pathologists for indications of melanoma and an additional 7 million biopsy specimens per year are examined
for NMSC, for a total of approximately 11.6 million skin biopsies of suspicious lesions. Based on the average U.S. Medicare reimbursement
rates of $106 for a single surgical biopsy, $73 for pathology laboratory for preparation of a microscope slide and $37 for diagnostic
interpretation of the slide by a pathologist, this equates to approximately a $2.5 billion annual market for skin cancer diagnosis of which we
believe $0.85 billion is an addressable market for Lucid. To date, we have not recorded revenue for our VivaNet Solution in the U.S.

Our Strategy

     Our business objective is to have virtual biopsies produced by VivaScope confocal imagers replace surgical biopsy in a dermatologist's
office, and to have pathologists using VivaNet workstations read our virtual biopsies instead of samples of skin biopsy specimens on glass
slides. Our near term priority is to establish our VivaNet Solution as the standard of medical care for the early detection and diagnosis of

                                                                         5
Table of Contents



melanoma and non-melanoma skin cancers. We believe that our solution may ultimately eliminate the need for many routine surgical skin
biopsies.

     In order to achieve our near term priority, we intend to pursue the following strategy following this offering:

     1)
            Establish our VivaScope confocal imagers as a leading technology for the early detection and diagnosis of melanoma and
            non-melanoma skin cancers;

     2)
            Verify third party payer reimbursement for pathologists and for us to support our VivaNet Business Model;

     3)
            Verify third party payer reimbursement for dermatologists using our VivaScope confocal imagers; and

     4)
            Build out our sales, marketing and technical support teams to commercialize our skin cancer application using both direct and
            distribution sales channels.

     In the long term, we expect to apply our current broad FDA market clearance for our VivaScope System to acquire, store, retrieve, display
and transfer in vivo images of tissue in other clinical applications including the early detection and diagnosis of oral and cervical cancers. We
believe these applications are indicated under the current FDA 510(k) clearance and can be addressed with straightforward engineering
modifications to our VivaScope 3000 confocal imager. Early research and case studies indicate our technology may also be able to address
other diseases including early detection of neuropathy and rapid screening of breast biopsy cores for breast cancer diagnosis. These potential
long term applications may require significant product development, clinical trials and new FDA clearances, none of which have commenced
to date.

     We have protected our products with 53 issued patents, 42 of which are United States patents and the remaining 11 are foreign patents. In
addition, we have 27 additional U.S. and foreign patents pending. Our portfolio of issued patents includes both method and apparatus patents.

Outstanding Securities Relating to this Offering

     Several of our outstanding securities contain provisions that relate to this offering, including conversion terms, exercise prices, and penalty
provisions.

     In May 2011, our stockholders approved a proposal to amend our Certificate of Incorporation to: (a) provide for the automatic conversion
of Series A Preferred Stock and Series B Preferred Stock immediately prior to the closing of an underwritten public offering; (b) provide that
registration rights related to the shares of common stock issuable upon conversion of the Series A and Series B Preferred Stock will terminate
when such shares can be sold without restriction under the securities laws; and (c) provide for an equitable adjustment to the conversion ratio of
Series A Preferred Stock and Series B Preferred Stock in connection with specified recapitalizations of the Company.

     We raised $3.8 million in total through three rounds of a private placement of our convertible debt securities, with two rounds closing in
November 2010 and one round closing in January 2011 (the "2010/2011 Convertible Debt Offering"). This offering was completed in
contemplation of a public offering. The principal amount (plus any accrued interest) of the convertible notes that were issued pursuant to the
2010/2011 Convertible Debt Offering will automatically convert into shares of our common stock at a conversion price equal to 70% of the
price at which shares of common stock are being sold in this offering. Warrants issued to those investors will become exercisable, at an
exercise price of $4.11 per share, upon the completion of this offering. These warrants entitle holders to purchase an amount of our common
stock equal to (i) seventy percent (70%) of the principal amount of each holder's convertible note, divided by (ii) the price at which our
common stock is being offered in this offering. In addition, the holders of these securities are entitled to certain rights and damages in

                                                                         6
Table of Contents



the event that we do not complete an initial public offering, or similar financing event per the terms of the agreement, subject to the
modifications described below. These securities provide that if we have not completed an initial public offering prior to November 15, 2012,
we must redeem the principal amount of the notes at 140% of the face value plus any accrued and unpaid interest. In addition, beginning
July 12, 2011 (the "Issuance Cut-Off Date"), the holders of these securities are entitled to cash liquidated damages equal to 1.5% of each
purchaser's subscription amount per month until we complete an initial public offering or similar financing. This amount is capped at 10% of
the purchaser's subscription amount. These holders will also be entitled, beginning six months after the Issuance Cut-Off Date, to a reduction in
the exercise price of their warrants which is currently $4.11, at the rate of 5% per month until an offering is completed, with a floor exercise
price of $1.00. The holders of the requisite principal amount of notes required to effect a blanket amendment to all notes issued pursuant to the
2010/2011 Convertible Debt Offering have agreed to extend the Issuance Cut-Off Date from July 12, 2011 to January 1, 2012. Accordingly, so
long as this offering is completed by January 1, 2012, we do not expect the above-described penalties to be triggered.

     On June 28, 2011, our Board of Directors authorized a capital raise through a private placement of our convertible debt securities, of up to
$2.0 million (the "July 2011 Convertible Debt Offering"). As of July 29, 2011, we had raised $830,000 and had received subscription
agreements totaling an additional $340,000. The principal amount (plus any accrued interest) of the convertible notes issued pursuant to the
July 2011 Convertible Debt Offering will automatically convert into shares of our common stock at a conversion price equal to 70% of the
price at which shares of common stock are being sold in this offering. Warrants issued to those investors will become exercisable, at an
exercise price of $4.61 per share, upon the completion of this offering. These warrants entitle holders to purchase an amount of our common
stock equal to (i) seventy percent (70%) of the principal amount of each holder's convertible note, divided by (ii) the price at which our
common stock is being offered in this offering. These securities provide that if we have not completed an initial public offering prior to
November 15, 2012, we must redeem the principal amount of the notes at 140% of the face value plus any accrued and unpaid interest. In
addition, beginning January 1, 2012, the holders of these securities are entitled to cash liquidated damages equal to 1.5% of each purchaser's
subscription amount per month until we complete an initial public offering or similar financing. This amount is capped at 10% of the
purchaser's subscription amount. These holders will also be entitled, beginning July 1, 2012, to a reduction in the exercise price of their
warrants at the rate of 5% per month until an offering is completed, with a floor exercise price of $1.00.

     In 2009, we completed a convertible debt offering of convertible notes, which notes are convertible into shares of our common stock at the
option of the holder (the "2009 Convertible Debt Offering"); unlike the convertible notes issued in the July 2011 Convertible Debt Offering and
the 2010/2011 Convertible Debt Offering, the convertible notes issued in the 2009 Convertible Debt Offering (the "2009 Convertible Notes")
will not be automatically converted into equity upon the completion of this offering. The 2009 Convertible Notes are currently convertible at
the option of the holder. However, because the Company's 2010/2011 Convertible Debt Offering is deemed a "Placement" under the terms of
the 2009 Convertible Notes, the conversion ratio became tied to the Company's "pre-money valuation" at the time of the 2010/2011
Convertible Debt Offering. This pre-money valuation cannot be calculated, because the value of the securities issued in the 2010/2011
Convertible Debt Offering could not be determined until a public offering price was established. Assuming an offering price of • per share,
which is the mid-point of the filing range set forth on the cover of this prospectus, the 2009 Convertible Debt Notes will, at the option of the
holder, convert into shares of our common stock at a conversion price of $ • per share.

                                                                        7
Table of Contents

     The following warrants are also outstanding, with values that are dependent on the offering price of our common stock in this offering:

     •
            Warrants to purchase 18,332 shares our common stock, at an exercise price of     • , which is equal to 85% of the public offering
            price;

     •
            Warrants to purchase • shares of our common stock, which is equal to 20,000 divided by the offering price, at an exercise price
            of • , which is equal to the offering price;

     •
            Warrants to purchase • shares of our common stock, which is equal to 7,500 divided by the offering price, at an exercise
            of • , which is equal to the offering price;

     •
            Warrants to purchase • shares of our common stock, which is equal to 3% of the aggregate securities offered pursuant to the
            2010/2011 Convertible Debt Offering divided by the offering price, at an exercise price of $4.52;

     •
            Warrants to purchase • shares of our common stock, which is equal to 3% of a certain security issued pursuant to the July 2011
            Convertible Debt Offering divided by the offering price, at an exercise price of $5.07;

     •
            Warrants to purchase • shares of our common stock, which is equal to 70% of 5.5 million divided by the offering price, at an
            exercise price of $4.11;

     •
            Warrants to purchase • shares of our common stock, which is equal to 70% of 375,000 divided by the offering price, at an
            exercise price of $4.61; and

     •
            Warrants to purchase • shares of our common stock, which is equal to 2% of the total number of shares sold in this offering
            (excluding the over-allotment) at an exercise price of • , which is equal to 120% of the public offering price per share.

A description of the dilutive impact of the above-described securities can be found on page 42, under the heading "Dilution."

Interests of Related Parties in this Transaction

     Certain of our directors, officers and holders of more than 5% of our common stock have an interest in this transaction, either because of
the nature of the securities they hold in our Company, or because of the increased compensation they will receive if the offering is completed.
A more detailed discussion of these interests appears under the heading, "Related Party Transactions" on page 99 hereof; what follows is a brief
summary of these interests:

     •
            Jay M. Eastman (Chief Executive Officer and Director), William J. Shea (Executive Chairman and Director), Rocco Maggiotto
            (Director), and Richard LeFrois (Principal Stockholder) each purchased convertible notes and warrants pursuant to our 2010/2011
            Convertible Debt Offering. Upon the completion of this offering, the amounts outstanding under these notes will automatically
            convert into shares of our common stock at a discount to the offering price of this offering, and their warrants will become
            exercisable.

     •
            Northeast LCD Capital, LLC and Robert Sperandio (each a Principal Stockholder) and Mr. Shea have purchased convertible notes
            and warrants pursuant to the July 2011 Convertible Debt Offering, or have provided us with subscription agreements. Upon the
            completion of this offering, the amounts outstanding under their notes will automatically convert into shares of our common stock
            at a discount to the offering price of this offering, and their warrants will become exercisable.

     •
Messrs. Eastman and Shea have personally guaranteed our obligations under our current credit facility (the "2011 Credit Facility").
These guarantees will be released upon the completion of this offering.

                                                          8
Table of Contents

     •
            Northeast LCD Capital, LLC (a Principal Stockholder) has pledged cash collateral, in the amount of $500,000, to support our
            obligations under the 2011 Credit Facility. The amount will be returned to Northeast LCD Capital, LLC upon completion of this
            offering. As consideration for this pledge we accrue fees at an annual rate of 10%. Upon the closing of this offering, we will be
            required to pay Northeast LCD Capital, LLC all of these accrued fees.

     •
            Northeast LCD Capital, LLC also pledged cash collateral, in the amount of $2.0 million, to support our obligations under our prior
            credit facility, which was closed and paid off with the proceeds of the 2011 Credit Facility. As consideration for this pledge and for
            this entity's limited guarantee, we accrued fees of $413,000, representing fees from July 2010 to July 2011. Upon the closing of
            this offering, we will be required to pay Northeast LCD Capital, LLC all of these accrued fees, or this entity has the option to elect
            to take payment of these fees in shares of our common stock, which shares would be priced at a discount of thirty percent (30%) to
            the price at which such shares are being sold in this offering.

     •
            We have employment agreements with each of our named executive officers which provide for automatic base salary increases
            upon the completion of a "qualified financing." We expect that this offering will be deemed a "qualified financing" and,
            accordingly, will entitle our named executive officers to salary increases in accordance with their respective employment
            agreements.

Risks Associated with our Business

     Our ability to generate significant revenues and expand our business is subject to a number of risks discussed under the heading "Risk
Factors" and elsewhere in this prospectus, including, but not limited to, the following:

     •
            We have a limited operating history, expect future losses, and may be unable to achieve or maintain profitability. Our business and
            prospects must be considered in light of the significant risks, expenses, and difficulties frequently encountered by medical device
            companies in their early stage of operations.

     •
            We have not generated significant sales and we may be unable to obtain market acceptance of our products. If our VivaNet
            Solution does not achieve an adequate level of acceptance by physicians, healthcare payers, and patients, we may not generate
            meaningful revenue and we may not become profitable.

     •
            Third-party payers may not provide sufficient coverage or reimbursement to healthcare providers for the use of our products. If our
            customers are unable to obtain adequate reimbursement for our products, market acceptance of our VivaScope confocal imagers
            and/or our VivaNet Business Model would be adversely affected, and our revenues and prospects for profitability will suffer.

     •
            We have generated limited revenues and have incurred net operating losses since our inception. Our net loss was approximately
            $1.9 million and $4.3 million for the three months ended March 31, 2011 and the year ended December 31, 2010, respectively. We
            expect to incur significant sales, research, marketing, and manufacturing expenses, as well as capital expenditures for VivaNet
            servers, during the early marketing phase of our VivaScope confocal microscope devices and in the launch of our VivaNet
            Solution. As a result, we expect to continue to incur operating losses for the foreseeable future. In addition, the report of our
            independent registered public accounting firm with respect to our financial statements appearing at the end of this prospectus
            contains an explanatory paragraph stating that our financial results and our need to raise additional financing raise substantial
            doubt about our ability to continue as a going concern.

                                                                        9
Table of Contents

     •
            We may be unable to protect our intellectual property rights, and claims of infringement or misappropriation of the intellectual
            property rights of others could prohibit us from commercializing our products.

     •
            We will be dependent upon the proceeds of this offering to fund our operations. Assuming we raise the maximum amount set forth
            on the cover page of this prospectus, the net proceeds of this offering, plus our existing cash and cash equivalents, is expected to
            fund our operations only through the first half of 2013. We will need substantial additional capital for the continued development
            and operation of our business. We may not be able to obtain such additional capital on favorable terms or at all.

     •
            We are a highly leveraged company. Our substantial indebtedness could make it difficult for us to satisfy all of our obligations to
            our creditors or to obtain additional financing to fund our operations, and imposes significant financial and other restrictions on us.

     •
            We face intense competition, both nationally and internationally, within the precision optical imaging device market. Many of our
            competitors enjoy numerous competitive advantages and may be able to discover, develop or commercialize products sooner, or
            more successfully, than we do, which may affect market acceptance of our product and materially adversely affect our results of
            operations.

     •
            Our ability to generate revenue is dependent upon our relationships with key distributors. The termination of any of these
            relationships, or a decrease in product sales through any of these distributors, could have a material adverse effect on our results of
            operations.

     •
            We operate in a highly regulated industry. Compliance with the extensive regulations governing the medical device industry is
            expensive and time-consuming, and may adversely impact our current and future business operations.

     You should carefully consider these factors, as well as all of the other information set forth in this prospectus, before making an
investment decision.

Company Information

     We were organized as a New York corporation on November 27, 1991 under the name Lucid Technologies, Inc. We subsequently
amended our Certificate of Incorporation to change our name to Lucid, Inc. Our principal executive offices are located at 2320 Brighton
Henrietta Town Line Road, Rochester, New York 14623. Our telephone number is (585) 239-9800. Our web site is www.lucid-tech.com. The
information on or accessible through our website does not constitute a part of this prospectus and is not incorporated herein by reference.

      This prospectus contains references to our U.S. registered trademarks, which include: VivaScope®, VivaNet®, VivaBlock®, VivaStack®,
VivaCam®, VivaCell®, VivaScopy® and our corporate logo. All other trademarks, tradenames and service marks appearing in this prospectus
are the property of their respective owners.

                                                                        10
Table of Contents

The Offering

               Common stock offered by us                              • shares
               Common stock offered by the selling stockholders        • shares
               Common stock outstanding after the offering             • shares
               Over-allotment option to purchase additional shares
                 from us                                               • shares
               Use of proceeds                                         We estimate that we will receive net proceeds of
                                                                       approximately $• million from the sale of [•] million
                                                                       shares of our common stock at an assumed initial public
                                                                       offering price of $[•] per share, the mid-point of the
                                                                       range set forth on the cover page of this prospectus, after
                                                                       deducting underwriting discounts and commissions and
                                                                       estimated expenses of approximately $•. We expect to
                                                                       use the net cash proceeds of the offering. We expect to
                                                                       use the net cash proceeds of the offering: (i) To launch
                                                                       our VivaNet Solution, including hiring a U.S.-based
                                                                       sales and technical support team; (ii) To support
                                                                       research and development for other clinical applications
                                                                       of our technology beyond the early detection and
                                                                       diagnosis of skin cancer; (iii) To increase VivaNet
                                                                       server capacity; and, (iv) The balance, if any, for
                                                                       working capital and other general corporate purposes.
                                                                       We will not receive any of the proceeds from the sale of
                                                                       shares by the selling stockholders. See "Use of
                                                                       Proceeds."
               Risk factors                                            You should read the "Risk Factors" section of this
                                                                       prospectus for a discussion of factors to consider
                                                                       carefully before deciding to invest in shares of our
                                                                       common stock.
               Proposed Nasdaq Capital Market Trading Symbol           LUCD

    The number of shares of our common stock to be outstanding after this offering is based on 4,511,546 shares outstanding as of July 29,
2011, and unless otherwise indicated, excludes:

    •
            4,363,548 shares of common stock issuable as of the date of this prospectus upon the exercise of outstanding stock options at a
            weighted average exercise price of $2.88 per share;

    •
            274,013 shares of our common stock issuable upon the exercise of warrants at a weighted average exercise price of $1.98 per
            share;

    •
            The conversion of the 2009 Convertible Notes into    • shares of our common stock because such conversion is at the option of
            the holder;

    •
            up to 2,656,000 shares of common stock reserved for future grants under our 2010 Long-Term Equity Incentive Plan;

    •
            Warrants to purchase (i) 18,332 shares our common stock, at an exercise price of • , which is equal to 85% of the public
            offering price; (ii) • shares of our common stock, which is equal to 20,000 divided by the offering price, at an exercise price
            of • , which is equal to the offering price; (iii) • shares of our common stock, which is equal to 7,500 divided by the

                                                                      11
Table of Contents

          offering price, at an exercise of • , which is equal to the offering price; (iv) • shares of our common stock, which is equal to
          3% of the aggregate principal amount of the convertible notes offered pursuant to the 2010/2011 Convertible Debt Offering, at an
          exercise price of $4.52; (v) • shares of our common stock, which is equal to 3% of certain securities issued pursuant to the July
          2011 Convertible Debt Offering divided by the offering price, at an exercise price of $5.07; (vi) • shares of our common stock,
          which is equal to 70% of 5.5 million divided by the offering price, at an exercise price of $4.11; (vii) • shares of our common
          stock, which is equal to 70% of 375,000 divided by the offering price, at an exercise price of $4.61; and, (viii) • shares of our
          common stock, which is equal to 2% of the total number of shares sold in this offering (excluding the over-allotment) at an exercise
          price of • , which is equal to 120% of the public offering price per share.

     •
            • shares of common stock which may be issued upon the conversion of certain fee entitlements payable to Northeast LCD
            Capital, exercisable at the option of Northeast LCD Capital.

    Except as otherwise indicated herein, all information in this prospectus, including the number of shares outstanding after this offering,
assumes or gives effect to:

     •
            A    • for   • reverse stock split of our common stock that we may complete prior to the closing of this offering;

     •
            The conversion of our outstanding convertible debt notes, which notes were issued pursuant to our 2010/2011 Convertible Debt
            Offering, into • shares of our common stock; and,

     •
            The conversion of our outstanding convertible debt notes, which notes were issued pursuant to our July 2011 Convertible Debt
            Offering, into • shares of our common stock; and,

     •
            The conversion of all of our shares of Series A and Series B preferred stock into 2,896,666 shares of our common stock at the
            closing of this offering.

     Unless we specifically state otherwise, all information in this prospectus assumes no exercise of the underwriters' over-allotment option.

                                                                       12
Table of Contents

Summary Financial Data

      The following table sets forth our summary consolidated financial data, which is derived from our consolidated financial statements. The
summary consolidated financial statement data as of March 31, 2011, and for the three months ended March 31, 2011 and 2010, are derived
from our unaudited condensed consolidated financial statements. The summary consolidated financial statement data for the years ended
December 31, 2010 and 2009, are derived from our audited consolidated financial statements also included elsewhere in this prospectus. You
should read this summary financial data in conjunction with, and it is qualified in its entirety by, reference to our historical financial
information and other information provided in this prospectus, including "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and our consolidated financial statements and related notes appearing elsewhere in this prospectus. The historical results
set forth below are not necessarily indicative of the results to be expected in future periods.

                                                        Three Months Ended                             Year Ended
                                                             March 31,                                 December 31,
                                                    2011                   2010                 2010                  2009
              Statement of Operations
                Data:
              Revenue                         $        735,366      $        403,429        $    2,626,792       $     2,302,539
                Operating expenses:
                   Cost of Revenue                     298,390               175,254             1,143,035             1,064,214
                   General and
                     administrative                  1,153,537               880,584             3,799,268             3,232,441
                   Sales and marketing                 393,870               224,094               798,925               879,482
                   Engineering, research
                     and development                   248,589               139,995               685,710              756,199

                 Total operating
                   expenses                          2,094,386             1,419,927             6,426,938             5,932,336

                 Other operating
                   income                                                                          244,479                85,049
                 Loss from operations               (1,359,020 )           (1,016,498 )         (3,555,667 )          (3,544,748 )
                 Other (expense)
                   income, net                        (576,310 )             (176,469 )           (747,250 )            (506,603 )


              Net loss                        $     (1,935,330 )    $      (1,192,967 )     $   (4,302,917 )     $    (4,051,351 )

                 Basic and diluted net
                   loss per common
                   share                      $           (0.45 )   $             (0.51 )   $          (1.61 )   $           (1.72 )

              Weighted-average
               number of common
               shares outstanding                    4,326,376             2,348,151             2,671,248             2,356,867

              Basic and diluted net loss
                per common
                share—pro forma
                (unaudited)                   $               •                             $              •

                 Basic and diluted
                   shares used in
                   computing pro
                   forma net loss per
                   share (unaudited)                          •                                            •


    The pro forma balance sheet data below and income statement above, including pro forma basic and diluted net loss per common share,
assumes or gives effect to:

     •
    The conversion of the notes issued in connection with our 2010/2011 Convertible Debt Offering into • shares of our common
    stock, including the reversal of interest expense in the amount of $345,000 and $100,000 for the three months ended March 31,
    2011 and for the year ended December 31, 2010, respectively, which has been recorded as a proforma adjustment to income,
    representing the interest expense recorded on these securities; and,

•
    The conversion of all of our shares of Series A and Series B preferred stock into 2,896,666 shares of our common stock at the
    closing of this offering.

                                                             13
Table of Contents

      The pro forma, as adjusted, balance sheet data also gives effect to our issuance and sale of • shares of common stock in this offering at
the initial public offering price of $ • per share, after deducting underwriting discounts and commissions and estimated offering expenses
payable by us.

                                                                                  As of March 31, 2011
                                                                                                              Pro Forma
                                                                 Actual                Pro Forma              As Adjusted
                                                                                       (unaudited)            (unaudited)
              Long Term Debt:
                2009 Convertible Debt Offering            $           700,000         $                  •    $              •
                2010/2011 Convertible Debt Offering                 5,386,720                            •                   •
                Other debt(1)                                         747,528                            •                   •
                Warrant liabilities                                 2,890,699                            •                   •
                Less debt discount and current
                  portion                                          (2,765,521 )                          •                   •

                                                                    6,959,426
              Stockholders' Deficit:
                Preferred stock                                       144,833                            •                   •
                Common stock                                           44,866                            •                   •
                Additional paid-in capital                         20,208,712                            •                   •
                Accumulated deficit                               (29,532,997 )                          •                   •

                 Total stockholders' (deficit) equity     $        (9,134,586 )       $                  •    $              •

              Total capitalization                        $        (2,175,160 )       $                  •    $              •



              (1)
                     Includes related party debt of $91,233.

                                                                      14
Table of Contents


                                                                   Risk Factors

      Investing in our common stock involves a high degree of risk. You should carefully consider the following risk factors, as well as the
other information in this prospectus, before deciding whether to invest in shares of our common stock. If any of the following risks actually
occur, our business, financial condition and results of operations would suffer. In that case, the trading price of our common stock would likely
decline and you might lose all or part of your investment in our common stock. The risks described below are not the only ones we face.
Additional risks that we currently do not know about or that we currently believe to be immaterial may also impair our business, financial
conditions and results of operations.

Risks related to Our Financial Position and Capital Requirements

We have a history of losses, and we anticipate that we will incur continued losses for the foreseeable future.

     We reported net losses of approximately $4.3 million and $4.1 million in 2010 and 2009, respectively, and a net loss of approximately
$1.9 million for the three months ended March 31, 2011. As of March 31, 2011, we had an accumulated deficit of approximately $29.5 million.
We have devoted substantially all of our resources to research and development and sales relating to our VivaScope confocal imagers and
VivaNet. Our success will depend upon, among other things, our ability to successfully market and sell our products and to generate revenues.
Unanticipated problems, expenses and delays are frequently encountered in developing and commercializing new technology. These include,
but are not limited to, competition, the need to gain clinical acceptance of our technology, the need for sales and marketing expertise,
regulatory concerns, and setbacks in the continued development of new technology. We expect to incur significant sales, marketing, and
manufacturing expenses during the early marketing phase and launch of our VivaNet Solution. As a result, we expect to continue to incur
operating losses for the foreseeable future. These losses, among other things, have had and will continue to have an adverse effect on our
stockholders' equity. If we are not able to fund our cash needs, we may not be able to continue as a going concern, and it is likely that all of our
investors would lose their investment.

The report of our independent registered public accounting firm expresses substantial doubt about our ability to continue as a going
concern.

     Our auditors, Deloitte & Touche LLP, have indicated in their report on our financial statements for the fiscal years ended December 31,
2010 and 2009 that conditions exist that raise substantial doubt about our ability to continue as a going concern due to our recurring losses from
operations, working capital deficiency, deficit in equity, and the need to raise additional capital to fund operations. A "going concern" opinion
could impair our ability to finance our operations through the sale of debt or equity securities. Our ability to continue as a going concern will
depend on our ability to obtain additional financing when necessary, which is not certain. If we are unable to achieve these goals, our business
would be jeopardized and we may not be able to continue. If we ceased operations, it is likely that all of our investors would lose their
investment.

After giving effect to the proceeds of this offering, assuming we raise the maximum amount set forth on the cover of this prospectus, our
capital resources will only fund our operations through the first half of 2013 and we will need substantial additional capital for the
continued development of our products and for our long-term operations .

    We will use the proceeds from this offering to fund our operations. We believe that the net proceeds of this offering, assuming we raise the
maximum amount set forth on the cover of this prospectus, plus our existing cash and cash equivalents, should be sufficient to meet our
operating and capital requirements for approximately 24 months after the closing of this offering. Because of the numerous risks and
uncertainties associated with research, development and commercialization of

                                                                        15
Table of Contents



medical devices, we are unable to estimate the exact amounts of our working capital requirements. Our future funding requirements will
depend on many factors, including, but not limited to:

     •
             the cost of commercialization activities of our existing VivaScope products and VivaNet, and of our future product candidates,
             including marketing, sales and distribution costs;

     •
             the number and characteristics of any future product candidates we pursue or acquire;

     •
             the scope, progress, results and costs of researching and developing our future product candidates, and conducting clinical trials;

     •
             the timing of, and the costs involved in, obtaining regulatory approvals for our future product candidates;

     •
             the cost of manufacturing our existing VivaScope products and maintaining VivaNet, as well as such costs associated with any
             future product candidates we successfully commercialize;

     •
             our ability to establish and maintain strategic partnerships, licensing or other arrangements and the financial terms of such
             agreements;

     •
             the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims, including litigation costs
             and the outcome of such litigation; and

     •
             the timing, receipt and amount of sales of, or royalties on, our future products, if any.

      In addition to the net proceeds from this offering, we will require significant amounts of additional capital in the future, and such capital
may not be available when we need it on terms that we find favorable, if at all. We may seek to raise these funds through public or private
equity offerings, debt financings, credit facilities, or partnering or other corporate collaborations and licensing arrangements. If adequate funds
are not available or are not available on acceptable terms, our ability to fund our operations, take advantage of opportunities, develop products
and technologies, and otherwise respond to competitive pressures could be significantly delayed or limited, and we may need to downsize or
halt our operations. Prevailing market conditions may not allow for such a fundraising or new investors may not be prepared to purchase our
securities at prices that are greater than the purchase price of shares sold in this offering. In the event that future fundraising is at prices lower
than the purchase price of shares sold in this offering, investors participating in this offering could suffer significant ownership dilution and/or a
reduction in the market value of their holdings of our common stock.

We currently have a negative net worth, and, if we are unable to pay our accounts payable and other obligations, our business could be
adversely affected.

     Our financial statements report us having a negative net worth of $9.1 million. In addition, we have accumulated substantial debt, accounts
payable, and accrued expenses to our trade vendors and to certain of our research partners/collaborators. Our inability to pay these accounts
payable and accrued expenses could have a material adverse effect on our business, financial condition and results of operations. Our inability
to negotiate and meet payment terms on some of these obligations may significantly increase the degree of risk for investors in this offering.

We are a highly leveraged company. Substantial indebtedness imposes significant operating and financial restrictions on us, which may
adversely affect our financial condition and prevent us from capitalizing on business opportunities and taking some actions.

      We have substantial indebtedness. As of March 31, 2011, we had $7.0 million of outstanding debt, of which $2.0 million was outstanding
under our credit facility, and approximately $3.6 million of which will convert automatically into shares of our common stock upon completion
of this offering. This level of indebtedness could have important consequences to investors in our securities. Among other things, it could make
it difficult for us to satisfy all of our obligations to our creditors and could limit our
16
Table of Contents



ability to obtain additional debt financing to fund our working capital requirements. Our credit facility consists of a 3-year term loan in the
amount of $3 million. Our credit facility contains financial and other restrictive covenants that may limit our ability to incur additional
indebtedness, and it imposes significant operating and financial restrictions on us. These restrictions limit our ability to, among other things:

     •
            transfer or sell assets;

     •
            engage in business activities unrelated to our business;

     •
            consolidate, merge or sell all or substantially all of our assets;

     •
            incur additional indebtedness or liens;

     •
            pay dividends or make other distributions;

     •
            make investments;

     •
            enter into transactions with our affiliates; or,

     •
            make any unscheduled payments on our subordinated debt.

     In addition, we are required to satisfy and maintain specified financial ratios and other financial condition tests. Our ability to meet those
financial ratios and tests can be affected by events beyond our control, and we cannot assure you that we will meet those ratios and tests. A
breach of any of these covenants could result in a default. Upon the occurrence of an event of default our lenders could elect to declare all
amounts outstanding to be immediately due and payable.

     As a result of these covenants and restrictions, we will be limited in how we conduct our business and we may be unable to raise
additional capital to compete effectively or to take advantage of new business opportunities. The terms of any future indebtedness we may
incur could include more restrictive covenants. A breach of any of these covenants could result in a default in respect of the related
indebtedness. If a default occurs, the relevant lenders could elect to declare the indebtedness, together with accrued interest and other fees, to be
due and payable immediately and proceed against any collateral securing that indebtedness. In the event that some or all of our debt is
accelerated and becomes immediately due and payable, we may not have the funds to repay, or the ability to refinance, such debt.

     Subject to the terms of our outstanding debt, we may be able to incur substantial additional indebtedness in the future. Although the
agreements governing our outstanding indebtedness contain restrictions on the incurrence of additional indebtedness, these restrictions are
subject to a number of significant qualifications and exceptions, and under certain circumstances, the amount of indebtedness that could be
incurred in compliance with these restrictions could be substantial.

     If we cannot make scheduled payments on our indebtedness, we will be in default under one or more of our debt agreements and, as a
result, holders of our debt could declare all outstanding principal and interest due and payable, and we could be forced into bankruptcy or
liquidation. Our ability to make scheduled payments or to refinance our indebtedness depends on our financial and operating performance,
which is subject to prevailing economic and competitive conditions and to certain financial, business and other factors beyond our control. We
may not be able to maintain a level of cash flow from operations sufficient to permit us to pay the principal and interest on our indebtedness. If
our cash flows and capital resources are insufficient to fund our debt service obligations, we may be forced to reduce or delay capital
expenditures, sell assets or operations, seek additional capital or restructure or refinance our indebtedness. We may not be able to take any of
these actions, and these actions may not be successful or permit us to meet our scheduled debt service obligations. Furthermore, these actions
may not be permitted under the terms of our existing or future debt agreements. In the absence of such operating results and resources, or
refinancings and

                                                                          17
Table of Contents



amendments, we could face substantial liquidity problems and may be required to dispose of material assets or operations to meet our debt
service and other obligations.

Our future growth is dependent upon the development of new products, which requires significant research and development, clinical trials
and regulatory approvals, all of which are very expensive and time-consuming and may not result in commercially viable products.

     In order to develop new products and improve current product offerings, we focus our research and development programs largely on the
development of next-generation and novel technology offerings. If we are unable to develop and launch new products, our ability to maintain
or expand our market position may be materially adversely impacted. We may not be able to access new technologies on terms favorable to us,
and we may not be able to achieve commercial feasibility, obtain regulatory approval or gain market acceptance of any such new technologies.
A delay in the development, approval or commercialization of these technologies may adversely impact the contribution of new products to our
future growth.

We may suffer damages if there are delays in our completion of this offering.

      Pursuant to the terms and conditions of the securities issued in our July 2011 and 2010/2011 Convertible Debt Offerings, the holders of
these securities are entitled to certain rights and damages in the event that we do not complete an initial public offering, or similar financing
event per the terms of the agreement, subject to the modifications described below. These securities provide that if we have not completed an
initial public offering prior to November 15, 2012, we must redeem the principal amount of the notes at 140% of the face value plus any
accrued and unpaid interest. In addition, beginning July 12, 2011 (the "Issuance Cut-Off Date"), the holders of these securities are entitled to
cash liquidated damages equal to 1.5% of each purchaser's subscription amount per month until we complete an initial public offering or
similar financing. This amount is capped at 10% of the purchaser's subscription amount. These holders will also be entitled, beginning six
months after the Issuance Cut-Off Date, to a reduction in the exercise price of their warrants, at the rate of 5% per month until an offering is
completed, with a floor exercise price of $1.00. The holders of the requisite principal amount of notes required to effect a blanket amendment
to all notes issued pursuant to the 2010/2011 Convertible Debt Offering have agreed to extend the Issuance Cut-Off Date from July 12, 2011 to
January 1, 2012.

     As of March 31, 2011, we had approximately $5.5 million of indebtedness outstanding under the 2010/2011 Convertible Debt Offering. If
we do not complete an initial public offering or similar financing on or prior to January 1, 2012, we will begin accruing liquidated damages
retroactively from July 12, 2011, at a rate of approximately $83,000 per month, with a cap of approximately $554,000, to be paid after a
financing event occurs. This offering will qualify as a financing event.

Risks Related to Our Intellectual Property Rights

We rely on copyrights, trademarks, trade secrets, and patents to protect our proprietary rights.

     We have registered our Lucid®, VivaNet® and VivaScope® trademarks on the Principal Register of the United States Patent and
Trademark Office for uses on and in connection with our medical product and equipment line. Our trademarks and copyrights, whether
registered or not, may not provide significant commercial protection or an advantage over our competitors.

      In addition, third parties may claim that our trademarks, copyrights, or patents, or our products or technology, infringe their trademarks,
copyrights, patents or other proprietary rights. Any infringement or misappropriation claim could cause us to incur significant costs, could
place significant strain on our financial resources, divert management's attention from our business and harm our reputation. If the relevant
intellectual property is upheld as valid and enforceable and we were found to infringe, we could be prohibited from selling our products unless
we could obtain licenses to use the technology

                                                                       18
Table of Contents



covered by the intellectual property or are able to design around the intellectual property. We may be unable to obtain a license on terms
acceptable to us, if at all, and we may not be able to redesign our products to avoid infringement.

We could be unsuccessful in obtaining adequate patent protection for one or more of our products.

     We have 53 issued patents and approximately 27 pending patent applications worldwide. Our pending patent applications may not be
allowed. In addition, any patent now issued, or obtained in the future, may not provide protection or be of commercial benefit to us, and the
validity of our patents could be challenged. Moreover, our means of protecting our proprietary rights may not be adequate, and our competitors
may independently develop comparable or superior technologies.

     The medical device market in which we operate is largely technology driven. Physician customers have historically moved quickly to new
products and new technologies. As a result, intellectual property rights, particularly patents and trade secrets, play a significant role in product
development and differentiation. Our ability to commercialize our VivaNet Solution will depend, in part, on our ability, both in the U.S. and in
other countries, to obtain patents, enforce those patents, preserve trade secrets and operate without infringing the proprietary rights of third
parties.

     Patents and other proprietary rights are and will continue to be essential to our business, and our ability to compete effectively with other
companies will be dependent upon the proprietary nature of our technologies. We rely upon trade secrets, know-how, continuing technological
innovations, strategic alliances and licensing opportunities to develop, maintain and strengthen our competitive position. We pursue a policy of
generally obtaining patent protection in both the U.S. and abroad for patentable subject matter in our proprietary devices and attempt to review
third-party patents and patent applications to the extent publicly available in order to develop an effective patent strategy, avoid infringement of
third-party patents, identify licensing opportunities and monitor the patent claims of others. No assurance can be made that any pending or
future patent applications will result in the issuance of patents, that any current or future patents issued to, or licensed by, us will not be
challenged or circumvented by our competitors, or that our patents will not be found invalid. In addition, we may have to take legal action in
the future to protect our patents, trade secrets or know-how or to assert them against claimed infringement by others. Any legal action of that
type could be costly and time consuming and no assurances can be made that any lawsuit will be successful.

     In addition, any future patents may not prevent other persons or companies from developing similar or medically equivalent products and
other persons or companies may be issued patents that may prevent the sale of our products or that will require us to license or pay significant
fees or royalties. Furthermore, issued patents may not be valid or enforceable, or be able to provide our Company with meaningful protection.
The invalidation of key patents or proprietary rights that we own, or an unsuccessful outcome in lawsuits to protect our intellectual property,
could have a material adverse effect on our business, financial condition or results of operations.

     We are not aware of any third parties infringing our patents. Unauthorized parties may try to copy aspects of our products and
technologies or obtain and use information we consider proprietary. Policing the unauthorized use of our proprietary rights is difficult. We
cannot guarantee that no harm or threat will be made to our or our collaborators' intellectual property. In addition, changes in, or different
interpretations of, patent laws in the U.S. and other countries may also adversely affect the scope of our patent protection and our competitive
situation.

     There is certain subject matter that is patentable in the U.S. but not generally patentable outside of the U.S. Differences in what constitutes
patentable subject matter in various countries may limit the protection we can obtain outside of the U.S. These and other issues may prevent us
from obtaining patent protection outside of the U.S., which would have a material adverse effect on our business, financial condition and
results of operations.

                                                                         19
Table of Contents



Issued patents for one or more of our products could be found invalid or unenforceable if challenged in court.

      If we or one of our collaborators were to initiate legal proceedings against a third party to enforce a patent covering one of our products,
the defendant could counterclaim that our patent is invalid and/or unenforceable. In patent litigation in the United States, defendant
counterclaims alleging invalidity and/or unenforceability are commonplace. Grounds for a validity challenge could be an alleged failure to
meet any of several statutory requirements, for example, lack of novelty, obviousness or non-enablement. Grounds for an unenforceability
assertion could be an allegation that someone connected with prosecution of the patent withheld relevant information from the U.S. Patent and
Trademark Office, or made a misleading statement, during prosecution. Although we believe that we have conducted our patent prosecution in
accordance with the duty of candor and in good faith, the outcome following legal assertions of invalidity and unenforceability during patent
litigation is unpredictable. With respect to the validity question, for example, we cannot be certain that there is no invalidating prior art, of
which we and the patent examiner were unaware during prosecution. If a defendant were to prevail on a legal assertion of invalidity and/or
unenforceability, we would lose at least part, and perhaps all, of the patent protection on one or more of our products or certain aspects of
VivaNet and VivaScope. Such a loss of patent protection could have a material adverse impact on our business.

Claims that our technology, our products or the sale or use of our products infringe the patent rights of third parties could result in costly
litigation or could require substantial time and money to resolve even if litigation is avoided.

     The medical device industry in which we operate is susceptible to significant intellectual property litigation and, in recent years, it has
been common for companies in the medical device field to aggressively challenge the patent rights of other companies in order to gain a
competitive advantage. Patent litigation is costly and time-consuming and there can be no assurance that we will have, or will be able to devote,
sufficient resources to pursue such litigation.

     We may become involved as either a plaintiff or a defendant in patent infringement and other intellectual property-related actions. We
may become a party to patent infringement claims and litigation or interference proceedings declared by the U.S. Patent and Trademark Office
to determine the priority of inventions. The defense and prosecution of these matters are both costly and time consuming. Additionally, we may
need to commence proceedings against others to enforce our patents, to protect our trade secrets or know-how or to determine the
enforceability, scope and validity of the proprietary rights of others. These proceedings would result in substantial expense to us and significant
diversion of effort by our technical and management personnel.

Unfavorable outcomes in intellectual property litigation could limit our research and development activities and/or our ability to
commercialize our products.

     Potentially unfavorable outcomes in intellectual property proceedings could limit our intellectual property rights and activities and could
result in significant royalty or other payments or injunctions that may prevent the sale of products and may significantly divert the attention of
our technical and management personnel. Such adverse outcomes could have a material adverse effect on our ability to sell certain products and
on our operating margins, financial condition, results of operation or liquidity.

     If third parties successfully assert intellectual property rights against us, we might be barred from using certain aspects of our technology
or barred from developing and commercializing certain products. Prohibitions against using certain technologies, or prohibitions against
commercializing certain products, could be imposed by a court or by a settlement agreement between us and a plaintiff. In addition, if we are
unsuccessful in defending against allegations of patent infringement or misappropriation of trade secrets, we may be forced to pay substantial
damage awards to the plaintiff. There is inevitable uncertainty in any litigation, including intellectual property litigation. There can be

                                                                        20
Table of Contents



no assurance that we would prevail in any intellectual property litigation, even if the case against us is weak or flawed. If litigation leads to an
outcome unfavorable to us, we may be required to obtain a license from the owner of the intellectual property in order to continue our research
and development programs or to market our products. The necessary license may not be available to us on commercially acceptable terms, or at
all. This could limit our research and development activities, our ability to commercialize certain products, or both. If we fail to obtain a
required license or are unable to design around a patent, our business, financial condition or results of operations could be materially adversely
affected.

     Most of our competitors are larger than we are and have substantially greater resources. They are, therefore, likely to be able to sustain the
costs of complex patent litigation longer than we could. In addition, the uncertainties associated with litigation could have a material adverse
effect on our ability to raise the funds necessary for clinical trials, continue our internal research programs, obtain licenses to use needed
technology, or enter into strategic partnerships that would help us bring our product candidates to market.

Intellectual property litigation may lead to unfavorable publicity that harms our reputation and causes the market price of our common
stock to drop.

      During the course of any patent litigation, there could be public announcements of the results of hearings, rulings on motions, and other
interim proceedings in the litigation. If securities analysts or investors regard these announcements as negative, the perceived value of our
products, programs, or intellectual property could be diminished. Accordingly, the market price of our common stock may decline.

Confidentiality agreements with employees and third parties may not prevent unauthorized disclosure of trade secrets and other proprietary
information.

      In addition to patents, we rely on trade secrets, technical know-how, and proprietary information concerning our business strategy in order
to protect our competitive position. In the course of our research and development activities and our business activities, we often rely on
confidentiality agreements to protect our proprietary information. Such confidentiality agreements are used, for example, when we talk to
vendors of laboratory or clinical development services or potential strategic partners. In addition, each of our employees is required to sign a
confidentiality agreement upon joining our Company. We take steps to protect our proprietary information, and our confidentiality agreements
are carefully drafted to protect our proprietary interests. Nevertheless, there can be no guarantee that an employee or an outside party will not
make an unauthorized disclosure of our proprietary confidential information. This might happen intentionally or inadvertently. It is possible
that a competitor will make use of such information, and that our competitive position will be compromised, in spite of any legal action we
might take against persons making such unauthorized disclosures.

     Trade secrets are difficult to protect. Although we use reasonable efforts to protect our trade secrets, our employees, consultants,
contractors, or outside scientific collaborators might intentionally or inadvertently disclose our trade secret information to competitors.
Enforcing a claim that a third party illegally obtained and is using any of our trade secrets is expensive and time consuming, and the outcome is
unpredictable. In addition, courts outside the U.S. sometimes are less willing than U.S. courts to protect trade secrets. Moreover, our
competitors may independently develop equivalent knowledge, methods and know-how.

     Our research and development strategic partners may have rights to publish data and other information to which we have rights. In
addition, we sometimes engage individuals or entities to conduct research relevant to our business. The ability of these individuals or entities to
publish or otherwise publicly disclose data and other information generated during the course of their research is subject to certain contractual
limitations. These contractual provisions may be insufficient or inadequate

                                                                        21
Table of Contents



to protect our confidential information. If we do not apply for patent protection prior to such publication, or if we cannot otherwise maintain the
confidentiality of our proprietary technology and other confidential information, then our ability to obtain patent protection or to protect our
trade secret information may be jeopardized.

Intellectual property rights do not necessarily address all potential threats to our competitive position.

     The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have
limitations, and may not adequately protect our business, or permit us to maintain our competitive position. We may face, among others, the
following threats or challenges:

     •
            Others may be able to develop technology or systems that are similar to our products and systems but that are not covered by the
            claims of the patents that we own or have exclusively licensed.

     •
            Others may assert an ownership interest in any of our intellectual property rights or raise an inventorship issue with respect to our
            patent filings.

     •
            We or our licensors or strategic partners might not have been the first to make the inventions covered by the issued patent or
            pending patent application that we own or have exclusively licensed.

     •
            We or our licensors or strategic partners might not have been the first to file patent applications covering certain of our inventions.

     •
            Others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our
            intellectual property rights.

     •
            Our pending patent applications may not lead to issued patents.

     •
            Issued patents that we own or have exclusively licensed may not provide us with any competitive advantages, or may be held
            invalid or unenforceable, as a result of legal challenges by our competitors.

     •
            Our competitors might conduct research and development activities in countries where we do not have patent rights and then use
            the information learned from such activities to develop competitive products for sale in our major commercial markets.

     •
            We may not develop additional proprietary technologies that are patentable.

     •
            The patents of others may have an adverse effect on our business.

Changes in U.S. patent law could diminish the value of patents in general, thereby impairing our ability to protect our products.

     Obtaining and enforcing medical device patents is costly, time-consuming and inherently uncertain. In addition, Congress may pass patent
reform legislation. The U.S. Supreme Court has ruled on several patent cases in recent years, either narrowing the scope of patent protection
available in certain circumstances or weakening the rights of patent owners in certain situations. In addition to increasing uncertainty with
regard to our ability to obtain patents in the future, this combination of events has created uncertainty with respect to the value of patents, once
obtained. Depending on decisions by the U.S. Congress, the federal courts, and the U.S. Patent and Trademark Office, the laws and regulations
governing patents could change in unpredictable ways that would weaken our ability to obtain new patents or to enforce our existing patents
and patents that we might obtain in the future. If we are unable to obtain new patents or enforce our existing patents, our business, financial
condition, and results of operations would be harmed.
22
Table of Contents

Risks Related to the Development and Commercialization of Our Products

We have limited marketing experience, sales force or distribution capabilities. If we are unable to recruit key personnel to perform these
functions, we may not be able to successfully commercialize our products.

     Our ability to produce revenues ultimately depends on our ability to sell our products. We currently have limited experience in marketing
or selling our products, and we have a limited marketing and sales staff and distribution capabilities. Developing a marketing and sales force is
time-consuming and will involve the investment of significant amounts of financial and management resources, and could delay the launch of
new products or expansion of existing product sales. In addition, we will compete with many companies that currently have extensive and
well-funded marketing and sales operations. If we fail to establish successful marketing and sales capabilities or fail to enter into successful
marketing arrangements with third parties, our ability to generate revenues will suffer.

      Furthermore, even if we enter into marketing and distributing arrangements with third parties, we may have limited or no control over the
sales, marketing and distribution activities of these third parties, and these third parties may not be successful or effective in selling and
marketing our VivaNet Solution and VivaScope products. If we fail to create successful and effective marketing and distribution channels, our
ability to generate revenue and achieve our anticipated growth could be adversely affected. If these distributors experience financial or other
difficulties, sales of our products could be reduced, and our business, financial condition and results of operations could be harmed.

Our commercial success depends upon attaining significant market acceptance of our products by physicians, patients and healthcare
payers.

     The medical device industry is highly competitive and subject to rapid technological change. Our success depends, in part, upon
physicians continuing to perform a significant number of diagnostic procedures and our ability to achieve and maintain a competitive position
in the development of technologies and products in the skin cancer diagnosis field. If physicians, patients, or other healthcare providers opt to
use our competitors' products, or healthcare payers do not accept our products, our commercial opportunity will be reduced and our potential
revenues will suffer.

     Biopsy of the lesion, followed by pathologic examination of the tissue specimen is today's widely accepted standard of care with a long
history of use. Two alternative diagnostic tools, clinical photography and dermoscopy, are currently gaining acceptance in the U.S. medical
community. In addition, technological advances may result in improvements in these alternative diagnostic tools or new technologies may
emerge that produce superior diagnostic results as compared to VivaNet and VivaScope.

If we are unable to obtain adequate reimbursement from healthcare payers, or acceptable prices, for our products, our revenues and
prospects for profitability will suffer.

     Our future revenues and ability to become profitable will depend heavily upon the availability of adequate and timely reimbursement for
the use of our products and services from governmental and other third-party payers. Reimbursement by a third-party payer may depend upon a
number of factors, including the third-party payer's determination that use of a product is: (i) a covered benefit under its health plan, (ii) safe,
effective and medically necessary, (iii) appropriate for the specific patient, (iv) cost effective, and (v) neither experimental nor investigational.
Obtaining reimbursement approval for our products and services from each government or other third-party payer will be a time-consuming
and costly process that could require us to provide supporting scientific, clinical and cost-effectiveness data to each payer. We may not be able
to provide data sufficient to gain acceptance with respect to reimbursement. Even when a payer determines that a product is eligible for
reimbursement, the payer may impose coverage limitations that preclude payment for some product uses that are approved by the FDA or
similar authorities. Moreover, eligibility for coverage does not imply that any product will be reimbursed in all cases or at a rate that allows us
to make a profit or

                                                                         23
Table of Contents



even cover our costs. If we are not able to obtain coverage and profitable reimbursement promptly from government-funded and private
third-party payers for our products, our ability to generate revenues and become profitable will be compromised.

The termination of our distribution relationships with any of our key distributors, or a decline in revenue from such distributors, could have
a material adverse effect on our business, financial condition, and results of operations.

      Our business is characterized by a high degree of customer concentration. For the year ended December 31, 2010, approximately 74% of
our product sales were generated through our top three distributors. Our distribution agreements with these key distributors may be terminated,
or our distributors may fail to perform their obligations under such agreements. If either of these events occurs, our marketing and distribution
efforts may be impaired and our revenues may be adversely impacted. We may experience greater or lesser customer concentration in the
future. However, it is likely that our revenue and profitability will continue to be dependent on a very limited number of large customers and
distributors, and we may experience an even higher degree of customer concentration in the future. The loss of, material reduction in sales
volume to, or significant adverse change in our relationship with any of our key distributors could have a material adverse effect on our revenue
in any given period and may result in significant annual and quarterly revenue variations. Although we may be able to sell directly to customers
if our relationships with any or all of our key distributors terminate, the development of our sales and distribution capabilities could involve
significant expense and delay.

We rely heavily on a limited number of customers and a loss of or reduction in the amount of business from certain customers could
adversely affect our revenues.

     Our sales to date have been to a limited number of customers. For the year ended December 31, 2010, moreover, sales to two customers
were in the amounts of approximately $1.3 million and $200,000, representing 49% and 8%, respectively, of our total revenues. This customer
concentration creates risk for us, in that a loss of either customer or a significant reduction in sales from these customers could adversely affect
our financial condition and results of operations.

We operate in a highly competitive market, which may result in others discovering, developing or commercializing products before, or more
successfully, than we do.

     Although we possess proprietary technology for our VivaScope confocal imagers and for our VivaNet Solution, we face intense
competition, both nationally and internationally, from companies marketing alternative technologies. Certain of such companies have
established name recognition, reputation, and market presence, and greater financial, technical, sales, marketing and other resources than us,
enabling them to better withstand the impact of risks associated with a highly competitive industry. We compete directly with MELA
Sciences, Inc. (NASDAQ: MELA) and, specifically, with its MelaFind® product, which features a hand-held imaging device that emits
multiple wavelengths of light to capture images of suspicious pigmented skin lesions and extract data. Optiscan Imaging Ltd. (Australia) and
Mauna Kea Technologies (France, doing business as Cellvizio in the United States) offer confocal imaging technology. However, their first
applications are believed to be primarily targeted for imaging the human gastrointestinal tract. We believe that electro-optical products
designed to enhance the visualization and analysis of potential melanomas have been approved or are under development by: Welch
Allyn, Inc.; Heine Optotechnik; 3Gen, LLC; Derma Medical Systems, Inc.; Medical High Technologies S.p.A.; ZN Vision Technologies AG;
Biocompatibles International (previously Astron Clinica, Ltd.); LL Tech, Inc. (France); and Biomips Engineering. Balter Medical is developing
optical transfer diagnosis technology for the purpose of detecting anomalies in human tissue.

                                                                         24
Table of Contents

     The broader market for precision optical imaging devices used for medical diagnosis is intensely competitive, subject to rapid change, and
significantly affected by new product introductions and other market activities of industry participants. We may also be subject to competition
from major optical imaging companies, such as: General Electric Co.; Siemens AG; Bayer AG; Carestream Health; Welch Allyn, Inc.;
Olympus Corporation; Carl Zeiss AG Deutschland; and others, each of which manufactures and markets precision optical imaging products for
the medical market, and could decide to develop or acquire a product to compete with our VivaNet Solution. These companies enjoy numerous
competitive advantages, including: significantly greater name recognition; established relations with healthcare professionals, customers and
third-party payers; established distribution networks; additional lines of products, and the ability to offer rebates, higher discounts or incentives
to gain a competitive advantage; greater experience in conducting research and development, manufacturing, clinical trials, obtaining
regulatory approval for products, and marketing approved products; and greater financial and human resources for product development, sales
and marketing, and patent litigation. As a result, we may not be able to compete effectively against these companies or their products. The
success of our competitors in developing, bringing to market, distributing and selling their products could negatively affect our result of
operations and/or general acceptance of our products.

Technological breakthroughs in the diagnosis or treatment of melanoma could render VivaNet and VivaScope obsolete.

      The precision optical imaging field is subject to rapid technological change and product innovation. VivaNet and VivaScope are based on
our proprietary technology, but a number of companies and medical researchers are pursuing new technologies. Companies in the medical
device industry with significantly greater financial, technical, research, marketing, sales and distribution and other resources have expertise and
interest in the exploitation of computer- aided diagnosis, medical imaging, and other technologies VivaNet and VivaScope utilize. Some of
these companies are working on potentially competing products or therapies, including confocal microscopy, various forms of spectroscopy,
other imaging modalities, and molecular and genetic screening tests. In addition, the National Institutes of Health, several U.S. and
international academic and medical centers, and other supporters of cancer research are presumptively seeking ways to improve the diagnosis
or treatment of melanoma by sponsoring corporate and academic research. One or more of these companies could succeed in developing or
marketing technologies and products or services that demonstrate better safety or effectiveness, superior clinical results, greater ease of use or
lower cost than VivaNet and VivaScope, or such competitors could succeed in obtaining regulatory approval for introducing or
commercializing any such products or services prior to us. Approval by the FDA of a commercially viable alternative to VivaScope produced
by a competitor could significantly reduce market acceptance of VivaNet and VivaScope. Any of the above competitive developments could
have a material adverse effect on our business, financial condition, and results of operations. Products, services, or technologies introduced
prior to or subsequent to the commercialization of VivaNet and VivaScope could render these products less marketable or obsolete.

New product development in the medical device industry is both costly and labor intensive with very low success rates for successful
commercialization; if we cannot successfully develop or obtain future products, our ability to grow may be impaired.

     Our long-term success is dependent, in large part, on the design, development and commercialization of new products and services in the
medical technology industry. The product development process is time-consuming, unpredictable and costly. There can be no assurance that we
will be able to develop or acquire new products, successfully complete clinical trials, obtain the necessary regulatory clearances or approvals
required from the FDA on a timely basis, or at all, manufacture our potential products in compliance with regulatory requirements or in
commercial volumes, or that potential products will achieve market acceptance. In addition, changes in regulatory

                                                                         25
Table of Contents



policy for product approval during the period of product development, and regulatory agency review of each submitted new application, may
cause delays or rejections. It may be necessary for us to enter into licensing arrangements in order to market effectively any new products or
new indications for existing products. There can be no assurance that we will be successful in entering into such licensing arrangements on
terms favorable to us or at all. Failure to develop, obtain necessary regulatory clearances or approvals for, or successfully market potential new
products could have a material adverse effect on our business, financial condition and results of operations.

If our VivaNet Solution is approved for reimbursement, we anticipate experiencing significant pressures on pricing.

      Our products will be purchased principally by hospitals and physicians associated with research centers, and by private practitioners, that
typically bill various third-party payers, including governmental programs (e.g., Medicare and Medicaid), private insurance plans and managed
care programs, for the healthcare diagnostic services provided to their patients. In some foreign markets, which we may seek to enter in the
future, pricing and profitability of medical devices are subject to government control. In the U.S., we expect that there will continue to be
federal and state proposals for similar controls. Many private payers look to the Centers for Medicare & Medicaid Services, or CMS, which
administer the Medicare program, in setting their reimbursement policies and amounts. If CMS or other agencies limit coverage or decrease or
limit reimbursement payments for doctors and hospitals, this may affect coverage and reimbursement determinations by many private payers.

     The ability of customers to obtain appropriate reimbursement for their products and services from private and governmental third-party
payers is critical to the success of medical technology companies. The availability of reimbursement affects which products or services
customers purchase and the prices they are willing to pay. Reimbursement varies from country to country and can significantly impact the
acceptance of new products and services. After we develop a new product, we may find limited demand for the product unless reimbursement
approval is obtained from private and governmental third-party payers. Further legislative or administrative reforms to reimbursement systems
in a manner that significantly reduces reimbursement for procedures using our medical devices or denies coverage for those procedures,
including price regulation, competitive pricing, coverage and payment policies, comparative effectiveness of diagnostic tools, technology
assessments and managed-care arrangements, could have a material adverse effect on our business, financial condition or results of operations.

     Even if reimbursement programs cover a device for certain uses, that does not mean that the level of reimbursement will be sufficient for
commercial success. We expect to experience pricing pressures in connection with the commercialization of our VivaNet Solution and our
future products due to efforts by private and government-funded payers to reduce or limit the growth of healthcare costs, the increasing
influence of health maintenance organizations, and additional legislative proposals to reduce or limit increase in public funding for healthcare
services. Private payers, including managed care payers, increasingly are demanding discounted fee structures and the assumption by
healthcare providers of all or a portion of the financial risk. Efforts to impose greater discounts and more stringent cost controls upon
healthcare providers by private and public payers are expected to continue. Payers frequently review their coverage policies for existing and
new diagnostic tools and can, sometimes without advance notice, deny or change their coverage policies. Current trends toward managed
healthcare in the U.S. and proposed legislation intended to control the cost of publicly funded healthcare programs could significantly influence
the purchase of healthcare services and products, and may force us to reduce prices for our VivaNet Solution or result in the exclusion of our
products from reimbursement programs. Significant limits on the scope of services covered or on reimbursement rates and fees on those
services that are covered could have a material adverse effect on our ability to commercialize our VivaNet Solution and therefore, on our
liquidity and our business, financial condition, and results of operations.

                                                                        26
Table of Contents



We operate in a heavily regulated sector, and our ability to remain viable will depend on future legislative action and favorable government
decisions at various points by various agencies.

     In the United States, the FDA regulates the introduction of medical devices, as well as manufacturing, labeling and record keeping
procedures for such products. The process of obtaining marketing clearance or approval for new medical devices from the FDA is costly and
time consuming, and there can be no assurance that such approval will be granted for new products on a timely basis, if at all, or that the FDA
review will not involve delays that would adversely affect our ability to commercialize new products. Even if regulatory clearance or approval
to market a diagnostic product is obtained from the FDA, this clearance or approval may contain limitations on the indicated uses of the
product. Marketing clearance or approval can also be withdrawn by the FDA due to failure to comply with regulatory standards or the
occurrence of unforeseen problems following initial clearance or approval.

     From time to time, legislation is introduced in the U.S. Congress that could significantly change the statutory provisions governing the
approval, manufacture and marketing of a medical device. Additionally, the medical device industry is heavily regulated by the federal
government, and by state and local governments. The federal laws and regulations affecting healthcare change frequently, thereby increasing
the uncertainty and risk associated with any healthcare related venture, including our business and our VivaNet Solution. In addition, FDA
regulations and guidance are often revised or reinterpreted by the agency in ways that may significantly affect our business and our products. It
is impossible to predict whether legislative changes will be enacted or FDA regulations, guidance, or interpretations changed, and what the
impact of such changes, if any, may be.

      The federal government regulates healthcare through various agencies, including but not limited to the following: (i) the FDA, which
administers the Food, Drug, and Cosmetic Act, or the FD&C Act, as well as other relevant laws; (ii) CMS, which administers the Medicare and
Medicaid programs; (iii) the Office of Inspector General, or OIG, which enforces various laws aimed at curtailing fraudulent or abusive
practices, including by way of example, the Anti-Kickback Law, the Anti-Physician Referral Law, commonly referred to as the Stark Law, the
Anti-Inducement Law, the Civil Money Penalty Law, and the laws that authorize the exclusion of healthcare providers and others from
participating in federal healthcare programs for violation of these governmental laws and regulations; and (iv) the Office of Civil Rights, which
administers the privacy aspects of the Health Insurance Portability and Accountability Act of 1996, or HIPAA. All of the aforementioned are
agencies within the U.S. Department of Health & Human Services, or HHS. Healthcare is also provided or regulated, as the case may be, by the
Department of Defense through its TriCare program, the Public Health Service within HHS under the Public Health Service Act, the
Department of Justice through the Federal False Claims Act and various criminal statutes, and state governments under Medicaid and other
state sponsored or funded programs and their internal laws regulating all healthcare activities.

     In addition to regulation by the FDA as a medical device manufacturer, we are subject to general healthcare industry regulations. The
healthcare industry is subject to extensive federal, state and local laws and regulations relating to: billing for services; quality of medical
equipment and services; confidentiality, maintenance and security issues associated with medical records and individually identifiable health
information; false claims; and product labeling.

     These laws and regulations are extremely complex and, in some cases, still evolving. In many instances, the industry does not have the
benefit of significant regulatory or judicial interpretation of these laws and regulations. If our operations are found to be in violation of any of
the federal, state or local laws and regulations that govern our activities, we may be subject to the applicable penalty associated with the
violation, including civil and criminal penalties, damages, fines or curtailment of our operations. Any action against us for violation of these
laws or regulations, even if we successfully

                                                                         27
Table of Contents



defend against it, could cause us to incur significant legal expenses and divert our management's time and attention from the operation of our
business.

     In addition, recent, widely-publicized events concerning the safety of certain drug, food and medical device products have raised concerns
among members of Congress, medical professionals, and the public regarding the FDA's handling of these events and its perceived lack of
oversight over regulated products. The increased attention to safety and oversight issues could result in a more cautious approach by the FDA
and other agencies with respect to clearances and approvals for products such as ours.

If we fail to comply with ongoing regulatory requirements, or if we experience unanticipated problems with VivaNet or VivaScope, our
product could be subject to restrictions or withdrawal from the market.

     Any product for which we obtain marketing approval, along with the manufacturing processes, post-approval clinical data and
promotional activities for such product, will be subject to continual review and periodic inspections by the FDA and other regulatory bodies.
Regulatory approval of our products may be subject to limitations on the indicated uses for which the products may be marketed or contain
requirements for costly postmarketing testing and surveillance to monitor the safety or effectiveness of the products. Later discovery of
previously unknown problems with our products, including unanticipated adverse events or adverse events of unanticipated severity or
frequency, manufacturer or manufacturing processes, or failure to comply with regulatory requirements, may result in restrictions on such
products or manufacturing processes, withdrawal of the products from the market, voluntary or mandatory recall, fines, suspension of
regulatory approvals, product seizures, injunctions or the imposition of civil or criminal penalties.

Our facilities will be subject to inspection by the FDA and international authorities, and we could face penalties if we are found to be
non-compliant with the regulations of the FDA or international authorities.

      The FDA and various other authorities will inspect our facilities from time to time to determine whether we are in compliance with
regulations relating to medical device manufacturing, including regulations concerning design, manufacturing, testing, quality control, product
labeling, distribution, promotion, and record keeping practices. Our facility was most recently inspected by the FDA in August 2009. A
determination that we are in material violation of such regulations could lead to the imposition of civil penalties, including fines, product
recalls, product seizures or, in extreme cases, criminal sanctions or a shutdown of our manufacturing facility. Even if regulatory approvals to
market a product are obtained from the FDA, such approvals may contain limitations on the indicated uses of the product. The FDA could also
limit or prevent the manufacture or distribution of our products and has the power to require the recall of products. FDA regulations depend
heavily on administrative interpretation, and future interpretations made by the FDA or other regulatory bodies with possible retroactive effect
may adversely affect us.

Our promotional and marketing activities will be subject to regulation by the FDA and international authorities, and we could face severe
penalties if we are found to be promoting VivaNet or VivaScope for an unapproved use.

      If the FDA or international authorities determine that our promotional materials or activities constitute promotion of VivaNet or
VivaScope for an unapproved use or other claim in violation of applicable law relating to the promotion of our products, it could demand that
we cease the use of or modify our promotional materials or subject us to regulatory enforcement actions, including the issuance of a warning
letter, injunction, civil fine and criminal penalties. It is also possible that other federal, state or foreign enforcement authorities might take
action if they consider promotional or other materials to constitute promotion of VivaNet or VivaScope for an unapproved use, which could
result in significant fines or penalties under other statutory authorities, such as laws prohibiting false

                                                                         28
Table of Contents



claims for reimbursement. Our competitors may also assert claims either directly or indirectly with the FDA concerning any alleged illegal or
improper marketing promotional activity.

Healthcare policy changes, including legislation to reform the U.S. healthcare system, may have a material adverse effect on our business,
financial condition, results of operations and cash flows.

     Political, economic and regulatory influences are subjecting the healthcare industry to potential fundamental changes that could
substantially affect our results of operations. In response to perceived increases in health care costs in recent years, there have been and
continue to be proposals and enactments by the Obama administration, members of U.S. Congress, state governments, regulators and
third-party payers to control these costs and, more generally, to reform the U.S. healthcare system. These changes are causing the marketplace
to put increased emphasis on the delivery of more cost-effective treatments. Certain of these proposals and enactments or regulations
promulgated to enforce them may limit the prices we are able to charge for our VivaNet Solution or the amount of reimbursement that may be
available if such products are approved for reimbursement. The adoption of some or all of these enactments and proposals could have a
material adverse effect on us. We cannot predict the final form these might take or their effects on our business.

      The Patient Protection and Affordable Care Act and Health Care and Education Affordability Reconciliation Act of 2010 were enacted
into law in the U.S. in March 2010. As a U.S. headquartered company with sales in the U.S., this healthcare reform legislation will materially
impact us. Certain provisions of the legislation will not be effective for a number of years, there are many programs and requirements for which
the details have not yet been fully established or consequences not fully understood, and it is unclear what the full impact of the legislation will
be. The legislation imposes on medical device manufacturers such as us a 2.3 percent excise tax on U.S. sales of Class I, II and III medical
devices beginning in 2013. Both downward pressure on reimbursement and the excise tax could have a material adverse effect on our business,
financial condition and the results of operations. Other provisions of this legislation, including Medicare provisions aimed at improving quality
and decreasing costs, comparative effectiveness research, an independent payment advisory board, and pilot programs to evaluate alternative
payment methodologies, could meaningfully change the way healthcare is developed and delivered, and may adversely affect our business and
results of operations. Further, we cannot predict what healthcare programs and regulations ultimately will be implemented at the federal or state
level, or the effect of any future legislation or regulation in the U.S. or internationally. However, any changes that lower reimbursements for
our products or reduce medical procedure volumes could adversely affect our business and results of operations.

We must comply with complex statutes prohibiting fraud and abuse, and both we and physicians utilizing VivaNet workstations could be
subject to significant penalties for noncompliance.

      There are extensive federal and state laws and regulations prohibiting fraud and abuse in the healthcare industry that can result in
significant criminal and civil penalties. These federal laws include: the Anti-Kickback Law which prohibits certain business practices and
relationships, including the payment or receipt of remuneration for the referral of patients or the purchase, order or recommendation of goods
or services for which payment will be made by Medicare or other federal healthcare programs; the physician self-referral prohibition,
commonly referred to as the Stark Law; the Anti-Inducement Law, which prohibits providers from offering anything to a Medicare or Medicaid
beneficiary to induce that beneficiary to use items or services covered by either program; the Civil False Claims Act, which prohibits any
person from knowingly presenting or causing to be presented false or fraudulent claims for payment by the federal government, including the
Medicare and Medicaid programs; HIPAA, which creates federal criminal laws that prohibit executing a scheme to defraud any healthcare
benefit program and which also imposes certain obligations on entities with respect to the privacy, security and transmission of individually
identifiable health information; the federal False

                                                                        29
Table of Contents



Statements Statute, which prohibits knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false
statement in connection with the delivery of or payment for healthcare benefits, items or services; and the Civil Monetary Penalties Law, which
authorizes HHS to impose civil penalties administratively for fraudulent or abusive acts. We are also subject to state laws that are analogous to
the above federal laws, such as state anti-kickback and false claims laws (some of which may apply to healthcare items or services reimbursed
by any third-party payer, including commercial insurers), as well as certain state laws that require pharmaceutical and medical device
companies to comply with industry voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal
government.

      Sanctions for violating these laws include criminal and civil penalties that range from punitive sanctions, damage assessments, money
penalties, imprisonment, denial of Medicare and Medicaid payments, or exclusion from the Medicare and Medicaid programs, or both. As
federal and state budget pressures continue, federal and state administrative agencies may also continue to escalate investigation and
enforcement efforts to root out waste and to control fraud and abuse in governmental healthcare programs. Private enforcement of healthcare
fraud has also increased, due in large part to amendments to the Civil False Claims Act in 1986 that were designed to encourage private persons
to sue on behalf of the government. Our ongoing efforts to comply with these laws may be costly, and a violation of any of these federal and
state fraud and abuse laws and regulations could have a material adverse effect on our liquidity and financial condition. The risk of our being
found in violation of these laws is increased by the fact that many of them have not been definitively interpreted by the regulatory authorities or
the courts, and their provisions are open to a variety of subjective interpretations. In addition, these laws and their interpretations are subject to
change. Any action against us for violation of these laws, even if we successfully defend against it, could cause us to incur significant legal
expenses, divert our management's attention from the operation of our business and damage our reputation. An investigation into the use of
VivaNet, VivaNet workstations and VivaScope by physicians may dissuade physicians from either purchasing or using VivaNet, VivaNet
workstations and VivaScope and could have a material adverse effect on our ability to commercialize our products.

The application of the privacy provisions of HIPAA is unclear, and we will become subject to other laws and regulations regarding the
privacy and security of medical information.

     HIPAA, among other things, protects the privacy and security of individually identifiable health information by limiting its use and
disclosure. HIPAA directly regulates "covered entities" (insurers, clearinghouses, and most healthcare providers) and indirectly regulates
"business associates" with respect to the privacy of patients' medical information. All entities that receive and process protected health
information are required to adopt certain procedures to safeguard the security of that information. It is unclear whether we would be deemed to
be a covered entity or a business associate under the HIPAA regulations. In either case, we will be required to physically safeguard the integrity
and security of the patient information that we, or our physician customers receive, store, create or transmit. If we fail to safeguard patient
information, then we or our physician customers may be subject to civil monetary penalties, and this could adversely affect our ability to
market our VivaNet Solution and VivaScope. We also may be liable under state laws governing the privacy of health information. As and when
we expand our commercialization efforts in the foreign markets that we have targeted, we will also become subject to a variety of international
laws, regulations and policies designed to protect the privacy of health information.

                                                                         30
Table of Contents



Clinical trials associated with future applications of our technology may involve lengthy and expensive processes with uncertain outcomes,
and results of earlier studies and trials may not be predictive of future trial results.

      In the future, as we explore additional applications of our technology, clinical trials may be required for regulatory approval. We are not
currently conducting any clinical trials related to any regulatory approval and we have no current plans to conduct any such clinical trials.
However, should we decide to conduct such clinical trials, we cannot predict whether we will encounter problems with any future clinical trials,
which would cause us or regulatory authorities to delay or suspend those clinical trials, or delay the analysis of data from those clinical trials.
We estimate that clinical trials involving any of the various potential applications of VivaNet and VivaScope which we may choose to pursue
could continue for several years and that such trials may also take significantly longer to complete and may cost more money that we expect.
Failure can occur at any stage of testing, and we may experience numerous unforeseen events during, or as a result of, the clinical trial process
that could delay or prevent commercialization of the current, or a future, more advanced, version of our VivaScope confocal imager or
VivaNet, including but not limited to:

     •
            delays in obtaining regulatory approvals to commence a clinical trial;

     •
            slower than anticipated patient recruitment and enrollment;

     •
            negative or inconclusive results from clinical trials;

     •
            unforeseen safety issues;

     •
            an inability to monitor patients adequately during or after treatment; and

     •
            problems with investigator or patient compliance with the trial protocols.

     A number of companies in the medical device industry, including those with greater resources and experience than us, have suffered
significant setbacks in advanced clinical trials, even after seeing promising results in earlier clinical trials. Despite the successful results
reported in early clinical trials regarding VivaScope, we do not know whether any clinical trials we or our clinical partners may conduct will
produce favorable results. The failure of clinical trials to produce favorable results could have a material adverse effect on our business,
financial condition and results of operations.

Alternative applications of our technology may not be successful, which will limit our ability to grow the Company and generate revenue.

      Although we believe the early exploratory and pilot studies for other clinical applications of our technology beyond the early detection and
diagnosis of skin cancer are encouraging, there can be no assurance any of these research and development activities, engineering efforts, or
clinical studies will be successful or that any FDA clearances will be achieved for any of these other clinical applications. If alternative
applications of our technology are not successful, our ability to grow the Company and generate revenue will be adversely impacted.

We face the risk of product liability claims and may not be able to obtain or maintain adequate insurance to protect against these claims.

      Our business exposes us to the risk of product liability claims that is inherent in the testing, manufacturing and marketing of medical
devices, including those that may arise from the misuse or malfunction of, or design flaws in, our products. We may be subject to product
liability claims if VivaNet, VivaNet workstations or VivaScope cause, or merely appears to have caused, an injury or if a patient alleges that
VivaNet, VivaNet workstations or VivaScope failed to provide appropriate diagnostic information on a lesion where melanoma, another skin
cancer, or another form of disease, was subsequently found to be present. Claims may be made by patients, healthcare providers or others

                                                                        31
Table of Contents



involved with VivaNet, VivaNet workstations or VivaScope. Although we carry product liability insurance that covers our VivaScope
products, our anticipated current and anticipated product liability insurance may not be available to us in amounts and on acceptable terms, if at
all, and if available, the coverage may not be adequate to protect us against any future product liability claims. If we are unable to obtain
insurance at an acceptable cost or on acceptable terms with adequate coverage, or otherwise protect against potential product liability claims,
we will be exposed to significant liabilities, which may harm our business. A product liability claim, recall or other claim with respect to
uninsured liabilities or for amounts in excess of insured liabilities could result in significant costs and significant harm to our business.

      We may be subject to claims against us even if the apparent injury is due to the actions of others. For example, we rely on the expertise of
physicians, nurses and other associated medical personnel to operate VivaScope. If these medical personnel are not properly trained or are
negligent, we may be subjected to liability. These liabilities could prevent or interfere with our product commercialization efforts. Defending a
suit, regardless of merit, could be costly, could divert management attention and might result in adverse publicity, which could result in the
withdrawal of, or inability to recruit, clinical trial volunteers, or result in reduced acceptance of VivaScope in the market.

     Insurance and surety companies have reassessed many aspects of their businesses and, as a result, may take actions that could negatively
affect our business. These actions could include increasing insurance premiums, requiring higher self-insured retentions and deductibles,
reducing limits, restricting coverage, imposing exclusions, and refusing to underwrite certain risks and classes of business. Any of these actions
may adversely affect our ability to obtain appropriate insurance coverage at reasonable costs, which could have a material adverse effect on our
business, financial condition and results of operations.

Our manufacturing operations are dependent upon third-party suppliers, making us vulnerable to supply problems and price fluctuations,
which could harm our business.

      Our manufacturing efforts currently rely on various suppliers that supply components and subassemblies required for the final assembly
and test of our devices. In some cases we have written agreements with these suppliers, under which the supplier is obligated to perform
services or produce components for us. There can be no assurance that these third parties will meet their obligations under the agreements.
Some of these suppliers are sole-source suppliers. Contract manufacturers of some of our components, such as completed circuit boards, may
also rely on sole-source suppliers to manufacture some of the components used in our products. Our manufacturers and suppliers may
encounter problems during manufacturing due to a variety of reasons, including failure to follow specific protocols and procedures, failure to
comply with applicable regulations, equipment malfunction and environmental factors, any of which could delay or impede their ability to meet
our demand. Our reliance on these outside manufacturers and suppliers also subjects us to other risks that could harm our business, including:
suppliers may make errors in manufacturing components that could negatively affect the effectiveness or safety of our products, or cause delays
in shipment of our products; we may not be able to obtain adequate supply in a timely manner or on commercially reasonable terms; we may
have difficulty locating and qualifying alternative suppliers for our sole-source suppliers; our suppliers manufacture products for a range of
customers, and fluctuations in demand for the products these suppliers manufacture for others may affect their ability to deliver components to
us in a timely manner; and our suppliers may encounter financial hardships unrelated to our demand for components, which could inhibit their
ability to fulfill our orders and meet our requirements.

     Any interruption or delay in the supply of components or materials, or our inability to obtain components or materials from alternate
sources at acceptable prices in a timely manner, could impair our ability to meet the demand of our customers and cause them to cancel orders.

                                                                        32
Table of Contents

Risks Related to the Operation of Our Business

We may be adversely affected by breaches of online security.

     To the extent that our activities involve the storage and transmission of confidential information, security breaches could damage our
reputation and expose us to a risk of loss, or to litigation and possible liability. A substantial portion of our revenue in future years will rely
upon the transmission and storage of medical data through a virtual private network, or VPN, across the Internet. Our business may be
materially adversely affected if our security measures do not prevent security breaches. In addition, such information may be subject to HIPAA
privacy and security regulations, the potential violation of which may trigger concerns by healthcare providers, which may adversely impact
our business, financial condition and results of operations.

All of our operations are conducted at a single location. Any disruption at our facility could increase our expenses.

     All of our operations are conducted at a single location. We take precautions to safeguard our facility, including insurance, health and
safety protocols, contracted off-site engineering services, and off-site storage of computer data. However, a natural disaster, such as a fire,
flood or earthquake, could cause substantial delays in our operations, damage or destroy our manufacturing equipment or inventory, and cause
us to incur additional expenses. The insurance we maintain against fires, floods, earthquakes and other natural disasters may not be adequate to
cover our losses in any particular case.

Our success will depend on our ability to attract and retain our personnel.

     Our success is particularly dependent upon the continued service of our executive officers and other key employees. We have currently
executed employment agreements with Ms. Davis-McHugh and each of Messrs. Eastman, Fox, Hone, and Shea, which are described in more
detail under the caption "Employment Agreements." These agreements expire on January 1, 2016, and are renewable for additional one-year
terms unless either we or the executive send written notice to the other party of its intention not to renew at least ninety (90) days prior to
expiration of the then-current term. We entered into an employment agreement with Mr. Joyce on March 22, 2011. Mr. Joyce's employment
agreement is set to expire on March 22, 2016, but is also renewable for additional one-year terms. Each of these executives has agreed,
pursuant to his or her respective employment agreement, not to compete with us, nor solicit our customers or employees, for a period of one
(1) year following the termination of such executive's employment. All of our employees, including our executive officers, have executed our
standard form of Employee Invention, Copyright, Proprietary Information and Conflicts of Interest Agreement. The loss of the services of any
of our executive officers or other key employees could have a material adverse effect on our business and results of operations. Our future
success will depend in part upon our ability to attract and retain highly qualified personnel. We may not be successful in hiring, retaining or
developing sufficient qualified individuals.

Our employees may engage in misconduct or improper activities, including noncompliance with regulatory standards and prohibitions on
insider trading.

      We are exposed to the risk of employee fraud or other misconduct. Misconduct by employees could include intentional failures to comply
with FDA regulations, provide accurate information to the FDA, comply with applicable manufacturing standards, comply with federal and
state healthcare fraud and abuse laws and regulations, report financial information or data accurately or disclose unauthorized activities to us. In
particular, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to
prevent fraud, misconduct, kickbacks, self-dealing and other abusive practices. These laws and regulations may restrict or prohibit a wide range
of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other

                                                                        33
Table of Contents



business arrangements. Employee misconduct could also involve the improper use of information obtained in the course of clinical trials, or
illegal misappropriation of drug product, which could result in regulatory sanctions and serious harm to our reputation. We have adopted a
Code of Business Conduct and Ethics, but it is not always possible to identify and deter employee misconduct, and the precautions we take to
detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from
governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations. If any such
actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant
impact on our business, including the imposition of significant fines or other sanctions.

We may be liable for contamination or other harm caused by materials that we handle, and changes in environmental regulations could
cause us to incur additional expense.

     Our manufacturing, research and development and clinical processes do not generally involve the handling of potentially harmful
biological materials or hazardous materials, but they may occasionally do so. We are subject to federal, state and local laws and regulations
governing the use, handling, storage and disposal of hazardous and biological materials. If violations of environmental, health and safety laws
occur, we could be held liable for damages, penalties and costs of remedial actions. These expenses or this liability could have a significant
negative impact on our business, financial condition and results of operations. We may violate environmental, health and safety laws in the
future as a result of human error, equipment failure or other causes. Environmental laws could become more stringent over time, imposing
greater compliance costs and increasing risks and penalties associated with violations. We may be subject to potentially conflicting and
changing regulatory agendas of political, business and environmental groups. Changes to or restrictions on permitting requirements or
processes, hazardous or biological material storage or handling might require an unplanned capital investment or relocation. Failure to comply
with new or existing laws or regulations could harm our business, financial condition and results of operations.

Failure to maintain an effective system of internal control over financial reporting may not allow us to be able to accurately report our
financial condition, results of operations or prevent fraud.

     We regularly review and update our internal control over financial reporting, disclosure controls and procedures, and corporate
governance policies and procedures. We maintain controls and procedures to mitigate against risks, such as processing system failures and
errors. Any system of controls and procedures, however well designed and operated, is based in part on certain assumptions and can provide
only reasonable assurances that the objectives of the system are met. Events could occur which are not prevented or detected by our internal
controls. Any failure or circumvention of our controls and procedures or failure to comply with regulations related to controls and procedures
could cause a failure to meet our reporting obligations under applicable federal securities laws, which could have a material adverse affect on
our business, results of operations and financial condition.

Risks Relating to this Offering

Following this offering, we will become subject to the reporting requirements of U.S. federal securities laws, which can be time-consuming
and expensive.

     We currently have no class of securities registered under the Securities Exchange Act of 1934, as amended, or the Exchange Act, and are
not a reporting company. In connection with this offering, we are becoming a U.S. public reporting company and, accordingly, subject to the
information and reporting requirements of the Exchange Act and other federal securities laws, and the compliance obligations of the
Sarbanes-Oxley Act of 2002, as amended, or SOX. The costs of preparing and filing annual and quarterly reports, proxy statements and other
information with the SEC and furnishing

                                                                        34
Table of Contents



audited reports to stockholders will cause our expenses to be higher than they would be if we did not become a U.S. reporting company. We
expect these rules and regulations to increase our legal and financial compliance costs, introduce new costs, such as investor relations, stock
exchange listing fees and shareholder reporting, and to make some activities more time consuming and costly.

Becoming a public company will cause us to incur increased costs and demands on our management and divert management's attention
from our core business.

      Although certain members of our Board of Directors and management team have experience in various capacities with publicly-traded
companies, we have never operated as a U.S. publicly-traded company subject to the reporting requirements of the federal securities laws and
have not been required to comply with SOX. We will face increased legal, accounting, administrative and other costs and expenses as a public
company that we did not incur as a private company. It may be time consuming, difficult and costly for us to develop and implement the
internal controls and reporting procedures required by SOX. Although we will likely be exempt from the auditor attestation requirements of
Section 404(b) of SOX due to our status as a non-accelerated filer under the SEC rules, we will still be subject to the annual requirements
related to management's assessment of internal control over financial reporting, which are costly. We are in the process of instituting changes to
our internal procedures to satisfy the requirements of SOX, as well as rules subsequently implemented by the SEC, the Public Company
Accounting Oversight Board and the Nasdaq Capital Market. We are evaluating our internal controls systems in order to allow us to report on
our internal controls, as required by Section 404 of SOX, and will be required to report on our internal controls beginning with our annual
report for the fiscal year ending December 31, 2011. While we anticipate being able to fully implement the requirements relating to internal
controls and all other aspects of Section 404 of SOX in a timely fashion, we cannot be certain as to the timing of completion of our evaluation,
testing and remediation actions or the impact of the same on our operations.

     As a small company with limited capital and human resources, we will need to divert management's time and attention away from our core
business in order to ensure compliance with these regulatory requirements. Implementing these changes may require new information
technologies systems, the auditing of our internal controls, and compliance training for our directors, officers and personnel. We may need to
hire additional financial reporting, internal controls and other finance staff in order to develop and implement appropriate internal controls and
reporting procedures. Such efforts would require a potentially significant expense. In addition, these laws, rules and regulations could make it
more difficult or more costly for us to obtain certain types of insurance, including director and officer liability insurance, and we may be forced
to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. The impact of these
requirements could also make it more difficult for us to attract and retain qualified persons to serve on our Board of Directors, our board
committees or as executive officers. Additionally, changes in the laws and regulations affecting public companies, including Section 404 and
other provisions of SOX, the rules and regulations adopted by the SEC and the Nasdaq Capital Market, will result in increased costs to us as we
respond to such requirements.

An active trading market for our common stock may not develop.

     Prior to this offering, there has been no public market for our common stock. Although we are seeking approval for listing of our common
stock on the Nasdaq Capital Market, an active trading market for our shares may never develop or be sustained following this offering. Further,
we cannot be certain that the market price of our common stock will not decline below the initial public offering price or below the amount
required by the Nasdaq Capital Market to maintain our listing. Should we fail to meet the minimum standards established by the Nasdaq
Capital Market, we could be de-listed. If our securities were to be delisted from the Nasdaq Capital Market, our securities could continue to

                                                                        35
Table of Contents



trade on the NASD's over-the-counter bulletin board following any delisting from the Nasdaq Capital Market, or on the Pink Sheets, as the case
may be. Any such delisting of our securities could have an adverse effect on the market price of, and the efficiency of the trading market for,
our securities, not only in terms of the number of shares that can be bought and sold at a given price, but also through delays in the timing of
transactions and less coverage of us by securities analysts, if any. Also, if in the future we were to determine that we need to seek additional
equity capital, it could have an adverse effect on our ability to raise capital in the public or private equity markets. The initial public offering
price for our common stock will be determined through negotiations with the underwriters. This initial public offering price may vary from the
market price of our common stock after the offering and investors may therefore be unable to sell their common stock at or above the initial
public offering price.

Our stock price will be volatile, meaning purchasers of our common stock could incur substantial losses.

     Our stock price is likely to be volatile. The stock market in general and the market for medical technology companies in particular have
experienced extreme volatility that has often been unrelated to the operating performance of particular companies. As a result of this volatility,
investors may not be able to sell their common stock at or above the initial public offering price. The following factors, in addition to other risk
factors described in this section and general market and economic conditions, may have a significant impact on the market price of our
common stock:

     •
            the announcement of new products or product enhancements by us or our competitors;

     •
            developments or disputes concerning patents or other intellectual property rights;

     •
            changes in the structure of third-party reimbursement in the U.S.;

     •
            the departure of key personnel;

     •
            results of our research and development efforts and our clinical trials;

     •
            regulatory developments in the U.S. and foreign countries;

     •
            developments concerning our clinical collaborators, suppliers or marketing partners;

     •
            changes in financial estimates or recommendations by securities analysts;

     •
            failure of any new products, if approved, to achieve commercial success;

     •
            product liability claims and litigation against us;

     •
            the strength and variations in our financial results or those of companies that are perceived to be similar to us;

     •
            general economic, industry and market conditions; and

     •
            future sales of our common stock.
      A decline in the market price of our common stock could cause you to lose some or all of your investment and may adversely impact our
ability to attract and retain employees and raise capital. In addition, stockholders may initiate securities class action lawsuits if the market price
of our stock drops significantly. Whether or not meritorious, litigation brought against us could result in substantial costs and could divert the
time and attention of our management. Our insurance to cover claims of this sort may not be adequate.

We have broad discretion in the use of the net proceeds from this offering and may not use them effectively.

    We cannot specify with certainty the particular uses of the net proceeds we will receive from this offering. Our management will have
broad discretion in the application of the net proceeds, including

                                                                          36
Table of Contents



for any of the purposes described in "Use of Proceeds." Accordingly, you will have to rely upon the judgment of our management with respect
to the use of the proceeds, with only limited information concerning management's specific intentions. Our management may spend a portion
or all of the net proceeds from this offering in ways that our stockholders may not desire or that may not yield a favorable return. The failure by
our management to apply these funds effectively could harm our business and financial condition. Pending their use, we may invest the net
proceeds from this offering in a manner that does not produce income or that loses value.

Concentration of ownership among our directors, executive officers, and principal stockholders may prevent new investors from
influencing significant corporate decisions.

     Upon closing of this offering, based upon beneficial ownership as of March 31, 2011, our directors, executive officers, holders of more
than 5% of our common stock, and their affiliates will, in the aggregate, beneficially own approximately • % of our outstanding common
stock. As a result, these stockholders, subject to any fiduciary duties owed to our other stockholders under New York law, will be able to
exercise a controlling influence over matters requiring stockholder approval, including the election of directors and approval of significant
corporate transactions, and will have significant control over our management and policies. Some of these persons or entities may have
interests that are different from yours. For example, these stockholders may support proposals and actions with which you may disagree or
which are not in your interests. The concentration of ownership could delay or prevent a change in control of our Company or otherwise
discourage a potential acquirer from attempting to obtain control of our Company, which in turn could reduce the price of our common stock.
In addition, these stockholders, some of whom have representatives sitting on our Board of Directors, could use their voting influence to
maintain our existing management and directors in office, delay or prevent changes of control of our Company, or support or reject other
management and board proposals that are subject to stockholder approval, such as amendments to our employee stock plans and approvals of
significant financing transactions.

If there are substantial sales of our common stock, our stock price could decline.

     If our existing stockholders sell a large number of shares of our common stock or the public market perceives that these sales may occur,
the market price of our common stock could decline. Based on shares outstanding on March 31, 2011, upon the closing of this offering,
assuming no outstanding options are exercised prior to the closing of this offering, we will have approximately • shares of common stock
outstanding. All of the shares offered under this prospectus will be freely tradable without restriction or further registration under the federal
securities laws, unless purchased by our affiliates. The remaining • shares outstanding upon the closing of this initial public offering will be
available for sale pursuant to Rules 144 and 701, and the volume, manner of sale and other limitations under these rules, as follows:

     •
            • shares of common stock will be eligible for sale in the public market, beginning 90 days after the effective date of this
            prospectus, unless the lock-up period applicable to these holders is otherwise extended pursuant to its terms;

     •
            • shares of common stock will be eligible for sale in the public market, beginning 180 days after the effective date of this
            prospectus, unless the lock-up period applicable to these holders is otherwise extended pursuant to its terms; and

     •
            the remaining    • shares of common stock will become eligible for sale in the public market beginning        • , 20[      ].

     Existing stockholders holding an aggregate of • shares of common stock (including shares of series A preferred and series B preferred
stock, and holders of our convertible debt, which securities will be automatically converted into our common stock immediately prior to the
completion of the

                                                                        37
Table of Contents



offering) and warrant holders holding warrants to purchase • shares of our common stock, based on shares outstanding as of March 31,
2011 have rights with respect to the registration of these shares of common stock with the SEC. See "Description of Capital
Stock—Registration Rights." If we register these shares of common stock, they can immediately sell those shares in the public market, subject
to any lock-up agreements.

      Promptly following this offering, we intend to register up to 7,068,548 shares of common stock that are authorized for issuance under our
equity incentive plans. As of June 30, 2011, 4,363,548 shares were subject to outstanding options, of which 2,218,548 shares were vested. Once
we register these shares, they can be freely sold in the public market upon issuance, subject to the lock-up agreements referred to above and
restrictions on our affiliates.

You will incur immediate and substantial dilution as a result of this offering.

     The initial public offering price of this offering is substantially higher than the book value per share of our common stock. As a result,
purchasers in this offering will experience immediate and substantial dilution of $ • per share in the tangible book value of our common
stock from the initial public offering price, based on the number of shares outstanding as of March 31, 2011. This is due in large part to earlier
investors in our Company having paid substantially less than the initial public offering price when they purchased their shares. Investors who
purchase shares of common stock in this offering will contribute approximately • % of the total amount we have raised to fund our
operations but will own only approximately • % of our common stock, based on the number of shares outstanding as of March 31, 2011. In
addition, the exercise of currently outstanding options and warrants to purchase common stock and future equity issuances, including future
public or private securities offerings and any additional shares issued in connection with acquisitions, will result in further dilution.

Our charter documents and New York law may inhibit a takeover that stockholders consider favorable and could also limit the market price
of our stock.

     Provisions of our certificate of incorporation and bylaws and applicable provisions of New York law may make it more difficult for or
prevent a third party from acquiring control of us without the approval of our Board of Directors. These provisions:

     •
            limit who may call a special meeting of stockholders; and,

     •
            do not permit cumulative voting in the election of our directors, which would otherwise permit less than a majority of stockholders
            to elect directors; and,

     In addition, Section 912 of the New York Business Corporation Law generally provides that a New York corporation may not engage in a
business combination with an interested stockholder for a period of five years following the interested stockholder's becoming such. An
interested stockholder is generally a stockholder owning at least 20% of a corporation's outstanding voting stock. These provisions may have
the effect of entrenching our management team and may deprive you of the opportunity to sell your shares to potential acquirors at a premium
over prevailing prices. This potential inability to obtain a control premium could reduce the price of our common stock.

                                                                        38
Table of Contents


                                             Special Note Regarding Forward-Looking Statements

     This prospectus contains forward-looking statements that involve substantial risks and uncertainties. All statements, other than statements
of historical facts, included in this prospectus regarding our strategy, future operations, future financial position, future revenues, projected
costs, prospects, plans and objectives of management are forward-looking statements. The words "anticipates," "believes," "estimates,"
"expects," "intends," "may," "plans," "projects," "will," "would" and similar expressions are intended to identify forward-looking statements,
although not all forward- looking statements contain these identifying words. Although we do not make forward-looking statements unless we
believe we have a reasonable basis for doing so, we cannot guarantee their accuracy. We may not actually achieve the plans, intentions or
expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Actual
results or events could differ materially from the plans, intentions and expectations stated in the forward-looking statements we make. We have
included important factors in the cautionary statements included in this prospectus, particularly in the "Risk Factors" section, that we believe
could cause actual results or events to differ materially from the forward-looking statements that we make. Additional risks, uncertainties and
factors, other than those discussed under "Risk Factors," could also cause our actual results to differ materially from those projected in any
forward-looking statements we make. We operate in a very competitive and rapidly changing environment in which new risks emerge from
time to time and it is not possible for us to predict all risk factors, nor can we address the impact of all factors on our business or the extent to
which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking
statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures
or investments we may make. We do not assume any obligation to update or revise any forward-looking statements, or to so update the reasons
actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in
the future.


                                                                  Use of Proceeds

      We estimate that we will receive net proceeds of approximately $ • million from the sale of [ • ] million shares of our common
stock at an assumed initial public offering price of $[ • ] per share, the mid-point of the range set forth on the cover page of this prospectus,
after deducting underwriting discounts and commissions and estimated expenses of approximately $ • , which includes our underwriters'
non-accountable expense allowance, legal, accounting, printing costs and expenses, and various fees associated with the registration and listing
of our securities payable by us. If the underwriters exercise their over-allotment option in full, we will receive an additional $ • after
deducting $ • for underwriting discounts and commissions. We will not receive any of the proceeds from the sale of shares by the selling
stockholders.

     We expect to use the net cash proceeds of the offering:

     •
             To launch our VivaNet Solution, including hiring a U.S.-based sales and technical support team;

     •
             To support research and development for other clinical applications of our technology beyond the early detection and diagnosis of
             skin cancer;

     •
             To increase VivaNet server capacity; and,

     •
             The balance, if any, for working capital and other general corporate purposes.

     We also plan to use approximately $400,000 from the proceeds of this offering to pay certain of our outstanding trade payables, and
approximately $40,000 to repay certain outstanding affiliate debt. While we expect to use the net proceeds for the purposes described above,
we have not yet determined specific allocations of the proceeds among such purposes. Furthermore, we will have significant discretion with
respect to the application of such proceeds. In the event that our plans change, our

                                                                         39
Table of Contents



assumptions change or prove to be inaccurate, or the proceeds of this offering prove to be insufficient, it may be necessary or advisable to
reallocate proceeds or to use proceeds for other purposes, or we may be required to seek additional financing or we may be required to curtail
our operations. As a result of the foregoing, our success will be affected by our discretion and judgment with respect to the application and
allocation of the proceeds of this offering.

     Pending use of the proceeds from this offering, we may invest the proceeds in a variety of capital preservation investments, including
cash, cash equivalents and short-term investments.


                                                                Dividend Policy

     We have never declared or paid cash dividends on our common stock. We currently intend to retain our cash for the development of our
business. We do not intend to pay cash dividends to our stockholders in the foreseeable future.

     We are now, and expect in the future, to be subject to covenants in debt arrangements that place restrictions on our ability to pay
dividends. Other than those restrictions, and the limitation that applicable law provides that dividends may only be paid out of available
surplus, the payment of dividends will be at the discretion of our Board of Directors and will depend on our results of operations, capital
requirements, financial condition, prospects, contractual arrangements, any limitations on the payment of dividends present in our current or
future debt agreements, and other factors that our Board of Directors may deem relevant.

                                                                       40
Table of Contents


                                                                      Capitalization

      You should read this capitalization table together with the sections of this prospectus entitled "Management's Discussions and Analysis of
Financial Condition and Results of Operations" and with the financial statements and related notes to those statements included elsewhere in
this prospectus.

     The following table sets forth our capitalization as of March 31, 2011:

         (i) on an actual basis;

     (ii) on a pro forma basis, which assumes or gives effect to:

            •
                       The conversion of the notes issued in connection with our 2010/2011 Convertible Debt Offering into        • shares of our
                       common stock; and,

            •
                       The conversion of all of our shares of Series A and Series B preferred stock into 2,896,666 shares of our common stock at the
                       closing of this offering; and,

     (iii) on a pro forma, as adjusted basis to give effect to the pro forma transactions described above and the receipt of the estimated net
proceeds from the sale of • shares offered hereby at an assumed public offering price of $ • per share, after deducting underwriting
discounts and commissions, and estimated offering expenses payable by us.

      The pro forma information set out in this table is for illustrative purposes and our capitalization following the completion of the offering
will be adjusted based on the actual initial public offering price and other terms of this offering determined at pricing. You should read this
table together with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our financial statements and
related notes appearing elsewhere in this prospectus.

                                                                                        As of March 31, 2011
                                                                                                                   Pro Forma
                                                                      Actual                 Pro Forma             As Adjusted
                                                                                             (unaudited)           (unaudited)
                 Long Term Debt:
                   2009 Convertible Debt Offering               $          700,000          $                  •   $                •
                   2010/2011 Convertible Debt Offering                   5,386,720                             •                    •
                   Other debt(1)                                           747,528                             •                    •
                   Warrant liabilities                                   2,890,699                             •                    •
                   Less debt discount and current
                     portion                                            (2,765,521 )                           •                    •

                                                                         6,959,426
                 Stockholders' Deficit:
                   Preferred stock                                         144,833                             •                    •
                   Common stock                                             44,866                             •                    •
                   Additional paid-in capital                           20,208,712                             •                    •
                   Accumulated deficit                                 (29,532,997 )                           •                    •

                    Total stockholders' (deficit) equity        $       (9,134,586 )        $                  •   $                •

                 Total capitalization                           $       (2,175,160 )        $                  •   $                •



                 (1)
                           Includes related party debt of $91,233.

     The table above excludes, as of March 31, 2011:

     •
4,083,548 shares of common stock issuable as of the date of this prospectus upon the exercise of outstanding stock options at a
weighted average exercise price of $ 2.76 per share;

                                                          41
Table of Contents

     •
            254,490 shares of our common stock issuable upon the exercise of warrants at a weighted average exercise price of $1.78 per
            share;

     •
            The conversion of the 2009 Convertible Notes into      • shares of our common stock, because such conversion is at the option of
            the holder;

     •
            up to 2,985,000 shares of common stock reserved for future grants under our 2010 Long-Term Equity Incentive Plan;

     •
            Warrants to purchase (i) 18,332 shares our common stock, at an exercise price of • , which is equal to 85% of the public
            offering price; (ii) • shares of our common stock, which is equal to 20,000 divided by the offering price, at an exercise price
            of • , which is equal to the offering price; (iii) • shares of our common stock, which is equal to 7,500 divided by the
            offering price, at an exercise of • , which is equal to the offering price; (iv) • shares of our common stock, which is equal to
            3% of the aggregate principal amount of the convertible notes offered pursuant to the 2010/2011 Convertible Debt Offering
            divided by the offering price, at an exercise price of $4.52; (v) • shares of our common stock, which is equal to 70% of
            5.5 million divided by the offering price, at an exercise price of $4.11; and, (vi) • shares of our common stock, which is equal
            to 2% of the total number of shares sold in this offering (excluding the over-allotment) at an exercise price of • , which is equal
            to 120% of the public offering price per share.

     •
            • shares of common stock which may be issued upon the conversion of certain fee entitlements payable to Northeast LCD
            Capital, exercisable at the option of Northeast LCD Capital.

     In addition, the table above excludes the placement of our 2011 Credit Facility and the issuance of our July 2011 Convertible Debt
Offering, which we entered into subsequent to March 31, 2011.


                                                                     Dilution

     If you invest in our common stock, your interest will be diluted to the extent of the difference between the public offering price per share
of our common stock and the net tangible book value per share of our common stock immediately after this offering. Net tangible book value
per share represents the amount of our common stockholders' equity, less intangible assets, divided by the number of shares of our common
stock outstanding. As of March 31, 2011, we had a net tangible book value of approximately $(9.6) million or $(2.13) per share of common
stock.

     Pro forma net tangible book value as of March 31, 2011 was      •    million or   • per common share, which includes or gives effect to:

     •
            The conversion of the notes issued in connection with during our 2010/2011 Convertible Debt Offering into         • shares of our
            common stock; and,

     •
            The conversion of all of our shares of Series A and Series B preferred stock into 2,896,666 shares of our common stock at the
            closing of this offering.

     Assuming the sale by us of • million shares of common stock offered in this offering at an assumed initial public offering price of
$[ • ] per share, the mid-point of the range set forth on the cover page of this prospectus, and after deducting the underwriting discounts and
commissions and estimated offering expenses, our as adjusted pro forma net tangible book value as of March 31, 2011, would have been
$ • , or $ • per share of common stock. This represents an immediate increase in pro forma net tangible book value of $ • per share
of common stock to our existing

                                                                         42
Table of Contents



stockholders and an immediate dilution of $   • per share to the new investors purchasing shares in this offering. The following table
illustrates this per share dilution:

              Assumed initial public offering price per share                                                           $     •
              Net tangible book value per share as of March 31, 2011                                                    $     •
              Pro forma net tangible book value per share as of March 31, 2011                                          $     •
              Increase in pro forma net tangible book value per share attributable to new investors                     $     •
              Pro forma net tangible book value per share after the offering                                            $     •
              Dilution per share to new investors                                                                       $     •

      The following table sets forth on a pro forma as adjusted basis, as of March 31, 2011, the number of shares of common stock purchased
from us, the total consideration paid and the average price per share paid by existing holders of common stock and by the new investors in this
initial public offering, before deducting the underwriting discounts and commissions and estimated offering expenses payable by us. The data
for "Existing Investors" includes or gives effect to (i) the conversion of the notes issued in connection with our 2010/2011 Convertible Debt
Offering into • shares of our common stock, and (ii) the conversion of all of our shares of Series A and Series B preferred stock into
2,896,666 shares of our common stock at the closing of this offering. All of these figures also reflect a • for • reverse stock split of our
common stock that we may complete prior to the closing of this offering. At a Special Meeting of Shareholders on March 29, 2011, our
shareholders authorized our Board of Directors to select and file one of several possible amendments to the Company's certificate of
incorporation which would effect a reverse stock split, pursuant to which any whole number of outstanding shares of the Company's common
stock between and including 1.1 and 2.5 would be combined into one share of such stock.

                                                                                                               Average
                                            Shares Purchased                   Total Consideration           Consideration
                                          Number           Percent           Amount            Percent        Per Share
              Existing Investors                    •             •%     $             •              •%    $                 •
              New Investors                         •             •                    •              •                       •
              Total                                 •         100.0 %                  •          100.0 %

       Assuming an offering price of $ • , which is the mid-point of the range set forth on the cover of this Prospectus, and further assuming
(i) the conversion of the notes issued in connection with our 2010/2011 Convertible Debt Offering into • shares of our common stock,
(ii) the conversion of the notes issued in connection with our 2009 Convertible Debt Offering into • shares of our common stock, (iii) the
conversion of all of our shares of Series A and Series B preferred stock into 2,896,666 shares of our common stock at the closing of this
offering, (iv) the issuance of 4,083,548 shares of common stock issuable as of the date of this prospectus upon the exercise of outstanding stock
options at a weighted average exercise price of $2.76 per share, (v) the issuance of 2,985,000 shares of common stock reserved for future grants
under our 2010 Long-Term Equity Incentive Plan, (vi) the issuance of • shares of common stock issuable upon exercise of warrants at an
aggregate exercise price of $ • share, (vii) • shares of common stock issuable upon exercise of warrants to be issued to the underwriters
upon completion of this offering at an exercise price equal to 120% of the public offering price per share, and (viii) • shares of common
stock which may be issued upon the conversion of certain fee entitlements payable to Northeast LCD Capital, exercisable at the option of
Northeast LCD Capital, the shares purchased by the new investors would constitute • % of all shares purchased from us, and the total
consideration paid by new investors would constitute • % of the total consideration paid for all shares purchased from us. In addition, the
average price per share paid by new investors would be $ • , and the average price per share paid by existing stockholders would be $ • .

                                                                        43
Table of Contents

    In the preceding tables, the shares of our common stock exclude, as of March 31, 2011:

    •
            4,083,548 shares of common stock issuable as of the date of this prospectus upon the exercise of outstanding stock options at a
            weighted average exercise price of $2.76 per share;

    •
            254,490 shares of our common stock issuable upon the exercise of warrants at a weighted average exercise price of $1.78 per
            share;

    •
            The conversion of the 2009 Convertible Notes into    • shares of our common stock, because such conversion is at the option of
            the holder;

    •
            up to 2,985,000 shares of common stock reserved for future grants under our 2010 Long-Term Equity Incentive Plan;

    •
            Warrants to purchase (i) 18,332 shares our common stock, at an exercise price of • , which is equal to 85% of the public
            offering price; (ii) • shares of our common stock, which is equal to 20,000 divided by the offering price, at an exercise price
            of • , which is equal to the offering price; (iii) • shares of our common stock, which is equal to 7,500 divided by the
            offering price, at an exercise of • , which is equal to the offering price; (iv) • shares of our common stock, which is equal to
            3% of the aggregate principal amount of the convertible notes offered pursuant to the 2010/2011 Convertible Debt Offering
            divided by the offering price, at an exercise price of $4.52; (v) • shares of our common stock, which is equal to 70% of
            5.5 million divided by the offering price, at an exercise price of $4.11; and, (vi) • shares of our common stock, which is equal
            to 2% of the total number of shares sold in this offering (excluding the over-allotment) at an exercise price of • , which is equal
            to 120% of the public offering price per share.

    •
            • shares of common stock which may be issued upon the conversion of certain fee entitlements payable to Northeast LCD
            Capital, exercisable at the option of Northeast LCD Capital.

    In addition, the dilution information above excludes the placement of our 2011 Credit Facility and the issuance of our July 2011
Convertible Debt Offering, which were entered into subsequent to March 31, 2011.

                                                                      44
Table of Contents


                         Management's Discussion and Analysis of Financial Condition and Results of Operations

     You should read the following discussion and analysis of our financial condition and results of operations together with our financial
statements and the related notes appearing at the end of this prospectus. Some of the information contained in this discussion and analysis or set
forth elsewhere in this prospectus, including information with respect to our plans and strategy for our business and related financing, includes
forward-looking statements that involve risks and uncertainties—see "Special Note Regarding Forward-Looking Statements." You should
review the "Risk Factors" section of this prospectus for a discussion of important factors that could cause actual results to differ materially from
the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

Overview

     We are a medical device and information technology company that designs, manufactures and sells non-invasive imaging devices, known
as the VivaScope 1500 and VivaScope 3000 confocal imagers. We designed these imaging devices to assist physicians in the early detection
and diagnosis of melanoma, basal cell carcinoma, and squamous cell carcinoma, thus frequently eliminating biopsies of benign lesions.
VivaScopes produce noninvasive, high-resolution cellular images of a skin lesion (i.e. a "virtual biopsy") for subsequent diagnostic review by
pathologists. These devices have received FDA 510(k) clearance as the VivaScope System. VivaNet is our telepathology server that transfers
virtual biopsy images typically from a dermatologist's office to a pathologist for near real-time diagnosis and reporting. In addition, VivaNet
stores the virtual biopsy images and the pathology report as a part of the patient's permanent medical record.

      We have sold over 300 VivaScope confocal imagers to date to academic medical centers and other research institutions using both direct
and international distribution channels. Following this offering, we plan to begin providing our VivaNet Solution to pathologists on a per
procedure fee basis and leasing our VivaScope confocal imagers to dermatology practices that are connected to VivaNet. We believe the
strategy of providing VivaNet services on a per procedure fee basis will provide us with a recurring revenue stream directly related to:

     (i)
             the average per procedure fee billed for each virtual biopsy provided to pathologists through VivaNet;

     (ii)
             the total number of VivaScopes leased to dermatology practices connected to VivaNet; and

     (iii)
             the average number of lesions imaged annually in these practices using our VivaScopes.

We refer to this strategy as our VivaNet Business Model and we believe it will become our primary source of revenue in the future. To date, we
have not derived revenues from our VivaNet Business Model.

     We have devoted substantially all of our resources to the development of our VivaScope confocal imagers and VivaNet, which expenses
have included research and development, conducting clinical investigation for our product candidates, protecting our intellectual property and
the general and administrative support of these operations. While we have generated revenue through product sales, we have funded our
operations largely through multiple rounds of private debt and equity financings. We believe that our existing cash and cash equivalents,
including the net proceeds of this offering, assuming we raise the maximum amount set forth on the cover of this prospectus, will allow us to
fund our operating plan through the first half of 2013. We have never been profitable and we reported net losses of approximately $4.3 million
and $4.1 million in 2010 and 2009, respectively. As of March 31, 2011, we had an accumulated deficit of approximately $29.5 million. We
expect to incur operating losses for the foreseeable future as we invest substantial resources to promote the commercialization, and attempt to
achieve widespread adoption, of our products. We may require additional financing to support these

                                                                        45
Table of Contents



and other operating activities. In addition, the report of our independent registered public accounting firm, Deloitte & Touche LLP, with respect
to our consolidated financial statements appearing at the end of this prospectus contains an explanatory paragraph stating that our recurring
losses from operations and working capital deficiency raise substantial doubt about our ability to continue as a going concern. Adequate
additional funding may not be available to us on acceptable terms, or at all. We expect that research and development expenses and sales and
marketing expenses will increase along with general and administrative costs, as we grow and operate as a public company. We will need to
generate significant revenues to achieve profitability and we may never do so.

     Our revenues consist of product revenue, non-product revenue and grant revenue. Product revenues consist of revenues derived from the
sale of our products and services, primarily VivaScopes, as well as an immaterial amount of revenue from maintenance and support services.
We recognize product revenue when evidence of an agreement exists, title has passed (generally upon shipment) or services have been
rendered. When product sales do not include installation or training, such as for all distributor sales and many direct sales, revenue is
recognized upon shipment. Certain direct sales contracts require installation at the customer's location prior to acceptance. As such, revenue
recognition on these contracts is delayed until all aspects of delivery, including installation, are complete. In addition, should the contract
include training, revenue recognition is delayed until training is complete. Non-product revenue, which to date has been in the form of a
payment from a European distributor for certain rights including a license to use certain technology in defined geographic areas, is recognized
as earned. Grant revenue, which has most recently been derived from a small business innovation research grant, is generally recognized as
expenses provided for under the grants are incurred.

Results of Operations

     Three Month Periods Ended March 31, 2011 and 2010

      We reported a consolidated net loss of $1.9 million or $(0.45) per share for the period ended March 31, 2011 as compared to consolidated
net loss of $1.2 million or $(0.51) per share for the period ended March 31, 2010. The increase in net loss resulted primarily from increased
operating costs as we continue the process of preparing to become a public company.

     The following presents a more detailed discussion of our consolidated operating results:

     Product sales. For the period ended March 31, 2011 and 2010, we had sales of our VivaScope confocal imagers and related products of
$648,000 and $316,000, respectively. The increase was primarily attributed to a continued increase in distributor sales in Europe and direct
sales in the United States and Brazil. Increases in revenue of our VivaScope products are primarily a result of sales of our devices to new
customers. As of March 31, 2011, we have recorded no revenue related to our VivaNet Solution.

     Cost of revenue. For the period ended March 31, 2011 and 2010, we incurred cost of revenue of $298,000 and $175,000, respectively.
As a percentage of product sales, cost of revenue was 46% and 55% for the periods ended March 31, 2011 and 2010, respectively. The decrease
in cost of sales as a percentage of product sales reflects our focus on decreasing material costs through strategic purchasing (quantity buys,
shipping efficiencies and scheduling purchases in advance to reduce costs from vendors) as well as through vendor negotiation on materials
pricing.

     General and administrative expenses. General and administrative expenses consist primarily of salaries and benefits, professional fees
(including legal and accounting fees incurred during the period ended March 31, 2011 in connection with our efforts to become a public
company), occupancy costs for our office, insurance costs and general corporate expenses. For the period ended March 31, 2011, general and
administrative expenses totaled $1.2 million and had increased $300,000 from the same

                                                                       46
Table of Contents



period in the prior year primarily as a result of increased professional fees and increased wages and benefits for new employees as we continue
the process of preparing to become a publicly traded company.

     Sales and marketing expenses. Sales and marketing expenses consist primarily of salaries and benefits and general marketing expenses.
For the period ended March 31, 2011, sales and marketing expenses totaled $394,000, an increase of $170,000 from the same period in the
prior year. The increase in sales and marketing expenses primarily resulted from an increase in wages and benefits due to hiring additional
employees, combined with stock-based compensation charges.

     Engineering, research and development expenses. Engineering, research and development expenses consist primarily of salaries and
benefits and material costs used in the development of new products and product improvements. For the period ended March 31, 2011,
engineering, research and development expenses totaled $249,000, an increase of $109,000 from the same period in the prior year. The increase
in engineering, research and development expenses primarily resulted from an increase in wages and benefits due to hiring additional
employees, combined with stock-based compensation charges.

     Interest expense. Interest expense increased $315,000 from $147,000 in March 31, 2010 to $462,000 for the period ended March 31,
2011. The increase in interest expense was as a result of borrowings under our 2010/2011 Convertible Debt Offering during the fourth quarter
of 2010 and the first quarter of 2011.

     Fair value adjustment of warrants expense. For the periods ended March 31, 2011 and 2010, we recognized $113,000 and $30,000,
respectively, of expense to record changes in the fair value of certain of our outstanding warrants not indexed to our own stock.

     Years Ended December 31, 2010 and 2009

     We reported a consolidated net loss of $4.3 million or $(1.61) per share for the year ended December 31, 2010 as compared to
consolidated net loss of $4.1 million or $(1.72) per share for the year ended December 31, 2009. The increase in net loss resulted primarily
from increased operating costs as we began the preparations to become a public company. The following presents a more detailed discussion of
our consolidated operating results:

     Product sales. For the years ended December 31, 2010 and 2009, we had sales of our VivaScope confocal imagers and related products
of $2.3 million and $1.9 million, respectively. The increase was primarily attributable to increased distributor sales in Europe, and direct sales
to Australia during 2010. Increases in revenue of our VivaScope products are primarily a result of sales of our devices to new customers. As of
December 31, 2010, we have recorded no revenue related to our VivaNet Solution.

      Non-Product Revenue. For the years ended December 31, 2010 and 2009, we recognized non-product revenue resulting from fee
payments from our European distributor of approximately $350,000 in each year. We received a one-time licensing fee of $1.75 million in
2006, which is being amortized over a five-year period in increments of $350,000 per year. This licensing fee gives our European distributor
the right to use and sell our technology in certain geographic areas, pursuant to a distribution agreement which expires on December 31, 2011,
with automatic one-year renewals thereafter.

      Grant revenue, net. For the years ended December 31, 2010 and 2009, we recognized grant revenue of $0 and $95,000, respectively,
under a National Cancer Institute, Small Business Innovation Research grant, which grant was awarded on a competitive basis. Grant revenue
is recognized as it is earned, as determined by the terms of the grant, and is presented net of expenses directly related to the project being
funded by the grant.

                                                                        47
Table of Contents

     Cost of revenue. For the years ended December 31, 2010 and 2009, we incurred cost of revenue of $1.1 million in each year. As a
percentage of product sales, cost of revenue was 50% and 57% for the years ended December 31, 2010 and 2009, respectively. The decrease in
cost of sales as a percentage of product sales reflects our focus on decreasing material costs through strategic purchasing (quantity buys,
shipping efficiencies and scheduling purchases in advance to reduce costs from vendors) as well as through vendor negotiation on materials
pricing.

     General and administrative expenses. General and administrative expenses consist primarily of salaries and benefits, professional fees
(including legal and accounting fees incurred in connection with our efforts to become a public company), occupancy costs for our office,
insurance costs and general corporate expenses. For the year ended December 31, 2010, general and administrative expenses totaled
$3.8 million and had increased $567,000 from the prior year primarily as a result of increased professional fees and increased wages and
benefits due to hiring additional employees as we began the process of preparing to become a public company.

     Sales and marketing expenses. Sales and marketing expenses consist primarily of salaries and benefits, costs of holding reader training
courses, and general marketing expenses. For the year ended December 31, 2010, sales and marketing expenses totaled $799,000, a decrease of
$81,000 due to cost efficiencies related to our sponsorship of reader education courses and our sales staffing.

     Engineering, research and development expenses. Engineering, research and development expenses consist primarily of salaries and
benefits and material costs used in the development of new products and product improvements. For the year ended December 31, 2010,
engineering, research and development expenses totaled $686,000, a decrease of $70,000 from the prior year related to decreased stock based
compensation charges resulting from the vesting of certain awards in 2009.

     Other operating income. During the year ended December 31, 2010, we were awarded $244,000 under the federal government's
Qualified Therapeutic Discovery Program. These funds were awarded based on amounts we spent on qualified research and development
during 2009. During the year ended December 31, 2009, we transferred two diagnostic instruments in settlement of all past due obligations
under a terminated research agreement. We recognized a gain on this settlement of $85,000.

    Interest expense. Interest expense increased $260,000 from $335,000 in December 31, 2009 to $595,000 for the year ended
December 31, 2010, as a result of increased borrowings during 2010.

     Loss on extinguishment of debt. During the year ended December 31, 2010, we successfully negotiated with multiple debt holders,
including certain of those who participated in our 2009 Convertible Debt Offering, holders of convertible debentures, holders of convertible
notes and others, to convert their outstanding principal and accrued interest into shares of our common stock. In connection with these
conversions, we recognized a loss of $76,000.

     Fair value adjustment of warrants expense. For the years ended December 31, 2010 and 2009, we recognized $73,000 and $183,000,
respectively, of expense to record changes in the fair value of certain of our outstanding warrants not indexed to our own stock.

     Other expenses. For the year ended December 31, 2010, we incurred other expenses of $3,000, primarily related to taxes not based on
income. For the year ended December 31, 2009, we incurred other income of $11,000 primarily related to miscellaneous income partially offset
by taxes not based on income.

Liquidity and Capital Resources.

     As of March 31, 2011, we had $2.4 million in current assets and $5.1 in current liabilities, resulting in a working capital deficit of
$2.7 million. As of December 31, 2010, we had $1.7 million in current

                                                                         48
Table of Contents



assets and $5.6 million in current liabilities, resulting in a working capital deficit of $3.9 million. Our working capital deficit decreased during
the three months ended March 31, 2011 as a result of placing an additional $1.8 million of new long-term indebtedness under the 2010/2011
Convertible Debt Offering. Current assets increased by $744,000 during the three months ended March 31, 2011 as a result of increased cash
from the issuance of convertible notes as well as increases in inventory to meet the requirements of increasing sales. Our current assets consist
of cash, accounts receivable, inventories, prepaid expenses and other. Our current liabilities consist of the current portion of long-term debt,
deferred revenue (customer deposits), accounts payable, and accrued expenses.

     We anticipate that we will continue to generate losses for the next several years as we commercialize our VivaNet Solution and expand
our corporate infrastructure. We believe that our existing cash and cash equivalents, including the net proceeds of this offering, will allow us to
fund our operating plan through the first half of 2013.

      In addition to the net proceeds from this offering, we will require significant amounts of additional capital in the future, and such capital
may not be available when we need it on terms that we find favorable, if at all. We may seek to raise these funds through public or private
equity offerings, debt financings, credit facilities, or partnering or other corporate collaborations and licensing arrangements. If adequate funds
are not available or are not available on acceptable terms, our ability to fund our operations, take advantage of opportunities, develop products
and technologies, and otherwise respond to competitive pressures could be significantly delayed or limited, and we may need to downsize or
halt our operations. Prevailing market conditions may not allow for such a fundraising or new investors may not be prepared to purchase our
securities at prices that are greater than the purchase price of shares sold in this offering.

     Because of the numerous risks and uncertainties associated with research, development and commercialization of medical devices, we are
unable to estimate the exact amounts of our working capital requirements. Our future funding requirements will depend on many factors,
including, but not limited to:

     •
             the cost of commercialization activities of our VivaNet Solution, and of our future product candidates, including marketing, sales
             and distribution costs;

     •
             the number and characteristics of any future product candidates we pursue or acquire;

     •
             the scope, progress, results and costs of researching and developing our future product candidates, and conducting clinical trials;

     •
             the timing of, and the costs involved in, obtaining regulatory approvals for our future product candidates;

     •
             the cost of manufacturing our existing VivaScope products and maintaining our VivaNet, as well as such costs associated with any
             future product candidates we successfully commercialize;

     •
             our ability to establish and maintain strategic partnerships, licensing or other arrangements and the financial terms of such
             agreements;

     •
             the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims, including litigation costs
             and the outcome of such litigation; and

     •
             the timing, receipt and amount of sales of, or royalties on, our future products, if any.

In May 2011, our stockholders approved a proposal to amend our Certificate of Incorporation to: (a) provide for the automatic conversion of
Series A Preferred Stock and Series B Preferred Stock immediately prior to the closing of an underwritten public offering; (b) provide that
registration rights related to the shares of common stock issuable upon conversion of the Series A and Series B Preferred Stock will terminate
when such shares can be sold without restriction under the securities laws; and

                                                                         49
Table of Contents



(c) provide for an equitable adjustment to the conversion ratio of Series A Preferred Stock and Series B Preferred Stock in connection with
specified recapitalizations of the Company. We are currently evaluating the accounting implications of the amendment. If the amendment is
deemed a redemption of the preferred stock for accounting purposes, the transaction would be accounted for as if we had issued new preferred
shares in exchange for the original preferred shares outstanding at the time of the amendment, resulting in a non-cash charge to earnings on our
common stock. While the impact on earnings per share could be material, there would be no net effect on our balance sheet, stockholder's
deficit, or cash flows. If the amendment is not deemed a redemption of preferred stock, there would be no impact to the financial statements.

Summary of Cash Flows

                                                                                 For the Three Months Ended
                                                                                          March 31,
                                                                                2011                     2010
                             Operating activities                        $      (1,502,937 )       $         (1,232,669 )
                             Investing activities                                  (66,856 )                     (1,239 )
                             Financing activities                                1,978,910                    1,271,896
                             Net increase in cash and cash
                               equivalents                                         409,117                          37,988

    Net cash used in operating activities. Cash used in operating activities was $1.5 million and $1.2 million for the three months ended
March 31, 2011 and 2010, respectively. The increase in cash used in operating activities largely related to the increase in net loss for the period,
combined with additional payments made to decrease trade payables and accrued interest.

    Net cash used in investing activities. Cash used in investing activities was $67,000 and $1,000 for the three months ended March 31,
2011 and 2010, respectively, and represents the purchases of property and equipment during these periods.

     Net cash provided by financing activities. Cash provided by financing activities was $2.0 million and $1.3 million for the three months
ended March 31, 2011 and 2010, respectively. The increase during the three months ended March 31, 2011 as compared to the three months
ended March 31, 2010 was a result of the proceeds from the sale of our 2010/2011 Convertible Debt as well as cash received for warrant
exercises.

                                                                                        For the Year Ended
                                                                                           December 31,
                                                                                 2010                        2009
                             Operating activities                         $      (4,014,728 )       $        (1,439,915 )
                             Investing activities                                   (15,377 )                   (15,540 )
                             Financing activities                                 4,839,849                   1,481,502
                             Net increase in cash and cash
                               equivalents                                          809,744                         26,047

     Net cash used in operating activities. Cash used in operating activities was $4.0 million and $1.4 million for the years ended
December 31, 2010 and 2009, respectively. The increase in cash used in operating activities largely related to the increase in net loss for the
period, combined with additional payments made to decrease trade payables, accrued interest and other accrued expenses.

     Net cash used in investing activities. Cash used in investing activities was $15,000 and $16,000 for the years ended December 31, 2010
and 2009, respectively, and represents the purchases of fixed assets during these periods.

                                                                        50
Table of Contents

    Net cash provided by financing activities. Cash provided by financing activities was $4.8 million and $1.5 million for the years ended
December 31, 2010 and 2009, respectively. The increase during 2010 was a result of the proceeds from the sale of our convertible notes and
warrants issued during this period, as well as warrants exercised during this period.

    Credit Facilities. In July 2010, we entered into a revolving line of credit facility. As of March 31, 2011 and December 31, 2010, there
was $2.0 million outstanding under this line of credit, which amount represents the only borrowings to date under this credit facility. In July
2011, we repaid all amounts outstanding under the credit facility with proceeds from our 2011 Credit Facility. See "Subsequent Events," below.

      2009 Convertible Debt Offering. As of March 31, 2011 and December 31, 2010, we had $700,000 and $900,000, respectively,
outstanding under remaining convertible notes which were originally issued between March and October of 2009 at an interest rate of 12%.
These notes are referred to earlier as the "2009 Convertible Notes." The 2009 Convertible Notes are currently convertible at the option of the
holder. However, because our 2010/2011 Convertible Debt Offering was deemed a "Placement" under the terms of the 2009 Convertible Notes,
the conversion ratio became tied to our "pre-money valuation" at the time of the 2010/2011 Convertible Debt Offering. This pre-money
valuation cannot be calculated, because the value of the securities issued in the 2010/2011 Convertible Debt Offering could not be determined
until a public offering price was established. Assuming an offering price of • per share, which is the mid-point of the filing range set forth
on the cover of this prospectus, the Convertible Debt Notes will, at the option of the holder, convert into shares of our common stock at a
conversion price of $ • per share. In March 2011, the holders of $200,000 of this debt exchanged the amounts due under the 2009 offering
for notes and warrants issued under the 2010/2011 Convertible Debt Offering. The two remaining convertible notes mature December 31,
2011.

     2010/2011 Convertible Debt Offering. We issued senior convertible promissory notes to new investors during November 2010 totaling
$2,075,000 and in January 2011 totaling $1,750,000. In addition, existing debt holders exchanged principal and accrued interest of $1.0 million
and $700,000 in November 2010 and during the first quarter of 2011, respectively, under the terms of their old debt or accounts payable for
new notes under this offering. The notes bear interest at 8% and mature on the earlier of November 15, 2012, or such earlier date as may be
required by acceleration, conversion or otherwise as defined in the agreement. The notes are automatically convertible into common stock upon
the consummation of an underwritten initial public offering of at least $10 million (inclusive of the principal and interest of the convertible
securities) at a conversion price equal to 70% of the price per share in an initial public offering, as defined in the agreement, and will therefore
convert into [ • ] shares of common stock, calculated using [ • ] as the midpoint of our filing range. As of March 31, 2011, we had
accrued interest expenses of $126,000 and principal of $5.5 million recorded for the 2010/2011 Convertible Debt Offering.

      We also issued to all 2010/2011 Convertible Debt Offering participants warrants to purchase shares of common stock at a price of $4.11
per share in an amount equal to 70% of the principal of the note divided by either the price of an initial public offering, the price of a
non-qualified financing or the equity value per share, or, in the event none of these transactions occur by November 15, 2012, $4.11, as defined
by the agreement. These warrants expire on November 15, 2015. Pursuant to the terms and conditions of the securities issued in our 2010/2011
Convertible Debt Offering, the holders of these securities are entitled to certain rights and damages in the event that we do not complete an
initial public offering, or similar financing event per the terms of the agreement, subject to the modifications described below. These securities
provide that if we have not completed an initial public offering prior to November 15, 2012, we must redeem the principal amount of the notes
at 140% of the face value plus any accrued and unpaid interest. In addition, beginning July 12, 2011 (the "Issuance Cut-Off Date"), the holders
of these securities are entitled to cash liquidated damages equal to 1.5% of each

                                                                        51
Table of Contents



purchaser's subscription amount per month until we complete an initial public offering or similar financing. This amount is capped at 10% of
the purchaser's subscription amount. These holders will also be entitled, beginning six months after the Issuance Cut-Off Date, to a reduction in
the exercise price of their warrants which is currently $4.11, at the rate of 5% per month until an offering is completed, with a floor exercise
price of $1.00. The holders of the requisite principal amount of notes required to effect a blanket amendment to all notes issued pursuant to the
2010/2011 Convertible Debt Offering have agreed to extend the Issuance Cut-Off Date from July 12, 2011 to January 1, 2012. If we do not
complete an initial public offering or similar financing on or prior to January 1, 2012, we will begin accruing liquidated damages retroactively
from July 12, 2011, at a rate of approximately $83,000 per month, with a cap of approximately $554,000, to be paid after a financing event
occurs. This offering will qualify as a financing event.

     Promissory Notes. As of March 31, 2011 and December 31, 2010, we had $626,000 and $1.2 million outstanding under outstanding
promissory notes. As of March 31, 2011, four notes remained outstanding, two of which have a combined principal of $600,000 and do not
accrue interest. The remaining two notes had a combined principal of $26,000, and accrue interest at 10%. Subsequent to March 31, 2011, we
made a payment of $26,000 in respect of these notes, although the accrued interest thereon remains oustanding and, as such, these notes were
classified as a current liability in our Consolidated Balance Sheets as of March 31, 2011 and December 31, 2010. Two additional notes with a
combined principal of $264,000 were exchanged in March 2011 for notes and warrants under the 2010/2011 Convertible Debt Offering above.
Also during the three months ended March 31, 2011, we made a payment of $153,000 on one of the outstanding notes.

     Trade Payables and Receivables. As of March 31, 2011 and December 31, 2010, we had approximately $321,000 and $809,000,
respectively, of accounts payable which was aged over 180 days. Management has reached agreements with many of these vendors to pay
overdue amounts over time, and also converted $86,000 of accounts payable into a promissory note during the three months ended March 31,
2011. Management plans to use a portion of the proceeds from this offering, to pay certain of our outstanding trade payables. Generally, the
terms for our trade payables are 30 days from the date of receipt. Certain vendors require partial or full prepayment, especially for parts unique
to Lucid orders.

     As of March 31, 2011 and December 31, 2010, we had accounts receivable of approximately $248,000 and $328,000, respectively. We
generally request 50% prepayment from all direct sales customers, with the balance due 30 days after shipment, although in certain
circumstances we require the full balance prior to shipment. Amounts collected prior to the recognition of revenue are recognized as customer
deposits and are included in "accrued expenses and other current liabilities." We characterize our relationships with our distributors as excellent
and we generally require full payment within 30 days of shipment to our distributors.

Subsequent Events

     Credit Facility. In July 2011, we entered into a Loan and Security Agreement with an institutional lender (previously defined as the
"2011 Credit Facility"), under which we may borrow up to $3.0 million in term loans for general working capital purposes and to refinance our
preexisting line of credit. These term loans have an interest rate equal to the greater of (a) 4.00% above the prime rate, or (b) 7.25%, and are
due in payments of principal and all accrued interest over thirty-six months. If we prepay any amount outstanding under this facility, we will be
charged prepayment fees on a sliding scale: 3% of the aggregate principal amount prepaid, if such prepayment occurs before the first
anniversary of the Loan and Security Agreement; 2% of the aggregate principal amount prepaid, if such prepayment occurs after the first
anniversary but on or before the second anniversary; and 1% of the aggregate principal amount prepaid, if such prepayment occurs after the
second anniversary of the Loan and Security Agreement. Our obligations under this facility are secured by (i) a lien on all of our

                                                                        52
Table of Contents

assets, including our intellectual property assets, (ii) the personal guarantees of Messrs. Eastman and Shea, and (iii) cash collateral, in the
amount of $500,000, which has been pledged by Northeast LCD Capital, LLC, which holds greater than 10% of our common stock. In
consideration for its pledge of cash collateral, Northeast LCD Capital, LLC is entitled to fees at an annual rate of 10%. These fees accrue on a
quarterly basis, and become payable upon completion of this offering. If a "Release Event," as defined in the Loan and Security Agreement,
occurs, the lender will release (i) that portion of the blanket lien which pertains to our intellectual property assets, (ii) the personal guarantees of
Messrs. Eastman and Shea, and (iii) the cash collateral pledged by Northeast LCD Capital, LLC. This offering will qualify as a "Release
Event." We borrowed $3.0 million in July 2011 under this facility. We used a portion of the proceeds to repay our preexisting line of credit in
full, and we are using the balance of the proceeds for general working capital purposes.

     Our credit facility imposes significant operating and financial restrictions which limit our ability to, among other things:

     •
             transfer or sell assets;

     •
             engage in business activities unrelated to our business;

     •
             consolidate, merge or sell all or substantially all of our assets;

     •
             incur additional indebtedness or liens;

     •
             pay dividends or make other distributions;

     •
             make investments;

     •
             enter into transactions with our affiliates; or,

     •
             make any unscheduled payments on our subordinated debt.

     In addition, we are required to satisfy and maintain specified financial ratios and other financial condition tests. Our ability to meet those
financial ratios and tests can be affected by events beyond our control, and we cannot assure you that we will meet those ratios and tests. A
breach of any of these covenants could result in a default. Upon the occurrence of an event of default our lenders could elect to declare all
amounts outstanding to be immediately due and payable and terminate all commitments to extend further credit.

     July 2011 Convertible Debt Offering. On June 28, 2011, our Board of Directors authorized a capital raise of up to $2.0 million (the
"July 2011 Convertible Debt Offering"). As of July 29, 2011, we had raised $830,000 pursuant to the July 2011 Convertible Debt Offering and
had received subscription agreements totaling an additional $340,000. The principal amount (plus any accrued interest) of the convertible notes
issued pursuant to the July 2011 Convertible Debt Offering will automatically convert into shares of our common stock at a conversion price
equal to 70% of the price at which shares of common stock are being sold in this offering. Warrants issued to those investors will become
exercisable, at an exercise price of $4.61 per share, upon the completion of this offering. These warrants entitle holders to purchase an amount
of our common stock equal to (i) seventy percent (70%) of the principal amount of each holder's convertible note, divided by (ii) the price at
which our common stock is being offered in this offering. These securities provide that if we have not completed an initial public offering prior
to November 15, 2012, we must redeem the principal amount of the notes at 140% of the face value plus any accrued and unpaid interest. In
addition, beginning January 1, 2012, the holders of these securities are entitled to cash liquidated damages equal to 1.5% of each purchaser's
subscription amount per month until we complete an initial public offering or similar financing. This amount is capped at 10% of the
purchaser's subscription amount. These holders will also be entitled, beginning July 1, 2012, to a reduction in the exercise price of their
warrants at the rate of 5% per month until an offering is completed, with a floor exercise price of $1.00.

                                                                           53
Table of Contents

Off-Balance Sheet Arrangements

     We had no off-balance sheet arrangements as of December 31, 2010, March 31, 2011 and as of the date of this prospectus.

Recently Issued Accounting Pronouncements

     In the normal course of business, management evaluates all new accounting pronouncements issued by the Financial Accounting
Standards Board, SEC, Emerging Issues Task Force, American Institute of Certified Public Accountants and other authoritative accounting
bodies to determine the potential impact they may have on our Consolidated Financial Statements. Based upon this review, we do not expect
any of the recently issued accounting pronouncements to have a material impact on our consolidated financial statements.

Critical Accounting Policies and Estimates

     The discussion and analysis of our financial condition, liquidity and results of operations are based upon our consolidated financial
statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The
preparation of these financial statements requires management to make estimates and assumptions that affect amounts reported therein. The
following lists our current accounting policies involving significant management judgment and provides a brief description of these policies:

     Fair Value. Certain elements of our financial statements require us to make estimates regarding the fair market value of our common
stock. Our management determines this value from time to time utilizing a variety of factors, including the report of a third party valuation
consultant, the general performance of the Nasdaq composite, and our financial results and condition. The Company uses Black-Scholes for
financial option modeling. We believe that the results we have calculated using the Black-Scholes option pricing model approximate the results
of the Binomial Options Pricing Model and has yielded a reasonable estimate of fair value for all assessed dates. However, it is likely that these
results may have been different than our fair market value if our stock had been listed and traded on an exchange.

     Historically, we have used estimates of the fair value of our common stock at various dates for the purpose of:

     •
            Determining the fair value of our common stock on the date of grant of a stock-based compensation award to our employees and
            non-employees as one of the inputs into determining the grant date fair value of the award.

     •
            Determining the fair value of our common stock on the date of grant of a restricted stock award to determine the amount of
            compensation expense to be recorded over the requisite service period.

     •
            Determining the fair value of our common stock to be issued at the date of conversion of convertible debt instruments into our
            common stock.

     •
            Determining the intrinsic value of certain debt features, such as beneficial conversion features, on the date of issuance of
            convertible instruments.

     •
            Determining the fair value of our common stock at each reporting period as an input into our model to value warrants classified as
            liabilities.

                                                                       54
Table of Contents

     Management has estimated the fair value of our common stock during 2010 as follows:

                                                                        Estimate of
               Date of Valuation                                        Fair Value                          Purpose
               April 27, 2010                                       $             3.21   Grants of stock-based awards
               May 27, 2010                                         $             3.29   Grants of stock-based awards
               November 15, 2010                                    $             3.95   Issuance of common stock related to
                                                                                         extinguishment of convertible debt
               December 30, 2010                                    $             4.16   Grants of stock-based awards

     In order to determine the fair value of our common stock at each measurement date, we relied in part on a valuation report retrospectively
prepared by an independent valuation consultant based on data we provided. The valuation report provided us with guidelines in determining
the fair value, but the determination was made by our management. We obtained a retrospective valuation by a third- party valuation specialist
because, as an emerging company, we have not had the resources at our disposal to gather all of the necessary inputs including information
regarding comparable companies. We applied the income approach/ discounted cash flow analysis based on our projected cash flow using
management's best estimate as of the valuation date. The determination of the fair value of our common stock requires complex and subjective
judgments to be made regarding our projected financial and operating results, our unique business risks, complex features of our outstanding
debt and equity instruments, the liquidity of our shares and our operating history and prospects at the time of valuation.

     In determining the fair value of our common stock we made estimates surrounding our weighted average cost of capital of 21.90% based
on a number of inputs, including the risk-free rate, an equity risk premium based on forward looking equity risk premium studies multiplied by
a Beta derived from Bloomberg of firms in a comparable line of business, a small stock premium from a Duff &Phelps study that reflects
expectations of equity holders, a company-specific risk premium based on revenue projections relative to comparable firms, plus the
Company's cost of debt. We used an option-pricing method to allocate enterprise value to preferred and common shares, taking into account the
guidance prescribed by the AICPA Audit and Accounting Practice Aid, "Valuation of Privately-Held Company Equity Securities Issued as
Compensation." The method treats common stock and preferred stock as call options on the enterprise's value, with exercise prices based on the
liquidation preference of the preferred stock. We also used an option-pricing method which involves making estimates of the anticipated timing
of a potential liquidity event, such as a sale of our Company or an initial public offering, and estimates of the volatility of our equity securities.
The anticipated timing is based on the plans of our Board of Directors and management. Estimating the volatility of the share price of a
privately held company is complex because there is no readily available market for the shares. We estimated the volatility of our shares at 70%
based on the historical volatilities of comparable publicly traded companies engaged in similar lines of business. Had we used different
estimates of volatility, the allocations between preferred and ordinary shares may have been different.

      We believe the fair value of our shares has increased due to broader acceptance at leading cancer centers of Lucid's VivaScope confocal
imagers and VivaNet. The Company closed an institutional financing organized by an investment bank which broke escrow in November 2010,
and a related conversion of debt to equity, which were key events reinforcing our future prospects. An increase in VivaNet installations and
testing phase utilization during the last half of the year was also was an important milestone for the Company.

     Stock-Based Compensation. We measure compensation cost for stock-based compensation at fair value and recognize compensation
over the service period for awards expected to vest. The fair value of each restricted stock award is based on management's estimate of the fair
value of our common stock on the date of grant and is recognized as compensation expense using straight-line amortization over

                                                                           55
Table of Contents



the requisite service period. The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes pricing model
and is recognized as compensation expense using straight-line amortization over the requisite service period.

     Management has estimated the fair value of our stock option awards during 2010 as follows:

                                                    Type of Stock-Based
                                                           Award           Estimate of
                             Date of Valuation           Granted           Fair Value          Valuation Method
                             May 27, 2010          Stock option           $       2.10   Black-Scholes pricing
                                                                                         model
                             December 30,          Stock option           $       2.74   Black-Scholes pricing
                               2010                                                      model

      The determination of fair value using the Black-Scholes model requires a number of complex and subjective variables. Key assumptions
in the Black-Scholes pricing model include the fair value of common stock, the expected term, expected volatility of the common stock, the
risk-free interest rate, and estimated forfeitures. We determined the fair value of our common stock using a variety of factors, including the
report of a third party valuation consultant, the general performance of the Nasdaq composite, and our financial results and condition. The
expected term is estimated by using the actual contractual term of the awards and the length of time for the recipient to exercise the awards.
Management determined that, as a private company, it was not practicable to estimate the volatility of our stock price, based on our low
frequency of price observations. Therefore, expected volatilities were based on a volatility factor computed based on the historical equity
volatilities of the common stock of publicly traded comparable firms. The risk-free interest rate was based on the implied yield available at the
time the options were granted on U.S. Treasury zero coupon issues with a remaining term equal to the expected term of the option. Estimated
forfeitures are based on historical data, as well as management's current expectations.

      Warrant Liabilities. We have issued warrants with complex provisions which require estimates of fair value to appropriately record our
potential liabilities. We account for warrants that are indexed to our own stock as a component of equity and record these amounts at estimated
fair value computed at the date of grant. Warrants issued that are not indexed to our own stock are treated as a liability and are initially
recorded at estimated fair value computed at the date of grant. This liability is adjusted to fair value at each period presented. We also review
each warrant with complex provisions for triggering events at each reporting period. For example, during 2010, we reclassified certain warrants
from liabilities to stockholders' equity to reflect the recognition of certain provisions which indexed the warrant to our own stock when the
warrant had not previously been indexed to our stock.

     The fair value of warrants is derived using the Black-Scholes pricing model. The Company believes that the Black-Scholes pricing model
results in a value that is not materially different from the value determined using a binomial pricing model. Effective January 1, 2009, new
accounting guidance related to determination of warrants indexed to our own stock resulted in certain of the outstanding warrants to be
classified as liabilities. We recorded a cumulative effect of a change in accounting principle to the 2009 opening accumulated deficit as a result
of the new accounting guidance. Where warrants are issued in connection with debt, the proceeds from the debt issuance are allocated between
the debt and warrants based on their relative fair values.

      Convertible Debt. We have certain debt instruments that contain conversion features. When the debt agreement allows for conversion at
a stated price that is lower than the fair value of the underlying common stock at the date the agreement is consummated, the difference
between the common stock price and the conversion price multiplied by the number of convertible shares is recorded as a discount on the debt.
When the debt agreement allows for conversion at a value that is contingent upon the occurrence of future events, the difference between the
common stock price and the conversion price multiplied by the number of convertible shares is recorded as a discount on the debt at the time
the contingency no longer exists.

                                                                          56
Table of Contents

     We also examine each of the conversion features as a potential embedded derivative, though we have determined that none of our existing
conversion features represent embedded derivatives. We continue this assessment at each reporting period. Certain of our convertible debt
instruments have been issued with detachable warrants. In these instances, the value of the warrants is recorded as a debt discount, which is
accreted to interest expense over the life of the debt.

     Income Taxes. We recognize income taxes under the asset and liability method. As such, deferred taxes are based on temporary
differences, if any, between the financial statement and tax bases of assets and liabilities that will result in future taxable or deductible amounts.
The deferred taxes are determined using the enacted tax rates that are expected to apply when the temporary differences reverse. Income tax
expense is based on taxes payable for the period plus the change during the period in deferred income taxes. Valuation allowances are
established when it is more likely than not that the deferred tax assets will not be realized and the deferred tax assets are reduced to the amount
expected to be realized.

     Tax positions are recognized only when it is more likely than not (likelihood of greater than 50%) that the position would be sustained
upon examination based solely on the technical merits of the position. Tax positions that meet the more likely than not threshold are measured
using a probability- weighted approach as the largest amount of tax benefit that is greater than 50% likely of being realized upon settlement.
We recognize accrued interest and penalties, if any, related to income tax liabilities as a component of income tax expense.

     Revenue Recognition. We recognize revenue when evidence of an arrangement exists, title has passed (generally upon shipment) or
services have been rendered, the selling price is fixed or determinable and collectability is reasonable assured. When transactions include
multiple deliverables, we apply the accounting guidance for multiple element arrangements to determine if those deliverables constitute
separate units of accounting. Revenue on arrangements that include multiple elements is allocated to each element based on the relative fair
value of each element. Each element's allocated revenue is recognized when the revenue recognition criteria for that element have been met,
although multiple element arrangements have not been material through March 31, 2011. Fair value is generally determined by objective
evidence, which is based on the price charged when each element is sold separately. All costs related to product shipment are recognized at
time of shipment and included in cost of revenue. We do not provide for rights of return to customers on product sales.

Quantitative and Qualitative Disclosures about Market Risk

     Foreign Currency Exchange Risk—As of March 31, 2011 and through the date of this prospectus, we did not have significant exposure to
foreign currency exchange rates as substantially all of our transactions are denominated in U.S. dollars.

     Interest Rate Risk—We have $3.0 million in outstanding borrowings under our 2011 Credit Facility which has a variable interest rate with
a floor of 7.25%. Should interest rates rise above 7.25%, a 1% change in interest rates will change our annual interest expense by $30,000. The
remainder of our long-term debt has fixed rates and is not subject to interest rate fluctuations.

                                                                         57
Table of Contents


                                                                  Our Business

Overview

     We are a medical device and information technology company that designs, manufactures and sells non-invasive imaging devices, known
as the VivaScope 1500 and VivaScope 3000 confocal imagers. We designed these imaging devices to assist physicians in the early detection
and diagnosis of melanoma, basal cell carcinoma, and squamous cell carcinoma, thereby frequently eliminating biopsies of benign lesions.
VivaScopes produce noninvasive, high-resolution cellular images of a skin lesion (i.e. a "virtual biopsy") for subsequent diagnostic review by
pathologists. These devices have received FDA 510(k) clearance as the VivaScope System. VivaNet is our telepathology server that transfers
virtual biopsy images typically from a dermatologist's office to a pathologist for near real-time diagnosis and reporting. In addition, VivaNet
stores the virtual biopsy images and the pathology report as a part of the patient's permanent medical record.

     The primary components of VivaNet Solution comprise:

     •
            The VivaScope System—which includes either an arm-mounted VivaScope 1500 imaging head or a hand-held VivaScope 3000
            imaging head, or both—that uses a low power laser to clearly visualize thin layers of individual cells in the skin, without the need
            for an invasive biopsy; and

     •
            The VivaNet server that seamlessly transfers, stores, and retrieves VivaScope virtual biopsy images for use by dermatologists and
            pathologists; and

     •
            The VivaNet workstation that displays virtual biopsy images for interpretation, diagnosis and reporting by pathologists.

     The VivaNet Solution is designed to emulate the current clinical practice for the diagnosis of suspicious skin lesions. The primary
difference between the current standard of care and the use of our system is that rather than surgically excising a suspicious specimen of skin
tissue and shipping it for subsequent microscopic examination by a pathologist, a dermatologist using a VivaScope simply images the lesion
and sends a high resolution virtual biopsy through VivaNet to a pathologist for diagnosis. This results in a procedure that does not require
surgical excision of a lesion that is often benign and a pathologist's report can be rendered more quickly than it can in the traditional biopsy
model. A VivaNet pathology report can be conveyed to the patient in near real-time, thus eliminating the days to weeks of waiting and the
associated patient anxiety often associated with traditional biopsy assessments, and potentially allows for an earlier onset of treatment.

     We have sold over 300 VivaScope confocal imagers to date to academic medical centers and other research institutions using both direct
and international distribution channels. Physicians using our confocal imagers have published their research results in peer reviewed papers in
medical journals. We believe these publications have established the brands "Lucid" and "VivaScope" in the dermatology community. As a
consequence many of our VivaScopes are now used regularly in the U.S., Europe and Australia in clinical and research settings for the
evaluation of lesions suspicious for skin cancer.

     In addition to FDA clearance, our VivaScope 1500 and VivaScope 3000 are also CE marked as medical devices for sale and clinical use in
the European Union, and the VivaScope 1500 is cleared by the Australian Therapeutic Goods Administration and the Chinese State Food and
Drug Administration. We have protected our products with 53 patents, 42 of which are United States patents and the remaining 11 are foreign
patents. In addition, we have 27 additional U.S. and foreign patents pending. Our portfolio of issued patents includes both method and
apparatus patents.

      We currently sell our VivaScopes to academic medical centers and research institutions (our institutional customers) through direct
distribution channels in the United States, the rest of the Western Hemisphere and Australia. We rely primarily on third party distributors in
other parts of the

                                                                        58
Table of Contents



world. In the future we intend to continue selling our VivaScopes to our institutional customers in this manner.

     Following this offering, we plan to begin providing our VivaNet Solution to pathologists on a per procedure fee basis and leasing our
VivaScope confocal imagers to dermatology practices that are connected to VivaNet. We believe the strategy of providing our VivaNet
Solution on a per procedure fee basis will provide us with a recurring revenue stream directly related to:

            (i) the average per procedure fee billed for each virtual biopsy provided to pathologists through VivaNet;

           (ii) the total number of VivaScopes leased to dermatology practices connected to VivaNet; and

           (iii) the average number of lesions imaged annually in these practices using our VivaScopes.

We refer to this strategy as our VivaNet Business Model and we believe it will become our primary source of revenue in the future. To date, we
have not derived revenues from our VivaNet business model.

     We believe this VivaNet Business Model will allow us to provide access to our VivaScope confocal imagers and VivaNet workstations
without requiring significant up front capital investments by the participating physicians. We believe this model will help facilitate adoption of
our technology by dermatologists and will drive the recurring revenue stream (i.e., per procedure fees) received from pathologists evaluating
the images.

Industry

      Limitations of Current Melanoma and Non-Melanoma Cancer Diagnosis. Melanomas and non-melanoma skin cancers ("NMSCs") are
diagnosed by pathologists based on gross and microscopic examination of biopsy tissue specimens generally provided to them by
dermatologists, plastic surgeons or primary care physicians, or PCPs. In the United States, these physicians rely primarily on visual clinical
evaluation of skin lesions in order to determine which lesions to biopsy and send to the pathologist for evaluation. Consequently, these clinical
examinations are limited to the surface appearance of the suspicious skin lesion and are heavily dependent on the physician's experience and
skill. According to a 2005 paper by Welch, et al. published in the British Journal of Dermatology , U.S. physicians typically biopsy more than
40 suspicious lesions to find one melanoma. Dermatologists who specialize in the management of skin lesions may also use dermoscopy, a
method of viewing a lesion's gross superficial subsurface structure under magnification.

     Basal cell and squamous cell carcinomas are also clinically assessed by a physician using visual examination. As is the case for
melanoma, lesions suspicious for NMSC are biopsied and the tissue is sent to the pathologist for definitive diagnosis. Since most NMSCs are
considerably less lethal than melanoma, they are subject to a lower over-biopsy rate. We believe that the NMSC over-biopsy rate is in the range
of approximately 2:1.

      Our internal market research suggests that, while melanoma is the dominant concern of dermatologists, these physicians are also interested
in better technology for identifying and clinically diagnosing both basal cell carcinoma and squamous cell carcinoma. Our data also suggests
these physicians are significantly more likely to adopt a technology that can assist in the diagnosis of all three of these skin cancers, as opposed
to a technology that can only assist in the diagnosis of melanoma. We have also learned from our market research that physicians and patients
have a strong preference for a technology that places the final decision regarding the diagnosis of skin cancer in the hands of a pathologist, in
contrast to a technology that makes a diagnosis using computer automated diagnosis based on software algorithms.

                                                                        59
Table of Contents

     According to the American Cancer Society, and data in a 2010 paper by Rogers, et al., published in the Archives of Dermatology , skin
cancer, including melanoma and non-melanoma skin cancers, or NMSCs, is the most common of all cancers in the United States and accounts
for approximately 70% of all new U.S. cancer cases each year. According to Rogers, there were an estimated 3.5 million NMSCs and the ACS
reports an estimated 62,190 melanomas in the U.S. population in 2006. This compares to approximately 1.4 million cases of other types of
cancer, according to Cancer Facts and Figures 2006. The three most common skin cancers, in rank order are: (i) basal cell carcinoma,
accounting for approximately 78% of skin cancers; (ii) squamous cell, totaling approximately 19% of skin cancers; and (iii) melanoma, which
accounts for an estimated 3% of skin cancer cases, but is responsible for the majority of all skin cancer deaths. The American Cancer Society
projected that approximately 11,740 deaths from all types of skin cancer occurred in 2010.

     Melanoma is currently receiving significant attention from the medical community and the public. The American Academy of
Dermatology estimated that in 2010, 68,130 new cases of invasive melanoma would occur and 8,700 deaths would result. It is the most
common cancer in young adults between the ages of 25 to 29, and is the primary cause of cancer death in women between the ages of 25 to 30,
according to the Melanoma Research Foundation. In addition, according to Medscape, approximately 46,770 additional new cases of
melanoma in situ also occurred in 2010, resulting in a total of roughly 114,900 new cases of melanoma in that year.

     A survey of dermatologists by Dr. Seema P. Kini of Emory University, as reported in Skin and Allergy News (2011), revealed that 58% of
these dermatologists did not report new cases of malignant melanoma to their state cancer registry. Consequently, the number of melanoma
cases reported in Cancer Facts & Figures 2010 may substantially under report the incidence of melanoma in the United States.

     According to the Skin Cancer Foundation's "Skin Cancer Facts", melanoma is the most deadly skin cancer and is responsible for
approximately 75% of skin cancer fatalities and while there is no known effective cure for metastatic melanoma, early detection and excision of
melanoma can lead to nearly a 99% cure rate. Early diagnosis allows cure by simple excision at a cost typically in the range of $2,500 for a
melanoma in situ. Advanced Stage IV melanoma is costly to treat resulting in medical expenses that are often in the range of $160,000 per
patient, as reported in the Dermatology Online Journal (2009).

     The Prevalence of Skin Cancer Diagnosis in the U.S. Medical System. We estimate that approximately 4.6 million specimens are
examined annually by U.S. pathologists for indications of melanoma (based on a 40:1 biopsy ratio and an estimated 114,900 new cases of
melanoma per year) and that another 7 million are examined for NMSC (based on our estimate of a 2:1 biopsy ratio and an estimated
3.5 million new cases of NMSC per year), for a total of approximately 11.6 million skin biopsies of suspicious lesions.

Strategy

     Our objective is for our VivaNet Solution to become the standard of medical care for the early detection and diagnosis of melanoma and
non-melanoma skin cancers. We believe that this solution may ultimately eliminate the need for most routine surgical skin biopsies. In order to
achieve this objective, we intend to pursue the following strategy:

     •
            Establish our VivaScope confocal imagers as a leading technology for the early detection and diagnosis of melanoma and
            non-melanoma skin cancers. Our core VivaScope confocal imaging technology, which is protected by 42 U.S. patents, has been
            used as an FDA Class I medical device in medical research for melanoma and skin cancer detection and diagnosis, as well as the
            identification of dermatologic diseases, since 1997. Since then, VivaScopes have become routinely used for the diagnosis of
            melanoma and other skin cancers in leading melanoma and skin cancer clinics around the world. In 2007, leading melanoma and
            skin cancer physicians who

                                                                      60
Table of Contents

         use our technology for melanoma diagnosis established the International Confocal Microscopy Working Group, or the ICMWG, to
         promote use of VivaScope confocal imaging technology in melanoma and skin cancer clinics around the world. We have supported
         and will continue to support the needs of these physicians and will sponsor the ICMWG as one means of expanding the number of
         clinical applications in dermatology and other fields of diagnostic medicine.

    •
           Verify third party payer reimbursement for pathologists and for us to support our VivaNet Business Model. We intend to offer
           our VivaNet Solution to pathologists on a per procedure basis in order to create a recurring revenue stream. This strategy is
           predicated on the availability of third party reimbursement for pathologists using VivaNet, and for our technical VivaNet services,
           under existing Current Procedural Terminology ("CPT") codes for pathology procedures. We have retained the services of two
           medical reimbursement firms. One has commenced discussions with the medical directors of third party private payers and the
           second will be initiating similar discussions with corresponding federal regional reimbursement carriers in an effort to obtain
           positive coverage decisions and routine reimbursement for the pathologists reading our VivaScope confocal images using our
           VivaNet workstations.

         One of our medical reimbursement consulting firms has advised us that the medical directors of several private payers, together
         representing over 72 million covered U.S. lives, have indicated their firms are likely to reimburse pathologists using our VivaNet
         Solution, and us, for our respective services under existing CPT reimbursement codes for pathology procedures. Consequently, we
         are initiating the reimbursement contracting process with these payers so that we can obtain direct reimbursement from them, as we
         continue to pursue reimbursement from other private and federal payers.

    •
           Verify third party payer reimbursement for dermatologists using our VivaScope confocal imagers. We intend to lease our
           VivaScopes to dermatologists in order to eliminate up-front costs and encourage broad adoption of the technology. Currently, there
           is an existing CPT reimbursement code available to these dermatologists that covers either the clinical photography or dermoscopy
           portion of the imaging procedures performed using our VivaScope System. We have also been advised that the medical directors
           of several private payers discussed immediately above have indicated their firms are likely to reimburse dermatologists for either
           the clinical photography or dermoscopy portions of the imaging procedures they perform with our VivaScope System under an
           existing CPT reimbursement code. We believe that dermatologists who already have reimbursement contracts with these private
           payers should be able to immediately begin billing for these portions of the imaging procedure. To date, we are not aware of any
           physicians who have actually received reimbursements under these existing CPT codes.

    •
           Build out our sales, marketing and technical support teams to commercialize our skin cancer application using both direct and
           distribution sales channels. We are currently directly distributing our products in the United States, the rest of the Western
           Hemisphere and Australia, and we rely primarily on third party distributors in other parts of the world. We plan to continue this
           strategy as we move our products into routine clinical practice. Our initial sales and marketing to U.S. and Australian based private
           practice physicians will focus on dermatologists with specialties in the diagnosis and treatment of melanoma and non-melanoma
           skin cancers. Our market research indicates that we must demonstrate acceptance by these skin cancer specialists before it is
           possible to enter the broader markets that include general practice dermatologists, plastic surgeons, and primary care physicians.
           We intend to begin expanding our U.S. sales, marketing and product support team during 2011. Internationally we have
           distribution agreements in place with active partners in Europe, the Mediterranean region, Japan, South Korea, Thailand and
           China. We intend to extend our reach further into the Asia Pacific region with additional distribution partners. Expansion into
           Central and South America is initially being

                                                                      61
Table of Contents

          directed from our headquarters in Rochester, New York until sales volumes in these regions are sufficient to justify sales offices or
          third party distributors in the regions.

     •
            Broaden application of our technology into additional fields. If we are successful in achieving penetration of our technology into
            dermatology practices for melanoma and non-melanoma skin cancer diagnosis, our long term strategy is to broaden the application
            of our technology: (i) into the primary care market for skin cancer diagnosis; and (ii) into other medical specialties that require
            pathologic examination of tissue. These include neuropathy screening, oral and cervical cancer detection and diagnosis and rapid
            screening of breast biopsy cores. We will also consider expansion though potential acquisition of complementary products and
            technologies in the diagnostic devices and medical information services arenas as opportunities arise.

Our Products

     Our VivaScopes are non-invasive confocal imagers for assisting in the early detection of melanoma and other skin cancer, as well as
non-malignant skin diseases. VivaScopes are comprised of an imaging head that, in clinical use, performs cellular resolution imaging of the
skin at the point of care. The resolution of images produced by our VivaScopes is similar to that viewed by a pathologist when observing thin
slices of biopsy tissue on a glass microscope slide with the aid of a medical grade microscope. Consequently, the images produced by a
VivaScope are of sufficiently high quality for a pathologist to perform a diagnosis from the images, thereby eliminating the need to perform a
biopsy in order to obtain tissue specimens of the patient's lesion for diagnosis.

     VivaScopes employ low power laser diodes and high precision optics to image the skin below its surface with high resolution, producing
images that depict the cellular and sub-cellular structure of the skin. VivaScopes are available with either an arm mounted imaging head (the
VivaScope 1500), similar in size to a dental x-ray head, or a convenient handheld imaging head (the VivaScope 3000). Both imaging heads are
supplied on a medical grade cart that, in addition to the imaging head, carries the image acquisition computer, the operator keyboard and the
LCD display. A typical VivaScope 1500 is shown in an illustration on page 64 of this prospectus and the VivaScope 3000 handheld imaging
head is shown in the insert photo on that same page. Also shown is the VivaCam dermatoscopic imager that is included with all clinical
VivaScope Systems. The VivaCam is a full color five megapixel imager that provides an image of the suspicious lesion similar to the visual
image seen by the attending physician on visual examination of the lesion, and can assist the pathologist in forming an accurate evaluation of a
suspicious lesion.

    VivaScopes and VivaCams are designed by our engineering team and assembled and tested by our manufacturing staff from piece parts
purchased from local and, in limited cases, specialized suppliers. System software for the VivaScope Systems is designed and written in-house
under the rigid requirements of our quality system.

     VivaNet provides a rapid link between the dermatologist and the pathologist. VivaNet is a DICOM (Digital Imaging and Communications
in Medicine) compatible medical image server and proprietary software that stores, retrieves and transfers VivaScope images between
physicians and pathologists. Images of suspicious lesions from a VivaScope can be transferred to a pathologist in near real-time for evaluation
and reporting. The report can be rapidly returned to the attending physician for discussion with the patient, thereby enabling timely patient
management.

     The DICOM standard was set by radiologists nearly 25 years ago, and supplier interoperability requirements were mandated about
15 years ago. DICOM is accepted worldwide for the secure and reliable transfer and storage of medical images. We selected this standard to
minimize our development efforts and to assure ease of interface and acceptance in hospitals, the United States Veterans Administration, and
the U.S. Department of Defense.

                                                                       62
Table of Contents

     In operation, images of a patient's lesion acquired in an attending physician's office are transferred to and stored on our VivaNet servers
located in Rochester, New York. These servers are located in a HIPAA compliant facility and all communications are encrypted and secure. A
digital copy of the images is immediately transferred to an online pathologist for evaluation and reporting. As soon as the evaluation is
complete and the pathologist has filed an electronic report, the report is saved with the original images on the VivaNet server as a medical
record. The report is then returned to the attending physician for discussion with the patient.

      Since we adopted the DICOM standard for VivaNet, we can readily use industry standard equipment and software development kits for its
implementation. As an example, our servers are Hewlett Packard MAS (Medical Archive Storage) level devices running HP's MAS software.
Our VivaScope application is based on Medicore's SDK (software development kit) of DICOM software routines. System software for VivaNet
is proprietary and has been designed and written in-house, based on DICOM principles and standards and the requirements of our quality
system.

     We are also developing the VivaScope 2500, a confocal imager designed to image excised surgical tissue for the purpose of determining
the margin between malignant and benign tissue during surgical procedures. The initial application for this device is in Mohs surgery, a
dermatological procedure for the precise surgical excision of skin cancers. We believe this device will be ready for initial market launch in late
2012.

     All of our FDA cleared VivaScope confocal imaging products are designed, manufactured, sold and serviced under the requirements of
our quality system. The quality system is designed to jointly meet the requirements of the FDA's current Good Manufacturing Practices, or
"GMP", and Quality System Regulation, or "QSR", the European Medical Device Directive ( 93 / 42 /EEC) , the International Organization for
Standardization's ("ISO") general requirements for quality management systems (ISO 9001), and ISO's medical device requirements for
regulatory purposes for quality management systems (ISO 13485).

      Our quality system has been audited annually since 2003 by G-MED North America for compliance with applicable international
regulatory and quality standards. G-MED North America is a subsidiary of LNE/G-MED, a quality, standards and training organization
headquartered in Paris, France. Each year, we have successfully maintained our CE mark and ISO 9001 and ISO 13485 certifications. The CE
mark allows us to sell our VivaScope confocal imagers into the European Union, or EU. We have also achieved regulatory clearance for some
or all of our VivaScope products in Australian, China and several other countries. As a consequence, we believe that our domestic and
international regulatory clearances are sufficient to support our business for the foreseeable future.

     In-vivo Confocal Imagers. Our first in-vivo confocal imaging product was the VivaScope 1000. Thirty of these devices, were sold to
early adopters in medical and commercial research applications. This legacy product is no longer in production. Our in-vivo confocal imagers,
including the legacy VivaScope 1000, the VivaScope 1500 and the VivaScope 3000 confocal imagers, all were initially sold as FDA Class I
exempt devices. In September 2008, we received FDA 510(k) clearance for the VivaScope System. As used in the 510(k) intended use
statement, the term VivaScope System covers both our VivaScope 1500 imaging head and the VivaScope 3000 handheld imaging head, either
together or as separate imaging systems. The term VivaScope System also includes our VivaCam dermatoscopic imager, a full color five
megapixel macroscopic imager.

                                                                        63
Table of Contents




    We believe the 510(k) level of clearance that we have achieved for the VivaScope System, comprised of the VivaScope 1500, the
VivaScope 3000 and the VivaCam, is sufficient to proceed with sale of our in-vivo confocal imagers for routine use in U.S. private
dermatology practices for clinical assessment of various forms skin disease, including skin cancers. This, combined with our CE mark for the
EU and our Therapeutic Goods Administration, or TGA clearance in Australia for the VivaScope 1500 provide similar clearance in three key
world markets for skin cancer detection and diagnosis.

      We have designed our VivaScope System to support the capture of: (i) clinical images of the patient; (ii) dermascopic images of the
patient's lesions; and (iii) confocal images of the patient's lesions. Medicare, Medicaid and some private payers provide reimbursement for
clinical imaging and/or dermascopic imaging under an existing CPT code. We believe the amount of reimbursement available under this
existing CPT code is adequate to support the VivaScope procedure when performed by a medical assistant or technician in the office of a
private practice dermatologist.

     The FDA approved "Indication for Use" of the VivaScope System is, "The VivaScope System is intended to acquire, store, retrieve,
display and transfer in vivo images of tissue, including blood, collagen and pigment, in exposed unstained epithelium and the supporting
stroma for review by physicians to assist in forming a clinical judgment."

    We recognize that a favorable reimbursement environment can have a significant impact on the adoption of our VivaScope confocal
imagers and VivaNet Solution and our commercial success. We

                                                                       64
Table of Contents



believe this is especially true for adoption by general dermatologists and pathologists. Although we expect that the level of reimbursement
available under existing CPT codes will be sufficient to support initial adoption by physicians, the level of reimbursement initially available
may not be adequate for physicians to adopt the technology in their practices at the rate we expect.

     Ex-Vivo Confocal Imagers. We also have developed VivaScope confocal imagers for rapidly imaging tissue that has been surgically
excised from the body. These devices, which are intended to require little or no tissue preparation to render images similar to those obtained
using traditional histology techniques, may have the potential to streamline the practice of conventional laboratory pathology procedures for
excised tissue analysis. Our ex-vivo confocal imagers are registered as FDA Class I exempt devices. They are categorized in the same FDA
Class as conventional medical microscopes used by pathologists to view microscope slides of human tissue. We believe that such status is
sufficient for us to sell the VivaScope 2500 for medical research applications, which is the current market for the device, and for the Mohs
surgery application, which we expect will be the first clinical application for device.

     The FDA registered "Indication for Use" of the VivaScope 2500 is, "The VivaScope 2500 is intended to produce electro-optically
enlarged images of unstained and unsectioned excised surgical tissue for medical purposes. The VivaScope 2500 is exempt from FDA 510K."




     VivaNet Server. Our VivaNet server is a DICOM compliant medical grade server that stores, retrieves and transfers images between
attending physicians, typically dermatologists, and diagnostic readers, typically pathologists. It is registered with the FDA as a Class I medical
image storage device, which categorizes it as a radiology diagnostic device. The FDA registered "Indication for Use" for

                                                                        65
Table of Contents



VivaNet is, "VivaNet® is a DICOM compliant server for the storage, retrieval, and transfer of medical images. VivaNet® does not digitize,
print, display, process, or irreversibly compress the medical images."




Intellectual Property

     General. Our policy is to protect our intellectual property by obtaining U.S. and foreign patents to protect the technology, inventions,
and improvements important to the development of our business, U.S. and international trademarks to protect our company name, logo, brands
and trade secrets which we enforce through confidentiality agreements with our employees, members of our board of directors and Scientific
Advisory Board, and through non-disclosure agreements with certain others outside the Company. Our employees and consultants are required
to execute patent assignment agreements.

      Patents. To date we have been awarded 42 U.S. patents, four Australian patents, three Japanese patents, two European patents, one
Chinese patent and one Canadian patent. All of these patents are owned by the Company. In addition, we have 27 additional U.S. and foreign
patents pending. Our portfolio of issued patents includes both method and apparatus patents. Generally, we file foreign counterparts of our
most fundamental U.S. patents and we have been successful in obtaining issuance of these fundamental foreign patents in Europe, Australia,
Japan, China and Canada while other foreign patent applications remain pending. Our pending patents include pending foreign counterparts of
our U.S. patents and patent applications as well as pending U.S. patents on new technology. We have granted limited licenses to our European
intellectual property to our distribution partner in Europe.

    For organizational purposes we categorize our patent portfolio into 7 distinct groups. These are:

    •
            handheld imaging;

    •
            digital pathology;

    •
            tissue navigation;

    •
            tissue stabilization;
•
    image quality;

                     66
Table of Contents

     •
             see and treat; and,

     •
             surgical pathology

     We currently hold seven (7) issued U.S. patents in the handheld imaging category, two (2) issued patents in the digital pathology category,
two (2) issued patents in the tissue navigation category, seven (7) issued patents in the tissue stabilization category, eight (9) issued patents in
the image quality category, six (6) issued patents in the see and treat category and nine (9) issued patents in the surgical pathology category.
These patent categories, and the corresponding patent numbers, are illustrated in the patent tree diagram below:




    The earliest U.S. patent in our portfolio was issued on August 5, 1997 and the latest U.S. patent in our portfolio was issued on June 14,
2011. Our patents expire between 2014 and 2026.

      In building our patent portfolio we have performed significant patent searches of the prior patent art in our field and we believe we are free
to practice our technology in the United States and elsewhere throughout the world. Nevertheless, we cannot be certain that our patent searches
have identified all of the relevant prior art, or that we will be free to practice our technology throughout the world, or that our patents will not
be challenged or circumvented by competitors. Whether a patent application should be granted or whether an issued patent is valid or is
infringed by another party are all matters of law. Therefore we cannot be certain that, if challenged, our patents, patent applications or other
intellectual property rights will be upheld. If one or more of our patents, patent applications or other intellectual property rights are invalidated,
rejected or found unenforceable, that could reduce or eliminate any competitive advantage we may have.

     Trademarks and Domain Names. We have obtained United States trademark registrations for the following marks: "VivaScope",
"Lucid", VivaBlock", "VivaStack", "VivaCam", "VivaNet", "VivaCell", VivaScopy" as well as our corporate logo. We have applied for U.S.
trademark protection for "VivaScan," which application has been approved and is pending for the next phase of examination before the United
States Patent and Trademark Office.

     Foreign trademarks have been obtained corresponding to some of our U.S. trademarks and others are pending foreign trademark approval.

     We have registered the Internet domain name of our Company's web site, www.lucid-tech.com. In addition, we have obtained the
following registered domain names: vivascope.com; vivascopy.com; vivascopy.net; telepathnet.com; and confocalalert.com.

                                                                         67
Table of Contents

     Trade Secrets. We also rely on trade secrets and technical know-how in the manufacture and marketing of our VivaScopes, VivaNet
servers and proprietary software, and VivaNet Solution. We require our employees, directors, consultants, contractors, visitors to our Company
and certain others (including members of our Scientific Advisory Board, which is still in formation) to execute non-disclosure agreements with
respect to our proprietary information. Although these agreements provide us a degree of protection, we cannot be sure that the agreements will
be upheld in a court of law or that a court of law will enforce an injunction against unauthorized disclosure by a party to our confidentiality
agreements.

     We believe that our apparatus and method patents, together with patents pending and unpatented trade-secrets and technical know-how,
provide us a significant competitive advantage in the marketplace; however, we cannot be certain that, if challenged, our patented methods and
apparatus or trade-secrets would be upheld. If any of our patented methods, patented apparatus or trade-secrets rights is invalidated, rejected or
found unenforceable, that could reduce or eliminate any competitive advantage we might otherwise have had.

Clinical Studies of the Efficacy of VivaScope Confocal Imaging

     Studies of the confocal images produced by our VivaScopes have been reported by numerous independent medical researchers in peer
reviewed publications in scientific and medical journals. These papers cover a variety of malignant and non-malignant skin diseases as well as
diseases of other human tissues and range from research observations and case reports to large clinical studies.

     Due to the prevalence of melanoma as a disease and its potentially life-threatening nature, a number of studies have been performed to
assess the accuracy of confocal imaging in its diagnosis. The published melanoma studies evaluating our VivaScope confocal imagers have
been conducted by dermatologists specializing in melanoma from around the world.

     The efficacy of any diagnostic test is commonly measured by its:

           1) sensitivity (the ability to detect disease when present);

           2) specificity (the ability to exclude disease when not present); and

           3) test accuracy (the number of correct diagnoses—either benign or malignant—versus the total number of diagnoses).

     The following table presents a comparison of the diagnostic accuracy for melanoma of: 1) visual clinical diagnoses: 2) biopsy followed by
examination of the excised tissue by a pathologist (today's standard of care), and; 3) our confocal imaging technology as aggregated from eight
independent published in peer reviewed medical journals between 2005 and 2009. These eight studies were performed without significant
financial support from Lucid and thus, we believe, represent independent scientific studies. Although earlier peer reviewed journal papers using
our VivaScopes pointed the way for future research, none included a large enough population of melanocytic lesions to have statistical
significance. The first paper to do so was published in 2005, and is included with seven subsequent studies summarized in the table below.




                                                                          68
Table of Contents

     The first row of the above table presents the accuracy of clinical examination of lesions as reported by Monheit and his co-authors
(Monheit, et al., "The Performance of MelaFind" Arch Dermatol. 2011 Feb;147(2):188-94.). Sensitivity in determining whether a suspicious
lesion is melanoma for the dermatologists participating in the reader arm of the study was reported to be 78%, meaning that, on average, those
dermatologists will miss 22% of all melanomas when using visual examination of the lesion. Specificity of the dermatologists participating in
the MelaFind arm of the study was reported to be 3.7%, meaning that those dermatologists will, on average, biopsy 27 benign lesions to find
one melanoma. Accordingly, the accuracy of visual clinical examination of suspicious lesions by dermatologists appears inadequate and we
believe better tools are needed for the clinical diagnosis of suspicious lesions.

      The accuracy of today's standard of care, biopsy followed by pathologic examination of the tissue specimen, which is not well
documented in the medical literature, is presented on the second row of the table. The data presented was derived from a paper "Discordance in
the Histopathologic Diagnosis of Melanoma and Melanocytic Nevi Between Expert Pathologists," published by Evan Farmer and his
colleagues in the journal Human Pathology (Volume 27, No. 6, pp 528-531, June 1996) (referred to herein as the "Farmer study"). This paper
provides concordance data for eight dermatopathologists in melanoma diagnosis. We analyzed these data to estimate the sensitivity, specificity
and test accuracy for melanoma diagnosis of the eight dermatopathologists, based on the assumption that the majority diagnosis would be the
final (i.e. consensus) diagnosis. Those estimates are summarized in the second row of the table and correspond to sensitivity of 90.4%,
specificity of 86.5% and test accuracy of 88.2% for the diagnosis of melanoma.

     Although the Farmer study was published 15 years ago, we believe that it remains representative of routine clinical practice for melanoma
diagnosis in commercial pathology laboratories. Other publications in peer reviewed journals such as Histopathology (1996), the American
Journal of Dermatopathology (1998) and Journal of Pathology (2002) indicate there is considerable discordance in the diagnosis of melanoma.
More recent papers have studied the use of advanced immunohistochemical staining techniques. For example, JF Gibbs, et al. (1999), and RA
Scolyer, et al. (2004), demonstrated that immunohistochemical stains were no more sensitive for the detection of melanoma than the traditional
haematoxylin and eosin (H&E) stains routinely employed for melanoma diagnosis in commercial labs.

     The third row of the table presents the arithmetic average of the sensitivity, specificity and test accuracy of diagnostic readers familiar
with the interpretation of confocal images produced by our VivaScopes for the diagnosis of melanoma, based on the results of the eight clinical
studies. Each of these studies reported the sensitivity and specificity of confocal imaging as compared to the diagnosis via pathologic
examination of biopsy tissue. These studies represent an aggregate of 1,407 equivocal melanocytic lesions, of which 443 were melanomas. All
eight studies followed similar clinical protocols and each study included lesion populations generally comprised of melanoma in situ ,
superficial spreading melanoma and invasive melanoma, as well as clinical and dermoscopic "mimics" of these malignant melanocytic lesions.
Generally the lesion populations included in each study were equivocal for melanoma under visual clinical evaluation and/or dermoscopy. In
addition, the diagnostic readers of the confocal images were blinded to the ultimate pathologic diagnosis.

     The average indicated sensitivity of the eight studies was 95.5%, specificity was 80.8% and test accuracy was 85.4%. The sensitivities
reported in the papers ranged from 90.7% to 100% and the specificities ranged from 57.1% to 99.0%. As would be normally expected, the
study with the highest sensitivity (100%) also had the lowest specificity (57%) reflecting the typical trade-off of sensitivity versus specificity in
a diagnostic test. One paper reported 98.2% sensitivity and 98.9% specificity based on the presence or absence of monomorphic melanocytes as
a single diagnostic criterion. These results, either in the aggregate or taken individually, are similar to the corresponding results achieved by
pathologic examination of tissue samples as reported in the Farmer study and significantly exceed the results of visual clinical diagnosis
reported in the Monheit paper.

                                                                         69
Table of Contents

     We believe that the positive clinical results demonstrated in these published melanoma studies, as well as similar positive results published
in peer reviewed medical journals for non-melanoma skin cancers (NMSCs) and other non-malignant skin disease, have contributed to our
VivaScopes being adopted for routine patient diagnosis and management in some of the leading melanoma and NMSC skin cancer clinics
around the world.

       In 2007, confocal imaging investigators in the field of confocal imaging, all of whom were at the time unaffiliated with us, formed the
International Confocal Microscopy Working Group. The stated purpose of this working group is to: (i) promote use of the confocal imaging
technology worldwide; (ii) provide training in the use of confocal imaging technology and interpretation of confocal microscopy images; and
(iii) coordinate collaborative research activities among its members. We view this as a strong testament to the clinical utility of our VivaScope
confocal imaging technology for the early detection of melanoma and NMSC. We routinely provide modest support for the meetings of the
ICMWG held in the U.S. in the form of funding for the meeting room and refreshments for the participants, generally amounting to less than
$3,000 for each meeting. Our European distributor provides a similar level of support for meetings held in Europe.

     Based on the clinical data available to date, we believe that dermatologists who image lesions using our VivaScope confocal imagers and
collaborate with pathologists using our VivaNet Solution should be able to more accurately identify melanomas and NMSC than is possible
with visual clinical observation of the suspicious lesion alone. This may lead to diagnosis of skin cancers when they are in their earliest, most
curable stage. Early detection of these skin cancers can reduce cost of treatment and minimize the number of unnecessary biopsies, thus
improving the care for and quality of life of these patients.

Our Sales Process

     We are currently directly selling our products in the United States, the rest of the Western Hemisphere, and Australia; in other parts of the
world, we rely primarily on third party distributors. We plan to continue this strategy as we attempt to move our products into routine clinical
practice. Initial sales and marketing to U.S. based private practice physicians will focus on dermatologists with specialties in the diagnosis and
treatment of melanoma and non-melanoma skin cancers. Our market research indicates that we must demonstrate acceptance by these skin
cancer specialists before it is possible to enter the broader markets that include general practice dermatologists, plastic surgeons, and primary
care physicians. We intend to expand our U.S. sales, marketing and product support team following the offering.

     For the year ended December 31, 2010, the Company had sales of approximately $1.3 million and $200,000 to two customers. These two
customers accounted for 82% and 13%, respectively, of the Company's accounts receivable balance at March 31, 2011.

     Following this offering, we plan to begin providing our VivaNet Solution to pathologists on a per procedure fee basis and leasing our
VivaScope confocal imagers to dermatology practices that are connected to VivaNet. We believe this strategy will provide us with a recurring
revenue stream directly related to:

           (i) the average per procedure fee billed for each set of images of a lesion provided through VivaNet for pathologic diagnosis;

          (ii) the total number of VivaScopes leased to dermatology practices providing images of lesions across VivaNet; and

          (iii) the average number of lesions imaged annually by our VivaScopes in these practices.

     We structured our VivaNet Business Model to allow physicians access to our VivaScope confocal imagers and VivaNet workstations
without significant up front capital investments. We believe this will facilitate adoption of our technology by dermatologists and will drive the
recurring revenue stream

                                                                        70
Table of Contents

(i.e., per procedure fees) we receive for providing virtual biopsy images to pathologists for diagnosis. We also expect to continue deriving
non-recurring revenue from customers in academic medical centers and other research institutions. These customers have purchased
VivaScopes either directly from us or through our distributors in the past and we expect they will continue to do so in the future. Although the
Company anticipates a similar model in all markets, it has not yet finalized a roll-out plan nor established a pricing model for markets outside
the U.S.

     Internationally, we have established distribution relationships with active partners in Europe and the Mediterranean region, Japan, South
Korea, Thailand and China. In these regions, we have agreements with exclusive distributors pursuant to which the distributor sells our
products within its specified territory on a best efforts basis, and is responsible for actively promoting and selling our products within its
assigned territory. In 2006, we entered into exclusive distribution and supply agreements with Mavig VmbH, an Austrian limited liability
company ("Mavig"), covering territory including Europe and the Mediterranean region. The supply agreement has an initial term expiring on
December 31, 2011, but renews automatically on an annual basis unless terminated for cause by either party. We have granted this distributor
an exclusive, irrevocable, fully paid and royalty-free license to use our dermatologic imaging systems and software, including telemedic
software used in the dermatologic and other medical fields, in defined geographic areas for a one-time fee of $1,750,000.

     Our next two largest distributors, after Mavig, are Integral Corporation ("Integral") and ConBio (China) Co., Ltd. ("ConBio"). Our
agreement with Integral is for an initial two-year period, which renews automatically for periods of one year unless terminated by either party
upon three-months' notice prior to the end of the then-current term. Integral's assigned territory is Japan, and there is no minimum sales
requirement. Integral is entitled to purchase products from us at a 30% discount to the published price list. Our agreement with ConBio
provides for an initial term of three years, and renews automatically for periods of one year unless terminated by either party upon three
months' notice prior to the end of the then-current term. ConBio's assigned territory is the Peoples Republic of China, including Hong Kong
and Macau, and there is no minimum sales requirement. ConBio is entitled to purchase products from us at a 40% discount to the published
price list. Payments from ConBio must be made in accordance with our standard payment terms, which require 100% of order value by sixty
(60) day irrevocable letter of credit when the order is placed.

      Except as noted above, all of the terms of our agreements with Integral, and ConBio are the same as those contained in our standard form
of distribution agreement, which we require of all other distributors. These standard agreements have an initial term of three years but renew
automatically on an annual basis unless terminated for cause or upon 90 days' written notice by either party. Each of our distribution
agreements contains certain non-competition agreements on behalf of the distributor. Our products are purchased by the distributor and resold
by the distributor to the end-user. We maintain an International Distributor Price List, which is amended in our discretion from time to time,
and each distributor is entitled to purchase products from us at a 30% discount to the published price list. Our standard payment terms require
100% of order value by sixty (60) day irrevocable letter of credit when the order is placed with Lucid. For Integral, we permit a 50% payment
at the time the order is placed, and the balance is billed on a net-30 basis upon shipping of the product, due to our long-standing relationships
with this distributor.

      These distribution relationships have enabled us to sell over 300 VivaScopes worldwide, of which over 200 are current generation
products. We rely heavily on our distributors to generate sales revenue, and we have a high degree of customer concentration. Approximately
74% of our product sales were generated through Mavig, ConBio, and Integral, our top three distributors, during 2010. There is no guarantee
that our distribution agreements with these key distributors will be renewed, and we may experience greater or lesser customer concentration in
the future. Although we also sell directly to customers, if our relationships with any or all of our key distributors terminate, the development of
our sales and distribution capabilities in their territories could involve significant expense and delay.

                                                                        71
Table of Contents

      Our clinical support staff provides direct training in the operation of our VivaScopes to physicians and their staff. The first step in the
training occurs on installation of the VivaScope imager in the physician's office, which generally takes a few hours. This initial training session
is typically followed by one or two additional days of training as required by the staff in the physician's practice. We routinely provide
additional training over VivaNet from our headquarters in Rochester, New York, which reduces our expenses and the amount of on-site
training required in the physician's office.

      We have sponsored training courses for pathologists interested in providing image evaluation services over VivaNet. These courses are
taught by physicians experienced in the interpretation of images acquired by our VivaScope confocal imagers. To date, we have held six of
these two-day intensive courses. Pathologists attending these courses who choose to continue training are given access to our training database
of confocal imaging cases, which currently consists of a variety of melanoma and non-melanoma skin cancer image sets. During this online
training each participating pathologist typically reads 400 or more confocal imaging cases at his or her own pace over VivaNet to gain
proficiency and confidence in his or her diagnostic ability using confocal images.

      Medical schools are beginning to offer confocal reading courses bearing continuing medical education, or CME, credit. The first was held
at the Robert Wood Johnson Medical School in New Jersey on May 14th and 15th of this year and attracted over 50 participants. We believe
the availability of CME credit bearing courses for the interpretation of VivaScope confocal images at credible medical institutions will
significantly increase the motivation of pathologists to learn interpretation of confocal images. Consequently, we plan to encourage other
medical institutions to offer similar CME credit bearing courses. A second CME course at another medical school is in the initial planning
stage.

     We have relevant sales experience derived from our sales of over 300 VivaScope confocal imagers to academic medical centers and other
research customers using both direct and international distribution channels. Physicians using our confocal imagers have published their
research results in peer reviewed papers in medical journals. We believe these publications have established the brands "Lucid" and
"VivaScope" in the dermatology community. We intend to leverage our reputation, and these established brands, as we move forward with our
VivaNet Solution.

     The sale of products into large and small medical practices has provided us the opportunity to learn and improve the products based on
actual field experience. As a practical consequence, our current products are neither research prototypes nor early production units; rather,
many of our products are used routinely in clinical and research settings in academic medical centers around the world. The experience we
have gained in working with these institutions and practices has also provided valuable insight into the operations, procedures and workflow of
"real world" medical practices.

      We manage our sales process using a formal sales pipeline approach implemented using Salesforce.com customer relationship
management, or CRM, web based application. Our traditional VivaScope sales pipeline is based on an eight stage process, beginning with a
cold lead and progressing through a closed (i.e. fully paid) order. As we move forward with the launch of our VivaNet Solution we are adapting
this proven pipeline approach to meet the specific requirements of the more service based VivaNet sales process.

      The VivaNet sales process is a two pronged approach with efforts currently underway to establish adoption at some of the leading
academic medical and cancer centers in the United States concurrently with early adopter pathologists and dermatologists in private practices.
Certain medical institutions have expressed interest in reading cases submitted by dermatologists using VivaScopes as a means of extending
their reach into the private dermatology practices in the surrounding region. If academic medical and cancer centers that adopt our technology
become recognized as centers of excellence in the interpretation and diagnosis of melanoma and skin cancers, we believe this will facilitate the
adoption of our technology by private practice physicians in the region.

                                                                        72
Table of Contents

     In order to introduce our products to academic medical and cancer centers as well as private practice physicians, we exhibit at appropriate
medical conventions, including the American Academy of Dermatology annual and summer meetings and various regional dermatology and
pathology meetings. We have exhibited at the American Academy of Dermatology Annual Meeting for several years and at the American
Society of Dermatopathology, or "ASDP" Meeting for the past two years. At each of the ASDP meetings, we sponsored receptions that were
attended by certain of the key opinion leaders and early adopters in the field of dermatopathology.

     Our VivaNet Business Model is a typical "razor and razor blade" business wherein the VivaScopes are the "razors" and the recurring
VivaNet fees are the "razor blades." Over the next several fiscal quarters pathologists will become a key element of our VivaNet sales process,
because they have established professional relationships with their dermatologist clients. Today pathologists routinely process and diagnose
biopsies provided by their dermatology clients. Typically, the relationship between a pathologist and his or her dermatologist client is one
based on the highest level of professional trust, since it is the pathologist who provides the actual diagnosis of the dermatologist's patient's skin
condition.

     Based on our understanding of this relationship between pathologists and dermatologists, we believe that dermatologists are more likely to
adopt VivaScope confocal imaging in their practice if their pathologist is trained and competent to read the confocal images and provide
diagnostic interpretation and reporting based on those images. Therefore, our VivaNet sales process logically begins by training pathologists in
VivaScope confocal image interpretation using the training process outlined above. Once a pathologist is trained, we request that they provide
references for a few dermatologists for whom he or she would like to provide diagnostic reading services. Our sales staff then follows-up with
these dermatology practices regarding the lease of a VivaScope for use in their practice. Once the dermatologist is connected to VivaNet,
VivaScope confocal imaging cases can begin routine transfer to the pathologist for diagnosis. The pathologist is free to recommend additional
imaging sites, until he or she has a full time workload of VivaScope confocal cases.

     We believe our VivaScope "virtual biopsy" technology will differentiate a dermatology practice, bring in new patients and thereby
increase practice revenue. Since our VivaScope imaging is completely non-invasive, we believe patients will ultimately switch from those
dermatology practices that perform only traditional biopsies and seek dermatologists offering VivaScope imaging, which we believe will
increase patient volume in VivaScope dermatology practices. Patients being screened for skin cancer with our VivaScope technology do not
experience pain, skin punctures, scarring, infections and other complications caused by traditional biopsies.

     Our sales strategy is to lease, through a third party, our VivaScope System to dermatology practices for a five year term with an escalating
monthly lease rate in the range of approximately $1,500 per month. We have been advised that several private payers may reimburse
dermatologists, assuming Manhattan district CMS reimbursement rates, for a VivaScope image at approximately $86 per patient under CPT
code 96904. VivaScopes may be operated by technicians, rather than exclusively by physicians, thereby resulting in a lower cost to the
practice. A traditional biopsy under CPT code 11100, which is often performed by a physician, is reimbursed at approximately $123. Initially,
due to the cost differential between the medical technician and the physician, we believe incorporation of our VivaScope technology should be
cash flow neutral to the dermatology practice. Over time we believe our VivaScope will enable dermatology practices to be more productive
through the shift of physician procedures from surgical biopsies to excision of lesions known to be cancerous as determined by VivaScope
virtual biopsies. This is advantageous to the dermatologist because excision of a very small lesion diagnosed to be cancerous is reimbursed
under CPT code 11600 at approximately $218, as compared to the reimbursement for a biopsy of $123. By shifting the dermatologist's
workload from surgical biopsies to excisions of known cancerous lesions, valuable physician time will be devoted to procedures that result in
higher practice revenue.

                                                                         73
Table of Contents

      For the traditional dermapathologist who receives tissue specimens from a dermatologist, the process to evaluate the sample for cancer is
cumbersome. The tissue specimen when received at the pathology laboratory has to be carefully catalogued, prepared through an overnight or
longer multistep process, and ultimately sliced into thin, transparent slices that are placed on a glass microscope slides that are sent to the
pathologist for interpretation under a microscope to render a diagnosis of the disease. The CPT reimbursement for the technical component for
preparation of the slides, in the Manhattan region, is $88. The technical component covers the cost of material, labor and overhead for placing
the tissue on the slides and subsequently storing the slides and any remaining tissue as components of the patient's medical record. The storage
time for these slides and tissue varies from state to state but is often in the range of 7 to 20 years. The pathologist receives a $41 professional
fee for the diagnosis of the slides associated with a single lesion. We believe the VivaNet Business Model provides a compelling value
proposition to pathologists and will facilitate a meaningful increase in the number of specimens that a pathologist can review, virtually, thereby
affording the pathologist an opportunity to increase his or her income. In addition, the system affords such pathologists much greater flexibility,
since a traditional laboratory setting is not necessarily required and overhead expenses can be substantially reduced. Since the system is
available at all times, moreover, and not geographically dependent, the services can be rendered from such places and at such times as the
pathologist may select.

     Our revenue model assumes that Lucid will receive the technical component of $88 either as a pass through from the physician or as a
direct payment from an insurance company. As we have recently initiated the reimbursement contracting process, we have not yet received any
such reimbursement under existing CPT codes.

Other Potential Clinical Applications of Our VivaScope and VivaNet Technologies

     We believe that our VivaScope confocal imaging technology and our VivaNet server are platform technologies that potentially have
applicability in clinical applications beyond the early detection and diagnosis of skin cancer. These may include the early detection of oral and
cervical cancer as well as the rapid screening of breast cancer. Publications describing case studies and smaller single-site pilot studies related
to VivaScope imaging of oral tissue and breast tissue have appeared in peer reviewed medical literature and indicate the potential application of
our technology in these clinical applications. A manuscript describing exploratory studies of imaging of gynecological tissue using our
VivaScopes is pending publication and may point the way toward clinical applications of our imaging technology for gynecological cancers.

      Peer reviewed papers evaluating use of the VivaScope 1500 for the early detection of neuropathy have also been published in
peer-reviewed medical journals. Neuropathy is a common side effect of diseases such as diabetes and HIV infection, and may occur during the
treatment of cancers with chemotherapy. Peripheral neuropathy in diabetics may lead to blisters and sores on numb areas of the foot, because
pressure or injury go unnoticed on these areas. If foot injuries are not treated promptly, infection may potentially spread to the bone, and the
foot may then have to be amputated. Some publications estimate that half of all such amputations are preventable if minor problems are caught
and treated in time. A small single-site, pilot clinical study at the University of Rochester Medical Center indicated that our VivaScope
confocal imaging technology may be used in the early detection of neuropathy prior to the onset of clinically detectable symptoms. We expect
that a clinical trial in support of regulatory clearances may be required for any of these neuropathy applications.

      Our VivaScope 2500 is designed to use our confocal imaging technology to image excised tissue samples without the laborious tissue
preparation procedures required to prepare the microscope slides used in conventional pathologic examination of tissue. We are initially
targeting the dermatological Mohs surgery procedure as the first application of this device in clinical practice. Publications describing early
clinical studies of this application of confocal imaging have appeared in peer reviewed medical journals. We believe these early clinical studies
may point the way toward potentially broad

                                                                        74
Table of Contents



applications of VivaScope confocal imaging in place of the traditional tissue preparation procedures associated with conventional pathological
diagnosis.

     We believe that oral and cervical cancer applications and the neuropathy application can be accomplished through straightforward
engineering modifications to our existing VivaScope 3000. We believe that our current regulatory clearance is sufficiently broad to cover the
imaging of oral and cervical tissue. Clinical studies would be required, however, to establish the efficacy of confocal imaging for the detection
of oral and cervical cancers.

     Other applications, such as breast cancer and surgical pathology specimen testing, may require more substantial modifications and
enhancements to our VivaScope 2500 ex-vivo confocal imager. Since the VivaScope is classified as a "microscope," we do not believe that
additional regulatory approvals should be required for either the rapid screening of breast biopsy cores or surgical specimens, provided,
however, that clinical studies would be required to demonstrate efficacy.

     These development activities will require the commitment of future resources to these tasks before we may be able to achieve any degree
of commercial success in these new clinical applications, and there is no assurance we will be successful should we decide to devote resources
to any or all of these applications.

      VivaNet, in addition to being a telepathology server, is also a HIPAA compliant medical records system that provides a method to
organize digital clinical, dermoscopy and VivaScope images in a searchable medical database. In our initial markets of dermatology and
pathology, which have traditionally relied on paper charts, discrete photographs, microscope slides and paper diagnostic reports as
documentation, we believe that these practices would benefit from a switch to a digital record system, coupled with an ability to quickly
retrieve a complete patient history over VivaNet. The benefits of electronic medical records are not unique to dermatology and pathology,
however, and could translate to the other clinical applications described in this section.

Scientific Advisory Board

     We are in the process of forming a Scientific Advisory Board (SAB) to: assist us in the medical education programs; advise us in the
design of future products; help us design Company initiated clinical studies; and assist us in evaluation of external investigator proposed
studies. We anticipate the committee will initially be comprised of five to six key opinion leaders from the fields of dermatopathology,
dermatology, and statistical design of clinical studies. We may ask key opinion leaders from fields other than dermatopathology and
dermatology to participate in the activities of the SAB on an ad hoc basis, if and when we expand the scope our activities into other clinical
specialties.

     A leading scholar in the field of dermatopathology, Dr. Martin C. Mihm, Jr., who specializes in melanoma, pigmented lesions, lymphoma,
and cutaneous inflammatory diseases, has agreed to Chair the SAB. Dr. Mihm is an author or co-author of over 300 peer reviewed medical
journal publications of which 175 are related to the topic of melanoma. He co-heads two prestigious programs of the World Health
Organization (WHO), its Melanoma Pathology Program and its recently founded Rare Tumor Institute. Dr. Mihm has authored or co-authored
several books concerning skin pathology.

     Currently we are working with the Chairman of the SAB to write its charter and establish its membership and we believe these activities
will be completed within the next few months. We intend to have consulting agreements with each SAB member that will include customary
compensation and confidentiality clauses. We expect the SAB will meet two to four times per year, with at least one meeting per year on a
face-to-face basis at a convenient time and location for the SAB members.

Competition

     Biopsy of a suspicious skin lesion, followed by pathologic examination of the tissue specimen, is today's widely accepted standard of care
with a long history of use. Two alternative diagnostic tools,

                                                                        75
Table of Contents



clinical photography and dermoscopy, are currently gaining acceptance in the U.S. medical community. In addition, technological advances
may result in improvements in these alternative diagnostic tools or new technologies may emerge that produce superior diagnostic results as
compared to our VivaScopes and VivaNet Solution.

     We are aware that a significant number of systems for visualization and assessment of skin lesions are either in development or in use, and
may pose significant competition with our VivaScope confocal imagers and VivaNet server technologies. These other skin imaging systems
generally fall into one of four basic categories: (i) Adjuncts to current dermatologic examination; (ii) FDA cleared devices; (iii) Pre-FDA
clearance devices; and (iv) Nascent technologies. We do not believe that these systems have the ability of our VivaScope confocal imagers to
achieve the cellular resolution of the skin required to achieve definitive pathologic diagnosis of tissue.

     Adjuncts to Current Dermatologic Examination. In the United States, the current standard of care for melanoma and other skin cancer
detection and clinical diagnosis relies on the skill and vision of physicians to decide, based on unaided visual clinical examination, whether a
particular skin lesion is suspicious enough to warrant an invasive biopsy. For melanoma, a majority of physicians in the U.S. use a variant of
the "ABCDE" criteria to make this critical clinical decision. Data from a recent clinical study indicates that the sensitivity and specificity of a
physician relying on visual examination of a lesion to determine whether it is malignant is in the range of 78.0% sensitivity and 3.7%
specificity (Monheit, et al., "The Performance of MelaFind" Arch Dermatol. 2011 Feb;147(2):188-94.). The data presented in this paper
indicates that, on average, a dermatologist will miss 22 out of 100 melanomas and will biopsy approximately 27 benign lesions for each
melanoma found.

     In order to improve their clinical diagnostic accuracy, dermatologists may use either clinical photography or dermoscopy, both of which
are gaining wider acceptance in the U.S., to supplement unaided visual examination of lesions. Clinical photography provides a means to
identify those lesions that have changed from one examination to the next, i.e., the "E" (Evolution) of the ABCDE criteria. Clinical
photography may be performed in the dermatologist's office or using services provided by companies such as Canfield Scientific Imaging and
DigitalDerm, Inc. Dermoscopy is a non-invasive technique that provides a magnified image of the skin's surface using a device known as a
dermatoscope. A basic dermatoscope may be little more than an illuminated magnifying glass, or may be a digital camera that provides
magnified electronic images of the skin that can be viewed on a LCD display and stored for future reference. Basic dermatoscopes are sold by
numerous companies, including, among others, 3Gen, LLC (U.S.), Welch Allyn, Inc. (U.S.), and Heine Optotechnik (Germany), to name a few.
Digital dermatoscopes have been designed and sold by numerous companies, including, among others, Derma Medical Systems, Inc.
(Australia), Biomips Engineering (Italy). VisioMed AG (Germany), FotoFinder Systems GmbH (Germany) and BIOCAM GmbH (Germany).

      We consider clinical photography and dermoscopy to be complementary to our VivaScope confocal imaging technology. As a
consequence, we have integrated both clinical photography and dermoscopy into the workflow of our VivaScope System. We believe the
clinical photography and dermoscopy components of the VivaScope System are competitive to the products currently on the market and may
have enhanced clinical utility due to the close integration with our confocal imaging technology and the accessibility of the resulting clinical
data and images provided by VivaNet.

     FDA Cleared Devices. We are aware of two FDA cleared devices that may potentially compete with our technology. One is the
SIAscope developed by Astron Clinica of the UK, now operating as a business unit of Biocompatibles International. The SIAscope has 510(k)
clearance from the FDA, but the FDA cleared "Indications for Use" for the SIAscope do not state that it is intended to be used by physicians for
diagnosis or determination of any clinical condition.

                                                                         76
Table of Contents

     Michelson Diagnostics is headquartered in England and manufactures the VivoSight, an optical coherence tomography device that
achieved FDA 510(k) clearance in late 2009. The VivoSight is currently not capable of resolving individual cells or visualizing intercellular
details, both of which are necessary for the device to be useful for the diagnosis of melanoma and NMSCs. The FDA 510(k) Indications for
Use cover the "two-dimensional, cross-sectional, real-time imaging of external tissues of the human body." The Indications for Use do not
indicate use in diagnosis.

     Pre-FDA Clearance Devices. SciBase AB is a Swedish medical technology company that is developing a device known as the SciBase
Electrical Impedance Spectrometer, or "SEIS". The company contends that the SEIS screening device can determine whether a mole is
malignant. The SEIS is documented in seven published smaller clinical studies and over 1000 patients are currently being enrolled in a large
ongoing clinical study of the technology. The SEIS product does not have FDA clearance for sale in the United States.

     MELA Sciences is a U.S. public company (Nasdaq: MELA, previously Electro- Optical Sciences) headquartered in Irvington, New York
and developing MelaFind®, which uses multispectral dermoscopy and computerized diagnostic algorithms for the detection of melanoma.
MELA Sciences has conducted a large pivotal clinical study of its MelaFind® device and the FDA held a panel meeting on November 18, 2010
to review its assessment of the device and to hear the comments of a panel of independent physicians (primarily dermatologists) regarding the
pivotal clinical study results and the device itself. The panel voted narrowly in favor of the device (8 for, 7 opposed) on the critical question of
safety and efficacy, and indicated that dermatologists need better tools for the evaluation of lesions suspicious of melanoma. As of this date the
FDA has yet to make its final determination of whether MelaFind® will gain market clearance from the agency.

     Nascent Technologies. Verisante Technology, Inc. is a Canadian public company traded on the Toronto Venture Exchange (V.VRS,
previously T-Ray Science, Inc.—V.THZ), and is headquartered in Vancouver, British Columbia. The company is developing Raman
Spectroscopy for the early detection of melanoma and other skin cancers under license from the British Columbia Cancer Agency. The
company is currently developing the initial prototype of its device "Aura" which they expect to introduce first in Canada, Europe, and Australia
and eventually in the U.S. once it achieves the required regulatory approvals in those regions and countries.

     Other nascent imaging modalities and diagnostic techniques for the early detection of skin cancers either exist or are under development.
These include various molecular, genetic and proteomic screening tests. For example, Dermtech is exploring tape stripping of the stratum
corneum of the skin as a means to gather RNA for analysis of melanoma cells that have migrated to the surface of the skin. Molecular imaging
techniques that use fluorescent or other tags on antibodies to identify cancerous cells are also under investigation. Balter Medical is developing
optical transfer diagnosis as a means of assessing tissue for malignancy. Information on Balter's web site indicates that this technology is in an
early stage of development. LL Tech, Inc. is an early stage French company that develops cellular imaging scanners for research and clinical
applications based on optical coherence tomography (OCT) technology.

      Other Potential Competitors. The market for optical imaging devices used for medical diagnosis is intensely competitive and subject to
rapid change. It is significantly affected by new product introductions, the market activities of existing industry participants and acquisitions of
smaller medical device companies by larger players in the medical diagnostics marketplace. As we launch our VivaNet Solution into the U.S.
clinical dermatology market, we can expect competition from major medical imaging companies, such as General Electric Co., Siemens,
Phillips Healthcare, Bayer Diagnostics, Olympus Corporation, Carl Zeiss AG and others, each of which manufactures and markets precision
medical diagnostic products and could decide to develop or acquire a product or products to compete with our VivaScope confocal imagers. In
addition, the telepathology market is intensely competitive and any of the numerous companies are in the teleradiology and telepathology
markets and may decide to offer products and services that are competitive to our VivaNet Solution. Companies active in this space include,
among others, General Electric Co., Siemens AG, Philips Healthcare, Virtual Radiologic Corporation, and Apollo Telemedicine.

                                                                         77
Table of Contents

Manufacturing

     Our in-house manufacturing process is largely an assembly-and-test process that operates under the standardized procedures of our quality
system. Piece parts such as mechanically machined components, populated circuit boards, precision optical components and electro-mechanical
optical scanning devices are purchased from suppliers to either our custom specifications or the standard specifications of the supplier. We also
purchase computers, LCD displays and medical grade equipment carts which are integrated into our completed VivaScope Systems. The
application software for our VivaScopes is written by our in-house software staff and runs under the Windows XP operating system. We have
manufactured all generations of our VivaScope products since their inception, corresponding to over 300 devices shipped.

    Generally we single source our component purchases to suppliers with which we have had a long term relationship. In the event these
suppliers are unable to deliver parts we generally have back-up suppliers established. A few of our VivaScope components are from sole source
suppliers, which means we are purchasing a unique component from them that is not available from other suppliers. As we design future
generations of VivaScopes, it our intention to eliminate these specialized sole sourced components designs whenever possible.

Research and Development

     Our current technical research and development efforts are primarily focused on: (i) the product enhancements of our VivaNet proprietary
software, as requested by the physicians using the system; (ii) the ongoing simplification of our VivaScope products for use in clinical practice;
and (iii) the ongoing continuous improvements of the products to enhance manufacturability and product quality. To date, physician requests
for VivaNet software enhancements have included the addition of clinical photography to the imaging procedure and enhanced database search
capability for locating records based on parameters such as lesion diagnosis, diagnostic criteria in the various images, and other parameters
over and above those routinely used to recall an individual patient's medical history. We also improve the software by implementing changes
requested by physicians to improve their efficiency in use of the system. Throughout 2011 and following the completion of this offering, our
software and hardware development activities will be primarily focused in support of the roll-out of our VivaNet Solution into commercial
private and academic medical center clinical practice.

     We recently completed development and began manufacturing and selling a smaller, more functional version of our handheld
VivaScope 3000. The initial version of the VivaScope 3000, the world's first commercial handheld confocal microscope, resulted in substantial
feedback from customers and clinical investigators regarding its features and operation. Based on this feedback we designed and built the
second generation VivaScope 3000 that is smaller, lighter and more functional than the original device, while retaining the same image quality
in a more clinically acceptable configuration. Shipments of this product began in the fourth quarter of 2010. We believe that the basic
configuration of this second generation will be a platform from which other medical applications beyond skin cancer may be addressed.

     Our technical R&D plan also includes routine hardware product improvements and further software development that are generally driven
by customer feedback. These items include activities such as the development of more clinically and environmentally acceptable disposables,
enhanced VivaScope application software with features honed for use by private practice dermatologists and VivaNet workstation features that
will enhance the efficiency of pathologists for analyzing images and reporting their interpretations.

     We have applied for and received six Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR)
research grants from the United States National Cancer Institute (NCI). The funds from these grants have been used to augment our own
internal product development

                                                                       78
Table of Contents



and clinical studies funds. A summary of these NCI-funded SBIR and STTR research activities is detailed below:

          1.   A completed Phase I/Phase II project 5R44CA58954-03 "Confocal Imaging Through Thick Dermal Tissue."

          2.   A completed Phase I project 1R43CA60342-01 "Computer Based Video Imaging of Pigmented Skin Lesions."

          3.   A completed Phase I project 1R43CA093106-01 "Hand-held confocal microscope for clinical/surgical use."

          4.   A completed Phase II project 2R44CA93106-02 "Hand-held confocal line-scanner for intrasurgical use."

         5. A funded SBIR Phase II competing continuation STTR project 1R42-CA110226-01 "In-vivo clinical coherence confocal
     microscope." *This project remains in process

          6. A funded SBIR Phase II competing continuation project 2R44CA059054-04 "Accuracy of confocal imaging for pigmented
     lesion diagnosis." *This project remains in process

     Our engineering, research, and development expenses for the years ended December 31, 2010 and 2009 were $685,710 and $756,199,
respectively.

Regulation

      FDA Regulation of Medical Devices. Our VivaScope and VivaNet products are considered medical devices and thus are subject to
regulation by the FDA. The Food, Drug, and Cosmetic Act, or "FD&C Act", and other federal and state statutes and regulations govern the
research, design, development, preclinical and clinical testing, manufacturing, safety, approval or clearance, labeling, packaging, storage,
record keeping, servicing, promotion, import and export, and distribution of medical devices. Generally, each medical device we currently
distribute in the U.S., or plan to distribute in the future, requires either: (i) formal exemption; (ii) prior premarket notification; (iii) 510(k)
clearance; or (iv) PMA (premarket approval) from the FDA. The FDA classifies medical devices into one of three classes. Devices that are
deemed to pose low risk are placed in Class I or II and as such, require fewer controls. Some Class I and certain Class II devices are exempted
by regulation from the premarket notification, or 510(k), clearance requirement or the requirement of compliance with certain provisions of the
FDA's Quality System Regulation, or "QSR".

     The FDA cleared our 510(k) application for our VivaScope System (i.e., either our VivaScope 1500 or VivaScope 3000) as a Class II
device on September 17, 2008. Our VivaNet server is registered with the FDA as a Class I device. We believe these FDA clearances for our
VivaScope Systems and VivaNet are sufficient for us to pursue our business strategy for the foreseeable future. Future products or applications
may require additional FDA clearances and may also involve clinical trials to demonstrate whether they are safe and effective for their
indicated medical applications.

     Our ex-vivo imager, the VivaScope 2500 is registered with the FDA as a Class I device and is in the same FDA Class and category as
conventional medical microscopes used by pathologists to view microscope slides of human tissue. We believe this FDA classification is
sufficient for our current development, marketing and sales programs for the VivaScope 2500.

     FDA Regulations of Clinical Trials. Clinical trials may be required for a 510(k) clearance and are nearly always required to support a
PMA application. We currently have no plans to conduct clinical trials of our current products for the purpose of additional FDA regulatory
clearances or for changes in the indications for use of our existing products, however clinical trials may be required should we

                                                                        79
Table of Contents



decide to pursue new clinical applications of our existing devices or decide to develop new devices for either existing or new clinical
applications.

      In the event we are required to conduct clinical trials for the purpose of supporting a 510(k) clearance or a PMA application, those trials
must comply with the FDA's regulations governing the performance of clinical research, and these regulations may pose considerable hurdles
in the clearance process. For example, the clinical research must comply with the requirements for IRB (Institutional Review Board) approval
and for informed consent of patients enrolled in clinical trials. Records and reports for the clinical trial are subject to inspection by the FDA.
The results of clinical testing may be unfavorable, in which case market clearance will be denied. Even if the intended safety and effectiveness
success criteria are achieved, the FDA may not consider the data to be adequate and the approval or clearance of a product may be denied. The
commencement or completion of a clinical trial may be delayed or halted, or be inadequate to support approval of a 510(k) clearance or PMA
application, for numerous reasons, including (but not limited to): 1) the clinical trial protocol is not approved by the FDA or an IRB or is
delayed by these bodies; 2) patients do not enroll in sufficient numbers or do not follow-up; 3) patients experience adverse events;
4) physicians decline to participate in the trial or do not comply with trial protocols or experience delays in performing the protocol;
5) third-party organizations do not perform data collection and analysis in a timely or accurate manner; 6) regulatory inspections of our clinical
trial sites or our manufacturing facilities may require corrective actions or may suspend, terminate or invalidate our clinical trials; and 7) the
results of the clinical trial may be unfavorable or inconclusive with respect to safety or effectiveness.

     A clinical trial may not generate data that supports the 510(k) or PMA application, and approval may be delayed, if obtained at all. Delays
in receipt of approvals for future products or the failure to receive such approvals, the withdrawal of previously received approvals, or failure to
comply with existing or future regulatory requirements would have a material adverse effect on our business, results of operations and financial
condition. Approvals, if granted, may include significant limitations on the intended use and indications for use for which a product may be
marketed.

     Devices that are approved or cleared and placed in commercial distribution are subject to numerous regulatory requirements, including:
1) establishment registration and device listing; 2) QSR, a FDA requirement that manufacturers follow design, testing, control, documentation
and other quality assurance procedures; 3) labeling regulations that impose labeling restrictions and prohibit the promotion of products for
unapproved or "off-label" uses; 4) medical device reporting regulations that require reporting to the FDA if a device caused or contributed to a
death or serious injury or malfunctioned so as to cause or contribute to a death or serious injury if the malfunction were to recur; and
5) corrections and removal reporting regulations that require manufacturers to report field corrections and product recalls or removals
undertaken to reduce risk to health by the device or to correct a FD&C violation that presents a risk to health. Also, the FDA may require
postmarket surveillance studies or establishment and maintenance of a system for tracking products through the distribution channel to the
patient level.

     Failure to comply with applicable regulatory requirements, including those applicable to the conduct of clinical trials, can result in
enforcement action by the FDA, which may lead to any of the following sanctions: 1) warning letters; 2) fines and civil penalties resulting in
unanticipated expenditures; 3) approval delays or refusal to approve our applications, including supplements; 4) withdrawal of FDA approval;
5) product recall or seizure; 6) interruption of production; 7) operating restrictions; 8) injunctions; and 9) criminal prosecution.

     We, and some of the suppliers of components used in our products, are also required to manufacture in compliance with current Good
Manufacturing Practices (GMP) requirements set forth in the QSR. The QSR requires a quality system for the design, manufacture, packaging,
labeling, storage, installation and servicing of marketed devices, and includes extensive requirements with respect

                                                                        80
Table of Contents



to quality management and organization, device design, equipment, purchase and handling of components, production and process controls,
packaging and labeling controls, device evaluation, distribution, installation, complaint handling, servicing, and record keeping.

     The FDA enforces the QSR through periodic unannounced surveillance inspections. Our manufacturing facility has been and will continue
to be subject to domestic and international regulatory inspection and review. If the FDA determines in its sole discretion that we or any of our
regulated suppliers are non-compliant with these requirements, it can shut down our manufacturing operations, require recall of our devices,
refuse to approve new marketing applications, institute legal proceedings to detain or seize products, or assess civil and criminal penalties
against our Company or our officers, or other employees. Any such action by the FDA would have a material adverse effect on our business.
We cannot assure you that we will be able to comply with all applicable FDA regulations.

     International Medical Device Regulation. International sales of medical devices are subject to foreign government regulations that vary
substantially from country to country. Some countries have little to no regulation whereas other countries have a premarket notice or premarket
acceptance similar to the FDA. The time required to obtain approval in a foreign country may be either shorter or longer than that required for
FDA approval, and the requirements for approval may differ. There is a trend towards harmonization of quality system standards among the
European Union, U.S., Canada and various other industrialized countries.

      The EU has adopted numerous directives and standards regulating the design, manufacture, clinical trials, labeling and adverse event
reporting for medical devices. Devices that comply with the requirements of a relevant directive will be entitled to bear the CE conformity
marking, indicating that the device conforms to the essential requirements of the applicable directives and, accordingly, can be commercially
distributed throughout Europe. Our VivaScope 1500 and VivaScope 3000 are entitled to bear the CE mark for distribution as medical devices
in the EU.

      One aspect of CE compliance is that manufacturers are required to comply with the ISO 9000 series of standards for quality operations (an
international standard for quality management requirements maintained by the International Organization for Standardization (ISO)). The
method of assessing conformity to EU regulations varies depending on the class of the product. Generally conformance involves
self-assessment by the manufacturer and third party assessment by a "Notified Body." This third party assessment may consist of an audit of
the manufacturer's quality system and specific testing of the manufacturer's product. An assessment by a Notified Body of one country within
the European Union is required in order for a manufacturer to commercially distribute the product throughout the European Union. In order to
meet this requirement, our quality system, device designs and manufacturing facilities are assessed annually by GMED North America, a
certified EU Notified Body.

     Several other countries, such as Switzerland, have voluntarily adopted laws and regulations that mirror those of the European Union with
respect to medical devices. Outside of the European Union, regulatory approval needs to be sought on a country-by-country basis in order for
us to market our products. In this regard, we have obtained regulatory approval to market our VivaScope 1500 in Canada through its Health
Canada Administration, in Australia through its Therapeutic Goods Administration and in China through its State Food and Drug
Administration

      Other Government Regulation. The advertising of our medical devices is, and will continue to be subject to both FDA and Federal
Trade Commission regulations. In addition, the sale and marketing of our medical devices is subject to complex federal and state laws and
regulations generally intended to deter, detect, and respond to fraud and abuse in the healthcare system. These laws and regulations often
restrict or prohibit pricing, discounting, commissions and other commercial practices that are typical outside of the healthcare market.

                                                                      81
Table of Contents

     In particular, anti-kickback and self-referral laws and regulations limit our promotional programs and financial arrangements related to the
sale of our products and related services to physicians seeking reimbursement from Medicare, Medicaid, private insurers or patients.

     The Civil False Claims Act and the Civil Monetary Penalties Law are similar in nature in that they both address fraud in the healthcare
system. The Civil False Claims Act prohibits any person from knowingly presenting or causing to be presented false or fraudulent claims for
payment by the federal government, including the Medicare and Medicaid programs.

    Sanctions for violating the above federal laws include criminal and civil penalties ranging from punitive sanctions, damage assessments,
money penalties, imprisonment, denial of Medicare and Medicaid payments, or exclusion from the Medicare and Medicaid programs, or both.

     Many states have adopted laws or have pending legislative proposals similar to the federal fraud and abuse laws, some of which prohibit
the payment or receipt of remuneration for the referral of patients and physician self-referrals regardless of whether the service was reimbursed
by Medicare or Medicaid. Many states have also adopted laws or are considering legislation to increase patient protections, such as limiting the
use and disclosure of patient-specific health information. These state laws typically impose criminal and civil penalties similar to the federal
laws.

     In the ordinary course of business, medical device manufacturers and suppliers are subject to routine inquiries, investigations and audits
by federal and state agencies overseeing these laws and regulations. Recent federal and state legislation has increased funding for investigations
and enforcement actions, causing these actions to increase over the past several years, a trend that is expected to continue.

    Private enforcement of healthcare fraud is also increasing, due in part to amendments to the Civil False Claims Act in 1986. These
amendments encourage private persons to sue on behalf of the government. The Health Insurance Portability and Accountability Act of 1996
(HIPAA), in addition to its privacy provisions, created a series of new healthcare-related crimes.

     Environmental Regulation. Our research and development and clinical processes may involve the handling of potentially harmful
biological materials as well as hazardous materials. We and our investigators and vendors are subject to federal, state and local laws and
regulations governing the use, handling, storage and disposal of hazardous and biological materials and we incur expenses relating to
compliance with these laws and regulations. If violations of environmental, health and safety laws occur, we could be held liable for damages,
penalties and costs of remedial actions. These expenses or this liability could have a significant negative impact on our financial condition. We
may violate environmental, health and safety laws in the future as a result of human error, equipment failure or other causes. Environmental
laws could become more stringent over time, imposing greater compliance costs and increasing risks and penalties associated with violations.
Changes to or restrictions on permitting requirements or processes, hazardous or biological material storage or handling might require an
unplanned capital investment or relocation.

Reimbursement

    We have analyzed the applicability of existing American Medical Association reimbursement codes (i.e. Current Procedural Terminology
codes or "CPT codes") to our VivaNet Business Model. Based on advice from our reimbursement consulting firms, we believe that third party
reimbursement for our VivaNet Solution should be available, initially, from several private health insurance companies covering approximately
72 million lives under existing CPT codes for:

          1) The VivaScope imaging procedure performed in a dermatology office under CPT code 96904. We expect this reimbursement to
     be paid to the dermatologist.

                                                                       82
Table of Contents

         2) The pathologist reading VivaScope images on VivaNet workstations under the professional component of CPT code 88305-26.
     We expect this reimbursement to be paid to the pathologist.

         3) The technical services or virtual specimen slide we provide to the pathologist via our VivaNet server under the technical
     component of CPT code 88305 TC. We expect this reimbursement to be paid to Lucid.

     We have retained the services of two medical reimbursement firms. One has commenced discussions with the medical directors of third
party private payers and we expect that the second will be initiating similar discussions with corresponding federal regional reimbursement
carriers in an effort to verify positive coverage decisions and routine reimbursement for dermatologists and pathologists using our VivaNet
Solution.

     We have been advised that the medical directors of several private payers, together representing over 72 million covered U.S. lives, have
indicated their firms are likely to reimburse dermatologists, pathologists using our VivaNet Solution, and Lucid, for our respective services
under the aforementioned existing CPT reimbursement codes. Consequently, we are initiating the reimbursement contracting process with these
payers so that we can obtain direct reimbursement from them, as we continue to pursue reimbursement from other private and federal payers.
As we have only recently begun the reimbursement contracting process, we have not to date received any such reimbursement, nor are we
aware of any physicians who have received any such reimbursement to date, under existing CPT codes for use of the VivaNet Solution.

Product Liability and Insurance

      Our business exposes us to the risks of product liability claims that are inherent in the testing, manufacturing and marketing of medical
devices, including those which may arise from design flaws or the misuse or malfunction of our products. We may be subject to product
liability claims if any one of our products causes or appears to have caused an injury. Claims may be made by patients, healthcare providers or
others using our medical devices.

     We do not maintain domestic or international clinical trial liability insurance because we do not directly run clinical trials, nor are they
performed at our facility. Although we have general and product liability insurance that we believe is appropriate, this insurance is and will be
subject to deductibles and coverage limitations. Our anticipated product liability insurance may not be available to us in sufficient amounts and
on acceptable terms, if at all, and, if available, the coverage may not be adequate to protect us against any future product liability claims. If we
are unable to obtain insurance at an acceptable cost or on acceptable terms with adequate coverage or otherwise protect against potential
product liability claims, we will be exposed to significant liabilities, which may harm our business.

Employees

     As of March 31, 2011, we had 27 full-time employees and one part-time technical consultant. Seven of our employees were engaged in
product and software research, development and IP, three in clinical and regulatory affairs, four in production, five in marketing and sales and
eight in administrative activities. We believe that our relationship with our employees is good.

Facility

     We lease approximately 12,450 square feet of office, laboratory, and assembly space in the same building as our principal executive
offices. The lease expires in February 2012. We believe that this facility is adequate to meet our current and reasonably foreseeable
requirements. We believe that we will be able to obtain additional space, if required, on commercially reasonable terms.

                                                                         83
Table of Contents

Litigation

     We are not currently subject to any material legal proceedings, nor, to our knowledge, is any material legal proceeding threatened against
us. From time to time, we may be a party to certain legal proceedings, incidental to the normal course of our business. While the outcome of
these legal proceedings cannot be predicted with certainty, we do not expect that these proceedings will have a material effect upon our
financial condition or results of operations.

                                                                       84
Table of Contents


                                                                  Management

Directors and Executive Officers

     The following tables set forth the names, ages as of July 29, 2011 and a brief account of the business experience of each person who is a
current executive officer or director of our Company. Each director of our Company will hold office until the next annual meeting of
shareholders of our Company or until his or her successor has been elected and qualified.

     The directors of Lucid are as follows:

              Name                                                Age                              Position
              William J. Shea                                      63     Executive Chairman of the Board(4)
              Jay M. Eastman, Ph.D.                                63     Director and Chief Executive Officer
              Brian Carty*(1),(3)                                  61     Director
              Nancy E. Catarisano*(3)                              49     Director
              Matthew Cox*(2)                                      41     Director
              L. Michael Hone                                      61     Director and Executive Vice President—VivaNet
                                                                          Operations
              David Lovenheim                                      68     Director
              Rocco Maggiotto*(1),(3)                              60     Director
              Ruben King-Shaw, Jr.*(2)                             49     Director
              Ramey W. Tomson*(1),(2)                              65     Director

     Lucid's executive officers (in addition to those directors who also are executive officers as noted above) and other key personnel are as
follows:

              Name                                                Age                              Position
              Marcy K. Davis-McHugh                                48     Chief Operating Officer and Corporate Vice President
              William J. Fox                                       45     Vice President of Technical Operations and Chief
                                                                          Technical Officer
              Martin J. Joyce                                      57     Chief Financial Officer
              Karen A. Long                                        35     Controller


              *
                      Independent Director, as determined by the Board of Directors in accordance with Nasdaq marketplace rules

              (1)
                      Member of Executive Compensation Committee

              (2)
                      Member of Governance and Nominating Committee

              (3)
                      Member of Audit Committee

              (4)
                      Until March 15, 2011, Mr. Shea also served as our Acting Chief Financial Officer.

Directors, Executive Officers and Other Key Personnel

     William J. Shea, Executive Chairman, Board of Directors. Mr. Shea was elected to the Board in 2001, and in December 2010, he was
appointed our Executive Chairman. He served as our Acting Chief Financial Officer from February 1, 2010 through March 15, 2011. He has
more than 35 years of experience in the financial services industry. Mr. Shea co-founded DLB Capital in October of 2006, a private equity
firm, which he left in October of 2007. From 2005 to 2006, he served as Chairman of Royal & Sun Alliance, USA, and oversaw its divestiture
from RSA, an insurance company headquartered in the United Kingdom which trades on the London Stock Exchange. From 2001 to 2004, he
was Chief Executive Officer of Conseco, Inc. a public financial services firm which he guided through the bankruptcy and restructuring
process, and which was subsequently relisted on the New
85
Table of Contents

York Stock Exchange. From 1997 to 2001, he oversaw the turnaround of Centennial Technologies, Inc., a public manufacturing company.
Mr. Shea formerly served as vice chair and chief financial officer of BankBoston, a public financial services company, from 1993 to 1998, and
he was the vice chairman of Coopers & Lybrand, a national public accounting firm which has since merged with another entity, from 1990 to
1992. Mr. Shea is currently on the boards of Nasdaq OMX BX, Inc., a securities exchange, AIG SunAmerica, a financial services company,
Boston Private Financial Holdings, a public financial services holding company, and he is Chairman of the Board of DemoulasSuperMarkets.
Mr. Shea also previously served on the boards of the Boston Children's Hospital and Northeastern University. Mr. Shea's significant experience
in leadership roles with companies in the financial services industry and his extensive contacts in that industry make him well qualified to serve
on our Board. In addition, Mr. Shea brings to our Board useful expertise and knowledge from his past and present service in leadership
positions with publicly-held companies.

     Jay M. Eastman, Ph.D., Director and Chief Executive Officer. Dr. Eastman has served as a director and our chief executive officer
since Lucid's founding in 1991. Since 1993, Dr. Eastman has served on the board of Arotech Corp., a public company which manufactures
defense and security products, and since 1994, he has been a member of the board of directors Dimension Technologies, Inc., a manufacturer of
three-dimensional displays. Dr. Eastman has been a member of the board of Chapman Instruments, Inc., a manufacturer of precision surface
metrology instruments, since 2009. From 1986 to 1997, Dr. Eastman was an executive vice president and senior vice president of strategic
planning for PSC, Inc., a public barcode laser scanner manufacturer. Dr. Eastman served on PSC's board of directors from April 1996 through
November 2002, during which time the company filed for bankruptcy protection. He holds, as inventor or co-inventor, 44 patents. Dr. Eastman
has been a fellow of the Optical Society of America, or OSA, and the Society of Photo-Optical Instrumentation Engineers, or SPIE, as well as
an honorary member of the Rochester Engineering Society. Dr. Eastman brings to our Board a 20-year history with Lucid. As our Chief
Executive Officer, Dr. Eastman is specially qualified to serve on the Board because of his detailed knowledge of our products, business strategy
and operations. Our Board also benefits from Dr. Eastman's past and present experience serving on other boards of directors and his prior
leadership position with a publicly-held company.

    Brian Carty, Director. Mr. Carty was elected to the Board in 2008, and has served as the Chief Marketing Officer of Caritas Christi
Health Care since 2008. From 2006 to 2008, he headed his marketing consulting firm, MLM Ventures. Mr. Carty has been President of three
advertising agencies, including Wheelhouse in Boston and Hill Holiday in New York, positions that spanned the period from 1995 to 2006.
During this period, he oversaw all global merger and post-merger marketing and communications activities for the combination of Price
Waterhouse and Coopers & Lybrand which formed the world's largest professional services firm. Prior to that Mr. Carty served as partner and
Chief of Staff to the Chairman of Coopers & Lybrand, and also served as head of world-wide marketing for the firm. We believe that
Mr. Carty's substantial marketing experience enables him to make valuable contributions to our Board, particularly at this stage as we focus on
expanding and developing the markets for our products.

      Nancy E. Catarisano, Director. Ms. Catarisano was elected to the Board in March 2011. She currently is Partner and Chief Operating
Officer of Insero and Company, a certified public accounting firm in Rochester, New York, and also heads the Outsource Accounting Services
Group for Insero which provides accounting and advisory services to early stage, developing high tech, and established businesses. Prior to
joining Insero and Company as a Partner in 1999, Ms. Catarisano founded Ciaccia & Catarisano LLP, a public accounting firm that focused on
high technology and growing privately held businesses. Ms. Catarisano is a Certified Public Accountant. She is a member of the American
Institute of Certified Public Accountants and the New York Society of Certified Public Accountants. Ms. Catarisano has served as Chair of the
Board, Finance/Audit and Consumer Service Committees of CP Rochester and as Chair of the Finance/Audit Committee of the Rochester Area

                                                                       86
Table of Contents



Community Foundation. She has also been on various committees for National Center for Missing and Exploited Children and a member of the
Board of Directors for Marrow Drive Rochester. Ms. Catarisano's significant financial and accounting expertise, with a focus on high-tech
companies, makes her an asset to our Board and to our Audit Committee. In addition, her prior years of experience of working with Lucid as a
consultant on tax and accounting matters enable her to make valuable contributions to our Board.

      Matthew Cox, Director. Mr. Cox was elected to the Board in October 2010. Since 2007, he has served as Vice President of Product
Management at Virtual Radiologics and, since 2009, he has also served as Vice President of vRad Alliance at Virtual Radiologics, with the
responsibility for company strategy and business development initiatives. From 1999 to 2000, he was an administrator for Duke University
Health System and a practice management/accounting consultant, assisting physicians and practices with maximizing performance in
operations, revenue growth and billing/compliance related issues. Mr. Cox's experience in building and operating a business in the
teleradiology field make him well qualified to serve on our Board as he brings both business and technical expertise. His entrepreneurial skills,
strategic vision and leadership abilities enable him to make valuable contributions to our deliberations process.

     L. Michael Hone, Director and Executive Vice President, VivaNet Operations. Mr. Hone was elected to the Board in 2002. He joined
Lucid as Executive Vice President in 2011 and is charged with corporate strategic planning to support the adoption of Lucid's technology into
private dermatology and dermatopathology practices. From June 2008 through August 2010, Mr. Hone served as President, Chief Executive
Officer and as a director of American Aerogel. From 2006 through 2008, he was a consultant for Tempus Partners, a business consulting firm
of which he was the sole owner. From 2001 to 2005, Mr. Hone served as President and Chief Operating Officer of Conseco, Inc. during which
time he helped guide this financial services firm through the bankruptcy and restructuring process, resulting in its relisting on the New York
Stock Exchange. He also served as President and CEO of Centennial Technologies, a manufacturer of digital memory that has since been
acquired by another entity, and President, Chief Executive Officer, and Chairman of PSC, Inc., an Auto ID manufacturer of digital memory;
both were public companies traded on Nasdaq. Mr. Hone is a named inventor or co-inventor on seven patents. Mr. Hone also serves as director
for Chairman's View, Inc., in Boston, Massachusetts, and as Chairman of the Board of Trustees at the Killington Mountain School, Killington,
Vermont. Mr. Hone's qualifications to serve on our Board include his significant leadership experience with both private and publicly-held
companies, his sales and marketing skills, and his technical background.

     David A. Lovenheim, Director. Mr. Lovenheim was elected to the Board in 1993, and he has been the managing director of Keystones
Global, LLC, a national consulting firm based in Virginia that works with entrepreneurial businesses, including the Company, since 2007. He
also serves as the managing director of Esplanade Ventures and has served in executive capacities when called upon for Esplanade's portfolio
companies. One of these assignments was as a turn-around executive of Waste Reduction by Waste Reduction, Inc., a manufacturer-marketer
of bio-hazardous waste remediation equipment in Indianapolis, Indiana, from 2002-2006. Mr. Lovenheim served as an executive officer and
director of that company when it filed its petition in bankruptcy. Mr. Lovenheim was a partner of the law firm Harris Beach PLLC from
1979-2002 where he concentrated on corporate legal issues of entrepreneurial technology firms. From 1967-1978 he served as chief of staff for
U.S. Congressman Frank J. Horton. Since 1982, Mr. Lovenheim has served on the boards of directors of more than 40 technology companies in
North America and Europe, including some in the imaging and medical device industries. Because of Mr. Lovenheim's many years of
experience working in various capacities with high-tech companies he contributes significant legal and business expertise to the Board. In
addition, his extensive knowledge of our historical operations and business strategy position him well to serve on our Board.

                                                                       87
Table of Contents

      Rocco Maggiotto, Director. Mr. Maggiotto was elected to the Board in February 2011. In December 2010, he retired as Executive Vice
President and Global Head of Customer and Distribution Management for Zurich Financial's General Insurance Business, a position he held
since 2006. Prior to joining Zurich, Mr. Maggiotto was a Senior Executive Advisor at Booz Allen Hamilton, Chairman of Client Development
for the Parent Company of Marsh & McLennan Companies, Inc., a Senior Partner for PricewaterhouseCoopers and Vice Chairman for the
former Coopers & Lybrand, a Managing Partner of their New York region, and Chairman of their worldwide financial services industry
practice. He is on the Boards of the Ronald McDonald House of New York, The Weston Playhouse Theatre Company, and the Spenser
Foundation. We believe that Mr. Maggiotto's years of experience in the financial services industry, including his experience in auditing
publicly-traded companies, enable him to be a valuable contributor to our Board.

     Ruben King-Shaw, Jr., Director. Mr. King-Shaw was elected to the Board in December 2010. Since 2004, he has served as the chief
executive officer of Mansa Equity Partners, Inc., a private equity and investment advisory firm specializing in supporting the growth of
healthcare companies. He currently serves on the Obama administration's Medicare's Program Advisory and Oversight Commission, and he has
been a member of the Executive Committee of the Board of Steward Health, LLC since November 2010, and the Lead Director of
athenahealth, Inc., a public health services company, since 2004. From 2001 to 2003, Mr. King-Shaw served as Chief Operating Officer and
Deputy Administrator of the Centers for Medicare and Medicaid Service and prior to public service, had 20 years of operating and executive
experience in various health care service organizations. Mr. King-Shaw's knowledge and experience in the healthcare field, specifically in
navigating the reimbursement system, make him a significant asset to our Board.

     Ramey W. Tomson, Director. Ms. Tomson was elected to the Board in 1994. She is the wife of the late Dr. Steven H. Tomson,
co-founder of Lucid. Ms. Tomson maintains an active interest in Lucid to support her husband's vision for the Company. She is an early
childhood education specialist, having worked in that field for the past 35 years. She is also an Orton-Gillingham certified tutor for children
with dyslexia. Ms. Tomson has been associated with Lucid since our inception, and her historical background with us enables her to bring a
unique perspective to the Board.

     Marcy K. Davis-McHugh, Corporate Vice President and Chief Operating Officer. Ms. Davis-McHugh is responsible for the business
operations at Lucid and also serves as our Corporate Secretary and as a director of Lucid's U.K. subsidiary, Lucid International Limited. With
Lucid since 1995, she has also held positions in marketing and sales.

     William J. Fox, Vice President of Technology Operations and Chief Technology Officer. Mr. Fox is responsible for Lucid's engineering
and manufacturing operations. He joined our Company in 1999, serving as engineering manager until his promotion to his current position in
2005. Prior to joining our Company in 1999, Mr. Fox previously held product engineering positions at Mitsui- Pathtek, Burron Medical, and
Fisher Price. He currently manages teams that specialize in technologies such as video-rate confocal scanning laser microscopy and
design/development of optics and electronic instrumentation. He holds inventor or coinventor patents in confocal imaging head design and
optical examination of tissue, plus instrumentation design and methodology.

     Martin J. Joyce, Chief Financial Officer. Mr. Joyce joined Lucid as Chief Financial Officer in March 2011. Previously he was Chief
Financial Officer of BioSphere Medical, Inc., a publicly traded manufacturer and marketer of products for women's health and oncology, from
2004 through its acquisition by Merit Medical Systems, Inc. in 2010. From 2000 to 2004, Mr. Joyce served as Managing Partner of Stratex
Group LLC, a provider of biopharmaceutical executive services to early stage companies and venture investors. From 1987 to 2000 he held a
variety of senior-level positions in finance, sales, marketing and manufacturing at the biotechnology company Serono, Inc., ultimately serving
as North American Chief Financial Officer. At Millipore Corporation, a bioscience company,

                                                                        88
Table of Contents



and Bose Corporation, an audio equipment manufacturer, Mr. Joyce focused on strategic planning, product rationalization and return on
investment analysis.

     Karen A. Long, Controller. Ms. Long joined Lucid as Controller in June 2010, and primarily is responsible for all accounting functions,
including ensuring compliance with financial and future SEC reporting requirements. Prior to joining Lucid, Ms. Long served as the
Accounting Manager for Harbinger Group, Inc. (formerly Zapata Corporation) a publicly traded financial holding company, a position she held
since 2000. Prior to Harbinger Group, she served as a senior accountant at Arthur Andersen LLP. Ms. Long is a Certified Public Accountant.
Ms. Long is a member of the Finance Committee of a local nonprofit organization, the American Institute of Certified Public Accountants and
the New York State Society of Certified Public Accountants.

Board of Directors Composition

     Our Board of Directors must consist of no less than three directors, provided that if all the shares are owned by fewer than three
shareholders, the number of directors may be less than three, but not less than the number of shareholders. The number of directors is
determined from time to time by resolution of a majority of the entire Board of Directors then in office, and the Board is currently composed of
ten directors. At each annual meeting of stockholders, directors are elected to hold office until the next annual meeting. Directors are elected by
a plurality of votes cast by shareholders. Holders of our series B preferred stock are entitled to elect one (1) director to our Board of Directors,
and Mr. Hone is currently serving as the representative of the series B preferred stockholders on our Board of Directors. Because all shares of
our series B preferred stock will automatically convert into shares of our common stock upon completion of the offering, this arrangement will
terminate following the offering.

Board Committees

      Our Board of Directors has established three standing committees: the Audit Committee, the Governance and Nominating Committee, and
the Executive Compensation Committee. The members of each committee have been nominated by the Chairman of the Board of Directors and
approved by the full Board. The names of the members of each committee, together with a brief description of each committee's function, are
set forth below.

   Audit Committee. The members of our audit committee are Nancy Catarisano (Chair), Brian Carty, and Rocco Maggiotto. The audit
committee's primary duties and responsibilities are to:

     •
            Oversee our accounting and financial reporting processes and the audit of our financial statements and to monitor the integrity our
            financial statements;

     •
            Monitor the independence and qualifications of our independent auditor;

     •
            Monitor the performance of our independent auditor and internal auditing department; and,

     •
            Provide an avenue of communication among our independent auditor, management, the internal auditing department, and the
            Board of Directors.

      The Board of Directors has determined that Nancy Catarisano, Brian Carty, and Rocco Maggiotto each qualify as an "audit committee
financial expert" as defined in Item 407(d) of Regulation S-K. Brian Carty and Rocco Maggiotto are currently "independent directors" as
defined in the marketplace rules of the Nasdaq Stock Market, as well as applicable rules promulgated by the SEC related to the independence
of audit committee members. Ms. Catarisano is an equity owner of an accounting firm which provides tax accounting services to us. We expect
that this tax work will be completed within ninety days following the completion of the offering, at which time we will terminate our agreement
with this accounting firm. Until this agreement is terminated, Ms. Catarisano will not satisfy the

                                                                        89
Table of Contents

elevated SEC independence requirements for audit committee membership; however, the Nasdaq and SEC Rules, taken together, permit
Ms. Catarisano a phase-in period following the effectiveness of the registration statement relating to this offering to satisfy the applicable
independence criteria, and it is currently expected that she will do so on or prior to such date. The Board of Directors has adopted an Audit
Committee Charter, which is available in the "Corporate Governance" section of the "Investor Relations" page included in our website at
www.lucid-tech.com.

      Executive Compensation Committee. The members of our Executive Compensation Committee are Brian Carty (Chair), Ramey
Tomson, and Rocco Maggiotto. The primary function of the Executive Compensation Committee is to assist our Board of Directors in fulfilling
its responsibilities in connection with the compensation our directors, officers and employees. It performs this function by:

     •
            establishing and overseeing compensation programs, including both long term and short term incentive compensation plans for our
            employees;

     •
            recommending to the Board the compensation of directors who are not officers;

     •
            administering our equity award plans, both those in existence at the time of adoption of the Charter and those created thereafter,
            including the granting of equity awards thereunder;

     •
            furnishing an annual Executive Compensation Committee Report on executive compensation and approving any disclosures
            related to compensation included in our proxy statement; and

     •
            performing such general oversight and investigation functions related to Company compensation inherent to the responsibilities
            designated herein or set forth in future resolutions of the Board.

     The authority of the Executive Compensation Committee with respect to any future equity incentive plan may be limited by the provisions
of such plans as adopted by the Board and/or approved by our stockholders. The Committee may form and delegate authority to subcommittees
when appropriate. The Board of Directors has determined that each of the members of the Executive Compensation Committee is an
"independent director," as defined in the marketplace rules of the Nasdaq Stock Market. The Board of Directors has adopted an Executive
Compensation Committee Charter.

      Governance and Nominating Committee. The members of our governance and nominating committee are Ramey Tomson (chair),
Ruben King-Shaw, Jr., and Matthew Cox. The committee is appointed by the Board of Directors to oversee, review and make periodic
recommendations concerning our corporate governance policies, and shall recommend candidates for election to our Board of Directors. To
this end, the committee is responsible for:

     •
            Identifying and reviewing candidates for the Board and approving director nominations to be presented for shareholder approval at
            the annual meeting and to fill any vacancies. The Committee will from time to time review the process for identifying and
            evaluating candidates for election to the Board. The Committee may engage consultants or third-party search firms to assist in
            identifying and evaluating potential nominees.

     •
            Reviewing from time to time the appropriate skills and characteristics required of Board members;

     •
            Periodically reviewing our corporate governance policies and recommending to the Board modifications to the policies as
            appropriate;

     •
            Having full access to our executives as necessary to carry out its responsibilities;

     •
            Performing any other activities consistent with this Charter, our Bylaws and governing law as the Committee or the Board deems
            necessary or appropriate;
90
Table of Contents

    •
            Reviewing the Committee Charter from time to time for adequacy and recommending any changes to the Board; and,

    •
            Reporting to the Board on the major items addressed at each Committee meeting.

    The Board of Directors has determined that each of the members of the committee is an "independent director," as defined in the
marketplace rules of the Nasdaq Stock Market. The Board of Directors has adopted a Governance and Nominating Committee Charter.

Compensation Committee Interlocks and Insider Participation

     We did not have an Executive Compensation Committee until December 14, 2010. Prior to the formation of that Committee, Dr. Eastman,
our Chief Executive Officer, participated in the deliberations regarding executive compensation. None of our executive officers has served as a
member of the compensation committee, or other committee serving an equivalent function, of any other entity, one of whose executive
officers served as a member of our Executive Compensation Committee.

Compensation Discussion and Analysis

Overview and Objectives

     Our approach to executive compensation reflects our view that compensation of our executive officers should focus our executive team on
the accomplishment of our short-term objectives, as well as implementation of our long-term strategies. In December 2010, we established an
Executive Compensation Committee composed of independent directors, which has the responsibility to oversee our executive compensation
programs and practices to ensure they are competitive and include incentives for the creation of value for our shareholders, by aligning their
interests with those of our executive officers.

     Historically, and as is discussed in greater detail below, our executive compensation has consisted of three principal components:

     Base Salary. Base salary for our executive officers is determined at the commencement of employment and is re-evaluated periodically.
In determining whether to adjust an executive's base salary, our Board of Directors takes into account factors such as Company performance,
individual performance, general economic factors and the resources available to us.

     Stock Option Grants. Our executive officers receive stock option grants as long-term incentives to ensure a portion of compensation is
linked to our long-term success.

     Benefits.   Our executive officers are eligible for health insurance and other benefits made generally available to other employees.

    As is indicated below, we expect that annual incentive compensation in the form of cash bonuses will be another component of executive
compensation in future years.

    As is also indicated in greater detail below, the Executive Compensation Committee, working with outside consultants, has developed a
compensation program for our executive officers that has been designed to achieve the following objectives as we move forward:

    •
            Attract and retain talented executives;

    •
            Motivate and reward executives based on annual performance;

    •
            Reward the achievement of particular objectives and individual contributions;

    •
            Incentivize management to enhance long-term shareholder value; and

    •
            Provide compensation that is competitive within our industry.

                                                                       91
Table of Contents

Role of the Board of Directors

     We have an Executive Compensation Committee of the Board which is responsible for determining the compensation of our executive
officers. That Committee is now composed of directors who qualify as independent directors within the meaning of Nasdaq's marketplace rules.
Our Chief Executive Officer makes recommendations regarding executive compensation, but, since the formation of our Executive
Compensation Committee in December 2010, has not participated in discussions regarding his own compensation. None of our executive
officers participate in discussions of the Executive Compensation Committee or the Board regarding executive compensation.

     During 2010, the Executive Compensation Committee retained the services of First Niagara Benefits Consulting to assist it in making
determinations regarding executive compensation, including: base salaries to be paid to our executive officers; annual incentive compensation
to be paid to our executive officers; equity awards to be made to our executive officers in 2010; compensation to be paid to our outside
directors; and the terms and conditions to be included in our executive employment agreements. The Committee adopted the recommendations
of the compensation consultant with two exceptions. First, Mr. Hone received his entire equity grant in the form of stock options, rather than
the proposed 200,000 stock options plus 100,000 shares of restricted stock. The restricted stock had originally been proposed in an offer letter
to Mr. Hone but, following discussions with the Committee, it was decided that, in accordance with the Company's past practices, equity
incentives would be entirely in the form of options. In addition, the Committee increased the fees payable to committee chairs to $7,500 for the
Executive Compensation Committee and Governance and Nominating Committees, and $10,000 for the Audit Committee. The Committee
believes that these increases were justified by the higher level of responsibility and workload attendant to serving as a Committee chair for a
public company, and also are necessary to attract and retain the highest quality persons to serve in these roles. Our Board of Directors ratified
the recommendations of the Executive Compensation Committee with respect to executive compensation.

     We do not believe that our compensation policies and practices, for either our executive officers or our non-executive employees, are
reasonably likely to give rise to risks that would have a material adverse affect on us.

     Taking into account the advice and input received from our benefits consultant, we have designed an executive employment program for
our future operations that will include the elements discussed below.

Compensation Program

     Base Salary. In December 2010, we executed employment agreements with Ms. Davis-McHugh and each of Messrs. Eastman, Fox,
Hone, and Shea. These agreements provide for an increase in their respective base salaries upon the completion of a "qualified financing,"
which is deemed to have occurred in the discretion of our Executive Compensation Committee, and it is expected that this offering shall be
deemed a "qualified financing." The increases provided for in these agreements reflect the individual roles and responsibilities of these
executives, and take into account data related to salaries paid to similarly situated executives in the medical instrument and supplies industry.
This data was provided by First Niagara Benefits Consulting, based on compensation for executives in the medical instruments and supply
industry, with annual revenues between $10 million and $15 million, as contained in the Towers Watson Executive Compensation Survey. The
revised salaries for our named executive officers are designed to place those salaries near the midpoint of the market salary range for

                                                                       92
Table of Contents

each position. Due to the extensive experience and strong backgrounds of our named executive officers, their salaries were set slightly higher
than the midpoint. The increased base salaries are as follows:

                             Executive Chairman:                                                   $     150,000
                             Chief Executive Officer:                                              $     275,000
                             Chief Operating Officer:                                              $     200,000
                             Executive Vice President:                                             $     200,000
                             Chief Financial Officer:                                              $     245,000
                             Chief Technology Officer:                                             $     180,000

     Our Executive Compensation Committee will make periodic reviews of base salaries to determine if they remain competitive and continue
to provide appropriate motivation and rewards for performance.

      Annual Incentive Compensation. We have not historically paid cash incentive compensation or bonuses to our executives. As part of
our review of our overall executive compensation in late 2010, however, based on the recommendations of our compensation consultant, we
determined to implement a program for annual cash incentive compensation in future years. Our executive chairman and our chief executive
officer will each be entitled to receive incentive compensation ranging from 20% to up to 60% of their respective base salaries upon attainment
of specific performance criteria to be developed by the Executive Compensation Committee. The other named executive officers will be
entitled to receive incentive compensation ranging from 15% to up to 50% of base salary, again based on attainment of objectives to be
developed by the Executive Compensation Committee. We currently expect that the performance criteria will likely focus on objectives related
to the installed base for our products, our fee income and product utilization. The ranges of incentive compensation were approved by this
committee upon the recommendation of our compensation consultant.

     Long-term Incentives. Base salary and annual incentive compensation are intended to compensate our executive officers for their
performance in a particular year. We also use equity incentives to award longer-term performance and to align the interests of our executive
officers with those of our shareholders. Our current long term incentives are in the form of option grants under our 2007 Long Term Incentive
Plan or our 2010 Long Term Equity Incentive Plan. We believe the grant of stock options remains an important component of executive
compensation. We have made grants of options to our executive officers on a periodic, but not necessarily annual, basis. Stock options provide
our executive officers the right to purchase shares of our common stock at a fixed exercise price, typically for a period of up to ten years,
subject to continued employment. Our stock options typically vest over a three year period and have an exercise price reflecting the fair market
value of the stock on the date of grant. Fair market value historically has been determined by our Board of Directors based on a number of
factors, including, among others: third party independent valuation reports; values implied by recent capital transactions; the market value of
similarly situated public companies; recent financial results and prospects; the rights, preferences and privileges of our shares of preferred
stock; and, historically, the lack of a liquid market for our stock. The fair market value of awards granted after the completion of this offering
will have an exercise price equal to the closing price of a share of our common stock on the Nasdaq Capital Market on the date of grant. Based
in part on the guidance furnished by our compensation consultant, together with our Executive Compensation Committee's own assessment of
appropriate long-term incentives for our management team, stock option awards were made to our executive officers in late 2010, all of which
are described in this prospectus. The ranges of long-term incentive compensation were approved by this committee upon the recommendation
of our compensation consultant.

     Other Compensation. All of our executive officers are eligible for health benefits and group insurance benefits made generally
available to our other employees. We also have a 401(k) plan that all

                                                                        93
Table of Contents



employees are eligible to participate in, including our named executive officers. The 401(k) plan is intended to qualify as a tax-qualified plan
under Section 401(k) of the Internal Revenue Code. Employees contribute their own pre-tax compensation, as salary deductions. Contributions
may be made up to plan limits, subject to government limits. The plan permits us to make discretionary matching contributions, again subject
to established limits. We have not made any discretionary contributions in recent years.

    We have not historically provided compensation in the form of perquisites, although we do reimburse all of our executive officers for
expenses incurred in the performance of their duties.

     Section 162(m) of the Internal Revenue Code limits our deduction for federal income tax purposes to not more than $1 million of
compensation paid to certain of our executive officers in a calendar year. Compensation above $1 million may be deducted if it is "performance
based compensation." In light of the levels of compensation paid to our executive officers in recent years, the Section 162(m) limits have not
posed any issues for consideration by the Board of Directors. The Executive Compensation Committee and the Board, however, will consider
the impact of this section in connection with future compensation determinations.

     All of the share amounts set out in the tables included in this "Management" section will be subject to adjustment in connection with the
reverse stock split described elsewhere in this prospectus.

Summary Compensation Table

                                                                                                                                           Change in
                                                                                                                                            Pension
                                                                                                                                           Value and
                                                                                                                                          Nonqualified
                                                                                                                        Non-Equity          Deferred
                                                                                       Stock             Option        Incentive Plan     Compensation
                                      Name and                         Salary   Bonus Awards             Awards        Compensation         Earnings           All Other               Total
                                      Principal Position    Year       ($)(1)    ($)    ($)               ($)(2)            ($)               ($)            Compensation               ($)
                                      Jay M. Eastman         2010       150,000     —       —             1,388,322                 —                 —                  —             1,538,32
                                          Chief              2009       150,000     —       —                    —                  —                 —                  —               150,00
                                         Executive
                                         Officer
                                      William J. Shea
                                                              2010            —        —          —        1,251,391                 —                  —                  —           1,251,39
                                          Acting Chief        2009            —        —          —               —                  —                  —                  —                  —
                                          Financial
                                          Officer(3)
                                       L. Michael Hone
                                                              2010       19,231        —          —          821,587                 —                  —                  —            840,81
                                         Executive            2009           —         —          —               —                  —                  —                  —                 —
                                        Vice President,
                                        VivaNet
                                        Operations
                                      Marcy K.
                                       Davis-McHugh           2010       71,110        —          —          641,624                 —                  —                  —            712,73
                                        Chief Operating       2009       71,110        —          —               —                  —                  —                  —             71,11
                                        Officer
                                      William J. Fox
                                                              2010       97,500                              536,549                 —                  —                  —            634,04
                                          Chief               2009       97,500        —          —               —                  —                  —                  —             97,50
                                         Technology
                                         Officer


              (1)
                      Amounts represent base salary paid during fiscal years 2010 and 2009; see "—Compensation Program" for a discussion of salaries following this offering.


              (2)
                      The amounts represent the aggregate grant date fair value of stock options granted. The valuation of stock options is based on the assumptions and methodology
                      set forth in Note 14 to our audited financial statements included in this prospectus.


              (3)
                      Mr. Shea served as Acting Chief Financial Officer until March 2011, when these duties were assumed by Mr. Joyce, who is currently serving as our Chief
                      Financial Officer.


Grants of Plan-Based Awards for Years Ended December 31, 2010 and 2009
   There were no grants of plan-based awards to the named executive officers during the year ended December 31, 2009. The following table
summarizes the grants of plan-based awards to each of the

                                                                   94
Table of Contents



Named Executive Officers during 2010. All stock-based awards in 2010 were granted under either our 2007 Long Term Incentive Plan or our
2010 Long-Term Equity Incentive Plan. Under these plans, all stock options expire 10 years from the date of grant and vest in equal one-third
increments. Prior to vesting, individuals who receive a grant of restricted stock are eligible to participate in the rights or privileges of a
stockholder of our Company in respect to those shares, including the right to vote and receive any dividends. We have not paid cash dividends
and currently intend to retain all earnings to further develop and grow our business.

                                                                All Other
                                                              Option Awards:         Exercise or        Grant Date
                                                            Number of Securities    Base Price of      Fair Value of
              Name and Principal                               Underlying          Option Awards        Stock and
              Position                  Grant Date             Options (#)             ($/Sh)         Option Awards
               Jay M. Eastman              5/27/2010 (1)                300,000               3.29           630,449
               Chief Executive             5/27/2010 (2)                100,000               3.29           210,149
              Officer
                                          12/30/2010 (2)                200,000               4.16           547,724
              William J. Shea
                                           5/27/2010 (1)                400,000               3.29           840,598
              Acting Chief                12/30/2010 (2)                150,000               4.16           410,793
              Financial Officer
              (through 3/11)
               L. Michael
                 Hone(3)                  12/30/2010 (2)                300,000               4.16           821,587
               Executive Vice
              President, VivaNet
              Operations
              Marcy K.
                 Davis-McHugh              5/27/2010 (1)                175,000               3.29           367,762
              Chief Operating             12/30/2010 (2)                100,000               4.16           273,862
              Officer
               William J. Fox
                                           5/27/2010 (1)                125,000               3.29           262,687
               Chief Technology           12/30/2010 (2)                100,000               4.16           273,862
              Officer


              (1)
                      Grant made under our 2007 Long-Term Incentive Plan.

              (2)
                      Grant made under our 2010 Long-Term Equity Incentive Plan.

                                                                        95
Table of Contents


Outstanding Equity Awards at 2010 Fiscal Year-End

                                                                                                                                                     Stock Award




                                                                                                                                                               Eq
                                                                                                                                                             Ince
                                                                                                                                                                P
                                                                                                                                                              Awa
                                                                                                                                                              Num
                                                                                                                                                             of Sh
                                                                                                                                                              Uni
                                                                                                                                                               Ot
                                                                                                                                                               Rig
                                                                                                                                                             That
                                                                                                                                                                N
                                                                                                                                                               Ve
                                                                                                                                                                 (
                                                                                    Option Awards
                                                                                                                                                  Market
                                                                                                                                                  Value of
                                                                                               Equity                                             Shares
                                                                                           Incentive Plan                              Number        or
                                                        Number of         Number of           Awards:                                 of Shares   Units of
                                                         Securities        Securities        Number of                                 or Units    Stock
                                                        Underlying        Underlying         Securities                                of Stock    That
                                                        Unexercised      Unexercised        Underlying      Option                    That Have    Have
                                                          Options           Options         Unexercised     Exercise      Option          Not       Not
                                   Name and                 (#)               (#)            Unearned        Price       Expiration     Vested    Vested
                                   Principal Position   Exercisable     Unexercisable(1)    Options (#)       ($)          Date           (#)      (#)(2)
                                    Jay M. Eastman            500,000                    —              —         2.15      9/11/2017         —          —
                                    Chief Executive                 —              400,000              —         3.29      5/26/2020         —          —
                                     Officer
                                                                  —               200,000                        4.16      12/29/2020       —          —
                                   William J. Shea
                                                                  —               400,000             —          3.29       5/26/2020       —          —
                                   Acting Chief                   —               150,000                        4.16      12/29/2020       —          —
                                      Financial
                                      Officer
                                   (through 3/11)                 —                    —              —            —              —     125,000     41,250
                                    L. Michael Hone
                                                                  —               300,000             —          4.16      12/29/2020        —          —
                                    Executive Vice                —                    —              —            —       12/29/2020    75,000     24,750
                                   President, VivaNet
                                   Operations
                                   Marcy K.
                                     Davis-McHugh              1,500                   —              —          2.00        3/3/2011       —          —
                                   Chief Operating            17,600                   —              —          0.15       8/11/2012       —          —
                                     Officer
                                                              50,400                   —              —          2.00      10/31/2016       —          —
                                                              25,000                   —              —          2.15       9/11/2017       —          —
                                                                  —               175,000             —          3.29       5/26/2020       —          —
                                                                  —               100,000             —          4.16      12/29/2020       —          —
                                    William J. Fox
                                                               53000                   —              —          0.15       8/11/2012       —          —
                                    Chief Technology          20,000                   —              —          2.00      10/31/2016       —          —
                                     Officer
                                                              35,000                   —              —          2.15       9/11/2017       —          —
                                                                              —                  125,000                 —          3.29        5/26/2020            —            —
                                                                              —                  100,000                 —          4.16       12/29/2020            —            —



             (1)
                     Stock option awards become exercisable in equal one-third increments annually over three years of continuous service.


             (2)
                     Market value of shares of stock that have not vested is calculated using our estimate of the fair value of our common stock on December 31, 2010 of $4.14 and the
                     number of restricted shares.


Option Exercises and Stock Vested During 2010

                                                                  Option Awards                                          Stock Awards
                                                         Number of                                            Number of
                                                           Shares                Value                          Shares                  Value
                                                         Acquired on          Realized on                     Acquired on             Realized on
                                                          Exercise              Exercise                        Vesting                Vesting
             Name and Principal Position                     (#)                  ($)                             (#)                     ($)
             Marcy K. Davis-McHugh                               24,309                   101,235                             —                             —
              ,(1)
              Chief Operating Officer
             William J. Fox, (1)
              Chief Technology                                   67,167                   277,938                             —                             —
              Officer


             (1)
                     Stock options exercised were "net exercises," pursuant to which the optionee received shares of common stock equal to
                     the intrinsic value of the options (fair market value of common stock on date of exercise less exercise price) reduced by
                     any applicable withholding taxes.

                                                                                     96
Table of Contents


Director Compensation

     We historically have not paid fees to our non-employee directors for their service in that capacity. However, we have made one-time
grants of restricted stock to certain directors in connection with their election to the Board of Directors. In April, October and December 2010,
we granted to each of Messrs. Abdalian, Cox and King-Shaw, respectively, 25,000 shares of restricted stock. Each of these restricted stock
awards cliff vests on the third anniversary of the grant date; however, Mr. Abdalian's shares were forfeited in connection with his resignation
from our Board of Directors in February 2011.

     After the offering, we plan to begin compensating our non-employee directors with an annual retainer of $20,000, paid quarterly in
arrears, with the chairs of the compensation and audit committees earning an additional $7,500 annually and $10,000, respectively, for their
additional services to the Board. In addition, non-employee directors will receive an annual equity grant of 12,000 shares of restricted stock,
which will vest in equal portions over a three-year period, and will be issued under our 2010 Long-Term Equity Incentive Plan.

Non-Employee Director Compensation Table for Year Ended December 31, 2010

                                                                                                       Change in
                                                                                                        Pension
                                                  Fees                                                 Value and
                                                Earned                                Non-Equity      Nonqualified
                                                or Paid     Stock          Option    Incentive Plan     Deferred       All Other
                                                in Cash    Awards          Awards    Compensation     Compensation   Compensation   Total
                             Name                  ($)     ($)(1)(2)         ($)          ($)           Earnings           ($)       ($)
                             Charles H.
                               Abdalian,
                               Jr.(3)               —        80,250              —               —              —              —     80,250
                             Brian Carty            —            —               —               —              —              —         —
                             Matthew Cox            —       104,000              —               —              —              —    104,000
                             David A.
                               Lovenheim            —                  —         —               —              —              —            —
                             Ruben
                               King-Shaw,
                               Jr.                  —       104,000              —               —              —              —    104,000
                             Ramey W.
                               Tomson               —                  —         —               —              —              —            —


              (1)
                      The amounts represent the aggregate grant date fair value of restricted stock granted. The valuation of restricted stock is
                      based upon management's assessment of fair value as of the date of grant. Each of the awards reflected in this table
                      represents 25,000 shares of restricted stock which cliff vest after three years of continuous service.

              (2)
                      The following awards of restricted stock were outstanding, but not vested, as of December 31, 2010:
                      Mr. Abdalian—25,000; Mr. Carty—75,000; Mr. Cox—25,000; Mr. Lovenheim—75,000; Mr. King-Shaw—25,000; and
                      Ms. Tomson—75,000. Mr. Lovenheim's restricted stock award is held by Keystones Global LLC, an entity controlled by
                      him.

              (3)
                      Mr. Abdalian resigned from our Board of Directors in February 2011.

     Employment Agreements. In December 2010, we executed employment agreements with Ms. Davis-McHugh and each of
Messrs. Eastman, Fox, Hone, and Shea. These agreements expire on January 1, 2016, and are automatically renewable in one-year increments
thereafter. We entered into an employment agreement with Mr. Joyce on March 22, 2011. Mr. Joyce's employment agreement is set to expire
on March 22, 2016, but is also automatically renewable for additional one-year terms. Each of these executives has agreed, pursuant to his or
her respective employment agreement, not to compete with us, nor solicit our customers or employees, for a period of one year following the
termination of such executive's employment. In addition to base salary, the executives are also eligible to receive equity grants under our 2010
Long-Term Equity Incentive Plan, which plan is administered by the Executive Compensation Committee of our Board of Directors. The
Committee may approve grants under the 2010 Long-Term Equity Incentive Plan from time to time.

                                                                            97
Table of Contents

     As shown in the table below, Messrs. Eastman and Shea are each eligible to receive a cash bonus of up to 60%, and Ms. Davis-McHugh
and Messrs. Fox, Hone and Joyce are each eligible to receive a cash bonus of up to 50% of his or her base salary with respect to any calendar
year. The specific objectives that will be used to measure attainment of the "Threshold," "Target," and "Superior" levels set forth below are
currently being developed, and will likely reflect a mix of our performance and individual performance. These criteria will be subject to the
approval of the Compensation Committee, and performance will be measured at the end of our fiscal year.

                                                            Potential Annual Incentive Payments

              Name and Principal Position            Annual Base Salary(1)               Threshold              Target                 Superior
              Jay M. Eastman, Chief
                 Executive Officer              $                     275,000        $       55,000     $         110,000          $      165,000
              William J. Shea,
                 Executive Chairman             $                     150,000        $       30,000     $          60,000          $       90,000
              L. Michael Hone,
                 Executive Vice
                 President                      $                     200,000        $       30,000     $          60,000          $      100,000
              Marcy K.
                 Davis-McHugh, Chief
                 Operating Officer              $                     200,000        $       30,000     $          60,000          $      100,000
              Martin J. Joyce, Chief
                 Financial Officer              $                     245,000        $       36,750     $          73,500          $      122,500
              William J. Fox, Chief
                 Technology Officer             $                     180,000        $       27,000     $          54,000          $       90,000


              (1)
                      Assumes that this offering is a "qualified financing" per the terms of each executive's employment agreement.

      In the event the employment agreement is terminated (i) by us without "just cause," or (ii) by the executive with "good reason," each as
defined in each executive's respective employment agreement, then the executive is entitled to an immediate cash payment equal to two times
his or her base salary plus bonus for the applicable year or, in the case of the bonus, for the immediately prior year, and all restrictions
remaining on any shares of restricted stock will lapse and any options earned under the 2010 Long-Term Equity Incentive Plan will fully vest.
In the event the agreement is terminated following a change-in-control, then the executive is entitled to an immediate cash payment equal to
two and one half times his or her base salary plus bonus for the applicable year or, in the case of the bonus, for the immediately prior year, and
all restrictions remaining on any shares of restricted stock will lapse and any options earned under the 2010 Long-Term Equity Incentive Plan
will fully vest.


                                                            Cash Payments Upon Termination (1)

                                                                             Termination By Lucid               Termination
                                                                             without "Just Cause"               Following a
                                                                              or by Executive with              "Change-in-
                              Name and Principal Position                      "Good Reason"(2)                 Control"(2)
                              Jay M. Eastman, Chief
                                 Executive Officer                      $                     550,000       $            687,500
                              William J. Shea, Executive
                                 Chairman                               $                     300,000       $            375,000
                              L. Michael Hone, Executive
                                 Vice President                         $                     400,000       $            500,000
                              Marcy K. Davis-McHugh,
                                 Chief Operating Officer                $                     400,000       $            500,000
                              Martin J. Joyce, Chief Financial
                                 Officer                                $                     490,000       $            612,500
                              William J. Fox, Chief
                                 Technology Officer                     $                     360,000       $            450,000


                              (1)
                                       Assumes that this offering is a "qualified financing" per the terms of each executive's employment
                                       agreement, and that at the time of termination, each executive's base salary is at the level set forth above in
      the "Annual Base Salary" column of the "Potential Annual Incentive Payments" table.

(2)
      As such quoted terms are defined in the employment agreements of each executive, respectively.

                                       98
Table of Contents


     The "Cash Payments Upon Termination" table above excludes cash compensation which is calculated by reference to a prior year's bonus,
because no bonuses have been paid historically and it is not possible to calculate or estimate the amount of future bonus payments. This table
also excludes all non-cash compensation to which the executive would be entitled upon termination, including accelerated vesting of equity
awards.

     For the reasons described earlier, under the heading "Base Salary," our employment agreements with Ms. Davis-McHugh and
Messrs. Eastman, and Fox, also provide for an increase in each executive's base salary upon the occurrence of a qualified financing, which
financing shall be deemed to have occurred at the sole discretion of the Executive Compensation Committee. The Executive Compensation
Committee expects that the closing of this offering will be deemed a "qualified financing," and that the following increased base salaries will
become effective concurrently with the closing: Mr. Eastman, $275,000; Ms. Davis-McHugh, $200,000; and, Mr. Fox $180,000. In addition,
our newly-hired Chief Financial Officer, Martin Joyce, will be entitled to an increased base salary of $245,000 upon the occurrence of a
qualified financing.

    Equity Compensation Plans. There are currently awards outstanding under our three equity compensation plans, the Lucid, Inc. Year
2000 Stock Option Plan, the Lucid, Inc. 2007 Long-Term Incentive Plan, and the Lucid, Inc. 2010 Long-Term Equity Incentive Plan. As of
March 31, 2011, 2,985,000 shares remained available for issuance under the 2010 Long-Term Equity Incentive Plan. No further awards may be
made under the Year 2000 Stock Option Plan or the 2007 Long-Term Incentive Plan.

Limitation of Liability and Indemnification of Directors and Officers

     Our certificate of incorporation and bylaws provide that we will indemnify our directors and executive officers and may indemnify our
other officers and employees and other agents to the fullest extent permitted by the New York Business Corporation Law (the "NYBCL"). In
addition, we have entered into indemnification agreements with each of our officers and directors. Pursuant to these agreements, we have
agreed to indemnify each of our officers and directors for liabilities arising out of any action or threatened action to which such officer or
director is made a party by reason of the fact that he or she is or was an officer or director of our Company, or served an affiliated entity in any
capacity. We believe that these provisions and agreements are necessary to attract and retain qualified persons as directors and executive
officers.


                                                            Related Party Transactions

     Our Board of Directors has adopted a written policy regarding the review and approval of transactions between our Company and related
parties, which includes our senior officers, directors, holders of 5% or more of our capital stock, or any entity owned or controlled by any such
person or in which any such person has a substantial ownership interest (our "Affiliates"). For purposes of this policy, any proposed transaction
between our Company and any related party, other than transactions available to all of our employees generally or involving less than $10,000
when aggregated with all similar transactions, must be submitted to the Audit Committee of our Board of Directors for prior review and
approval.

     We have issued to several of our Affiliates, namely: Mr. Eastman, our President and Chief Executive Officer, Mr. Shea, the Executive
Chairman of our Board of Directors, Mr. Maggiotto, a member of our Board of Directors, and Richard LeFrois, an individual who holds greater
than 5% of our common stock, convertible notes and warrants on the same terms as those issued to investors in our 2010/2011 Convertible
Debt Offering. The principal amount (plus any accrued interest) of those convertible notes will automatically convert into shares of our
common stock at a discount to the price paid by investors in this offering. More specifically, all unpaid principal and any unpaid accrued
interest

                                                                         99
Table of Contents



on such notes will convert into shares of our common stock at a conversion price equal to 70% of the price at which shares of common stock
are being sold in this offering. In addition, the warrants have an exercise price of $4.11 per share, and will become exercisable upon the
completion of this offering; further, pursuant to an agreement that was made with all warrant holders in that offering, we have agreed to register
the shares of our common stock that will be issued upon exercise of such warrants. The terms of the notes issued in the 2010/2011 Convertible
Debt Offering are described in greater detail above under "Prospectus Summary—Outstanding Securities Relating to this Offering."
Mr. Eastman holds a convertible note with a face value of $100,000 and warrants to purchase an amount of our common stock equal to 70,000
divided by the price at which shares of common stock are being sold in this offering. Mr. Shea holds a convertible note with a face value of
$51,317 and warrants to purchase an amount of our common stock equal to 35,922 divided by the price at which shares of common stock are
being sold in this offering. Mr. Maggiotto holds a convertible note with a face value of $50,000 and warrants to purchase an amount of our
common stock equal to 35,000 divided by the price at which shares of common stock are being sold in this offering. Mr. LeFrois holds a
convertible note with a face value of $263,933 and warrants to purchase an amount of our common stock equal to 184,753 divided by the price
at which shares of common stock are being sold in this offering. During fiscal 2010, we did not pay any principal or interest in respect of such
notes.

     In July 2011, we issued convertible notes and warrants, or will issue notes and warrants under subscription agreements recieved by us,
under our July 2011 Convertible Debt Offering to Northeast LCD Capital, LLC and Robert Sperandio, each of whom is a principal stockholder,
and also to Mr. Shea and his wife. The principal amount (plus any accrued interest) of those convertible notes will automatically convert into
shares of our common stock at a discount to the price paid by investors in this offering. More specifically, all unpaid principal and any unpaid
accrued interest on such notes will convert into shares of our common stock at a conversion price equal to 70% of the price at which shares of
common stock are being sold in this offering. In addition, the warrants have an exercise price of $4.61 per share, and will become exercisable
upon the completion of this offering; further, pursuant to an agreement that was made with all warrant holders in the July 2011 Convertible
Debt offering, we have agreed to register the shares of our common stock that will be issued upon exercise of such warrants. The terms of the
notes issued in the July 2011 Convertible Debt Offering are described in greater detail above under "Prospectus Summary—Outstanding
Securities Relating to this Offering." Mr. Sperandio holds a convertible note with a face value of $125,000 and warrants to purchase an amount
of our common stock equal to 87,500 divided by the price at which shares of common stock are being sold in this offering. Northeast LCD
Capital and Mr. Shea and his wife have delivered to us subscription agreements each in the amount of $300,000.

       In July 2010, we entered into a revolving line of credit facility with an institutional lender (the "2010 Credit Facility"), which has since
been replaced by the 2011 Credit Facility with a different lender. Our obligations under the 2010 Credit Facility were secured by, among other
things, (i) a cash collateral pledge of $2.0 million by Northeast LCD Capital, LLC, which holds greater than 10% of our common stock, and
(ii) the personal guarantees of Messrs. Eastman and Shea. In consideration for the pledge from Northeast LCD Capital, we agreed to pay this
entity $100,000 in fees per quarter, which fees are payable in cash after an initial public offering of our common stock or, at the option of
Northeast LCD Capital, in shares of our common stock at a discount of 30% from the initial public offering price. Currently, the aggregate
amount of this fee is $413,000. If we do not complete an initial public offering of our common stock before January 1, 2012, we will be
obligated to pay Northeast LCD Capital the accrued fee at that date.

     In July 2011, we received a term loan in the amount of $3.0 million under the 2011 Credit Facility, which is described in greater detail on
page 51 hereof. We used a portion of these loan proceeds to repay all of our outstanding obligations under the 2010 Credit Facility, and the
$2.0 million cash collateral pledge was returned to Northeast LCD Capital. Following this payoff, Northeast LCD Capital

                                                                        100
Table of Contents



pledged $500,000 to support our obligations under the 2011 Credit Facility, and Messrs. Eastman and Shea have again provided personal
guarantees. In consideration for its pledge of cash collateral, Northeast LCD Capital, LLC is entitled to fees at an annual rate of 10%. Messrs.
Crane, Eastman, LeFrois, Shea and Sperandio, each of whom is a holder of our debt securities, executed subordination agreements in favor of
Square 1 Bank in connection with our 2011 Credit Facility.

     Each of our named executive officers has entered into employment agreements which provide for an increase in base salary which will
become effective upon a "qualified financing," which financing is to be determined in the discretion of the Compensation Committee of our
Board of Directors. It is expected that this offering will be deemed a "qualified financing" and, accordingly, will trigger the increased base
salaries for each of our executive officers. The salary increases payable to each of our named executive officers are set forth above under
"Management—Employment Agreements".

      During 2009 and 2010, Mr. Eastman held our promissory note in the original principal amount of $140,457, which note bore interest at
6% and matured on January 1, 2011. This note was issued in December 2008. In January 2011, we did not make the mandatory payments
required thereunder and we were in default of our obligations. In March 2011, $40,457 of the face value of the note was converted into a new
promissory note which bears interest at 6% and matures on the earlier of January 1, 2012, or 30 days following our completion of additional
equity financing in an amount in excess of $8 million. This offering will constitute an "additional equity financing" within the meaning of this
note, and therefore, this note will be payable within 30 days after completion of this offering. We expect to use a portion of the net proceeds of
this offering to repay the balance of approximately $40,000 owed on this note. The remaining principal of $100,000 was exchanged for a
convertible note and warrant on the same terms and conditions as such securities were issued to investors in our 2010/2011 Convertible Debt
Offering, as described above. No payments were made to Mr. Eastman in respect of any of these notes during 2009 or 2010.

      In addition to the notes and warrants issued to Mr. Shea as described above, on November 15, 2010, we issued to Mr. Shea 282,884 shares
of our common stock upon his election to convert $869,467 in outstanding principal and accrued interest on convertible notes held by him. As
described above, Mr. Shea holds a convertible note, in the principal amount of $51,317, and warrants, on the same terms and conditions as the
2010/2011 Convertible Debt Offering. Mr. Shea received these securities upon his election to convert the outstanding principal and accrued
interest on convertible notes held by him. Mr. Shea also holds warrants which are exercisable at • , which is the public offering price, and
entitle him to purchase • shares of our common stock, which is equal to the quotient obtained by dividing 7,500 by the public offering price.

     During fiscal 2010 and 2009, we received legal and consulting services from Mr. Lovenheim, a member of our Board of Directors,
through Keystones Global LLC, an entity controlled by him. We paid fees to Keystones Global aggregating $140,327 and $52,298 during 2010
and 2009, respectively.

     During fiscal 2010 and 2009, we received consulting and outsourcing services from Insero and Company, a certified public accounting
firm. Nancy Catarisano, a member of our Board of Directors, serves as Partner and Chief Operating Officer of Insero and Company, and holds
a minority equity interest in Insero and Company. We paid Insero and Company fees aggregating $192,976 and $284,438 for 2010 and 2009,
respectively. These fees represented less than 5% of that firm's gross revenues in each such year.

    In December 2010, we issued a non-interest bearing promissory note to Dale Crane, an individual who holds greater than 10% of our
common stock, in the amount of $612,412 (the "2010 Crane Note"). In 2003, we issued promissory notes to Mr. Crane in original principal
amounts totaling $739,219 and bearing interest at 10% (collectively, the "2003 Crane Notes"). The entire principal amount of the 2003 Crane
Notes was repaid in July 2010, and accrued but unpaid interest amounts of $509,405 on these notes were cancelled and exchanged for the 2010
Crane Note, together with accrued

                                                                       101
Table of Contents



but unpaid interest of $103,007 from a 2003 demand note held by Mr. Crane, the principal of which was repaid prior to 2010. The 2010 Crane
Note requires a first payment of $153,103, which payment was made prior to March 31, 2011, and three equal successive annual payments of
$153,103 each, which payments are to be made on or before January 15th of 2012, 2013 and 2014. Also in December 2010, Mr. Crane received
591,374 shares of our common stock upon exercise of common stock warrants held by him at an exercise price of $1.25 per share. Finally, in
2010, we paid Mr. Crane an interest payment of $229,244, which represented the remaining accrued but unpaid interest relating to the 2003
demand note held by Mr. Crane, the principal of which was repaid prior to 2010. No payments were made to Mr. Crane in respect of any of
these notes during 2009.

     In July 2010, we paid principal and interest to Mr. Sperandio in the amount of $430,593. These payments were made in connection with
senior secured notes which were issued to Mr. Sperandio in 2003, in the original principal amount of $318,956 and bearing interest at 15%. As
part of this payment in 2010, Mr. Sperandio received 234,478 shares of our common stock upon exercise of common stock warrants at a
weighted average exercise price of $1.36 per share. No payments on Mr. Sperandio's 2003 note were made during 2009.

     In addition to the above transactions, from time to time, various of our shareholders and warrant holders have sold raw materials, parts and
supplies to us or have rendered services to us. These transactions have taken place at prices that we considered comparable to those we would
have paid in arm's length transactions.

Interests of Related Parties in this Transaction

    Certain of our Affiliates have an interest in this transaction, either because of the nature of the securities they hold in our Company, or
because of the increased compensation they will receive if the offering is completed.

     The investors in our 2010/2011 Convertible Debt Offering included Messrs. Eastman, Maggiotto, Shea and LeFrois and the investors in
our July 2011 Convertible Debt Offering included Northeast LCD Capital and Messrs. Shea and Sperandio. As described above, the principal
amount (plus any accrued interest) of the convertible notes that were issued to them pursuant to that offering will automatically convert into
shares of our common stock at a discount to the price paid by investors in this offering, the warrants issued to them will become exercisable
upon the completion of this offering, and we have agreed to register the shares of our common stock that will be issued upon exercise of such
warrants.

     Also as described above, our 2011 Credit Facility is personally guaranteed by Messrs. Eastman and Shea; upon completion of this
offering, our lender will release these personal guarantees. The $500,000 cash collateral pledge given by Northeast LCD Capital in connection
with the 2011 Credit Facility will also be released back to Northeast LCD Capital upon the completion of this offering. In addition, the fees we
owe as consideration for pledges by Northeast LCD Capital pursuant to our 2010 and 2011 Credit Facilities will become payable upon
completion of this offering.

     Finally, also as set forth above, it is expected that this offering will be deemed a "qualified financing" and, accordingly, will trigger
increased base salaries for each of our named executive officers in accordance with the terms of their employment agreements.

                                                                         102
Table of Contents


                                                                     Principal and Selling Stockholders

     The following table reflects the holdings by directors, officers, selling stockholders and owners of five percent (5%) or more of all of the
issued and outstanding shares of our common stock as of July 29, 2011, and the percentage of shares held by each stockholder.

                                                                                                Number                          Number of
                                                                                                   of                            Common
                                                                                                Common         Percentage         Shares          Percentage
                                                          Number of                              Shares        Ownership        Pro Forma,        Ownership
                            Name of Beneficial            Common            Percentage            Pro             Pro               As               Pro
                            Owner                          Shares          Ownership(1)         Forma(2)        Forma(2)        Adjusted(3)        Forma(3)
                            Executive Officers and
                               Directors:
                            Jay M. Eastman(4)                 1,423,592                24.2 %              •                •                 •                •
                            William J. Shea(5)                  871,217                18.8 %              •                •                 •                •
                            Brian Carty(6)                       75,000                 1.7 %              •                •                 •                •
                            Nancy E. Catarisano(24)              12,000                   *                •                •                 •                •
                            Matthew Cox(7)                       25,000                   *                •                •                 •                •
                            L. Michael Hone(8)                  206,972                 4.6 %              •                •                 •                •
                            Ruben J. King-Shaw,
                               Jr.(9)                           25,000                    *                •                •                 •                •
                            David A. Lovenheim(10)             245,266                  5.4 %              •                •                 •                •
                            Rocco Maggiotto(20)                 12,000                    *                •                •                 •                •
                            Ramey W. Tomson(11)                569,861                 11.4 %              •                •                 •                •
                            Martin J. Joyce                         —                     *                •                •                 •                •
                            Marcy K.
                               Davis-McHugh(12)                176,903                  3.8 %              •                •                 •                •
                            William J. Fox(13)                 216,833                  4.7 %              •                •                 •                •
                            All Directors and
                               Executive Officers as a
                               Group (13 persons)             3,859,644                56.4 %              •                •                 •                •
                            5% Stockholders:
                            Dale Crane(14)                     642,176                 14.1 %              •                •                 •                •
                            James A. Zavislan(15)              537,349                 11.4 %              •                •                 •                •
                            Northeast LCD
                               Capital(16)                     544,190                 12.1 %              •                •                 •                •
                            Robert Sperandio(17)               375,000                  8.1 %              •                •                 •                •
                            Richard LeFrois(18)                257,202                  5.7 %              •                •                 •                •
                            John Boles(19)                     235,010                  5.2 %              •                •                 •                •
                            Selling Stockholders:
                            CNH Diversified
                               Opportunity Master
                               Account, L.P.(21)                       •                  •                •                •                 •            —
                            Rockmore Investment
                               Master Fund LTD.(22)                    •                  •                •                •                 •            —
                            AQR Opportunity
                               Premium Offshore
                               Fund LTD(23)                            •                  •                •                •                 •            —
                            Total (All Selling
                               Stockholders)                           •                  •                •                •                 •            —


*
       Represents beneficial ownership of less than one percent.


(1)
       Percentages have been computed based upon 4,486,546 shares of common stock outstanding at July 29, 2011, plus, for each person (except where indicated otherwise) and the
       group, shares that such person or the group has the right to acquire pursuant to preferred stock, restricted common stock and common stock warrants or options, each to the extent
       exercisable within 60 days after July 29, 2011.


(2)
       Numbers of Common Shares and Percentages have been computed based upon • shares of common stock outstanding, after assuming or giving effect to (i) the conversion of our
       outstanding convertible debt notes, which notes were issued pursuant to the 2010/2011 Convertible Debt Offering, into • shares of our common stock, and, (ii) the conversion of
       all of our shares of Series A and Series B preferred stock into • shares of our common stock at the closing of this offering. In addition, for each person and the group, these
       numbers of common shares and percentages reflect shares of our common stock that such person or the group has the right to acquire pursuant to restricted common stock and
       common stock warrants or options, each to the extent exercisable within 60 days of July 29, 2011.


(3)
       Numbers of Common Shares and Percentages have been computed based upon • shares of common stock outstanding after the offering, after assuming or giving effect to (i) the
       conversion of our outstanding convertible debt notes, which notes were issued pursuant to the 2010/2011 Convertible Debt Offering, into • shares of our common stock, and
       (ii) the conversion of all of our shares of Series A and Series B preferred stock into • shares of our common stock at
103
Table of Contents

       the closing of this offering. In addition, for each person and the group, these numbers of common shares and percentages reflect shares of our common stock that such person or the
       group has the right to acquire pursuant to restricted common stock and common stock warrants or options, each to the extent exercisable within 60 days of July 29, 2011. The table
       assumes no exercise of the underwriters' over-allotment option.

(4)
          Includes 173,910 shares held by his spouse in trust for children. Excludes • shares of our common stock issuable upon exercise of warrants and conversion of convertible debt,
          each as issued on the terms and conditions of the 2010/2011 Convertible Debt Offering. Also includes 633,333 shares issuable upon exercise of stock options exercisable within
          60 days of July 29, 2011. As adjusted amount includes the conversion of debt into • shares, calculated using an assumed initial offering price of $[ • ] per share, which is the
          midpoint of the range set forth on the cover page of this prospectus.


(5)
          Includes 125,000 shares of restricted stock, but excludes • shares of our common stock issuable upon exercise of warrants and conversion of convertible debt, each as issued on
          the terms and conditions of the 2010/2011 Convertible Debt Offering. Excludes • and • shares of our common stock issuable to Mr. Shea and his wife, respectively, upon
          exercise of warrants and conversion of convertible debt, each as issued upon the terms and conditions of the July 2011 Convertible Debt Offering. Also includes 133,333 shares
          issuable upon exercise of stock options exercisable within 60 days of July 29, 2011. As adjusted amount includes the conversion of debt into • shares, calculated using an
          assumed initial offering price of $[ • ] per share, which is the midpoint of the range set forth on the cover page of this prospectus.


(6)
          Includes 75,000 shares of restricted stock.


(7)
          Includes 25,000 shares of restricted stock.


(8)
          Includes 75,000 shares of restricted stock.


(9)
          Includes 25,000 shares of restricted stock.


(10)
          Includes 30,000 shares of common stock held directly by Mr. Lovenheim (all of which have been pledged as collateral to secure a loan) and 123,600 shares of common stock held by
          Keystones Global, LLC, of which Mr. Lovenheim is the Managing Director. Also includes 75,000 shares of restricted stock and 16,666 shares issuable upon exercise of stock
          options, exercisable within 60 days of July 29, 2011, all of which are held by Keystones Global, LLC.


(11)
          Includes 75,000 shares of restricted stock. Also includes 494,166 shares owned by Tomson Partners LLP and 695 shares owned by Tomson Partners, LLC, entities owned and
          controlled by Ramey Tomson.


(12)
          Includes 151,333 shares issuable upon exercise of stock options exercisable within 60 days of July 29, 2011.


(13)
          Includes 149,666 shares issuable upon exercise of stock options exercisable within 60 days of July 29, 2011


(14)
          The address of Mr. Crane is c/o Lucid, Inc., 2320 Brighton Henrietta Town Line Road, Rochester, New York 14623.


(15)
          The address of Mr. Zavislan is c/o Lucid, Inc., 2320 Brighton Henrietta Town Line Road, Rochester, New York 14623. Amounts include shares held in Trust for Children and
          210,000 shares issuable upon exercise of stock options exercisable within 60 days of July 29, 2011.


(16)
          Excludes • shares of our common stock issuable upon exercise of warrants and conversion of convertible debt, each as issued upon the terms and conditions of the July 2010
          Convertible Debt Offering. The address of Northeast LCD Capital is c/o Wesley Crowell, Bergen & Parkinson, LLC, 62 Portland Rd, Kennebunk Maine 04043. Mr. Crowell is the
          Managing Director of Northeast LCD Capital and, as such, has sole voting and dispositive power over these shares.


(17)
          Includes 40,522 shares of our common stock issuable upon exercise of warrants. Excludes • shares of our common stock issuable upon exercise of warrants and conversion of
          convertible debt, each as issued upon the terms and conditions of the July 2011 Convertible Debt Offering. The address of Mr. Sperandio is c/o Lucid, Inc., 2320 Brighton Henrietta
          Town Line Road, Rochester, New York 14623.


(18)
          Excludes • shares of our common stock issuable upon exercise of warrants and conversion of convertible debt, each as issued upon the terms and conditions of the July 2010
          Convertible Debt Offering. The address of Mr. LeFrois is c/o Lucid, Inc., 2320 Brighton Henrietta Town Line Road, Rochester, New York 14623.


(19)
          The address of Mr. Boles is c/o Lucid, Inc., 2320 Brighton Henrietta Town Line Road, Rochester, New York 14623.
(20)
       Includes 12,000 shares of restricted stock. Excludes • shares of our common stock issuable upon exercise of warrants and conversion of convertible debt, each as issued on the
       terms and conditions of the 2010/2011 Convertible Debt Offering.


(21)
       Represents shares received upon the automatic conversion, at the completion of this offering, of the entire principal amount plus accrued interest of a convertible note held by this
       entity. All such shares are being offered for sale pursuant to this offering. Excludes • shares of common stock issuable upon exercise of warrants purchased in the 2010/2011
       Convertible Debt Offering.


(22)
       Rockmore Capital, LLC ("Rockmore Capital") serves as the investment manager to Rockmore Investment Master Fund Ltd ("Rockmore Master Fund") and in such capacity has
       investment discretion to vote and dispose of these shares.

                                                                                           104
Table of Contents

       Mr. Bruce T. Bernstein and Mr. Brian Daly, as officers of Rockmore Capital, are responsible for the portfolio management decisions of Rockmore Master Fund and may be deemed to
       have investment discretion over these shares. Each of Rockmore Capital, Messrs. Bernstein and Daly, disclaims beneficial ownership of these shares. Represents shares received upon
       the automatic conversion, at the completion of this offering, of the entire principal amount plus accrued interest of a convertible note held by this entity. All such shares are being
       offered for sale pursuant to this offering. Excludes • shares of common stock issuable upon exercise of warrants purchased in the 2010/2011 Convertible Debt Offering.

(23)
          Represents shares received upon the automatic conversion, at the completion of this offering, of the entire principal amount plus accrued interest of a convertible note held by this
          entity. All such shares are being offered for sale pursuant to this offering. Excludes • shares of common stock issuable upon exercise of warrants purchased in the 2010/2011
          Convertible Debt Offering.


(24)
          Includes 12,000 shares of restricted stock.



                                                                             Description of Capital Stock

     We have authorized capital of 70,000,000 shares, of which 60,000,000 shares have been designated as common stock, par value $0.01 per
share, and 10,000,000 shares have been designated as preferred stock, par value $0.05 per share. The shares of preferred stock may be issued
from time to time in series with such rights, preferences, and privileges and restrictions as may be designated by our Board of Directors. We
had 4,511,546 shares of common stock held of record by approximately 65 holders, 2,258,745 shares of Series A preferred stock, and 637,921
shares of series B preferred stock issued and outstanding as of July 29, 2011. Upon completion of the offering, assuming the automatic
conversion of the 2010/2011 Convertible Notes, the July 2011 Convertible Debt Offering, and all of our outstanding preferred stock into our
common stock immediately prior to the completion of the offering, there will be • shares of our common stock outstanding following the
offering.

Common Stock

     The holders of our common stock are entitled to one vote for each share standing in the holder's name on our transfer books, and holders
vote together as a single class on all matters requiring the vote of the stockholders. Common stock holders have no preemptive, subscription or
redemption rights. Subject to law and the provisions of our Certificate of Incorporation, our Board of Directors may declare dividends on our
stock, payable upon such dates as the Board of Directors may designate. No dividend may be paid on common stock unless all declared but
unpaid dividends, if any, on the Preferred Stock have been paid. Under Section 510 of the NYBCL, the net assets of the corporation upon
declaration or distribution of a dividend must remain at least equal to the amount of the corporation's stated capital.

Preferred Stock

     In May 2011, our stockholders approved a proposal to amend our Certificate of Incorporation to: (a) provide for the automatic conversion
of Series A Preferred Stock and Series B Preferred Stock immediately prior to the closing of an underwritten public offering; (b) provide that
registration rights related to the shares of common stock issuable upon conversion of the Series A and Series B Preferred Stock will terminate
when such shares can be sold without restriction under the securities laws; and (c) provide for an equitable adjustment to the conversion ratio of
Series A Preferred Stock and Series B Preferred Stock in connection with specified recapitalizations of the Company.

     The holders of Series A preferred stock and Series B preferred stock (collectively referred to as "Preferred Stock") have the same voting
rights as holders of our common stock and, in addition, holders of Preferred Stock are entitled to a class vote on (i) the sale of all or
substantially all of our assets and (ii) a merger transaction. The Preferred Stock will automatically convert, on a 1:1 basis subject to the
equitable adjustment described above, into shares of our common stock upon the closing of this offering. Holders of our Preferred Stock have
no preemptive, subscription or redemption rights. Holders of Preferred Stock are entitled to receive, when and as declared by the Board of
Directors, non-cumulative dividends out of any assets legally available therefor, in a per share amount equal to at

                                                                                              105
Table of Contents



least that paid on shares of common stock, prior and in preference to any declaration or payment of any dividend on the common stock of the
corporation. See Note 14 to our audited financial statements included in this prospectus for a description of the currently outstanding preferred
stock.

     Holders of Series A preferred stock rank in preference to our common stockholders, but junior to holders of Series B preferred stock,
regarding certain rights upon liquidation. The holders of both Series A and Series B preferred stock are entitled to receive, when and as
declared by the Board of Directors, dividends in a per share amount equal at least to that paid on shares of common stock, prior and in
preference to any dividends on common stock.

      In the event of any liquidation, dissolution, or winding up of the Corporation, the holders of Series B preferred stock are entitled to
receive, prior and in preference to any distribution to the holders of Series A preferred stock and common stock, an amount per share equal to
the original purchase price of such shares, plus any declared but unpaid dividends on such shares. After distribution of such amount, the holders
of Series A preferred stock are entitled to receive, prior and in preference to any distribution to the holders of common stock, an amount equal
to the original purchase price of such Series A preferred stock, plus any declared but unpaid dividends on such shares. After the preferred
distributions to the holders of Series A and Series B preferred stock, the holders of Common Stock are entitled to receive an amount equal to
the original purchase price of such shares of common stock, plus declared but unpaid dividends. After the foregoing distributions, the
remaining assets would be distributed among the holders of Series A preferred stock, Series B preferred stock, and common stock, pro rata
based on the number of shares held by each.

Limitation of Personal Liability of Directors and Officers

      The Lucid certificate of incorporation provides that no officer or director shall be personally liable to the corporation or its shareholders
for damages for any breach of duty in such capacity except where a judgment or other final adjudication adverse to said officer or director
establishes: that the officer or director's acts or omissions were in bad faith or involved intentional misconduct or a knowing violation of law;
that the officer or director personally gained a financial profit or other advantage to which he was not entitled.

     Section 402 of the NYBCL permits corporations to eliminate or limit the personal liability of directors to the corporation or its
stockholders for damages for any breach of duty in such capacity except liability of a director: (i) whose acts or omissions were in bad faith,
involved intentional misconduct or a knowing violation of law; (ii) who personally gained a financial profit or other advantage to which he or
she was not legally entitled; or (iii) whose acts violated certain provisions of New York law.

Indemnification of Directors and Officers

      Our bylaws provide that we will indemnify (a) any person made or threatened to be made a party to any action or proceeding by reason of
the fact that he, his testator or intestate, is or was a director or officer of our Company, and (b) any director or officer of Lucid who served any
other company in any capacity at our request, in the manner and to the maximum extent permitted by the NYBCL; and we may, in the
discretion of the Board of Directors, indemnify all other corporate personnel to the extent permitted by law.

     Under Section 722 of the NYBCL, a corporation may indemnify its directors and officers made, or threatened to be made, a party to any
action or proceeding, except for stockholder derivative suits, if the director or officer acted in good faith, for a purpose that he or she
reasonably believed to be in or, in the case of service to another corporation or enterprise, not opposed to the best interests of the corporation,
and, in addition, in criminal proceedings had no reasonable cause to believe his or her conduct was unlawful. In the case of stockholder
derivative suits, the corporation may indemnify a director or officer if he or she acted in good faith for a purpose that he or she reasonably
believed to

                                                                        106
Table of Contents



be in or, in the case of service to another corporation or enterprise, not opposed to the best interests of the corporation, except that no
indemnification may be made in respect of (i) a threatened action, or a pending action that is settled or otherwise disposed of, or (ii) any claim,
issue or matter as to which such individual has been adjudged to be liable to the corporation, unless and only to the extent that the court in
which the action was brought, or, if no action was brought, any court of competent jurisdiction, determines, upon application, that, in view of
all the circumstances of the case, the individual is fairly and reasonably entitled to indemnity for the portion of the settlement amount and
expenses as the court deems proper.

      Any individual who has been successful on the merits or otherwise in the defense of a civil or criminal action or proceeding will be
entitled to indemnification. Except as provided in the preceding sentence, unless ordered by a court pursuant to Section 724 of the NYBCL, any
indemnification under the NYBCL as described in the immediately preceding paragraph may be made only if, pursuant to Section 723 of the
NYBCL, indemnification is authorized in the specific case and after a finding that the director or officer met the requisite standard of conduct
by the disinterested directors if a quorum is available, or, if the quorum so directs or is unavailable, (i) the board of directors upon the written
opinion of independent legal counsel or (ii) the stockholders.

Certain Provisions Having Potential Anti-Takeover Effects

      The following is a summary of the material provisions of the Business Corporation Law of the State of New York, which we refer to as
the NYBCL, and our restated certificate of incorporation and our amended and restated bylaws (collectively, our "Charter Documents") that
address matters of corporate governance and the rights of shareholders. Certain of these provisions may delay or prevent takeover attempts not
first approved by our board of directors (including takeovers which certain shareholders may deem to be in their best interests). These
provisions also could delay or frustrate the removal of incumbent directors or the assumption of control by shareholders. The primary purpose
of these provisions is to encourage negotiations with our management by persons interested in acquiring control of the Company. All
references to our Charter Documents are to our restated certificate of incorporation and our amended and restated bylaws in effect on the date
of this prospectus.

    Vacancies occurring in our board of directors may be filled by the shareholders or a majority of the remaining directors, even if less than a
quorum. Our amended and restated bylaws provide that special meetings of shareholders may be called only by our President, or by request of
a majority of our board of directors.

      New York law does not require shareholder approval for any issuance of authorized shares. Authorized but unissued shares may be used
for a variety of corporate purposes, including future public or private offerings to raise additional capital or to facilitate corporate acquisitions.
One of the effects of the existence of authorized but unissued shares may be to enable the board of directors to issue shares to persons friendly
to current management, which issuance could render more difficult or discourage an attempt to obtain control of us by means of a merger,
tender offer, proxy contest or otherwise, and thereby protect the continuity of our management and possibly deprive the stockholders of
opportunities to sell their shares of common stock at prices higher than prevailing market prices.

      Under the terms of our restated certificate of incorporation, our board of directors is authorized to issue shares of preferred stock in one or
more series without shareholder approval. Our board of directors has the discretion to determine the rights, preferences, privileges and
restrictions, including voting rights, dividend rights, conversion rights, redemption privileges and liquidation preferences, of each series of
preferred stock. The purpose of authorizing our board of directors to issue preferred stock and determine its rights and preferences is to provide
flexibility and eliminate delays associated with a shareholder vote on specific issues. However, the ability of our board of directors to issue
preferred stock and determine its rights and preferences may have the effect of delaying or preventing a change in control.

                                                                         107
Table of Contents

     Section 912 of the NYBCL generally provides that a New York corporation may not engage in a business combination with an interested
stockholder for a period of five years following the interested stockholder's becoming such. Such a business combination would be permitted
where it is approved by the board of directors before the interested stockholder's becoming such, or within 30 days thereafter, if a good faith
proposal regarding a business combination is made in writing.

     Covered business combinations include certain mergers and consolidations, dispositions of assets or stock, plans for liquidation or
dissolution, reclassifications of securities, recapitalizations and similar transactions. An interested stockholder is generally a stockholder
owning at least 20% of a corporation's outstanding voting stock.

      In addition, New York corporations may not engage at any time with any interested stockholder in a business combination other than: (i) a
business combination approved by the board of directors before the stock acquisition, or where the acquisition of the stock had been approved
by the board of directors before the stock acquisition; (ii) a business combination approved by the affirmative vote of the holders of a majority
of the outstanding voting stock not beneficially owned by the interested stockholder at a meeting for that purpose no earlier than five years after
the stock acquisition; or (iii) a business combination in which the interested stockholder pays a formula price designed to ensure that all other
stockholders receive at least the highest price per share that is paid by the interested stockholder and that meets certain other requirements.

    Further, New York law generally requires approval by two-thirds of the shareholders entitled to vote on merger and asset sale transactions,
which is a higher threshold than many state statutes and could render a change of control more difficult to complete.

    These provisions are intended to enhance the likelihood of continuity and stability in the composition of the board and in policies
formulated by the board and to discourage certain types of transactions that may involve an actual or threatened change of control of our
Company. These provisions are designed to reduce our vulnerability to an unsolicited proposal for a takeover that does not contemplate the
acquisition of all of our outstanding shares or an unsolicited proposal for the restructuring or sale of all or part of our Company.

Transactions Involving Officers or Directors

      Section 713 of the NYBCL provides that a corporation may enter into a contract or transaction with a director so long as (1) the material
facts as to such director's interest in such contract or transaction are disclosed in good faith or known to the board, and the board approves such
contract or transaction by a vote sufficient for such purpose without counting the vote of such interested director or, if the votes of the
disinterested directors are insufficient to constitute an act of the board, by unanimous vote of the disinterested directors, (2) the material facts as
to such director's interest in such contract or transaction are disclosed in good faith or known to the shareholders entitled to vote thereon, and
such contract or transaction is approved by vote of such shareholders, or (3) the party or parties thereto establish affirmatively that the contract
or transaction was fair and reasonable as to the corporation at the time it was approved by the board, a committee or the shareholders.

      Section 714 of the NYBCL provides that a corporation may not lend money to or guarantee the obligation of a director unless: (1) the
particular loan or guarantee is approved by the shareholders, with the holders of a majority of the votes of the shares entitled to vote thereon
constituting a quorum, but shares held of record or beneficially by directors who are benefitted by such loan or guarantee shall not be entitled to
vote or to be included in the determination of a quorum; or (2) with respect to any corporation in existence on or before February 22, 1998, the
certificate of incorporation of which expressly provides such, and with respect to any corporation incorporated after February 22, 1998, the
board determines that the loan or guarantee benefits the corporation and either approves the specific loan or guarantee or a general plan
authorizing loans and guarantees.

                                                                         108
Table of Contents

Warrants

     As of July 29, 2011, there were outstanding warrants to purchase 274,013 shares of our common stock at a weighted average exercise
price of $1.98 per share. The following warrants are also outstanding, with values that are dependent on the offering price of our common
stock:

     •
            Warrants to purchase 18,332 shares our common stock, at an exercise price of     • , which is equal to 85% of the public offering
            price;

     •
            Warrants to purchase • shares of our common stock, which is equal to 20,000 divided by the offering price, at an exercise price
            of • , which is equal to the offering price;

     •
            Warrants to purchase • shares of our common stock, which is equal to 7,500 divided by the offering price, at an exercise
            of • , which is equal to the offering price;

     •
            Warrants to purchase • shares of our common stock, which is equal to 3% of the aggregate securities offered pursuant to the
            2010/2011 Convertible Debt Offering divided by the offering price, at an exercise price of $4.52;

     •
            Warrants to purchase • shares of our common stock, which is equal to 3% of the principal amount of certain securities issued
            pursuant to the July 2011 Convertible Debt Offering divided by the offering price, at an exercise price of $5.07;

     •
            Warrants to purchase • shares of our common stock, which is equal to 70% of 5.5 million divided by the offering price, at an
            exercise price of $4.11; and,

     •
            Warrants to purchase • shares of our common stock, which is equal to 70% of 375,000 divided by the offering price, at an
            exercise price of $4.61

     •
            Warrants to purchase • shares of our common stock, which is equal to 2% of the total number of shares sold in this offering
            (excluding the over-allotment) at an exercise price of • , which is equal to 120% of the public offering price per share.

Each warrant contains provisions for the adjustment of the exercise price and the number of shares issuable upon the exercise of the warrant in
the event of certain stock dividends, stock splits, reorganizations, reclassifications and consolidations. Certain of the holders of the shares
issuable upon exercise of our warrants are entitled to registration rights with respect to such shares as described in greater detail under the
heading "Registration Rights."

Registration Rights

     Warrant Registration. Pursuant to an agreement which we made with the holders of all the warrants issued in connection with our
2010/2011 Convertible Debt Offering, we have agreed to register the shares of our common stock that will be issued upon exercise of such
warrants. More specifically, we have agreed to use commercially reasonable efforts to cause the registration of the shares issuable upon the
exercise of these warrants to be declared effective by the Securities and Exchange Commission under the Securities Act of 1933, as amended,
within thirty (30) days of the expiration of the 90-day lock-up period applicable to certain holders of these warrants.

     Demand Registration and Piggyback Registration. The warrants received by the underwriters provide for demand registration of the
shares of common stock underlying the warrants, as well as "piggy-back" registration rights with respect to these shares. The shares of our
common stock received by holders of notes issued pursuant to the July 2011 and 2010/2011 Convertible Debt Offerings are entitled to
"piggy-back" registration rights, subject to customary cut-backs, in connection with future registered offerings of our common stock. Such
holders, other than the selling stockholders, have provided a limited waiver of their piggyback registration right in connection with this
offering; if this offering is not completed by January 1, 2012, this waiver becomes null and void.

                                                                      109
Table of Contents

     We are generally required to bear the expenses of all registrations, except underwriting discounts and commissions.

     Although our Restated Certificate of Incorporation filed May 6, 2011, provides holders of our preferred stock with certain registration
rights in respect of the common shares they receive upon conversion of their preferred shares, these rights terminate if such common shares are
freely tradeable under federal securities laws. Because of the date of issuance of our preferred stock, it is expected that they will be freely
tradeable without registration.

Transfer Agent and Register

     The transfer agent and registrar for our securities, including our common stock, is the American Stock Transfer and Trust Company.

Listing

    We have applied to have our common stock approved for listing, subject to official notice of issuance, on the Nasdaq Capital Market
under the symbol "LUCD." We have not applied to list our common stock on any other exchange or quotation system.


                                                          Shares Eligible for Future Sale

     Prior to this offering, there has been no public market for our common stock. Market sales of shares of our common stock after this
offering and from time to time and the availability of shares for future sale, may reduce the market price of our common stock. Furthermore,
since only a limited number of shares will be available for sale shortly after this offering because of contractual and legal restrictions on resale
described below, sales of substantial amounts of our common stock, or the perception that these sales could occur, could adversely affect
prevailing market prices for our common stock and could impair our future ability to obtain capital, especially through an offering of equity
securities.

      Based upon • shares outstanding on March 31, 2011, assuming conversion of all outstanding preferred stock, and the conversion of the
2010/2011 Convertible Notes, upon completion of this offering • shares of common stock will be outstanding, assuming no exercise of the
underwriters' over-allotment option and no exercise of outstanding options or warrants. Of these outstanding shares, all of the shares sold in this
offering will be freely tradable without restrictions or further registration under the Securities Act, unless the shares are purchased by our
certain of existing stockholders (some of which have entered into lock-up agreements as described below) or "affiliates" as that term is defined
under Rule 144 under the Securities Act. The remaining shares of common stock are "restricted" securities, which means they were originally
sold in offerings that were not registered under the Securities Act. Restricted securities may be sold in the public market only if registered or if
they qualify for exemption from registration described below under Rule 144 or Rule 701 promulgated under the Securities Act. As a result of
the lock-up agreements described below and the provisions of

                                                                        110
Table of Contents



Rule 144 and Rule 701, the shares sold in this offering and the restricted shares will be available for sale in the public market as follows:

                                                                  Number of Shares
                                                                     Eligible for
                                                                   Sale / Percent of
Date                                                              Outstanding Stock                                 Comment
At the date of this prospectus                                                             Shares sold in this offering or eligible for sale under
                                                                                           Rule 144
Between 90 and 180 days (subject to extension) after                                       Shares eligible for sale under Rule 144 or Rule 701
the date of this prospectus                                                                upon expiration of lock-up agreements
After 180 days after the date of this prospectus and                                       Shares eligible for sale under Rules 144 or Rule 701
various times thereafter                                                                   upon expiration of lock-up agreements

      Additionally, of the • shares of our common stock that were subject to stock options and warrants outstanding as of March 31, 2011,
options and warrants to purchase approximately • shares of common stock will be vested and eligible for sale after 180 days after the date
of this prospectus.

Rule 144

     In general, under Rule 144 under the Securities Act, as currently in effect, beginning 90 days after the date of this prospectus, a person
who has beneficially owned shares of our common stock for at least six months is entitled to sell within any three-month period a number of
shares that does not exceed the greater of:

       •
            one percent of the number of shares of our common stock then outstanding, which will equal          • shares immediately after the
            closing of this offering; or

       •
            the average weekly trading volume of our common stock on the Nasdaq Capital Market during the four calendar weeks preceding
            the filing of a notice on Form 144 with respect to the sale.

     Sales under Rule 144 are also subject to requirements on the manner of sale, notice and the availability of our current public information.
Rule 144 also provides that affiliates that sell shares must comply with the same restrictions applicable to restricted shares, other than the
holding period requirement.

      Under Rule 144, a person who is deemed not to have been one of our affiliates at any time during the 90 days preceding a sale and who
has beneficially owned the shares proposed to be sold for at least one year, including the holding period of any prior owner other than an
affiliate, is entitled to sell the shares without complying with the manner of sale, public information, volume limitation or notice provisions of
Rule 144.

Rule 701

      Under Rule 701, shares of our common stock acquired upon the exercise of currently outstanding options, delivered as a result of the
vesting of restricted stock, or acquired pursuant to other rights granted under our stock plans may be resold, beginning 90 days after the date of
this prospectus, to the extent not subject to lock-up agreements, by:

       •
            persons other than affiliates, subject only to the manner of sale provisions of Rule 144; and

       •
            our affiliates, subject to the manner of sale, public information and filing requirements of Rule 144, in each case, without
            compliance with the one year holding period requirement of Rule 144.

                                                                        111
Table of Contents

     As of July 29, 2011, options to purchase a total of 4,363,548 shares of common stock were outstanding, of which approximately
2,218,548 were vested.

Registration Rights

      The holders of an aggregate of • shares of our common stock, and shares of common stock issued upon exercise of certain warrants, or
their permitted transferees, are entitled to rights with respect to the registration of these shares under the Securities Act. Registration of these
shares under the Securities Act would result in the shares becoming freely tradable without restriction under the Securities Act immediately
upon the effectiveness of the registration statement. See "Description of Capital Stock—Registration Rights."

Equity Compensation Awards

      Immediately after this offering, we intend to file with the SEC a registration statement on Form S-8 under the Securities Act covering the
shares of common stock reserved for issuance pursuant to our Year 2000 Stock Option Plan, our 2007 Long-Term Incentive Plan, and our 2010
Long-Term Equity Incentive Plan. The registration statement is expected to be filed and become effective as soon as practicable after the
closing of this offering. Accordingly, shares registered under the registration statement will, subject to Rule 144 volume limitations applicable
to affiliates and the lock-up agreements described above, be available for sale in the open market.

                                                                        112
Table of Contents


                                                                  Underwriting

      We and the selling stockholders have entered into an underwriting agreement with Roth Capital Partners, acting as the representative of
the underwriters named below, with respect to the shares of common stock subject to this offering. Subject to certain conditions, we and the
selling stockholders have agreed to sell to the underwriters, and the underwriters have agreed to purchase, the number of shares of common
stock provided below opposite their respective names.

                             Underwriters                                                    Number of Shares
                             Roth Capital Partners
                             Ladenburg Thalmann & Co. Inc.
                             Maxim Group LLC
                                       Total

      The underwriters are offering the shares of common stock subject to their acceptance of the shares of common stock from us and the
selling stockholders and subject to prior sale. The underwriting agreement provides that the obligations of the several underwriters to pay for
and accept delivery of the shares of common stock offered by this prospectus are subject to the approval of certain legal matters by their
counsel and to certain other conditions. The underwriters are obligated to take and pay for all of the shares of common stock if any such shares
are taken. However, the underwriters are not required to take or pay for the shares of common stock covered by the underwriters'
over-allotment option described below.

Over-Allotment Option

      We have granted the underwriters an option, exercisable for 45 days from the date of this prospectus, to purchase up to an aggregate
of • additional shares of common stock to cover over-allotments, if any, at the public offering price set forth on the cover page of this
prospectus, less underwriting discounts and commissions. The underwriters may exercise this option solely for the purpose of covering
over-allotments, if any, made in connection with the offering of the shares of common stock offered by this prospectus. If the underwriters
exercise this option, each underwriter will be obligated, subject to certain conditions, to purchase a number of additional shares proportionate to
that underwriter's initial purchase commitment as indicated in the table above.

Commission and Expenses

     The underwriters have advised us that they propose to offer the shares of common stock to the public at the initial public offering price set
forth on the cover page of this prospectus and to certain dealers at that price less a concession not in excess of $ • per share. The
underwriters may allow, and certain dealers may reallow, a discount from the concession not in excess of $ • per share to certain brokers
and dealers. After this offering, the initial public offering price, concession and reallowance to dealers may be reduced by the representatives.
No such reduction shall change the amount of proceeds to be received by us as set forth on the cover page of this prospectus. The shares of
common stock are offered by the underwriters as stated herein, subject to receipt and acceptance by them and subject to their right to reject any
order in whole or in part. The underwriters have informed us that they do not intend to confirm sales to any accounts over which they exercise
discretionary authority.

      The following tables show the per share and total underwriting discounts and commissions payable to the underwriters by us and by the
selling stockholders in connection with this offering. Such amounts are shown assuming both no exercise and full exercise of the underwriters'
over-allotment option to purchase shares. The fees do not include the over-allotment option granted by us to the underwriters,

                                                                       113
Table of Contents



the corporate finance fee in the amount of 2.5% of the gross proceeds payable to the representative of the underwriters, or the warrants to
purchase shares of common stock equal to 2% of the number of shares sold in the offering (excluding the over-allotment) to the representative
of the underwriters at the closing.


                                                                       Paid by Lucid, Inc.

                             ($ in thousands, except per share data)                No Exercise           Full Exercise
                             Per share                                          $                 •   $                   •
                             Total                                              $                 •   $                   •


                                                              Paid by the Selling Stockholders

                             ($ in thousands, except per share data)                No Exercise           Full Exercise
                             Per share                                          $                 •   $                   •
                             Total                                              $                 •   $                   •

    We and the selling stockholders estimate that expenses payable by us and the selling stockholders in connection with the offering of our
common stock, other than the underwriting discounts and commissions referred to above, will be approximately $ • , which includes up to
$275,000 that we have agreed to reimburse the representative of the underwriters for the legal fees and actual expenses incurred by them in
connection with the offering. We have advanced $25,000 of such amount to the representative of the underwriters.

Underwriters' Warrants

     We have also agreed to issue to the underwriters warrants to purchase a number of our shares of common stock equal to an aggregate of
2% of the shares of common stock sold in this offering (excluding any over-allotment). The warrants will have an exercise price equal to 120%
of the offering price of the shares of common stock sold in this offering and may be exercised on a cashless basis. The warrants are exercisable
commencing six months after the effective date of the registration statement related to this offering, and will be exercisable for four and a half
years thereafter. The warrants are not redeemable by us. The warrants also provide for one demand registration of the shares of common stock
underlying the warrants at our expense, an additional demand at the warrant holder's expense and unlimited "piggyback" registration rights at
our expense with respect to the underlying shares of common stock during the five year period after the effective date of the registration
statement related to this offering. The warrants and the underlying shares of common stock have been deemed compensation by FINRA and are
therefore subject to a 180-day lock-up following the effective date of the registration statement related to this offering pursuant to
Rule 5110(g)(1) of FINRA. The underwriters (or permitted assignees under the Rule) may not sell, transfer, assign, pledge, or hypothecate the
warrants or the securities underlying the warrants, nor will they engage in any hedging, short sale, derivative, put, or call transaction that would
result in the effective economic disposition of the warrants or the underlying securities for a period of 180 days from the date of this
prospectus. The warrants will provide for adjustment in the number and price of such warrants (and the shares of common stock underlying
such warrants) in the event of recapitalization, merger or other structural transaction to prevent mechanical dilution.

Indemnification

     We have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act of 1933, as amended,
or the Securities Act, and liabilities arising from breaches of

                                                                              114
Table of Contents



representations and warranties contained in the underwriting agreement, or to contribute to payments that the underwriters may be required to
make in respect of those liabilities.

Lock-up Agreements

      We, our officers, directors and certain of our shareholders, holding an aggregate of • shares of our common stock, have agreed, subject
to limited exceptions, for a period of 180 days after the date of the underwriting agreement, not to offer, sell, contract to sell, pledge, grant any
option to purchase, make any short sale or otherwise dispose of, directly or indirectly any shares of common stock or any securities convertible
into or exchangeable for our common stock either owned as of the date of the underwriting agreement or thereafter acquired without the prior
written consent of Roth Capital Partners. The "Funding Holders," as defined below, have agreed to a 90-day lock-up period.

     The applicability of the 90- vs. 180-day lock-up period depends on whether the holder advanced funds pursuant to the 2010/2011
Convertible Debt Offering (a "Funding Holder"), in contrast to a holder who exchanged existing debt for an equal amount of debt on the same
terms and conditions as the 2010/2011 Convertible Debt Offering (an "Exchanging Holder"). Funding Holders have agreed to a 90-day lock-up
period, while Exchanging Holders, along with our officers, directors, and certain stockholders, have agreed to a 180-day lock-up period. These
periods may be extended if (1) during the last 17 days of the applicable period, we issue an earnings release or material news or a material
event regarding us occurs or (2) prior to the expiration of the applicable, we announce that we will release earnings results during the 16-day
period beginning on the last day of the applicable period, then the period of such extension will be 18-days, beginning on the issuance of the
earnings release or the occurrence of the material news or material event. If after any announcement described in clause (2) of the preceding
sentence, we announce that we will not release earnings results during the 16-day period, the lock-up period shall expire the later of the
expiration of the applicable period and the end of any extension of such period made pursuant to clause (1) of the preceding sentence. Roth
Capital Partners may, in its sole discretion and at any time or from time to time before the termination of the lock-up period, without notice,
release all or any portion of the securities subject to lock-up agreements.

Listing

     We have applied to list our common stock on the Nasdaq Capital Market under the trading symbol "LUCD".

Electronic Distribution

     A prospectus in electronic format may be made available on websites or through other online services maintained by one or more of the
underwriters of this offering, or by their affiliates. Other than the prospectus in electronic format, the information on any underwriter's website
and any information contained in any other website maintained by an underwriter is not part of this prospectus or the registration statement of
which this prospectus forms a part, has not been approved and/or endorsed by us or any underwriter in its capacity as underwriter, and should
not be relied upon by investors.

Price Stabilization, Short Positions and Penalty Bids

     In connection with the offering the underwriters may engage in stabilizing transactions, over-allotment transactions, syndicate covering
transactions and penalty bids in accordance with Regulation M under the Exchange Act:

     •
            Stabilizing transactions permit bids to purchase the underlying security so long as the stabilizing bids do not exceed a specified
            maximum.

                                                                        115
Table of Contents

     •
            Over-allotment involves sales by the underwriters of shares in excess of the number of shares the underwriters are obligated to
            purchase, which creates a syndicate short position. The short position may be either a covered short position or a naked short
            position. In a covered short position, the number of shares over-allotted by the underwriter is not greater than the number of shares
            that it may purchase in the over-allotment option. In a naked short position, the number of shares involved is greater than the
            number of shares in the over-allotment option. The underwriter may close out any covered short position by either exercising its
            over-allotment option and/or purchasing shares in the open market.

     •
            Syndicate covering transactions involve purchases of shares of the common stock in the open market after the distribution has been
            completed in order to cover syndicate short positions. In determining the source of shares to close out the short position, the
            underwriters will consider, among other things, the price of shares available for purchase in the open market as compared to the
            price at which it may purchase shares through the over-allotment option. If the underwriters sell more shares than could be covered
            by the over-allotment option, a naked short position, the position can only be closed out by buying shares in the open market. A
            naked short position is more likely to be created if the underwriters are concerned that there could be downward pressure on the
            price of the shares in the open market after pricing that could adversely affect investors who purchase in the offering.

     •
            Penalty bids permit the representative to reclaim a selling concession from a syndicate member when the common stock originally
            sold by the syndicate member is purchased in a stabilizing or syndicate covering transaction to cover syndicate short positions.

     These stabilizing transactions, syndicate covering transactions and penalty bids may have the effect of raising or maintaining the market
price of our common stock or preventing or retarding a decline in the market price of the common stock. As a result, the price of our common
stock may be higher than the price that might otherwise exist in the open market. Neither we nor the underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of the common stock. In
addition, neither we nor the underwriters makes any representations that the underwriters will engage in these stabilizing transactions or that
any transaction, once commenced, will not be discontinued without notice.

No Public Market

     Prior to this offering, there was no public market for the common stock. The initial public offering price of our common stock was
determined by negotiation between us and the underwriters. The principal factors considered in determining the public offering price of the
common stock included:

     •
            the information in this prospectus and otherwise available to the underwriters;

     •
            the history and the prospects for the industry in which we will compete;

     •
            the ability of our management;

     •
            the prospects for our future earnings;

     •
            the present state of our development and our current financial condition;

     •
            the general condition of the economy and the securities markets at the time of this offering; and

     •
            the recent market prices of, and the demand for, publicly traded securities of generally comparable companies.

    We cannot be sure that the initial public offering price will correspond to the price at which the common stock will trade in the public
market following this offering or that an active trading market for the common stock will develop and continue after this offering.

                                                                      116
Table of Contents

Other

     The underwriters and/or their respective affiliates have provided, and may in the future provide, various investment banking and other
financial services for us for which services they have received and, may in the future receive, customary fees. Except for services provided in
connection with this offering or as otherwise disclosed in this prospectus, no underwriter has provided any investment banking or other
financial services to us during the 180-day period preceding the date of this prospectus and we do not expect to retain any of the underwriters to
perform any investment banking or other financial services for at least 90 days after the date of this prospectus.

Notice to Investors in the United Kingdom

     In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (each, a "Relevant
Member State") an offer to the public of any securities which are the subject of the offering contemplated by this prospectus may not be made
in that Relevant Member State except that an offer to the public in that Relevant Member State of any such securities may be made at any time
under the following exemptions under the Prospectus Directive, if they have been implemented in that Relevant Member State:

         (a) to legal entities which are authorized or regulated to operate in the financial markets or, if not so authorized or regulated, whose
     corporate purpose is solely to invest in securities;

          (b) to any legal entity which has two or more of (1) an average of at least 250 employees during the last financial year; (2) a total
     balance sheet of more than €43,000,000 and (3) an annual net turnover of more than €50,000,000, as shown in its last annual or
     consolidated accounts;

          (c) by the underwriters to fewer than 100 natural or legal persons (other than qualified investors as defined in the Prospectus
     Directive); or

          (d) in any other circumstances falling within Article 3(2) of the Prospectus Directive, provided that no such offer of shares shall
     result in a requirement for the publication by the issuer or the underwriters of a prospectus pursuant to Article 3 of the Prospectus
     Directive.

     For the purposes of this provision, the expression an "offer to the public" in relation to any security in any Relevant Member State means
the communication in any form and by any means of sufficient information on the terms of the offer and any securities to be offered so as to
enable an investor to decide to purchase such securities, as the same may be varied in that Member State by any measure implementing the
Prospectus Directive in that Member State and the expression "Prospectus Directive" means Directive 2003/71/EC and includes any relevant
implementing measure in each Relevant Member State.

     Each underwriter has represented, warranted and agreed that:

          (a) it has only communicated or caused to be communicated and will only communicate or cause to be communicated any invitation
     or inducement to engage in investment activity (within the meaning of section 21 of the Financial Services and Markets Act 2000 (the
     FSMA)) received by it in connection with the issue or sale of any of our securities in circumstances in which section 21(1) of the FSMA
     does not apply to the issuer; and

          (b) it has complied with and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation
     to our securities in, from or otherwise involving the United Kingdom.

                                                                       117
Table of Contents

European Economic Area

     In particular, this document does not constitute an approved prospectus in accordance with European Commission's Regulation on
Prospectuses no. 809/2004 and no such prospectus is to be prepared and approved in connection with this offering. Accordingly, in relation to
each Member State of the European Economic Area which has implemented the Prospectus Directive (being the Directive of the European
Parliament and of the Council 2003/71/EC and including any relevant implementing measure in each Relevant Member State) (each, a
Relevant Member State), with effect from and including the date on which the Prospectus Directive is implemented in that Relevant Member
State (the Relevant Implementation Date) an offer of securities to the public may not be made in that Relevant Member State prior to the
publication of a prospectus in relation to such securities which has been approved by the competent authority in that Relevant Member State or,
where appropriate, approved in another Relevant Member State and notified to the competent authority in that Relevant Member State, all in
accordance with the Prospectus Directive, except that the underwriters may, with effect from and including the Relative Implementation Date,
make an offer of securities to the public in that Relevant Member State at any time:

     •
            to legal entities which are authorized or regulated to operate in the financial markets or, if not so authorized or regulated, whose
            corporate purpose is solely to invest in securities;

     •
            to any legal entity which has two or more of (1) an average of at least 250 employees during the last financial year; (2) a total
            balance sheet of more than 43,000,000 euros; and (3) an annual net turnover of more than 50,000,000 euros, as shown in the last
            annual or consolidated accounts; or

     •
            in any other circumstances which do not require the publication by the issuer of a prospectus pursuant to Article 3 of the
            Prospectus Directive.

     For the purposes of this provision, the expression an "offer of securities to the public" in relation to any common shares in any Relevant
Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the securities to
be offered so as to enable an investor to decide to purchase or subscribe such securities, as the same may be varied in that Member State by any
measure implementing the Prospectus Directive in that Member State. For these purposes the units are "securities."


                                                                  Legal Matters

     The validity of the common stock being offered hereby is being passed upon for us by Harris Beach PLLC, Rochester, New York. Certain
legal matters relating to the offering will be passed upon for the underwriters by Lowenstein Sandler PC.


                                                                     Experts

     The financial statements of Lucid, Inc. as of and for the years ended December 31, 2010 and 2009, included in this prospectus have been
audited by Deloitte & Touche LLP, an independent registered public accounting firm as stated in their report appearing herein. Such financial
statements have been included herein in reliance upon the report of such firm given upon their authority as experts in accounting and auditing.


                                                Where You Can Find Additional Information

     We have filed with the SEC a registration statement on Form S-1 under the Securities Act of 1933, as amended, with respect to the shares
of common stock being offered by this prospectus. This prospectus does not contain all of the information in the registration statement and its
exhibits. For further information with respect to Lucid, Inc. and the common stock offered by this prospectus, we

                                                                       118
Table of Contents



refer you to the registration statement and its exhibits. Statements contained in this prospectus as to the contents of any contract or any other
document referred to are not necessarily complete, and in each instance, we refer you to the copy of the contract or other document filed as an
exhibit to the registration statement. Each of these statements is qualified in all respects by this reference.

     You can read our SEC filings, including the registration statement, on the Internet at the SEC's website at http://www.sec.gov. You may
also read and copy any document we file with the SEC at its public reference facilities at 100 F Street, N.E., Washington, D.C. 20549. You
may also obtain copies of these documents at prescribed rates by writing to the Public Reference Section of the SEC at 100 F Street, N.E.,
Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the public reference facilities.

     Upon completion of this offering, we will be subject to the information requirements of the Securities Exchange Act of 1934, as amended,
and we will file reports, proxy statements and other information with the SEC. These reports, proxy statements and other information will be
available for inspection and copying at the public reference room and web site of the SEC referred to above. We also maintain a website at
http://www.lucid-tech.com , at which you may access these materials free of charge as soon as reasonably practicable after they are
electronically filed with, or furnished to, the SEC. The information contained in, or that can be accessed through, our website is not part of this
prospectus.

                                                                       119
Table of Contents


                                                             LUCID, INC.

                                                       TABLE OF CONTENTS

                                                                                                             Page
             UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS:
               Unaudited Condensed Consolidated Balance Sheets as of March 31, 2011 and December 31,
                 2010                                                                                           F-2
               Unaudited Condensed Consolidated Statements of Operations for the Three Months Ended
                 March 31, 2011 and 2010                                                                        F-3
               Unaudited Condensed Consolidated Statements of Cash Flows for the Three Months Ended
                 March 31, 2011 and 2010                                                                        F-4
               Notes to Unaudited Condensed Consolidated Financial Statements
                                                                                                                F-5
             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
                                                                                                              F-13
             CONSOLIDATED FINANCIAL STATEMENTS:
               Balance Sheets as of December 31, 2010 and 2009
                                                                                                              F-14
                Statements of Operations for the Years Ended December 31, 2010 and 2009
                                                                                                              F-15
                Statements of Stockholders' Deficit for the Years Ended December 31, 2010 and 2009
                                                                                                              F-16
                Statements of Cash Flows for the Years Ended December 31, 2010 and 2009
                                                                                                              F-17
                Notes to Consolidated Financial Statements as of and for the Years Ended December 31, 2010
                  and 2009                                                                                    F-18

                                                                  F-1
Table of Contents


                                                              LUCID, INC.

                                  UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

                                            AS OF MARCH 31, 2011 AND DECEMBER 31, 2010

                                                                            March 31, 2011           December 31, 2010
             ASSETS
             CURRENT ASSETS:
               Cash                                                     $          1,248,192     $               839,075
               Accounts receivable                                                   247,577                     327,751
               Inventories                                                           819,030                     356,931
               Prepaid expenses and other current assets                             128,530                     175,910

                    Total current assets                                           2,443,329                   1,699,667

             PROPERTY AND EQUIPMENT—Net                                               80,654                       17,379

             DEFERRED FINANCING COSTS—Net                                            436,148                     287,191

             OTHER ASSETS                                                             12,199                       12,199

             TOTAL ASSETS                                               $          2,972,330     $             2,016,436

             LIABILITIES AND STOCKHOLDERS' DEFICIT
             CURRENT LIABILITIES:
               Line-of-credit                                           $          2,000,000     $             2,000,000
               Current portion of long-term debt—net                                 893,694                   1,049,792
               Current portion of long-term debt—related parties, net                 40,458
               Accounts payable                                                      822,291                   1,077,402
               Accrued expenses and other current liabilities                      1,118,899                   1,098,469
               Current portion of deferred revenue                                   263,873                     351,331

                    Total current liabilities                                      5,139,215                   5,576,994

             LONG-TERM DEBT—Net                                                    3,977,494                   3,003,747

             WARRANT LIABILITY                                                     2,890,699                   1,674,170

             NOTES PAYABLE—related parties, net                                       91,233                     183,146

             DEFERRED REVENUE                                                           8,275

                   Total Liabilities                                             12,106,916                   10,438,057
             COMMITMENTS AND CONTINGENCIES (NOTE 13)
             STOCKHOLDERS' DEFICIT:
               Preferred Stock—par value $.05 per share; 10,000,000
                 authorized; Series A—2,258,745 issued and
                 outstanding (liquidation value of $4,260,734)                       112,937                     112,937
               Series B—637,921 issued and outstanding (liquidation
                 value of $2,009,451)                                                 31,896                       31,896
               Common Stock—par value $.01 per share; 60,000,000
                 authorized; 4,486,546 issued and outstanding on
                 March 31, 2011; 4,508,239 issued and outstanding on
                 December 31, 2010.                                                  44,866                       45,083
               Additional paid-in capital                                        20,208,712                   19,725,348
               Subscription receivable                                                                          (739,218 )
               Accumulated deficit                                              (29,532,997 )                (27,597,667 )

                    Total Stockholders' Deficit                                   (9,134,586 )                (8,421,621 )
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT             $         2,972,330    $      2,016,436


                See notes to unaudited condensed consolidated financial statements.

                                               F-2
Table of Contents


                                                             LUCID, INC.

                        UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

                                 FOR THE THREE MONTHS ENDED MARCH 31, 2011 AND 2010

                                                                                                Three Months Ended
                                                                                                     March 31,
                                                                                         2011                        2010
             REVENUE:
               Product sales                                                      $         648,285         $           316,348
               Non-product revenue                                                           87,081                      87,081

                   Total revenue                                                            735,366                     403,429
             OPERATING EXPENSES:
               Cost of revenue                                                              298,390                     175,254
               General and administrative                                                 1,153,537                     880,584
               Sales and marketing                                                          393,870                     224,094
               Engineering, research and development                                        248,589                     139,995

                    Total operating expenses                                              2,094,386                   1,419,927

             LOSS FROM OPERATIONS                                                        (1,359,020 )                (1,016,498 )
             OTHER EXPENSE:
               Interest expense                                                            (461,855 )                  (146,541 )
               Fair value adjustment of warrants                                           (112,969 )                   (29,928 )
               Other                                                                         (1,486 )

             NET LOSS                                                             $      (1,935,330 )       $        (1,192,967 )

             BASIC AND DILUTED NET LOSS PER COMMON SHARE                          $               (0.45 )   $               (0.51 )

             WEIGHTED AVERAGE COMMON SHARES OUTSTANDING                                   4,326,376                   2,348,151


                                   See notes to unaudited condensed consolidated financial statements.

                                                                  F-3
Table of Contents


                                                                 LUCID, INC.

                        UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                                 FOR THE THREE MONTHS ENDED MARCH 31, 2011 AND 2010

                                                                                            Three Months Ended
                                                                                                 March 31,
                                                                                     2011                        2010
             CASH FLOWS FROM OPERATING ACTIVITIES:
               Net loss                                                          $   (1,935,330 )      $         (1,192,967 )
               Adjustments to reconcile net loss to net cash used in operating
                 activities:
                  Depreciation and amortization                                          71,124                      11,103
                  Stock-based compensation                                              486,675                     325,663
                  Warrants issued for services                                           39,365
                  Fair value adjustment of warrants                                     112,872                         29,928
                  Accretion of debt discount                                            248,518                          1,810
                  Change in:
                     Accounts receivable                                                 80,174                      21,505
                     Inventories                                                       (462,099 )                     6,909
                     Prepaid expenses and other current assets                           47,380                      38,490
                     Other assets                                                                                     2,830
                     Accounts payable                                                  (172,535 )                  (429,692 )
                     Accrued expenses and other current liabilities                      60,102                      39,960
                     Deferred revenue                                                   (79,183 )                   (88,208 )

                         Net cash used in operating activities                       (1,502,937 )                (1,232,669 )

             CASH FLOWS FROM INVESTING ACTIVITIES—Purchases of
              property and equipment                                                    (66,856 )                       (1,239 )
             CASH FLOWS FROM FINANCING ACTIVITIES:
               Repayments of line-of-credit                                                                          (1,150 )
               Borrowings on notes payable—related parties                                                          100,000
               Borrowings on debt                                                     1,750,000                   1,190,000
               Repayments of debt                                                      (293,808 )                   (15,954 )
               Loan acquisition costs                                                  (216,500 )                    (1,000 )
               Proceeds from warrant exercises                                          739,218

                      Net cash provided by financing activities                       1,978,910                   1,271,896

             NET INCREASE IN CASH                                                       409,117                         37,988

             CASH—Beginning of year                                                     839,075                         29,331

             CASH—End of year                                                    $    1,248,192        $                67,319

             SUPPLEMENTAL CASH FLOW DATA—Cash paid for interest                  $          30,000     $                 1,569

             SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
               AND FINANCING ACTIVITIES:
               Issuance of warrants in connection with debt issuance             $    1,020,232

                Issuance of warrants in connection with note payable—related
                   parties                                                       $          44,060

                Issuance of promissory note in exchange for accrued interest     $          49,533

                Issuance of promissory note in exchange for accounts payable     $          86,103
Reclassification of warrants to equity                                                    $   9,708


                    See notes to unaudited condensed consolidated financial statements.

                                                   F-4
Table of Contents


                                                                  LUCID, INC.

                       NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                          FOR THE THREE MONTHS ENDED MARCH 31, 2011

1. BASIS OF PRESENTATION

     The unaudited condensed consolidated financial statements of Lucid, Inc. (Lucid) and its wholly-owned subsidiary, Lucid
International Ltd. (LIL) (collectively, the "Company"), have been prepared in accordance with accounting principles generally accepted in the
United States of America. The financial statements reflect all adjustments that are, in the opinion of management, necessary for a fair
presentation of such information. All such adjustments are of a normal recurring nature. Although the Company believes that the disclosures
are adequate to make the information presented not misleading, certain information and footnote disclosures have been condensed or omitted
pursuant to such rules and regulations. The preparation of financial statements requires management to make estimates and assumptions that
affect the reported amounts of assets, liabilities, sales, expenses, and related disclosures at the date of the financial statements and during the
reporting period. Actual results could differ materially from these estimates. The year-end balance sheet data was derived and condensed from
audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of
America. The results of operations for the three months ended March 31, 2011 is not necessarily indicative of the results for any subsequent
period or for the entire fiscal year ending December 31, 2011.

   The Company evaluated all events and transactions that occurred after December 31, 2010, through July 29, 2011, the date that the
Company issued these condensed consolidated financial statements.

2. LIQUIDITY AND CAPITAL RESOURCES

     The Company incurred a net loss of approximately $1.9 million for the three months ended March 31, 2011. In addition, the Company had
a working capital deficit of approximately $2.7 million at March 31, 2011 and $3.9 million at December 31, 2010; and a deficit in equity of
approximately $9.1 million at March 31, 2011 and $8.4 million at December 31, 2010. Furthermore, the Company's operating plan for fiscal
2011 projects continued net losses, and the Company needs to raise additional capital to fund its operations in 2011 and beyond. The Company
continues to explore strategic alternatives to finance its business plan, including but not limited to a potential initial public offering of its
common stock, private equity or debt financings or other sources, such as strategic partnerships. The Company is also focusing on increasing
sales of its products to generate cash flows to fund its operations.

     There can be no assurance that the Company will be successful in its plans described above or in attracting alternative debt or equity
financing. These conditions raise substantial doubt about the Company's ability to continue as a going concern. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Fair Value Measurements —The Company considers warrants that are not indexed to the Company's own stock to be classified as
Level 3. Level 3 valuations are based on inputs that are unobservable and significant to the overall fair value measurement. The degree of
judgment exercised in determining fair value is greatest for instruments categorized in Level 3. During the three months ended March 31, 2011,
the Company granted 438,918 warrants at a weighted average exercise price of $4.13. The fair value of these warrants is derived using the
Black-Scholes pricing model using the same

                                                                        F-5
Table of Contents


                                                                LUCID, INC.

                NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                                         FOR THE THREE MONTHS ENDED MARCH 31, 2011

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

methodology utilized for the year ended December 31, 2010. The following table presents the change in Level 3 liabilities:

                                                                                      Three Months Ended
                                                                                           March 31,
                                                                                    2011                 2010
                            Balance at January 1                             $      1,674,170      $      368,034
                            Warrants issued                                         1,103,657
                            Reclassification to equity                                                     (9,708 )
                            Fair value adjustment                                     112,872              29,928

                            Balance at March 31                              $      2,890,699      $      388,254


     The Company's financial instruments consist principally of accounts receivable, accounts payable and debt. The Company considers these
to be classified as Level 1 and believes the recorded values for accounts receivable and accounts payable approximate current values as of
March 31, 2011 because of their nature and respective durations. Management estimates the carrying value of its debt instruments
approximates fair value as of March 31, 2011. This estimate is based on acceptable valuation methodologies which use market data of similarly
sized and situated debt issuers.

4. INVENTORIES

    The components of inventories are as follows at:

                                                                   March 31, 2011            December 31, 2010
                            Raw Materials                      $            760,738      $                230,658
                            Finished Goods                                   17,150                        85,131
                            Offsite Demo Equipment                           41,142                        41,142

                            Balance                            $            819,030      $                356,931


     Offsite demo equipment represents the cost of products physically located at customer locations, for an orientation period during which
the Company retains title. As such, no depreciation expense has been recorded on these units.

5. NOTE PAYABLE — RELATED PARTIES

     The Company has a promissory note agreement with its chief executive officer. The note bears interest at 6% and matures on the earlier of
January 1, 2011, or thirty days following our completion of additional equity financing in an amount in excess of $8 million. In January 2011,
the Company did not make the mandatory repayments required by the note and was in default of its obligations under the note. In March 2011,
$40,457 of the face value of the note was converted into a new promissory note which bears interest at 6% and matures on the earlier of
January 1, 2012, or thirty days following our completion of additional equity financing in an amount in excess of $8 million. The remaining
principal of $100,000 was exchanged for a note bearing interest at 8% and maturing on the earlier of November 15, 2012, or such earlier date
as may be required by acceleration, conversion or otherwise as defined in the agreement. In connection with this note, the Company issued
warrants to purchase

                                                                      F-6
Table of Contents


                                                                 LUCID, INC.

                NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                                         FOR THE THREE MONTHS ENDED MARCH 31, 2011

5. NOTE PAYABLE — RELATED PARTIES (Continued)



shares of the Company's common stock at a price of $4.11 per share in an amount equal to 70% of the principal of the note divided by either
the price of an initial public offering, the price of a non-qualified financing or the equity value per share, or, in the event none of these
transactions occur by November 15, 2012, $4.11, as defined by the agreement. These warrants expire on November 15, 2015. The Company
allocated the debt proceeds between the debt and warrants based on the fair value of each warrant, resulting in a debt discount of $44,060,
which is being amortized over the terms of the notes to interest expense within the consolidated statement of operations.

    The Chairman of the Company holds a note with a face value of $51,317 bearing interest at 8% and maturing on the earlier of
November 15, 2012, or such earlier date as may be required by acceleration, conversion or otherwise as defined in the agreement. At March 31,
2011 and December 31, 2010, $51,317 remained outstanding.

6. DEBT

     Long-term debt consisted of the following:

                                                                    March 31, 2011           December 31, 2010
                            2009 Convertible Debt
                              Offering                          $            700,000     $                900,000
                            2010/2011 Convertible Debt
                              Offering                                     5,386,720                   3,037,152
                            Promissory Notes Payable                         625,795                   1,162,800
                            Note payable in monthly
                              installments of $5,531,
                              including interest through
                              August 2011                                     21,986                       37,991
                            Note payable in monthly
                              installments of $707,
                              including interest through
                              June 2012. This note is
                              collateralized by software
                              licenses                                          8,514                      10,577
                            Note payable in monthly
                              installments of $677,
                              including interest through
                              March 2011                                                                    2,666

                                                                           6,743,015                   5,151,186

                            Less debt discount                            (1,871,827 )                (1,097,647 )

                                                                           4,871,188                   4,053,539
                            Current portion of long-term
                              debt                                           893,694                   1,049,792

                            Long-term debt—net of
                              discount and current portion      $          3,977,494     $             3,003,747


     Convertible Subordinated Promissory Notes ("2009 Convertible Debt Offering") —As of December 31, 2010, the Company had
three remaining notes under the 2009 Convertible Debt Offering bearing interest rates of 12%. One of these notes matured on January 1, 2011
and the Company did not make the required payments. The holder exchanged the amounts due for notes under the 2010/2011 Convertible Debt
Offering discussed below. The two remaining convertible notes mature December 31, 2011.

    Convertible Promissory Notes ("2010/2011 Convertible Debt Offering") —In November 2010, the Company issued convertible
promissory notes to new investors totaling $2,075,000 and to existing

                                                                  F-7
Table of Contents


                                                                   LUCID, INC.

                NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                                          FOR THE THREE MONTHS ENDED MARCH 31, 2011

6. DEBT (Continued)



investors who exchanged their debt and accrued interest totaling $962,000. In January 2011, the Company issued additional convertible
promissory notes to new investors totaling $1,750,000 and to existing investors who exchanged a portion of their Promissory Notes Payable
(discussed below) and accrued interest totaling $263,933. In March 2011, the Company issued convertible promissory notes to existing
investors who exchanged their 2009 Convertible Debt Offering notes and accrued interest of $249,533, and to a vendor in payment for services
received in the amount of $86,103. The 2010/2011 Convertible Debt Offering notes bear interest at 8% and mature on the earlier of
November 15, 2012, or such earlier date as may be required by acceleration, conversion or otherwise as defined in the agreement. The notes are
automatically convertible into common stock upon the consummation of an underwritten initial public offering of at least $10 million at a
conversion price equal to 70% of the price per share in an initial public offering, as defined in the agreement.

     These securities were entitled to certain rights and damages in the event that the Company does not complete an initial public offering, or
similar financing event per the terms of the agreement, by July 12, 2011. However, effective May 2011, the Company and the holders mutually
agreed to extend this date to January 1, 2012. As of that date, the interest rate of the notes would increase to 9% and the conversion price would
be reduced by 5% each month until an offering is completed. In addition, holders of these securities are entitled to a cash liquidated damages
equal to 1.5% of each purchaser's subscription amount per month until the Company completes an initial public offering or similar financing.
This amount is capped at 10% of the purchaser's subscription amount.

     The Company also issued to all 2010/2011 Convertible Debt Offering participants warrants to purchase shares of the Company's common
stock at a price of $4.11 per share in an amount equal to 70% of the principal of the note divided by either the price of an initial public offering,
the price of a non-qualified financing or the equity value per share, or, in the event none of these transactions occur by November 15, 2012,
$4.11, as defined by the agreement. These warrants expire on November 15, 2015. The Company allocated the debt proceeds between the debt
and warrants based on the relative fair value of each financial instrument, resulting in a debt discount of approximately $2.1 million which is
being amortized over the terms of the notes to interest expense within the consolidated statement of operations.

     Promissory Notes —The Company has four promissory notes outstanding which accrue interest at 10%. The entire principal balance
including accrued interest was due December 30, 2008. Two of the notes contain a conversion right into common shares of the Company at a
conversion price of $2.00. The holders may convert, at their option, at any time in which the notes remain outstanding. The Company has two
additional notes outstanding which do not accrue interest. Two of the notes, with an aggregate principal of approximately $26,000, remain
outstanding and are currently in default. In March 2011, portions of two of the promissory notes were exchanged for notes under the
Company's 2010/2011 Convertible Debt Offering.

                                                                        F-8
Table of Contents


                                                                 LUCID, INC.

                NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                                         FOR THE THREE MONTHS ENDED MARCH 31, 2011

7. NET LOSS PER COMMON SHARE DATA

     The following table sets forth the computation of basic and diluted net loss attributable to common stockholders per common share, as
well as a reconciliation of the numerator and denominator used in the computation:

                                                                                      Three Months Ended
                                                                                           March 31,
                                                                               2011                        2010
                            Net loss                                    $      (1,935,330 )       $        (1,192,967 )

                            Net loss attributable to common
                              stockholders                              $      (1,935,330 )       $        (1,192,967 )

                            Denominator:
                              Weighted-average common shares
                                outstanding                                     4,326,376                   2,348,151

                               Basic and diluted net loss per
                                 common share                           $               (0.45 )   $               (0.51 )


    The weighted-average common shares outstanding above includes 200,000 shares underlying exercisable options nominally priced at
$0.01 per share.

     The following equivalent shares were excluded from the calculation of diluted loss per share as their impact would have been anti-dilutive:

                                                                                     Three Months Ended
                                                                                          March 31,
                                                                                  2011                 2010
                            Options to purchase Common Stock                      3,883,548                 1,652,548
                            Warrants                                              1,272,551                 1,229,722
                            Restricted stock                                        358,333                   308,333
                            Convertible Notes (as converted basis)                   11,243                    19,576
                            Convertible Preferred Stock (as converted
                              basis)                                              2,896,666                 2,896,666

    In addition to the convertible note above, equivalent shares resulting from the potential conversion of the Company's 2010/2011
Convertible Debt Offering notes have been excluded from the calculation of the diluted loss per share, as the conversion price is contingent
upon the price of the Company's shares issued in an initial public offering.

8. SEGMENT INFORMATION

     The Company operates in one operating segment—the research, development and sale of medical devices to diagnose skin cancer. The
Company's chief operating decision maker reviews financial information for the Company as a whole for purposes of allocating resources and
evaluating financial

                                                                      F-9
Table of Contents


                                                                   LUCID, INC.

                NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                                          FOR THE THREE MONTHS ENDED MARCH 31, 2011

8. SEGMENT INFORMATION (Continued)



performance. Substantially all long-lived assets of the Company are in the United States. Sales for each significant geographical area are as
follows:

                                                                                                  Three Months
                                                                                                     Ended
                                                                                                    March 31,
                                                                                               2011           2010
                             United States                                                         23 %          32 %
                             Brazil                                                                20
                             Europe                                                                44            25
                             China                                                                  4
                             Japan                                                                  8            25
                             Australia                                                                           17
                             Other                                                                  1             1

                                                                                                 100 %          100 %


9. RELATED PARTIES

     The Company had the following transactions with related parties.

     A member of the Board of Directors (228,600 common shares, including 75,000 restricted common shares) through his business provided
legal/consulting services to the Company in the amount of $36,310 and $36,583 for the three months ended March 31, 2011 and 2010,
respectively.

     A shareholder (544,190 of common shares), pursuant to its limited guaranty of our credit facility, placed $2.0 million on deposit with the
Company's lender upon closing in July 2010. In consideration for this arrangement, the Company recognizes $100,000 in fees per quarter
(prorata for the initial partial quarter) to be paid after an initial public offering, or to be converted into common stock at a discount of 30% from
an initial public offering price. At March 31, 2011, the Company had approximately $291,000 accrued for this liability. If the Company does
not complete a public offering before July 9, 2011, the Company will be obligated at that date to pay the shareholder an amount equal to the
pledged funds, together with the amount of the accrued fee at that date; the Company could recoup the amount attributable to the pledged funds
when and if our lender releases the limited guaranty and the funds in the pledged account. In June 2011, the Company and the shareholder
mutually agreed to extend this date from July 9, 2011 to January 1, 2012.

     A shareholder (8,475 preferred A shares and 154,036 common shares) sold raw material parts/supplies to the Company in the amount of
$30,450 and $7,000 for the three months ended March 31, 2011 and 2010, respectively.

     Shareholders (17,020 preferred shares) through their business sold raw material parts/supplies to the Company in the amount of $9,874
and $4,557 for the three months ended March 31, 2011 and 2010, respectively.

     A shareholder (12,500 preferred A shares and 22,485 common shares) through his business sold supplies to the Company in the amount of
$7,850 and $6,420 for the three months ended March 31, 2011 and 2010, respectively.

                                                                        F-10
Table of Contents


                                                                 LUCID, INC.

                NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                                         FOR THE THREE MONTHS ENDED MARCH 31, 2011

9. RELATED PARTIES (Continued)

     A shareholder (40,025 common shares) through his business sold raw material parts/supplies to the Company in the amount of $9,455 and
$0 for the three months ended March 31, 2011 and 2010, respectively.

     A shareholder (3,440 common shares) through his business provided consulting/outsourced services to the Company in the amount of
$9,573 and $3,693 for the three months ended March 31, 2011 and 2010, respectively.

     A shareholder (600 common shares) through his business provided consulting/outsourced services to the Company in the amount of $34,
815 and $91,026 for the three months ended March 31, 2011 and 2010, respectively.

     Two shareholders (12,158 common shares) through their business provided consulting/outsourced services to the Company in the amount
of $78,662 and $47,440 for the three months ended March 31, 2011 and 2010, respectively.

10. SUBSEQUENT EVENT

     In May 2011, the Company's stockholders approved a proposal to amend Lucid's Certificate of Incorporation to: (a) provide for the
automatic conversion of Series A Preferred Stock and Series B Preferred Stock immediately prior to the closing of an underwritten public
offering; (b) provide that registration rights related to the shares of Common Stock issuable upon conversion of the Series A and Series B
Preferred Stock will terminate when such shares can be sold without restriction under the securities laws; and (c) provide for an equitable
adjustment to the conversion ratio of Series A Preferred Stock and Series B Preferred Stock in connection with specified recapitalizations of the
Company.

     As discussed above, the amendment to the Certificate of Incorporation modified the rights and features of the Company's outstanding
preferred stock. The Company is currently evaluating the accounting implications of the amendment. If the amendment is deemed a redemption
of the preferred stock for accounting purposes, the transaction would be accounted for as if the Company had issued new preferred shares in
exchange for the original preferred shares outstanding at the time of the amendment. Under redemption accounting, the new preferred shares
would be recorded at fair value at the time of the amendment, and a loss on redemption, representing the difference between the fair value of
the new preferred shares and the carrying value (i.e., liquidation value) of the original preferred shares, would be recorded as a non-cash charge
to earnings on common stock. While the impact on earnings per share could be material, there would be no net effect on the Company's balance
sheet, stockholder's deficit, or cash flows. If the amendment is not deemed a redemption of preferred stock, there would be no impact to the
financial statements.

      On June 28, 2011 the Company's Board of Directors authorized a capital raise up to $2.0 million (the "July 2011 Convertible Debt
Offering"). As of July 29, 2011, $830,000 had been raised pursuant to this offering and the Company had recieved subscription agreements
totaling an additional $340,000. The principal amount (plus any accrued interest) of the convertible notes issued pursuant to the July 2011
Convertible Debt Offering will automatically convert into shares of the Company's common stock at a conversion price equal to 70% of the
price at which shares of common stock will be sold in an initial public offering.

                                                                      F-11
Table of Contents


                                                                  LUCID, INC.

                NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                                          FOR THE THREE MONTHS ENDED MARCH 31, 2011

10. SUBSEQUENT EVENT (Continued)

      The Company issued to all July 2011 Convertible Debt Offering participants warrants to purchase shares of the Company's common stock
at a price of $4.61 per share in an amount equal to 70% of the principal of the note divided by the price of an initial public offering. These
warrants expire on November 15, 2015. The Company will allocate the debt proceeds between the debt and warrants based on the relative fair
value of each financial instrument, resulting in a debt discount which will be amortized over the terms of the notes to interest expense within
the consolidated statement of operations. The Company has not yet completed its assessment of the relative fair value of each instrument.

      In addition, the holders of these securities are entitled to certain rights and damages in the event that the Company does not complete an
initial public offering, or similar financing event per the terms of the agreement by January 1, 2012. As of that date, holders of these securities
are entitled to cash liquidated damages equal to 1.5% of each purchaser's subscription amount per month until the Company completes an
initial public offering or similar financing. This amount is capped at 10% of the purchaser's subscription amount. These holders will also be
entitled, beginning July 1, 2012, to a reduction in the exercise price of their warrants at the rate of 5% per month until an offering is completed,
with a floor exercise price of $1.00.

      In July 2011, the Company entered into a Loan and Security Agreement with an institutional lender (the "2011 Credit Facility"), under
which the Company may borrow up to $3.0 million in term loans for general working capital purposes and to refinance the Company's
preexisting line of credit. These term loans have an interest rate equal to the greater of (a) 4.00% above the prime rate, or (b) 7.25%, and are
due in payments of principal and all accrued interest over thirty-six months. The 2011 Credit Facility provides that if the Company prepays any
amount outstanding under this facility, the Company will be charged prepayment fees on a sliding scale: 3% of the aggregate principal amount
prepaid, if such prepayment occurs before the first anniversary of the Loan and Security Agreement; 2% of the aggregate principal amount
prepaid, if such prepayment occurs after the first anniversary but on or before the second anniversary; and 1% of the aggregate principal
amount prepaid, if such prepayment occurs after the second anniversary of the Loan and Security Agreement. Obligations under this facility are
secured by (i) a lien on all Company assets, including intellectual property assets, (ii) the personal guarantees of Messrs. Eastman and Shea,
and (iii) cash collateral, in the amount of $500,000, which has been pledged by a stockholder. In consideration for the pledge of cash collateral,
the stockholder is entitled to fees at an annual rate of 10%. These fees accrue on a quarterly basis, and become payable upon completion of this
offering. If a "Release Event," as defined in the Loan and Security Agreement, occurs, the lender will release (i) that portion of the blanket lien
which pertains to intellectual property assets, (ii) the personal guarantees of Messrs. Eastman and Shea, and (iii) the cash collateral pledged by
the stockholder. An initial public offering of the Company's common stock would qualify as a "Release Event."

     In conjunction with this financing, the Company issued to its lender a warrant to purchase up to 19,523 shares of the Company's common
stock at a price of $4.61 per share.

                                                                      ******

                                                                       F-12
Table of Contents


                              REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
Lucid, Inc. and Subsidiary
Rochester, NY

     We have audited the accompanying consolidated balance sheets of Lucid, Inc. and subsidiary (the "Company") as of December 31, 2010
and 2009, and the related consolidated statements of operations, stockholders' deficit, and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the financial statements based
on our audits.

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

     In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Lucid, Inc. and
subsidiary at December 31, 2010 and 2009, 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 of America.

     The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in
Note 2 to the consolidated financial statements, the Company's recurring losses from operations, working capital deficiency, deficit in equity,
and the need to raise additional capital to fund operations raise substantial doubt about its ability to continue as a going concern. Management's
plans concerning these matters are also discussed in Note 2 to the consolidated financial statements. The consolidated financial statements do
not include any adjustments that might result from the outcome of this uncertainty.

/s/ Deloitte & Touche LLP

Rochester, NY

April 15, 2011

                                                                      F-13
Table of Contents


                                                                  LUCID, INC.

                                                   CONSOLIDATED BALANCE SHEETS

                                                   AS OF DECEMBER 31, 2010 AND 2009

                                                                                            2010                 2009
             ASSETS
             CURRENT ASSETS:
               Cash                                                                 $              839,075   $           29,331
               Accounts receivable                                                                 327,751               96,145
               Other receivables                                                                                         22,125
               Inventories                                                                         356,931              333,016
               Prepaid expenses and other current assets                                           175,910               65,678

                  Total current assets                                                        1,699,667                 546,295
             PROPERTY AND EQUIPMENT—Net                                                          17,379                  15,975
             DEFERRED FINANCING COSTS—Net                                                       287,191                  62,222
             OTHER ASSETS                                                                        12,199                  15,030

             TOTAL ASSETS                                                           $         2,016,436      $          639,522

             LIABILITIES AND STOCKHOLDERS' DEFICIT
             CURRENT LIABILITIES:
               Line-of-credit                                                       $         2,000,000      $       128,733
               Current portion of long-term debt—net                                          1,049,792            1,822,884
               Accounts payable                                                               1,077,402            1,965,391
               Accrued expenses and other current liabilities                                 1,098,469            2,536,906
               Current portion of deferred revenue                                              351,331              350,000

                 Total current liabilities                                                    5,576,994            6,803,914
             LONG-TERM DEBT—Net                                                               3,003,747            1,460,075
             WARRANT LIABILITY                                                                1,674,170              368,034
             NOTES PAYABLE—related parties                                                      183,146              788,445
             DEFERRED REVENUE                                                                                        354,162

                   Total Liabilities                                                         10,438,057            9,774,630
             COMMITMENTS AND CONTINGENCIES (NOTE 13)
             STOCKHOLDERS' DEFICIT:
               Preferred Stock—par value $.05 per share; 10,000,000
                 authorized in 2010, and 6,000,000 authorized in 2009;
                 Series A—2,258,745 issued and outstanding (liquidation
                 value of $4,260,734)                                                              112,937              112,937
               Series B—637,921 issued and outstanding (liquidation value
                 of $2,009,451)                                                                     31,896               31,896
               Common Stock—par value $.01 per share; 60,000,000
                 authorized in 2010, and 12,000,000 authorized in 2009;
                 4,508,239 issued and outstanding in 2010, and 2,105,157
                 issued and outstanding in 2009                                                  45,083              21,052
               Additional paid-in capital                                                    19,725,348          13,993,757
               Subscription receivable                                                         (739,218 )
                Accumulated deficit                                                         (27,597,667 )        (23,294,750 )

                    Total Stockholders' Deficit                                              (8,421,621 )         (9,135,108 )

             TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT                            $         2,016,436      $          639,522


                                                  See notes to consolidated financial statements.
F-14
Table of Contents


                                                              LUCID, INC.

                                       CONSOLIDATED STATEMENTS OF OPERATIONS

                                     FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009

                                                                                           2010                  2009
             REVENUE:
               Product sales                                                        $       2,278,468        $    1,857,418
               Non-product revenue                                                            348,324               350,004
               Grant revenue—net                                                                                     95,117

                   Total revenue                                                            2,626,792             2,302,539
             OPERATING EXPENSES:
               Cost of revenue                                                              1,143,035             1,064,214
               General and administrative                                                   3,799,268             3,232,441
               Sales and marketing                                                            798,925               879,482
               Engineering, research and development                                          685,710               756,199

                   Total operating expenses                                                 6,426,938             5,932,336
             OTHER OPERATING INCOME:
               Refundable credit                                                                244,479
               Gain on settlement of research agreement                                                                 85,049
                    Total other operating income                                              244,479                85,049
             LOSS FROM OPERATIONS                                                          (3,555,667 )          (3,544,748 )
             OTHER INCOME (EXPENSE):
               Interest expense                                                                 (594,935 )         (334,570 )
               Loss on extinguishment of debt                                                    (75,875 )
               Fair value adjustment of warrants                                                 (73,049 )         (183,091 )
               Other                                                                              (3,391 )           11,058

             NET LOSS                                                               $      (4,302,917 )      $   (4,051,351 )

             BASIC AND DILUTED NET LOSS PER COMMON SHARE                            $              (1.61 )   $           (1.72 )

             WEIGHTED AVERAGE COMMON SHARES OUTSTANDING                                     2,671,248             2,356,867


                                              See notes to consolidated financial statements.

                                                                   F-15
Table of Contents


                                                          LUCID, INC.

                    CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT

                       FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009

                                                                                  Preferred Stock        Preferred Stock
                                                        Common Stock                  Class A                Class B
                                                                                                                               Additional
                                                                                                                                Paid-In         Subscription       Accumula
                                                                                                                                Capital          Receivable           Deficit

                                                        Shares     Amount        Shares      Amount      Shares   Amount
                      BALANCE—January 1, 2009            2,162,790 $ 21,628       2,258,745 $ 112,937     637,921 $ 31,896 $     12,801,803     $    (140,625 ) $     (19,42
                      Cumulative effect from the
                         adoption of accounting
                         principle                                                                                                                                        18
                      Reclassification of warrants
                         for the adoption of
                         accounting principle                                                                                      (354,545 )
                      Stock-based compensation                                                                                    1,686,548
                      Settlement of subscription
                         receivable                       (57,633 )     (576 )                                                     (140,049 )         140,625
                                   Net loss                                                                                                                            (4,05

                      BALANCE—December 31,
                        2009                            2,105,157     21,052     2,258,745     112,937    637,921    31,896      13,993,757                    0      (23,29

                      Stock-based compensation                                                                                    1,410,933
                      Stock option net exercises           91,476         915                                                       (28,316 )
                      Warrants exercised                  913,852       9,139                                                     1,159,035
                      Shares issued to settle accrued
                         expenses                           6,351         64                                                         20,820
                      Shares issued for services           12,158        121                                                         39,878
                      Reclassification of restricted
                         stock                            233,333       2,333                                                        (2,333 )
                      Issuance of restricted stock        150,000       1,500                                                        (1,500 )
                      Reclassification of warrants to
                         equity                                                                                                       9,708
                      Conversion of debt to
                         common stock                     713,028       7,130                                                     2,233,678
                      Conversion of related party
                         debt to common stock             282,884       2,829                                                       889,688
                      Warrant exercise receivable                                                                                                    (739,218 )
                                   Net loss                                                                                                                            (4,30

                      BALANCE—December 31,
                        2010                            4,508,239 $ 45,083       2,258,745 $ 112,937      637,921 $ 31,896 $     19,725,348     $    (739,218 ) $     (27,59




                                     See notes to consolidated financial statements.

                                                                 F-16
Table of Contents


                                                                  LUCID, INC.

                                         CONSOLIDATED STATEMENTS OF CASH FLOWS

                                     FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009

                                                                                           2010               2009
             CASH FLOWS FROM OPERATING ACTIVITIES:
               Net loss                                                                $   (4,302,917 )   $   (4,051,351 )
               Adjustments to reconcile net loss to net cash used in operating
                activities:
                 Depreciation and amortization                                                61,378            151,975
                 Stock-based compensation                                                  1,410,933          1,686,548
                 Stock issued for services                                                    39,999
                 Warrants issued for services                                                 70,045
                 Gain on settlement of research agreement                                                       (85,049 )
                 Fair value adjustment of warrants                                             73,049           183,091
                 Loss on extinguishment of debt                                                75,875
                 Accretion of debt discount                                                    78,053             56,491
                 Change in:
                     Accounts receivable                                                    (231,606 )           90,128
                     Inventories                                                             (23,915 )          (16,629 )
                     Prepaid expenses and other current assets                               (49,783 )           24,163
                     Other receivables                                                        22,106             50,990
                     Other assets                                                              2,830              4,948
                     Accounts payable                                                       (797,989 )          572,820
                     Accrued expenses and other current liabilities                          (89,954 )          502,653
                     Deferred revenue                                                       (352,832 )         (610,693 )

                         Net cash used in operating activities                             (4,014,728 )       (1,439,915 )

             CASH FLOWS FROM INVESTING ACTIVITIES—Purchases of
              property and equipment                                                          (15,377 )          (15,540 )

             CASH FLOWS FROM FINANCING ACTIVITIES:
               Borrowings on line-of-credit                                                2,000,000
               Repayments of line-of-credit                                                 (128,733 )           (4,867 )
               Borrowings on notes payable—related parties                                   200,000            650,000
               Borrowings on debt                                                          3,975,000            925,000
               Repayments of debt                                                           (937,268 )          (18,631 )
               Loan acquisition costs                                                       (272,375 )          (70,000 )
               Warrant exercises                                                               3,225

                      Net cash provided by financing activities                            4,839,849          1,481,502

             NET INCREASE IN CASH                                                            809,744              26,047
             CASH—Beginning of year                                                           29,331               3,284

             CASH—End of year                                                          $     839,075      $       29,331

             SUPPLEMENTAL CASH FLOW DATA—Cash paid for interest                        $     487,070      $       62,919

             SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
              FINANCING ACTIVITIES:
               Insurance premiums financed through note payable                        $       60,430     $       48,086

                Issuance of warrants in connection with debt issuance                  $   1,167,224      $          9,201

                Issuance of warrants in connection with note payable—related parties   $       19,722     $          3,532
Issuance of promissory note in exchange for accrued interest              $      1,075,880

Issuance of promissory note in exchange for accrued consulting fees       $       141,000

Settlement of subscription receivable                                                        $   140,625

Exercise of warrants in connection with repayments of debt, net of
  subscription receivable                                                 $       425,731

Issuance of common stock to settle accounts payable to vendors            $        20,884

Issuance of common stock upon conversion of debt                          $      2,240,808

Issuance of common stock upon conversion of debt—related parties          $       892,517


                               See notes to consolidated financial statements.

                                                    F-17
Table of Contents


                                                                  LUCID, INC.

                                       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009

1. NATURE OF OPERATIONS

     Lucid, Inc. (Lucid) and its wholly-owned subsidiary, Lucid International Ltd. (LIL) (collectively, the "Company"), is a medical device and
information technology company that develops, manufactures, markets and sells noninvasive diagnostic confocal imagers for assessing skin
lesions for skin cancer. The Company sells its products worldwide and is headquartered in Rochester, New York.

   The Company evaluated all events and transactions that occurred after December 31, 2010, through April 15, 2011, the date that the
Company issued these consolidated financial statements.

2. LIQUIDITY AND CAPITAL RESOURCES

      The Company has incurred net losses of approximately $4.3 million and $4.1 million in 2010 and 2009, respectively. In addition, the
Company had a working capital deficit of approximately $3.9 million and $6.3 million at December 31, 2010 and 2009, respectively, and a
deficit in equity of approximately $8.4 million and $9.1 million at December 31, 2010 and 2009, respectively. Furthermore, the Company's
operating plan for fiscal 2011 projects a net loss of approximately $3.5 million, and needs to raise additional capital to fund its operations in
2011 and beyond. The Company continues to explore strategic alternatives to finance its business plan, including but not limited to a potential
initial public offering of its common stock, private equity or debt financings or other sources, such as strategic partnerships. The Company is
also focusing on increasing sales of its products to generate cash flows to fund its operations.

     There can be no assurance that the Company will be successful in its plans described above or in attracting alternative debt or equity
financing. These conditions raise substantial doubt about the Company's ability to continue as a going concern. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Principles of Consolidation —The consolidated financial statements include the accounts of Lucid and LIL. All inter-company accounts
and transactions have been eliminated in consolidation.

      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 and
disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during
the reporting period. On an ongoing basis, the Company evaluates its estimates, including those related to revenue recognition, allowances for
doubtful accounts, inventories, impairment of long-lived assets, accrued expenses, income taxes including the valuation allowance for deferred
tax assets, valuation of warrants, and stock-based compensation. The Company bases its estimates on historical experience and on various other
assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and
liabilities.

     Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may differ from those estimates.

                                                                       F-18
Table of Contents


                                                                  LUCID, INC.

                                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                                AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

     Revenue Recognition —The Company recognizes revenue when evidence of an arrangement exists, title has passed (generally upon
shipment) or services have been rendered, the selling price is fixed or determinable and collectability is reasonable assured. When transactions
include multiple deliverables, the Company applies the accounting guidance for multiple element arrangements to determine if those
deliverables constitute separate units of accounting. Revenue on arrangements that include multiple elements is allocated to each element based
on the relative fair value of each element. Each element's allocated revenue is recognized when the revenue recognition criteria for that element
have been met, although multiple element arrangements have not been material through December 31, 2010. Fair value is generally determined
by objective evidence, which is based on the price charged when each element is sold separately. All costs related to product shipment are
recognized at time of shipment and included in cost of revenue. The Company does not provide for rights of return to customers on product
sales.

     When product sales do not include installation or training, such as for all distributor sales and many direct sales, revenue is recognized
upon shipment. Certain direct sales contracts require installation at the customer's location prior to acceptance. As such, revenue recognition on
these contracts is delayed until all aspects of delivery, including installation, are complete. In addition, should the contract include training,
revenue recognition is delayed until training is complete.

     Grant revenue is recognized as it is earned, as determined by the terms of the grant, and is presented net of expenses directly related to the
project being funded by the grant.

     Maintenance and service support contract revenues are recognized ratably over the term of the service contracts.

     Licensing fees related to the sale of a perpetual license to use certain technology in certain geographic areas are being recognized as
earned.

     Product Warranty —Medical devices sold are covered by a warranty, ranging from one year to two years, for which estimated
contractual warranty obligations are recorded as an expense at the time of shipment. As of December 31, 2010 and 2009, the Company's
reserve for warranty liability was $25,000 and $12,000, respectively.

     Concentrations of Credit Risk —Financial instruments that subject the Company to concentrations of credit risk consist primarily of
cash and accounts receivable. The Company maintains its cash in bank demand deposit accounts. The cash balances are insured by the FDIC up
to $250,000 per depositor. At times, the amounts in these accounts may exceed the federally insured limits. The Company has not experienced
any losses in these accounts and believes it is not exposed to any significant credit risk with respect to cash.

     The Company provides credit in the normal course of business to the majority of its customers. Accounts for which no payments have
been received for several months are considered delinquent and customary collection efforts are begun. After all collection efforts are
exhausted the account is written-off. Allowance for doubtful accounts is based on estimates of probable losses related to accounts receivable
balances. At December 31, 2010 and 2009, management has determined that no allowance is required.

                                                                       F-19
Table of Contents


                                                                   LUCID, INC.

                                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                                 AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

    For the year ended December 31, 2010, the Company had sales of $1,282,702 and $212,500 to two customers. These two customers
accounted for 82% and 13%, respectively, of the Company's accounts receivable balance at December 31, 2010.

     For the year ended December 31, 2009, the Company had sales of approximately $890,000 and $259,000 to two customers. These two
customers accounted for 75% and 0%, respectively, of the Company's accounts receivable balance at December 31, 2009. One other customer
had a significant accounts receivable balance, representing 23% of the Company's accounts receivable balance at December 31, 2009.

     Inventories —Inventories are stated at the lower of cost, determined on a first-in, first-out (FIFO) method, or market. Excess, obsolete or
expired inventory are adjusted to net realizable value, based primarily on how long the inventory has been held as well as the Company's
estimate of forecasted net sales of that product. A significant change in the timing or level of demand for our products may result in recording
additional adjustments to the net realizable value of excess, obsolete or expired inventory in the future. Adjustments to inventory have not been
material as of December 31, 2010 and 2009.

      Property and Equipment —Property and equipment is stated at cost, less accumulated depreciation. Depreciation is computed using the
straight-line method over the estimated useful lives of the related assets as follows:

                              Computer hardware and software                                                 2 - 3 years
                              Furniture and fixtures                                                             5 years
                              Machinery and equipment                                                        2 - 5 years
                              Office equipment                                                                   5 years
                              Vehicles                                                                           5 years

     Repairs and maintenance are expensed as incurred.

     Impairment of Long-Lived Assets —The Company assesses the impairment of definite lived assets when events or changes in
circumstances indicate that the carrying value of the assets may not be recoverable. Factors that are considered in deciding when to perform an
impairment review include significant under-performance of a business or product line in relation to expectations, significant negative industry
or economic trends, and significant changes or planned changes in the use of the assets.

     Recoverability potential is measured by comparing the carrying amount of the asset group to the asset group's related total future
undiscounted cash flows. If an asset group's carrying value is not recoverable through its related cash flows, the asset group is considered to be
impaired. Impairment is measured by comparing the asset group's carrying amount to its fair value.

     When it is determined that useful lives of assets are shorter than originally estimated, and there are sufficient cash flows to support the
carrying value of the assets, the rate of depreciation is accelerated in order to fully depreciate the assets over their new shorter useful lives. The
Company recognized no impairment expenses in 2010 or 2009.

                                                                         F-20
Table of Contents


                                                                   LUCID, INC.

                                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                                 AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

     Deferred Financing Costs, Net —Deferred financing costs, net, represent amounts incurred in connection with the Company's 2010/2011
Convertible Debt Offering and the 2009 Convertible Debt Offering. These costs are amortized over the period from the date of issuance to the
contractual maturity date. The Company expensed deferred fees of $47,406 and $7,778 for the years ended December 31, 2010 and
December 31, 2009, respectively, which are included as Depreciation and Amortization in the consolidated statement of cash flows, and as
interest expense within the consolidated statement of operations.

     Fair Value Measurements —Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e. the
"exit price") in an orderly transaction between market participants at the measurement date. The guidance establishes a hierarchy for inputs
used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the
most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the assets or liability
developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company's
assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information
available in the circumstances. The hierarchy is broken down into three levels based on the reliability of inputs as follows:

           Level 1 —Valuations based on quoted prices in active markets for identical assets or liabilities that the Company has the ability to
     access. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these products
     does not entail a significant degree of judgment.

           Level 2 —Valuation is determined from quoted prices for similar assets or liabilities in active markets, quoted prices for identical or
     similar instruments in markets that are not active or by model-based techniques in which all significant inputs are observable in the
     market.

          Level 3 —Valuations based on inputs that are unobservable and significant to the overall fair value measurement. The degree of
     judgment exercised in determining fair value is greatest for instruments categorized in Level 3.

     The availability of observable inputs can vary and is affected by a wide variety of factors, including, the type of asset/liability, whether the
asset/liability is established in the marketplace, and other characteristics particular to the transaction. To the extent that valuation is based on
models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. In certain
cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy.

     In such cases, for disclosure purposes the appropriate level in the fair value hierarchy is determined based on the lowest level input that is
significant to the fair value measurement in its entirety.

      Fair value is a market-based measure considered from the perspective of a market participant rather than an entity-specific measure.
Therefore, even when market assumptions are not readily available, assumptions are required to reflect those that market participants would use
in pricing the asset or liability at the measurement date.

                                                                        F-21
Table of Contents


                                                                 LUCID, INC.

                                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                                AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

     The Company considers warrants that are not indexed to the Company's own stock to be classified as Level 3. The following table
presents the change in Level 3 liabilities:

                                                                                   2010                2009
                             Balance at January 1                            $        368,034     $     172,210
                             Warrants issued                                        1,242,795            12,733
                             Reclassification to equity                                (9,708 )
                             Fair value adjustment                                     73,049           183,091

                             Balance at December 31                          $      1,674,170     $     368,034


     The fair value of these warrants is derived using the Black-Scholes pricing model using the same assumptions and methodology utilized in
the valuation of common stock option described below. (See Note 14 related to assumptions used to value warrants.)

     The Company's financial instruments consist principally of accounts receivable, accounts payable and debt. The Company considers these
to be classified as Level 1 and believes the recorded values for accounts receivable and accounts payable approximate current values as of
December 31, 2010 because of their nature and respective durations. Management estimates the carrying value of its debt instruments
approximates fair value as of December 31, 2010. This estimate is based on acceptable valuation methodologies which use market data of
similarly sized and situated debt issuers.

     Engineering, Research and Development Costs —Engineering, research and development costs are expensed as incurred.

     Stock-Based Compensation Plans —The Company measures compensation cost for stock awards at fair value and recognizes
compensation over the service period for awards expected to vest. The fair value of each option grant is estimated on the date of grant using the
Black-Scholes pricing model and straight-line amortization of compensation expense over the requisite service period of the grant. The
determination of fair value using the Black- Scholes model requires a number of complex and subjective variables. Key assumptions in the
Black-Scholes pricing model include the value of the common stock, the expected term, expected volatility of the common stock, the risk-free
interest rate, and estimated forfeitures. The Company determined the fair value of its common stock using a variety of factors, including the
report of a third party valuation consultant, the general performance of the Nasdaq composite, and the Company's financial results and
condition. The expected term is estimated by using the actual contractual term of the awards and the length of time for the employees to
exercise the awards. Management determined that, as a private company, it was not practicable to estimate the volatility of our stock price,
based on our low frequency of price observations. Therefore, expected volatilities were based on a volatility factor computed based upon an
external peer group analysis of publicly traded companies. The analysis provided historical volatilities of the public company comparables and
developed an estimate of expected volatility for the Company. The risk-free interest rate was based on the implied yield available at the time
the options were granted on U.S. Treasury zero coupon issues with a remaining term equal to the expected term of the option. Estimated
forfeitures are based on historical data, as well as management's current expectations.

                                                                      F-22
Table of Contents


                                                                  LUCID, INC.

                                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                                 AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

      Warrants —The Company accounts for warrants issued that are indexed to the Company's own stock as a component of equity and are
recorded at estimated fair value computed at the date of grant. Warrants issued that are not indexed to the Company's own stock are treated as a
liability and are initially recorded at estimated fair value computed at the date of grant. This liability is adjusted to fair value at each period
presented. During 2010, the Company reclassified certain warrants from liabilities to stockholders' equity to reflect expiration of certain
complex warrant provisions, and indexed the warrant to the Company's own stock.

     The fair value of warrants is derived using the Black-Scholes pricing model. The Company believes that the Black-Scholes pricing model
results in a value that is not materially different from the value determined using a binomial pricing model. Effective January 1, 2009, new
accounting guidance related to determination of warrants indexed to the Company's own stock, resulted in certain of the outstanding warrants
to be classified as liabilities. The Company recorded a cumulative effect of a change in accounting principle to the 2009 opening accumulated
deficit as a result of the new accounting guidance. Where warrants are issued in connection with debt, the proceeds from the debt issuance is
allocated between the debt and warrants based on their relative fair values, if the value of the warrants are classified as equity. If the warrants
are classified as a liability, the value of the warrants is allocated from the debt proceeds based on the fair value of the warrants.

      Convertible Debt —The Company has certain debt instruments that contain a conversion feature. When the debt agreement allows for
conversion at a stated price that is lower than the fair value of the underlying common stock at the date the agreement is consummated, the
difference between the common stock price and the conversion price multiplied by the number of convertible shares is recorded as a discount
on the debt. When the debt agreement allows for conversion at a value that is contingent upon the occurrence of future events, the difference
between the common stock price and the conversion price multiplied by the number of convertible shares is recorded as a discount on the debt
at the time the contingency no longer exists.

     The Company also examines each of the conversion features as a potential embedded derivative. The Company has determined that none
of the conversion features represent embedded derivatives. The Company continues this assessment at each reporting period.

     Certain of the Company's convertible debt have been issued with detachable warrants. In these instances, the value of the warrants is
recorded as a debt discount, which is accreted to interest expense over the life of the debt.

     Refundable Credit —The Company received a refundable credit under the Qualified Therapeutic Discovery Project (QTDP) created by
the Patient Protection and Affordable Care Act (enacted on March 23, 2010) and established under Section 48D of the Internal Revenue Code.
The Company elected to receive a cash payment in lieu of an investment tax credit and recognized other operating income of $244,479 within
the consolidated statement of operations.

     Income Taxes —Income taxes are provided for the tax effects of transactions reported in the consolidated financial statements and consist
of taxes currently due and deferred taxes related primarily to differences between the financial statement and tax basis of assets and liabilities
and operating loss and tax credit carryforwards measured by the enacted tax rates that are anticipated to be in effect in

                                                                       F-23
Table of Contents


                                                                  LUCID, INC.

                                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                                AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)



the respective jurisdiction when those differences reverse. The deferred tax provision generally represents the net change in the deferred tax
assets and liabilities. A valuation allowance is established when it is necessary to reduce deferred tax assets to amounts that more likely than
not will be realized.

     Tax positions are recognized only when it is more likely than not (likelihood of greater than 50%) that the position would be sustained
upon examination based solely on the technical merits of the position. Tax positions that meet the more likely than not threshold are measured
using a probability- weighted approach as the largest amount of tax benefit that is greater than 50% likely of being realized upon settlement.
The Company recognizes accrued interest and penalties related to income tax liabilities as a component of income tax expense.

     Net Loss Per Common Share —Basic net loss per common share is computed by dividing net loss by the weighted-average number of
common shares outstanding during the reporting period. Diluted net loss per common share is computed by dividing net loss by the
weighted-average number of dilutive common shares outstanding during the period. Dilutive common shares outstanding are calculated by
adding to the weighted average number of common shares outstanding any potential (unissued) shares of common stock assuming conversion,
exercise or issuance from the Company's outstanding convertible preferred stock, convertible debt, warrants, stock options and restricted stock.
Since the Company reported a net loss in the years ended December 31, 2010 and 2009, all potential common stock are excluded from the
calculation because they would have an anti-dilutive effect, meaning the loss per common share would be reduced. Therefore, in periods when
a loss is reported, the calculation of basic and dilutive loss per common share results in the same value. The Company's preferred stockholders
and nonvested restricted stockholders have the right to participate with common stockholders in dividends and unallocated earnings. Net losses
are not allocated to the preferred and nonvested restricted stockholders. Therefore, when applicable, basic and diluted earnings per share are
computed using the two-class method, under which the Company's undistributed earnings are allocated to the common, nonvested restricted
and preferred stockholders.

     Recently Issued Accounting Pronouncements —In the normal course of business, Management evaluates all new accounting
pronouncements issued by the Financial Accounting Standards Board, Securities and Exchange Commission, Emerging Issues Task Force,
American Institute of Certified Public Accountants and other authoritative accounting bodies to determine the potential impact they may have
on the Company's Consolidated Financial Statements. Based upon this review, Management does not expect any of the recently issued
accounting pronouncements to have a material impact on the Company's consolidated financial statements.

                                                                       F-24
Table of Contents


                                                                LUCID, INC.

                                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                               AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009

4. INVENTORIES

    The components of inventories are as follows at December 31:

                                                                                       2010                2009
                            Raw Materials                                       $       230,658       $      313,068
                            Finished Goods                                               85,131               19,948
                            Offsite Demo Equipment                                       41,142

                            Balance at December 31                              $       356,931       $      333,016


     Offsite demo equipment represents the cost of products physically located at customer locations, during an orientation period for which
the Company retains title. As such, no depreciation expense has been recorded on these units.

5. PROPERTY AND EQUIPMENT

    Property and equipment consists of the following at December 31:

                                                                                2010                      2009
                            Computer hardware and software                  $       106,378       $           92,985
                            Furniture and fixtures                                    4,000                    4,000
                            Machinery and equipment                                 412,367                  411,677
                            Office equipment                                            742
                            Vehicle                                                  18,680                      18,680

                                                                                    542,167                  527,342
                            Less accumulated depreciation and
                              amortization                                          (524,788 )              (511,367 )

                                                                            $         17,379      $              15,975


     Depreciation expense totaled $13,972 and $151,975 for the years ended December 31, 2010 and 2009, respectively. Depreciation in the
amount of $4,797 and $127,221 for the years ended December 31, 2010 and 2009, has been included as a component of Grant Revenue, Net on
the consolidated statements of operations. Depreciation in the amount of $0 and $12,719 for the years ended December 31, 2010 and 2009,
respectively, has been included as a component of Cost of Revenue on the consolidated statements of operations. Depreciation in the amount of
$9,175 and $12,035 for the years ended December 31, 2010 and 2009, respectively, has been included as a component of Operating Expenses
on the consolidated statements of operations.

     The Company has corrected its Property and Equipment footnote to the Consolidated Financial Statements as of December 31, 2009 to
reduce machinery and equipment, office equipment and accumulated depreciation and amortization by $761,987, $3,698 and $765,685,
respectively, to account for assets that were fully depreciated but no longer on site.

6. LINE OF CREDIT

    In July 2010, the Company entered into a bank line-of-credit agreement due upon demand, under which the Company may borrow up to
$5,000,000, subject to certain conditions. Amounts borrowed

                                                                     F-25
Table of Contents


                                                                 LUCID, INC.

                                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                                AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009

6. LINE OF CREDIT (Continued)



bear interest at the bank's prime rate plus 1% with a floor rate of 6% (6% effective rate at December 31, 2010) and are collateralized by
substantially all of the Company's assets and are guaranteed by the chief executive officer and chairman of the Company, and is further
guaranteed on a limited basis by one of our principal stockholder. At December 31, 2010, there was $2,000,000 outstanding, which amount
represents the only borrowings to date on this credit facility. In order to draw additional funds, the Company will need to place additional
collateral.

     The Company used proceeds from the new line-of-credit to pay down amounts under the Company's preexisting bank line-of-credit
agreement and revolving line-of-credit agreement, under which agreements $100,000 and $28,733, respectively, were outstanding at
December 31, 2009. No amounts remained outstanding under these preexisting agreements at December 31, 2010.

7. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

     Accrued expenses and other current liabilities consisted of the following at December 31:

                                                                                2010                 2009
                            Accrued interest                              $        405,401       $    1,871,504
                            Customer deposits                                      168,346              254,558
                            Accrued compensation and benefits                      180,246              120,986
                            Accrued professional fees                              101,109              143,878
                            Other accrued expenses                                 243,367              145,980

                                                                          $      1,098,469       $    2,536,906


     Customer deposits represent advances paid to the Company by customers for the purchase of equipment.

8. NOTE PAYABLE — RELATED PARTIES

     The Company has a promissory note agreement with its chief executive officer. The note bears interest at 6% and matures on the earlier of
January 1, 2011, or thirty days following the Company's completion of additional equity financing in an amount in excess of $8 million. At
December 31, 2010 and December 31, 2009, $140,457 remained outstanding. In January 2011, the Company did not make the mandatory
repayments. As such, the Company was in default of its obligations under the notes. In March 2011, $40,457 of the face value of the note was
converted into a new promissory note which bears interest at 6% and matures on the earlier of January 1, 2012, or thirty days following the
Company's completion of additional equity financing in an amount in excess of $8 million. The remaining principal of $100,000 was
exchanged for a note bearing interest at 8% and maturing on the earlier of November 15, 2012, or such earlier date as may be required by
acceleration, conversion or otherwise as defined in the agreement. In connection with this note, the Company issued warrants to purchase
shares of the Company's common stock at a price of $4.11 per share in an amount equal to 70% of the principal of the note divided by either
the price of an initial public offering, the price of a non-qualified financing or the equity value per share, or, in the event none of these
transactions occur by November 15, 2012, $4.11, as defined by the agreement.

                                                                     F-26
Table of Contents


                                                                  LUCID, INC.

                                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                                 AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009

8. NOTE PAYABLE — RELATED PARTIES (Continued)

     The Company issued nine convertible subordinated promissory notes to the Chairman of the Company between August 2009 and May
2010. The face value of the notes totaled $850,000 and the notes accrued interest at 12%. In November 2010, the face value of $800,000 of
these notes, together with accrued interest, was converted into common shares of the Company. In connection with the extinguishment of one
of the notes payable, the Company recognized a loss on extinguishment of debt of $24,063 within the consolidated statement of operations and
reclassified the other notes to equity with no impact on the consolidated statement of operations. The remaining face value of $50,000 in notes,
together with accrued interest of $1,317 was exchanged in November 2010 for a note bearing interest at 8% and maturing on the earlier of
November 15, 2012, or such earlier date as may be required by acceleration, conversion or otherwise as defined in the agreement. At
December 31, 2010 and 2009, $51,317 and $650,000, respectively, remained outstanding.

      In connection with one of the notes issued in 2009, the Company issued 2,381 warrants at either $3.15 per common share, or in the event
of a Financing Event or Qualified Equity Round as defined in the notes, at prices paid by the investors in the Financing Event or Qualified
Equity Round. The warrants are not separately transferable. The Company allocated the debt proceeds between the debt and warrants based on
the fair value of warrants, resulting in a debt discount of $3,351 which was amortized over the life of the notes to interest expense within the
consolidated statement of operations. In connection with the note issued in 2010, the Company issued warrants to purchase shares of the
Company's common stock at a price of $4.11 per share in an amount equal to 70% of the principal of the note divided by either the price of an
initial public offering, the price of a non-qualified financing or the equity value per share, or, in the event none of these transactions occur by
November 15, 2012, $4.11, as defined by the agreement. These warrants expire on November 15, 2015. The Company allocated the debt
proceeds between the debt and warrants based on the fair value of each warrant, resulting in a debt discount of $18,489, which is being
amortized over the terms of the notes to interest expense within the consolidated statement of operations.

                                                                       F-27
Table of Contents


                                                                 LUCID, INC.

                                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                                AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009

9. DEBT

     Long-term debt consisted of the following at December 31:

                                                                                              2010                  2009
              Senior Secured Notes                                                                            $     1,298,813
              2009 Convertible Debt Offering                                            $        900,000            1,000,000
              2010/2011 Convertible Debt Offering                                              3,037,152
              Promissory Notes Payable                                                         1,162,800              409,388
              Convertible Debenture with Empire State Development Small
                Business Investment Fund                                                                              500,000
              Convertible Note Payable                                                                                 25,000
              Note payable in monthly installments of $4,936, plus interest at
                5.72%, through September 2010                                                                              38,650
              Note payable in monthly installments of $5,531, including interest
                through August 2011                                                                  37,991
              Note payable in monthly installments of $707, including interest
                through June 2012. This note is collateralized by software
                licenses.                                                                            10,577                16,340
              Note payable in monthly installments of $677, including interest
                through March 2011                                                                    2,666

                                                                                               5,151,186            3,288,191
              Less debt discount                                                              (1,097,647 )             (5,232 )

                                                                                               4,053,539            3,282,959

              Current portion of long-term debt                                                1,049,792            1,828,116
              Less current portion of debt discount                                                                    (5,232 )

              Current portion of long-term debt—net of debt discount                           1,049,792            1,822,884

              Long-term debt—net of discount and current portion                        $      3,003,747      $     1,460,075


     Senior Secured Notes —The Company issued senior secured notes to six note holders between April 2003 and October 2003 totaling
$1,298,813. The notes accrued interest at rates ranging between 8% and 15%, and were collateralized by a first security interest in certain
Company assets including patents and intellectual property. On July 9, 2010, concurrent with the closing of the Company's bank line-of-credit
arrangement, the Company repaid the senior secured notes. Three holders were paid net amounts after reducing their liability for simultaneous
warrant exercises. In lieu of payment of accrued interest, one other holder received a promissory note for the accrued interest associated with
the senior secured note.

     In connection with the issuance of the senior secured notes, the Company also issued to the note holders warrants to purchase 963,375
shares of the Company's common stock at an exercise price of $1.25 per share. The Company allocated the debt proceeds between the debt and
warrants based on the relative fair value of each financial instrument, resulting in a debt discount which was amortized over the terms of the
notes to interest expense within the consolidated statement of operations. During 2010, 879,374 warrants were exercised and the remainder
expired unexercised.

                                                                     F-28
Table of Contents


                                                                LUCID, INC.

                                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                                AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009

9. DEBT (Continued)

     Subsequent to the original issuance, three of the notes were modified and the maturity dates were extended. In conjunction with this
modification, the Company issued additional stock purchase warrants for up to 18,332 shares of the Company's common stock at a purchase
price equal to the lower of $3.15 per common share, or 85% of the price per common share paid in a financing if the net proceeds from the
financing are in excess of ten million dollars.

      Effective January 1, 2009, the Company adopted accounting guidance related to determining whether an instrument (or embedded feature)
is indexed to an entity's own stock. In accordance with this guidance, warrants to purchase 18,332 shares of common stock were determined to
no longer be indexed to the Company's stock and, therefore, were no longer classified as equity. This determination was based on the warrant
exercise price being contingent on the occurrence of a specified event. This resulted in a reclassification of $18,014 from additional paid-in
capital to a warrant liability.

     Convertible Subordinated Promissory Notes ("2009 Convertible Debt Offering") —The Company issued convertible notes between
August 2008 and June 2010 at interest rates ranging between 10% and 12%. In connection with certain of these notes, the Company issued
warrants to purchase up to 10,635 common shares at either $3.15 per common share, or in the event of a financing event or qualified equity
round, as defined, at the price paid by investors in the financing event or qualified equity round. In November 2010, holders representing
principal amounts of $2.0 million converted their subordinated notes and associated accrued interest into the Company's common stock at a
conversion price of $3.07 per share. For certain of the converted notes, the Company recognized a loss on extinguishment of debt of $25,837
within the consolidated statement of operations and reclassified the other notes to equity with no impact on the consolidated statement of
operations. One of the remaining notes matured on January 1, 2011 and the Company did not make the required payments. The holder
exchanged the amounts due under the 2009 Convertible Debt Offering for the 2010/2011 Convertible Debt Offering notes discussed below.
The two remaining convertible notes mature December 31, 2011.

      Effective January 1, 2009, the Company adopted accounting guidance related to determining whether an instrument (or embedded feature)
is indexed to an entity's own stock. In accordance with this guidance, warrants to purchase 10,635 shares of common stock were determined to
no longer be indexed to the Company's stock and, therefore, were no longer classified as equity. This determination was based on the warrant
exercise price being contingent on the occurrence of a specified event. As a result of adopting this accounting guidance, the Company
eliminated $7,603 from additional paid-in capital and recorded a warrant liability at January 1, 2009 of $5,055. The remaining difference was
recorded as a cumulative effect from the adoption of accounting principle in the amount of $2,548.

      Convertible Promissory Notes ("2010/2011 Convertible Debt Offering") —The Company issued convertible promissory notes to new
investors during November 2010 totaling $2,075,000 and in January 2011 totaling $1,750,000. In addition, The Empire State Development
Small Business Investment Fund exchanged their convertible debenture plus accrued interest, totaling $962,000 for 2010/2011 Convertible
Debt Offering notes. The notes bear interest at 8% and mature on the earlier of November 15, 2012, or such earlier date as may be required by
acceleration, conversion or otherwise as defined in the agreement. The notes are automatically convertible into common stock upon the
consummation of an underwritten initial public offering of at least $10 million at a conversion price equal to 70% of the price per share in an
initial public offering, as defined in the agreement.

                                                                     F-29
Table of Contents


                                                                   LUCID, INC.

                                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                                 AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009

9. DEBT (Continued)

      These securities are entitled to certain rights and damages in the event that the Company does not complete an initial public offering, or
similar financing event per the terms of the agreement, by July 12, 2011. More specifically, the interest rate of the notes would increase to 9%
and the conversion price would be reduced by 5% each month until an offering is completed. In addition, holders of these securities are entitled
to a cash liquidated damages equal to 1.5% of each purchaser's subscription amount per month until the Company completes and initial public
offering or similar financing. This amount is capped at 10% of the purchaser's subscription amount.

     The Company also issued to all 2010/2011 Convertible Debt Offering participants warrants to purchase shares of the Company's common
stock at a price of $4.11 per share in an amount equal to 70% of the principal of the note divided by either the price of an initial public offering,
the price of a non-qualified financing or the equity value per share, or, in the event none of these transactions occur by November 15, 2012,
$4.11, as defined by the agreement. These warrants expire on November 15, 2015. The Company allocated the debt proceeds between the debt
and warrants based on the relative fair value of each financial instrument, resulting in a debt discount of $1,097,647 which is being amortized
over the terms of the notes to interest expense within the consolidated statement of operations.

    The Company has corrected its classification of the debt discount on the Consolidated Balance Sheet as of December 31, 2010 to present
$587,810 as long-term, in order to report the full discount as a direct deduction from the carrying amount of the related long-term debt.

      Convertible Debenture with the Empire State Development Small Business Investment Fund —Prior to 2007, the Company had
issued a convertible debenture, as amended, to the Empire State Development Small Business Investment Fund in the amount of $500,000
which accrued interest at 12%. In connection with this debenture, the Company issued warrants to the holder to purchase up to 100,000 shares
of preferred stock at an exercise price equal to the lower of either $2.00 per share, or, if the Company has completed a public offering for the
sale of its securities on a listed exchange, the lowest per share trading price during the ninety day period prior to the date of the holders'
exercise of the warrant. In June 2010, the Company and the holder entered into a promissory note which converted $135,000 of accrued interest
related to the Convertible Debenture into one of the Company's Convertible Subordinated Promissory Notes. In November of 2010, the holder
converted the principal of the new subordinated promissory note and associated accrued interest into the Company's common stock at a
conversion price of $3.07 per share. The Company reclassified this amount to equity with no impact on the consolidated statement of
operations. Also in November 2010, the convertible debentures, together with the remaining accrued interest, was exchanged for the
Company's Convertible Debt Offering notes.

      Effective January 1, 2009, the Company adopted accounting guidance related to determining whether an instrument (or embedded feature)
is indexed to an entity's own stock. In accordance with this guidance, the above warrants to purchase 100,000 shares of preferred stock were
determined to no longer be indexed to the Company's stock, and therefore, were no longer classified as equity. This determination was based on
the warrant exercise price being contingent on the occurrence of a specified event. As a result of adopting this accounting guidance, the
Company eliminated $328,928 from additional paid-in capital and recorded a warrant liability at January 1, 2009 of $128,676. The

                                                                        F-30
Table of Contents


                                                                 LUCID, INC.

                                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                                AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009

9. DEBT (Continued)



remaining difference was recorded as a cumulative effect from the adoption of accounting principle in the amount of $200,252 within the
consolidated statements of stockholders' deficit.

     Promissory Notes —The Company has four promissory notes outstanding which accrue interest at 10%. The entire principal balance
including accrued interest was due December 30, 2008. Two of the notes contain a conversion right into common shares of the Company at a
conversion price of $2.00. The holders may convert, at their option, at any time in which the notes remain outstanding. The Company has two
additional notes outstanding which do not accrue interest. Two of the notes remain outstanding and are currently in default.

     In March 2011, a portion of two of the promissory notes were exchanged for notes bearing interest at 8% and maturing on the earlier of
November 15, 2012, or such earlier date as may be required by acceleration, conversion or otherwise as defined in the agreement. In connection
with these notes, the Company issued warrants to purchase shares of the Company's common stock at a price of $4.11 per share in an amount
equal to 70% of the principal of the note divided by either the price of an initial public offering, the price of a non-qualified financing or the
equity value per share, or, in the event none of these transactions occur by November 15, 2012, $4.11, as defined by the agreement. As such,
these notes have been reclassified to long-term as of December 31, 2010. The remaining balance of the two notes remains outstanding and is
currently in default.

     Convertible Note Payable —The Company had a convertible note payable outstanding bearing interest at 18% which was in default prior
to the holder converting the note and accrued interest into the Company's common stock in November 2010 at a conversion price of $3.07 per
share. In connection with the extinguishment of the Convertible Note Payable, the Company recognized a loss on extinguishment of debt of
$25,975 within the consolidated statement of operations.

     Future Principal Payments —Future scheduled payments on long-term debt are as follows at December 31, 2010:

                             2011                                                               $      1,049,792
                             2012                                                                      3,795,188
                             2013                                                                        153,103
                             2014                                                                        153,103

                                                                                                $      5,151,186


10. INCOME TAXES

     Because the Company has incurred net losses, and has provided a full valuation allowance against deferred tax assets, its tax provision is
zero for the years ended December 31, 2010 and 2009.

                                                                      F-31
Table of Contents


                                                                  LUCID, INC.

                                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                                 AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009

10. INCOME TAXES (Continued)

     The differences between income taxes computed using the statutory U.S. federal income tax rate and the provision (benefit) for income
taxes were as follows:

                                                                                                2010                   2009
              Pre-tax net loss                                                           $      (4,302,917 )     $     (4,051,351 )

              Amount computed using the Statutory U.S. federal rate                      $      (1,462,991 )     $     (1,377,459 )
              State taxes-net of federal benefit                                                                         (165,327 )
              Increase (reduction) in taxes resulting from Valuation allowance                   1,147,226              1,591,396
                 Loss on extinguishment of debt                                                     25,798
                 Fair value adjustment of warrants                                                  24,836                 62,251
                 Interest on debt treated as equity                                                170,973                113,754
                 Stock-based compensation—ISO                                                      192,460
                 Other                                                                             (98,302 )             (224,615 )

              Provision (benefit) for income taxes                                       $                       $


    The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities as of December 31,
2010 and 2009 are as follows:

                                                                                 2010                  2009
                             Current deferred tax asset:
                               License fee                                $         118,431     $         135,401
                               Deferred revenue                                       1,021                 2,906
                               Prepaid fees                                          65,041
                               Other                                                 32,901                   28,518

                                                                                    217,394               166,825
                                 Valuation allowance                               (217,394 )            (166,825 )

                             Net current deferred tax asset               $                     $

                             Noncurrent deferred tax asset:
                               License fee                                                                135,399
                               Stock based compensation                             698,477             1,768,772
                               Net operating loss                                 4,834,324             4,623,468
                               Other                                                  3,140                35,850

                                                                                  5,535,941             6,563,489
                                 Valuation allowance                             (5,535,941 )          (6,563,489 )

                             Net noncurrent deferred tax asset            $                     $
                             Total                                        $                     $


     The Company has performed the required assessment of positive and negative evidence regarding the realization of deferred tax assets.
This assessment included the evaluation of scheduled reversals of deferred income tax assets and liabilities, estimates of projected future
taxable income and tax planning strategies.

                                                                       F-32
Table of Contents


                                                                  LUCID, INC.

                                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                                 AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009

10. INCOME TAXES (Continued)

     In assessing the realizability of deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the
deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable
income during the periods in which those temporary differences become deductible. Based on the Company's historical net losses, management
does not believe that it is more likely than not that the Company will realize the benefits of these deferred tax assets and, accordingly, a full
valuation allowance has been recorded against the deferred tax assets as of December 31, 2010 and 2009.

     As a result of certain realization requirements of Accounting Standards Codification (ASC) Topic 718, Compensation — Stock
Compensation , the Company's deferred tax assets at December 31, 2010 do not include approximately $316,000 of excess tax benefits from
the exercise of nonqualified options that are a component of the Company's NOL carryovers. Equity will be increased by approximately
$122,000 if and when such deferred tax assets are ultimately realized for federal income tax purposes. The Company uses ordering pursuant to
ASC Topic 740, Income Taxes , for purposes of determining when excess tax benefits have been realized.

     The Company has federal and state net operating loss carryforwards of approximately $14.3 million to offset future taxable income which
expire between 2012 and 2030. Any future equity raise by the Company may result in an ownership change, which under the provisions of
Section 382 of the Internal Revenue Code of 1986, as amended, may limit the use of these net operating losses.

     The Company did not record interest and penalties related to unrecognized tax benefits in 2010 or 2009.

     The following table sets forth a rollforward of the Company's total uncertain tax positions:

                                                                                      Years Ended December 31,
                                                                                      2010               2009
                             Balance at January 1                                $     406,545      $      406,545
                             Additions based on tax positions related to the
                               current year
                             Additions for tax positions of prior years

                             Balance at December 31                              $     406,545      $      406,545


     The Company does not anticipate significant increases or decreases in its uncertain tax positions within the next twelve months.

     The Company files a U.S. federal income tax return for which the statute of limitations remains open for the 2007 tax year and beyond.
U.S. state jurisdictions have statutes of limitations ranging from 3 to 6 years. Currently, we do not have any returns under examination

11. RESEARCH AGREEMENT

     The Company entered into a sponsored research, clinical trials and license agreement with Massachusetts General Hospital (the
"Institution"). Under the terms of the agreement, the Institution performed research and clinical trials for the diagnostic products being
developed by the Company. The Company owns the information developed as a result of this research. During 2009, the agreement was

                                                                       F-33
Table of Contents


                                                                 LUCID, INC.

                                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                                AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009

11. RESEARCH AGREEMENT (Continued)



terminated and all licenses and rights granted under the agreement were terminated. As settlement of all past due obligations under the
agreement, the Company agreed to transfer two diagnostic instruments. The Company recognized a gain on this settlement in the amount of
$85,049 during the year ended December 31, 2009 and the Company has no further liability.

12. NET LOSS PER COMMON SHARE DATA

     The following table sets forth the computation of basic and diluted net loss attributable to common stockholders per common share, as
well as a reconciliation of the numerator and denominator used in the computation:

                                                                                 Year Ended December 31,
                                                                               2010                   2009
                            Net loss                                    $      (4,302,917 )    $      (4,051,351 )

                            Net loss attributable to common
                              stockholders                              $      (4,302,917 )    $      (4,051,351 )

                            Denominator:
                              Weighted-average common shares
                                outstanding                                     2,671,248              2,356,867

                               Basic and diluted net loss per
                                 common share                           $            (1.61 )   $              (1.72 )


    The weighted-average common shares outstanding above includes 200,000 shares underlying exercisable options nominally priced at
$0.01 per share.

     The following equivalent shares were excluded from the calculation of diluted loss per share as their impact would have been anti-dilutive:

                                                                                   Year Ended December 31,
                                                                                  2010                 2009
                            Options to purchase Common Stock                      3,891,048            1,734,148
                            Warrants                                                840,128            1,229,723
                            Restricted stock                                        383,333              308,333
                            Convertible Notes (as converted basis)                   11,243               19,576
                            Convertible Preferred Stock (as converted
                              basis)                                              2,896,666            2,896,666

    In addition to the convertible note above, equivalent shares resulting from the potential conversion of the Company's 2010/2011
Convertible Debt Offering notes have been excluded from the calculation of the diluted loss per share, as the conversion price is contingent
upon the price of the Company's shares issued in an initial public offering.

13. COMMITMENTS AND CONTINGENCIES

    The Company leases its operating facility through February, 2012. Rent expense was approximately $155,362 and $116,228 for the years
ended December 31, 2010 and 2009, respectively, under the terms of this and previous lease agreements.

                                                                     F-34
Table of Contents


                                                                  LUCID, INC.

                                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                                AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009

13. COMMITMENTS AND CONTINGENCIES (Continued)

     Minimum future lease payments are as follows at December 31, 2010:

                             2011                                                                  $      161,020
                             2012                                                                          24,932

                                                                                                   $      185,952


14. EQUITY

     Preferred and Common Shares —In June 2010, the Company amended its Certificate of Incorporation to increase the number of shares
of Common Stock that the Company has authority to issue from 12,000,000 shares to 60,000,000 shares and to increase the number of shares of
Series Preferred Stock that the Company has authority to issue from 6,000,000 shares to 10,000,000 shares. As of December 31, 2010 and
2009, 4,508,239 and 2,105,157 shares of common stock, 2,258,745 shares of Series A Preferred Stock and 637,921 shares of Series B Preferred
Stock were issued and outstanding, respectively.

   In addition, the amended Certificate of Incorporation provides for the issue of up to 70,000,000 shares, consisting of 60,000,000 shares of
Common Stock, par value of $0.01 per share, and 10,000,000 shares of Series Preferred Stock, par value $0.05 per share. All shares of the
Company's common stock are equal in rank and have the same voting, dividend and liquidation rights. No shares have preemptive rights.

     Preferred stockholders shall be entitled to receive dividends when and as declared by the Board of Directors, prior and in preference to any
declaration or payment of any dividend on the common stock. No dividend shall be paid on the common stock unless all declared but unpaid
dividends on the preferred stock have been paid.

     In the event of any liquidation or dissolution of the Company, the holders of the Series B preferred stock shall be entitled to receive, prior
and in preference to any distribution of any assets of the Company to the holders of Series A preferred stock and common stock, an amount per
share equal to the original purchase price of such shares plus any declared but unpaid dividends. If the assets of the Company are insufficient to
pay holders of the Series B preferred stock the full amount to which they are entitled, the holders shall share ratably in any distribution of the
assets that is available. Any remaining funds available for distribution will be distributable first to the Series A preferred stockholders in an
amount equal to the original purchase price of such shares plus any declared but unpaid dividends, and then to the common stockholders in an
amount equal to the original purchase price of such shares plus any declared but unpaid dividends. After all of the aforementioned distributions
have been paid, the remaining assets of the Company available for distribution to the shareholders shall be distributed among the shareholders
on a pro rata basis.

     The Company has corrected its parenthetical disclosure of the liquidation values of the Series A and B Preferred Stock on the
Consolidated Balance Sheet as of December 31, 2010 to reflect the amount equal to the original purchase price of such shares of Series A
Preferred Stock and Series B Preferred Stock, which represents the liquidation value based on the terms of the preferred stock.

                                                                       F-35
Table of Contents


                                                                  LUCID, INC.

                                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                                AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009

14. EQUITY (Continued)

     Each share of preferred stock is convertible at the option of the holder thereof at any time into common stock on a share for share basis. In
addition, the preferred stock is convertible into common stock on a share for share basis at the option of the Company at any time on or after
90 days following the closing of the sale of the Company's common stock in an underwritten public offering, where the aggregate offering
price equals or exceeds $5,000,000.

      Stock-Based Awards —In June of 2010, the Company's stockholders approved a Stock Option Plan (the 2010 Plan), pursuant to which
options including incentive and nonqualified options for its common stock and shares of restricted stock may be granted to employees,
directors and consultants of the Company. The 2010 Plan also allows for stock awards to be granted a right to receive shares of stock in the
future. The Company reserved 4,000,000 common shares for the 2010 Plan and at December 31, 2010, there were 2,985,000 shares reserved
for future grants. As of December 31, 2010, there were options for the purchase of up to 965,000 shares and 50,000 shares of restricted stock
outstanding under the 2010 Plan. Under the terms of the awards, equity grants for employees generally vest based on three years of continuous
service and equity grants for directors and consultants vest over their respective remaining term as of the date of grant. Restricted stock grants
generally cliff vest after three years and stock-based awards generally have 10-year contractual terms. The Company does not capitalize any
expense related to the stock option awards.

     The Company also has options and restricted stock outstanding under a Stock Option Plan approved by stockholders during 2007 (the
2007 Plan) and options to purchase common shares outstanding under a Stock Option Plan approved by stockholders during 2000 (the 2000
Plan). Under the terms of the awards under these two plans, equity grants for employees generally vest based on three years of continuous
service and equity grants for directors and consultants vest over their respective remaining term as of the date of grant. As of December 31,
2010, options to purchase common shares of 2,050,000 and 876,048 were outstanding under the 2007 Plan and the 2000 Plan, respectively,
with an additional 450,000 shares of restricted stock outstanding under the 2007 Plan. As of December 31, 2010, no shares were reserved for
future grants under the 2007 Plan or the 2000 Plan. In addition, the Company authorized 200,000 options outside of a stock option plan. These
options are fully vested, exercisable at $.01 per share, and expire on July 1, 2012.

    The Company recognizes the expense related to stock option awards on a straight-line basis over the service period. Stock-based
compensation expense recognized in the statement of operations is as follows:

                                                                                   Year Ended December 31,
                                                                                  2010                  2009
                             Cost of revenue                               $          6,007      $         48,919
                             General and administrative                           1,201,142             1,269,213
                             Sales and marketing                                     81,639               134,099
                             Engineering, research and development                  122,145               234,317

                                                                           $      1,410,933      $      1,686,548


                                                                       F-36
Table of Contents


                                                                 LUCID, INC.

                               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                               AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009

14. EQUITY (Continued)

    A summary of option activity under the Plan and changes during the periods ended are presented below:

                                                        Weighted-Average           Weighted-Average            Aggregate
                                                            Exercise                  Remaining                Intrinsic
                                         Shares              Price                 Contractual Term             Value
              Outstanding at
                January 1, 2009          1,934,148        $               1.58
              Outstanding at
                December 31,
                2009                     1,934,148                        1.58
                Granted                  2,325,000                        3.61
                Exercised                 (118,100 )                      0.60
                Forfeited or
                   expired                  (50,000 )                     2.15

              Outstanding at
                December 31,
                2010                     4,091,048                        2.76              7.60 years           5,670,663

              Vested or expected
                to vest at
                December 31,
                2010                     4,009,227                        2.76              7.60 years           5,557,250

              Exercisable at
                December 31,
                2010                     1,764,381                        1.63              4.93 years           4,426,346


     The total intrinsic value of stock options exercised during the year ended December 31, 2010 was approximately $379,173. These stock
options exercised were "net exercises," pursuant to which the optionee received shares of common stock equal to the intrinsic value of the
options (fair market value of common stock on date of exercise less exercise price) reduced by any applicable withholding taxes.

    The following table summarizes information about stock options outstanding and exercisable at December 31, 2010:

                                                                            Options Outstanding                                        Options Exercisable
                                                                            Weighted-Average                                           Weighted-Average
                                                              Number of         Remaining         Weighted-Average     Number of          Remaining          Weigh
                                    Exercise Price             Options       Contractual Life      Exercise Price       Options         Contractual Life      Exer
                                    $0.01 - 0.15                 382,200           1.6 years          $       0.08           382,200           1.6 years        $
                                     0.42 - 1.25                  25,000           2.6 years                  1.25            25,000           2.6 years
                                     2.00 - 2.15               1,358,848           5.9 years                  2.08         1,357,181           5.9 years
                                     3.29                      1,460,000           9.4 years                  3.29
                                     4.16                        865,000          10.0 years                  4.16

                                                               4,091,048                                                   1,764,381


     The Company determines the fair value of each option award on the date of grant using the Black-Scholes option pricing model. The
determination of fair value using the Black-Scholes option pricing model requires a number of complex and subjective variables. Key
assumptions in the Black-Scholes option pricing model include the value of the common stock, the expected term, expected volatility of the
stock, the risk-free interest rate, and estimated forfeitures. The Company determined the fair value of its common stock after considering
valuations prepared for the Company's management by an independent valuation specialist. The expected term is estimated by using the actual
contractual term of the awards and the length of time for the employees to exercise the awards. Management determined that, as a private
company, it was not practicable to estimate the volatility of our stock price, based on our low frequency of price observations. Therefore,
expected volatilities were

                                                                      F-37
Table of Contents


                                                                LUCID, INC.

                               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                               AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009

14. EQUITY (Continued)



based on a volatility factor computed based upon an external peer group analysis of publicly traded companies. The analysis provided historical
volatilities of the public company comparables and developed an estimate of expected volatility for the Company. The risk-free interest rate
was based on the implied yield available at the time the options were granted on U.S. Treasury zero coupon issues with a remaining term equal
to the expected term of the option. Estimated forfeitures are based on historical data, as well as management's current expectations. The
expected dividend yield is 0% for all periods presented, based upon the Company's historical practice of not paying cash dividends on its
common stock.

    The weighted-average grant date fair value of options granted during the year ended December 31, 2010 was $3.61. The following
assumptions were used to estimate the grant date fair value of options granted during the year ended December 31, 2010 using the
Black-Scholes option pricing model. There were no options granted during the year ended December 31, 2009.

                                                                                                             2010
                            Risk free interest rate                                                             2.6 %
                            Expected dividend yield                                                               0%
                            Expected term (in years)                                                            6.5
                            Expected volatility                                                                  70 %
                            Pre-vesting forfeiture rate                                                           2%

     As of December 31, 2010 and 2009, there was $4.7 million and $533,644, respectively, of total unrecognized compensation cost related to
stock option arrangements granted under the Plan. As of December 31, 2010, the unrecognized cost is expected to be recognized over a
weighted average period of 2.7 years.

   The Company determines fair value of its restricted stock based on the common stock value on the date of grant. The following table
summarizes the Company's restricted stock activity:

                                                                    Number of             Weighted-Average
                                                                     Shares                  Fair Value
                            Nonvested at January 1, 2009                308,333          $                    3.98
                              Granted
                              Vested
                              Forfeited

                            Nonvested at December 31, 2009              308,333          $                    3.98
                              Granted                                    75,000          $                    3.84
                              Vested
                              Forfeited
                            Nonvested at December 31, 2010              383,333          $                    4.01


      The total intrinsic value of nonvested restricted stock as of December 31, 2010 and 2009 was approximately $2,070,000 and $1,759,500,
respectively. At December 31, 2010 and 2009, there was $462,477 and $474,925, respectively, of total unrecognized compensation cost related
to restricted stock

                                                                     F-38
Table of Contents


                                                                 LUCID, INC.

                               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                               AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009

14. EQUITY (Continued)



granted under the Plan. As of December 31, 2010, the unrecognized cost is expected to be recognized over a weighted average period of
2.2 years.

     Stock Warrants —Under the terms of various agreements, the Company has issued warrants for the purchase of common and preferred
shares. Warrants are exercisable at the grant date and generally expire 2 to 10 years from the date of the grant.

    Changes in the status of outstanding warrants are summarized as follows:

                                                       Common          Preferred          Weighted-Average
                                                        Shares          Shares             Exercise Price
                            Outstanding at
                              January 1, 2009           1,120,675         100,000         $                  1.45
                              Issued                        9,048                         $                  3.15
                              Exercised
                              Expired

                            Outstanding at
                              December 31,
                              2009                      1,129,723         100,000         $                  1.46

                            Outstanding at
                              January 1, 2010           1,129,723         100,000         $                  1.46
                              Issued                      558,257                         $                  4.13
                              Exercised                  (913,852 )                       $                  1.28
                              Expired                     (34,000 )                       $                  2.66

                            Outstanding at
                              December 31,
                              2010                        740,128         100,000         $                  3.39


     At the measurement date, the Company estimated the fair value of each warrant using the Black-Scholes option pricing model. The
following assumptions were used:

                                                                            2010                     2009
                            Risk free interest rate                   0.27% - 2.55%            3.74% - 4.40%
                            Expected dividend yield                         0%                      0%
                            Expected term (in years)                     1.0 - 5.0                2.0 - 2.3
                            Expected volatility                            70%                      70%

15. GRANT REVENUE

     The Company has received several grants which provide funding up to $4.2 million, a portion of which is sub-contracted to University of
Rochester in Rochester, New York. The funds are used to evaluate and develop diagnostic instruments and technology. The remaining grant
currently expires in April 2011 and substantially all of this grant has been recognized through December 31, 2010. Funding received under
these grants is recognized as expenses provided for under the grants are incurred.

16. NON-PRODUCT REVENUE
     The Company entered into distribution and supply agreements with a European distributor in 2006, under which the Company granted an
exclusive, irrevocable, fully paid up and royalty-free license to use the Company's dermatologic imaging systems and software, including
telemedic software used in the dermatologic and other medical fields, in defined geographic areas for a fee of $1,750,000. A supply

                                                                  F-39
Table of Contents


                                                                   LUCID, INC.

                                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                                 AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009

16. NON-PRODUCT REVENUE (Continued)



agreement with a five year term was entered into at the same time as the license agreement. As such, the license amount is being recognized on
a straight-line basis over a period of five years.

17. RETIREMENT PLAN

    The Company sponsors a defined contribution plan. All contributions are at the discretion of the Company. No Company contributions
were made during the years ended 2010 and 2009.

18. SEGMENT INFORMATION

     The Company operates in one operating segment—the research, development and sale of medical devices to diagnose skin cancer. The
Company's chief operating decision maker reviews financial information for the Company as a whole for purposes of allocating resources and
evaluating financial performance. Substantially all long-lived assets of the Company are in the United States. Sales for each significant
geographical area are as follows:

                                                                                                   Year Ended
                                                                                                  December 31,
                                                                                               2010           2009
                             United States                                                         12 %          18 %
                             Europe                                                                56            48
                             China                                                                  9            14
                             Japan                                                                  8             9
                             Australia                                                             12             2
                             Other                                                                  3             9

                                                                                                  100 %         100 %


19. RELATED PARTIES

     The Company had the following transactions with related parties.

     A member of the Board of Directors (228,600 common shares, including 75,000 restricted common shares) through his business provided
legal/consulting services to the Company in the amount of $140,327 and $52,298 for the years ended December 31, 2010 and 2009,
respectively.

     A shareholder (544,190 of common shares), pursuant to its limited guaranty of our credit facility, placed $2.0 million on deposit with the
Company's lender upon closing in July 2010. In consideration for this arrangement, the Company recognizes $100,000 in fees per quarter
(prorata for the initial partial quarter) to be paid after an initial public offering, or to be converted into common stock at a discount of 30% from
an initial public offering price. At December 31, 2010, the Company had approximately $191,000 accrued for this liability. If the Company
does not complete a public offering before July 9, 2011, the Company will be obligated at that date to pay the shareholder an amount equal to
the pledged funds, together with the amount of the accrued fee at that date; the Company could recoup the amount attributable to the pledged
funds when and if our lender releases the limited guaranty and the funds in the pledged account.

                                                                        F-40
Table of Contents


                                                               LUCID, INC.

                               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                               AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009

19. RELATED PARTIES (Continued)

     A shareholder (8,475 preferred A shares and 154,036 common shares) sold raw material parts/supplies to the Company in the amount of
$40,950 and $40,638 for the years ended December 31, 2010 and 2009, respectively.

     Shareholders (17,020 preferred shares) through their business sold raw material parts/supplies to the Company in the amount of $46,112
and $20,468 for the years ended December 31, 2010 and 2009, respectively.

     A shareholder (12,500 preferred A shares and 22,485 common shares) through his business sold supplies to the Company in the amount of
$33,030 and $30,855 for the years ended December 31, 2010 and 2009, respectively.

     A shareholder (40,025 common shares) through his business sold raw material parts/supplies to the Company in the amount of $8,838 and
$10,001 for the years ended December 31, 2010 and 2009, respectively.

     A shareholder (3,440 common shares) through his business provided consulting/outsourced services to the Company in the amount of
$38,132 and $54,314 for the years ended December 31, 2010 and 2009, respectively.

    A shareholder (600 common shares) through his business provided consulting/outsourced services to the Company in the amount of
$192,976 and $284,438 for the years ended December 31, 2010 and 2009, respectively.

     Two shareholders (12,158 common shares) through their business provided consulting/outsourced services to the Company in the amount
of $188,427 and $93,107 for the years ended December 31, 2010 and 2009, respectively.

                                                                   *****

                                                                    F-41
Table of Contents
Table of Contents


                                                           PART II
                                           INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13.     Other Expenses of Issuance and Distribution.

     The following table sets forth the fees and expenses to be incurred in connection with the registration of the securities being registered
hereby, all of which will be borne by us. Except for the SEC registration fee and the FINRA and Nasdaq filing fees, all amounts are estimates.

                             Item                                                                        Cost
                             Securities and Exchange Commission Registration Fee                   $          3,338
                             FINRA filing fee                                                      $          3,375
                             Nasdaq filing fee                                                     $         [      ]
                             Accountants' Fees and Expenses                                                       *
                             Legal Fees and Expenses                                                              *
                             Miscellaneous                                                                        *
                             Total Expenses                                                                       *


                             *
                                     To be completed by amendment.

ITEM 14.     Indemnification of Directors and Officers.

    Our officers and directors are indemnified pursuant to agreements we have entered into with them and as provided by the New York
Business Corporation Law (NYBCL), by our restated certificate of incorporation, and by our amended and restated bylaws.

    We have entered into indemnification agreements with each of our officers and directors. Pursuant to these agreements, we have agreed to
indemnify each of our officers and directors for liabilities arising out of any action or threatened action to which such officer or director is
made a party by reason of the fact that he or she is or was an officer or director of our company, or served an affiliated entity in any capacity.

      Under Section 722 of the NYBCL, a corporation may indemnify its directors and officers made, or threatened to be made, a party to any
action or proceeding, except for stockholder derivative suits, if the director or officer acted in good faith, for a purpose that he or she
reasonably believed to be in or, in the case of service to another corporation or enterprise, not opposed to the best interests of the corporation,
and, in addition, in criminal proceedings had no reasonable cause to believe his or her conduct was unlawful. In the case of stockholder
derivative suits, the corporation may indemnify a director or officer if he or she acted in good faith for a purpose that he or she reasonably
believed to be in or, in the case of service to another corporation or enterprise, not opposed to the best interests of the corporation, except that
no indemnification may be made in respect of (i) a threatened action, or a pending action that is settled or otherwise disposed of, or (ii) any
claim, issue or matter as to which such individual has been adjudged to be liable to the corporation, unless and only to the extent that the court
in which the action was brought, or, if no action was brought, any court of competent jurisdiction, determines, upon application, that, in view of
all the circumstances of the case, the individual is fairly and reasonably entitled to indemnity for the portion of the settlement amount and
expenses as the court deems proper.

      Any individual who has been successful on the merits or otherwise in the defense of a civil or criminal action or proceeding will be
entitled to indemnification. Except as provided in the preceding sentence, unless ordered by a court pursuant to Section 724 of the NYBCL, any
indemnification under the NYBCL as described above may be made only if, pursuant to Section 723 of the NYBCL, indemnification is
authorized in the specific case and after a finding that the director or officer met the requisite standard of conduct by the disinterested directors
if a quorum is available, or, if the quorum

                                                                        II-1
Table of Contents



so directs or is unavailable, (i) the board of directors upon the written opinion of independent legal counsel or (ii) the stockholders.

     In addition, the NYBCL permits the advancement of expenses to directors and officers relating to the defense of any proceeding upon
receipt of his or her commitment to repay such amounts to the extent he or she is ultimately found not entitled to be indemnified.

      The indemnification provisions contained in the NYBCL are not exclusive of any other right that a person seeking indemnification may
have or later acquire under any provision of a corporation's certification of incorporation or bylaws, or, when authorized by the corporation's
certificate of incorporation or bylaws, by any agreement, by any vote of shareholders or disinterested directors, or otherwise.

     Our restated certificate of incorporation and our amended and restated bylaws provide for indemnification of our officers and directors to
the fullest extent authorized by the NYBCL. In addition, as permitted by our charter documents, we maintain directors' and officers' liability
insurance under which our directors and officers are insured against loss (as defined in the policy) as a result of certain claims brought against
them in such capacities.

     The indemnification provision in our restated certificate of incorporation, amended and restated bylaws and the indemnification
agreements to be entered into between us and each of our directors and officers may be sufficiently broad to permit indemnification of our
directors and officers for liabilities arising under the Securities Act.

     Reference is made to the following documents filed as exhibits to this Registration Statement regarding relevant indemnification
provisions described above and elsewhere herein:

                  Exhibit No.                                                Description of Exhibit
                                3.1   Restated Certificate of Incorporation of Lucid Inc., as filed with the New York Department of
                                      State on July 31, 2001

                                3.2   Certificate of Amendment to Restated Certificate of Incorporation of Lucid, Inc., as filed with
                                      the New York Department of State on June 16, 2010

                                3.3   Amended and Restated Bylaws of Lucid, Inc.

                           10.8       Form of Indemnification Agreement

ITEM 15.     Recent Sales of Unregistered Securities

     Set forth below is information regarding shares of common stock (including debt convertible into shares of common stock), preferred
stock and warrants issued by us within the past three years that were not registered under the Securities Act. Also included is the consideration,
if any, received by us for such shares and warrants and information relating to the section of the Securities Act, or rule of the SEC, under which
exemption from registration was claimed.

     (a)
             Shares Underlying, and Shares Issued Pursuant to Exercise of, Stock Options

     Since March 31, 2008, we have (i) granted to our officers, directors and employees options to purchase an aggregate of 2,660,000 shares
of our common stock with per share exercise prices ranging from $2.15 to $4.44 under our 2007 Long-Term Incentive Plan and our 2010
Long-Term Equity Incentive Plan, and (ii) issued to our officers, directors and employees an aggregate of 283,283 shares of our common stock
at per share exercise prices ranging from $0.42 to $2.15 pursuant to exercises of options granted under our Year 2000 Stock Option Plan, our
2007 Long-Term Incentive Plan and our 2010 Long-Term Equity Incentive Plan.

                                                                          II-2
Table of Contents

     (b)
             Shares Issued in Lieu of Cash Payment for Services Rendered

     Since March 31, 2008, we have issued shares of our common stock to certain vendors in lieu of cash payment for services rendered, as
follows:

     •
             Between June 4, 2008 and October 16, 2008, we issued 3,440 shares of our common stock, at a per share price of $2.50, in lieu of
             payment of $8,600 in fees for information technology consulting services rendered.

     •
             On June 5, 2008, we issued 10,000 shares of our common stock, at a per share price of $3.00, as part of a severance agreement
             with a former employee of Lucid International, Ltd., our U.K. subsidiary.

     •
             On December 31, 2008, we issued 51,345 shares of our common stock, at a per share price of $2.00, to a raw materials vendor
             upon conversion of the outstanding debt owed to such vendor.

     •
             On May 27, 2010, we issued an aggregate of 6,351 shares of our common stock, at a per share price of $3.29, to a vendor in lieu of
             payment of $20,884 in fees for the purchase of raw materials.

     •
             On May 27, 2010, we issued an aggregate of 12,158 shares of our common stock, at a per share price of $3.29, to a vendor in
             exchange for investor relations services rendered.

     (c)
             Restricted Stock Issued to Directors Upon Election to Board of Directors

     Since March 31, 2008, we have issued an aggregate of 174,000 shares of restricted stock to certain of our directors upon their election to
our board of directors, as compensation for their service as directors.

     (d)
             Convertible Debt Instruments; Exchanges of Convertible Debt Instruments

      On June 28, 2011, our Board of Directors authorized a capital raise of up to an aggregate amount of $2.0 million (the "July 2011
Convertible Debt Offering"). As of July 29, 2011, we had raised $830,000 and had received subscription agreements totaling an additional
$340,000. The principal amount (plus any accrued interest) of the convertible notes that were issued pursuant to the July 2011 Convertible Debt
Offering will automatically convert into shares of our common stock at a conversion price equal to 70% of the price at which shares of
common stock are being sold in this offering. Warrants issued to those investors will become exercisable, at an exercise price of $4.61 per
share, upon the completion of this offering. These warrants entitle holders to purchase an amount of our common stock equal to (i) seventy
percent (70%) of the principal amount of each holder's convertible note, divided by (ii) the price at which our common stock is being offered in
this offering. These securities provide that if we have not completed an initial public offering prior to November 15, 2012, we must redeem the
principal amount of the notes at 140% of the face value plus any accrued and unpaid interest. In addition, beginning January 1, 2012, the
holders of these securities are entitled to cash liquidated damages equal to 1.5% of each purchaser's subscription amount per month until we
complete an initial public offering or similar financing. This amount is capped at 10% of the purchaser's subscription amount. These holders
will also be entitled, beginning July 1, 2012, to a reduction in the exercise price of their warrants at the rate of 5% per month until an offering is
completed, with a floor exercise price of $1.00.

     We raised $3.8 million in total through three rounds of a private placement of our convertible debt securities, with two rounds closing in
November 2010 and one round closing in January 2011 (the "2010/2011 Convertible Debt Offering"). This offering was completed in
contemplation of a public offering. The principal amount (plus any accrued interest) of the convertible notes that were issued pursuant to the
2010/2011 Convertible Debt Offering will automatically convert into shares of our common stock at a conversion price equal to 70% of the
price at which shares of common stock are

                                                                         II-3
Table of Contents



being sold in this offering. Warrants issued to those investors will become exercisable, at an exercise price of $4.11 per share, upon the
completion of this offering. These warrants entitle holders to purchase an amount of our common stock equal to (i) seventy percent (70%) of
the principal amount of each holder's convertible note, divided by (ii) the price at which our common stock is being offered in this offering. In
addition, the holders of these securities are entitled to certain rights and damages in the event that we do not complete an initial public offering,
or similar financing event per the terms of the agreement, subject to the modifications described below. These securities provide that if we have
not completed an initial public offering prior to November 15, 2012, we must redeem the principal amount of the notes at 140% of the face
value plus any accrued and unpaid interest. In addition, beginning July 12, 2011 (the "Issuance Cut-Off Date"), the holders of these securities
are entitled to cash liquidated damages equal to 1.5% of each purchaser's subscription amount per month until we complete an initial public
offering or similar financing. This amount is capped at 10% of the purchaser's subscription amount. These holders will also be entitled,
beginning six months after the Issuance Cut-Off Date, to a reduction in the exercise price of their warrants which is currently $4.11, at the rate
of 5% per month until an offering is completed, with a floor exercise price of $1.00. The holders of the requisite principal amount of notes
required to effect a blanket amendment to all notes issued pursuant to the 2010/2011 Convertible Debt Offering have agreed to extend the
Issuance Cut-Off Date from July 12, 2011 to January 1, 2012. Accordingly, so long as this offering is completed by January 1, 2012, we do not
expect the above-described penalties to be triggered.

      In 2009, we completed a convertible debt offering of convertible notes, which notes are convertible into shares of our common stock at the
option of the holder (the "2009 Convertible Debt Offering"); unlike the convertible notes issued in the 2010/2011 Convertible Debt Offering,
the convertible notes issued in the 2009 Convertible Debt Offering (the "2009 Convertible Notes") will not be automatically converted into
equity upon the completion of this offering. The 2009 Convertible Notes are currently convertible at the option of the holder. However, because
the Company's 2010/2011 Convertible Debt Offering is deemed a "Placement" under the terms of the 2009 Convertible Notes, the conversion
ratio became tied to the Company's "pre-money valuation" at the time of the 2010/2011 Convertible Debt Offering. This pre-money valuation
cannot be calculated, because the value of the securities issued in the 2010/2011 Convertible Debt Offering could not be determined until a
public offering price was established. Assuming an offering price of • per share, which is the mid-point of the filing range set forth on the
cover of this prospectus, the 2009 Convertible Debt Notes will, at the option of the holder, convert into shares of our common stock at a
conversion price of $ • per share.

     During the 2010/2011 Convertible Debt Offering, holders of an aggregate of $1.7 million of our outstanding debt (including principal and
accrued interest) exchanged their existing debt instruments for convertible debt instruments, with the same terms and conditions as those issued
to investors in the 2010/2011 Convertible Debt Offering. The replacement notes were issued for a principal amount equal to the existing
principal amount plus all accrued interest.

     Securities were issued to 17 investors pursuant to the 2010/2011 Convertible Debt Offering, and to 2 investors pursuant to the 2009
Convertible Debt Offering. A total of 6 other investors elected to exchange their promissory notes (which notes were not related to either
convertible debt offering) for notes and warrants issued on the same terms and conditions as the 2010/2011 Convertible Debt Offering. To date,
securities have been issued to four investors pursuant to the July 2011 Convertible Debt Offering.

     (e)
            Common Stock Warrants

    In August and November of 2008, in connection with the issuance of our promissory notes, we issued warrants to purchase 2,381 and
1,587 shares of our common stock, each at an exercise price of $3.15.

                                                                        II-4
Table of Contents

      In March and August of 2009, in connection with the issuance of our promissory notes, we issued warrants to these noteholders which
entitle them to purchase a number of shares of our common stock equal to the quotient obtained by dividing 10% of the principal amount of the
holder's note by the public offering price. These warrants are exercisable at the public offering price.

   In December of 2008, in connection with the issuance of our promissory notes, we issued warrants to purchase 8,332 shares of our
common stock at an exercise price equal to 85% of the public offering price.

     Holders of notes issued pursuant to the July 2011 Convertible Debt Offering received warrants to purchase an aggregate of   • shares of
our common stock at an exercise price of $4.61;

     Holders of notes issued pursuant to the 2010/2011 Convertible Debt Offering, including holders who exchanged their existing debt into
the 2010/2011 Convertible Debt Offering, received warrants to purchase an aggregate of • shares of our common stock, at an exercise price
of $4.11 per share.

     On December 31, 2010, we issued an aggregate of 591,374 shares of our common stock at an exercise price of $1.25 per share to one of
our principal stockholders pursuant to exercises of warrants.

     On December 31, 2008, we modified the terms of a warrant by extending its term to January 1, 2015, previously issued to the New York
State Foundation for Science, Technology, and Innovation—Small Business Technology Investment Fund on February 1, 2007, to purchase
100,000 shares of our common stock.

      In connection with this offering, we have agreed to issue an amount of our common stock equal to 2% of the total number of shares of our
common stock sold in this offering (excluding the over-allotment) upon exercise of warrants to be issued to the underwriters upon completion
of this offering at an exercise price equal to 120% of the public offering price per share.

      On July 20, 2011, we issued a warrant to our Lender under the 2011 Credit Facility to purchase up to 19,523 shares of our common stock
at a price of $4.61 per share.

     We issued warrants to Maxim Partners, LLC to purchase • shares of our common stock, at an exercise price of $4.52, as a portion of
the consideration they received in connection with the 2010/2011 Convertible Debt Offering, and, as required by the terms of our engagement
agreement we issued them warrants to purchase an additional • shares of our common stock, at an exercise price of $5.07, in connection
with one of the notes issued pursuant to the July 2011 Convertible Debt Offering.

    (f)
            Common Stock Issued Upon Conversion of Convertible Debt

     On July 9, 2010, we issued 322,478 shares of our common stock at per share prices ranging from $1.25 to $2.00 upon the exercise of
outstanding warrants, the proceeds of which were used to pay off the senior secured debt owed to the holder of those warrants.

    On November 15, 2010, we issued an aggregate of 995,912 shares of our common stock at a conversion price of $3.07 per share upon
conversion into equity of certain of notes issued pursuant to the 2009 Convertible Debt Offering.

     No underwriters were involved in the foregoing issuances of securities. Unless otherwise stated, the sales of the above securities were
deemed to be exempt from registration under the Securities Act in reliance upon Section 4(2) of the Securities Act or Regulation D
promulgated thereunder ("Regulation D"), or Rule 701 promulgated under Section 3(b) of the Securities Acts as transactions by an issuer not
involving any public offering or pursuant to benefit plans and contracts relating to compensation as provided under Rule 701.

     The unregistered securities described above were issued to less than twenty (20) investors, all of whom were "accredited investors," as
defined in Rule 501 of Regulation D, with the exception of a limited number of vendors who accepted shares of our common stock in exchange
for services rendered. The recipients of securities in each of these transactions (i) received written disclosures that

                                                                     II-5
Table of Contents



the applicable securities had not been registered under the Securities Act and that any resale must be made pursuant to a registration or an
available exemption from such registration, and (ii) represented their intention to acquire the securities for investment only and not with a view
to or for sale in connection with any distribution thereof.

      The July 2011 Convertible Debt Offering is still in process. We have offered these securities to a limited number of potential investors, all
of whom are (i) accredited investors, and (ii) existing equity holders or, in one case, a distributor with whom we have a long-standing
relationship, as described in the prospectus.

     All of the foregoing securities are deemed restricted securities for purposes of the Securities Act. The certificates representing the issued
shares of capital stock, the convertible notes, and the warrants described in this Item 15 included appropriate legends setting forth that the
applicable securities have not been registered and the applicable restrictions on transfer.

ITEM 16.     Exhibits and Financial Statement Schedules.

     The exhibits to this registration statement are listed in the Exhibit Index, attached hereto and incorporated by reference herein.

ITEM 17.     Undertakings.

     (a) The undersigned registrant hereby undertakes:

          (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:

                (i) to include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;

                (ii) to reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most
          recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information
          set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the
          total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the
          estimated maximum offering range may be reflected in the form of prospectus filed with the Securities and Exchange Commission
          pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a twenty percent (20%) change
          in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration
          statement;

               (iii) to include any material information with respect to the plan of distribution not previously disclosed in the registration
          statement or any material change to such information in the registration statement;

         (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be
     deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be
     deemed to be the initial bona fide offering thereof.

           (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold
     at the termination of the offering.

          (4) That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser, each prospectus filed pursuant to
     Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than
     prospectuses filed in reliance on Rule 430A (§230.430A of this chapter), shall be deemed to be part of and included in the registration
     statement as of the date it is first used after effectiveness.

                                                                        II-6
Table of Contents



     Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a
     document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration
     statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in
     the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such
     date of first use.

           (5) That, for the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial
     distribution of the securities: The undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant
     pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities
     are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the
     purchaser and will be considered to offer or sell such securities to such purchaser:

                (i) Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant
          to Rule 424;

                (ii) Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or
          referred to by the undersigned registrant;

              (iii) The portion of any other free writing prospectus relating to the offering containing material information about the
          undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and

               (iv) Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.

               That, for the purposes of determining any liability under the Securities Act of 1933, each filing of the Registrant's annual report
          pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 that is incorporated by reference in this registration
          statement shall be deemed to be a new registration statement relating to the securities offered herein, and the offering of such
          securities at that time shall be deemed to be the initial bona fide offering thereof.

     (b) Insofar as indemnification for liabilities arising under Securities Act of 1933 may be permitted to directors, officers and controlling
persons of each of the registrants pursuant to the foregoing provisions, or otherwise, the registrants have been informed that in the opinion of
the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is,
therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by either of the registrants
of expenses incurred or paid by a director, officer or controlling person of either of the registrants in the successful defense of any action, suit
or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, each of the
registrants will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be
governed by the final adjudication of such issue.

      (c) The undersigned registrant hereby undertakes to provide to the underwriter at the closing specified in the underwriting agreements
certificates in such denominations and registered in such names as required by the underwriter to permit prompt delivery to each purchaser.

                                                                        II-7
Table of Contents


                                                               SIGNATURES

    Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant has duly caused this Amendment No. 2 to
Registration Statement No. 333-173555 on Form S-1 to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of
Rochester, State of New York, on this 29 th day of July, 2011.

                                                                     LUCID, INC.

                                                                     By:      /s/ JAY M. EASTMAN, PH.D.

                                                                              Name: Jay M. Eastman, Ph.D.
                                                                              Title: Chief Executive Officer


                                                         POWER OF ATTORNEY

    Pursuant to the requirements of the Securities Act of 1933, as amended, this Amendment No. 2 to Registration Statement No. 333-173555
on Form S-1 has been signed by the following persons in the capacities and on the dates indicated.

                                 Signature                                     Title                               Date



                         /s/ JAY M. EASTMAN                    Director and Chief Executive                    July 29, 2011
                                                               Officer
                                                               (Principal executive officer)
                         Jay M. Eastman, Ph.D

                                    *                          Chief Financial Officer                         July 29, 2011
                                                               (Principal financial officer and
                                                               Principal accounting officer)
                             Martin J. Joyce

                                    *                          Executive Chairman of the Board                 July 29, 2011

                             William J. Shea

                                    *                          Director                                        July 29, 2011


                               Brian Carty

                                    *                          Director                                        July 29, 2011


                          Nancy E. Catarisano

                                    *                          Director                                        July 29, 2011


                              Matthew Cox

                                                                     II-8
Table of Contents

                          Signature                        Title       Date



                             *                  Director           July 29, 2011

                      L. Michael Hone

                             *                  Director           July 29, 2011

                     David Lovenheim

                             *                  Director           July 29, 2011

                      Rocco Maggiotto

                             *                  Director           July 29, 2011

                    Ruben King-Shaw, Jr.

                             *                  Director           July 29, 2011

                     Ramey W. Tomson

             *By:       /s/ JAY M. EASTMAN

                          Jay M. Eastman,
                          as attorney-in-fact

                                                    II-9
Table of Contents


                                                           INDEX OF EXHIBITS

                Exhibit
                 No.                                                  Description of Exhibit
                      1.1 *   Form of Underwriting Agreement

                      3.1 ** Restated Certificate of Incorporation of Lucid Inc., as filed with the New York Department of
                             State on July 31, 2001

                      3.2 ** Certificate of Amendment to Restated Certificate of Incorporation of Lucid, Inc., as filed with the
                             New York Department of State on June 16, 2010

                      3.3 ** Amended and Restated Bylaws of Lucid, Inc., as adopted December 14, 2010

                      3.4 ** Restated Certificate of Incorporation of Lucid Inc., as filed with the New York Department of
                             State on May 6, 2011

                      4.1 ** Specimen Common Stock Certificate

                      4.2 ** Specimen Preferred Stock (Series A) Certificate

                      4.3 ** Specimen Preferred Stock (Series B) Certificate

                      4.4 ** Form of 2001 Registration Rights Agreement between the Company and holders of the Company's
                             Series B Preferred Stock

                      4.5     Form of Secured Promissory Note, given by the Company in favor of the holders thereof

                      4.6     Form of Security Agreement, given by the Company in favor of holders of its Secured Promissory
                              Notes

                      4.7 ** Form of Modification and Extension Agreement pertaining to Secured Promissory Note, by and
                             between the Company and holders of its Secured Promissory Notes

                      4.8 ** Warrant to Purchase Convertible Preferred Stock, issued to the New York State Foundation for
                             Science, Technology, and Innovation—Small Business Technology Investment Fund, as successor
                             in interest by statute to New York Urban Development Corporation d/b/a Empire State
                             Development—Small Business Technology Investment Fund, on February 1, 2007, as modified
                             by the Second Modification and Extension Agreement, dated December 31, 2008

                      4.9 ** Form of Amended and Restated Common Stock Purchase Warrant—2007

                    4.10 ** Form of 2008 Common Stock Warrant

                    4.11 ** Form of 2009 Common Stock Warrant

                    4.12 ** Form of 2009 Convertible Subordinated Promissory Note, given by the Company in favor of the
                            holders thereof

                    4.13 ** Form of 2010/2011 Note and Warrant Purchase Agreement, by and between the Company and
                            purchasers of the Company's 2010/2011 Convertible Notes and 2010/2011 Common Stock
                            Warrants

                    4.14 ** Form of 2010/2011 Convertible Note, given by the Company in favor of the holders thereof

                    4.15 ** Form of 2010/2011 Common Stock Warrant

                    4.16 ** Common Stock Warrant Issued to Maxim Partners, LLC on November 15, 2010
4.17 ** Form of 2010 Note Exchange Agreement, between the Company and Certain Holders of the
        Company's Outstanding Debt

4.18 **† Form of Stock Option Agreement under the Lucid, Inc. 2010 Long-Term Equity Incentive Plan

4.19    Form of April 2007 Fixed Quantity Common Stock Warrant
Table of Contents

                Exhibit
                 No.                                                 Description of Exhibit
                     4.20    Form of August 2008 Fixed Price Common Stock Warrant

                     4.21    Warrant to Purchase Stock, issued to Square 1 Bank on July 20, 2011

                     4.22    Form of July 2011 Subscription Agreement with 90-Day Lock-Up Period, by and between the
                             Company and Certain Purchasers of the Company's July 2011 Convertible Notes and July 2011
                             Common Stock Warrants

                     4.23    Form of July 2011 Subscription Agreement with 180-Day Lock-Up Period, by and between the
                             Company and Certain Purchasers of the Company's July 2011 Convertible Notes and July 2011
                             Common Stock Warrants

                     4.24    Form of July 2011 Convertible Note, given by the Company in favor of the holders thereof

                     4.25    Form of July 2011 Common Stock Warrant

                     4.26    Common Stock Warrant issued to Maxim Partners, LLC on July 27, 2011

                     4.27    Form of November 2008 Fixed Price Common Stock Warrant

                      5.1    Opinion of Harris Beach PLLC

                     10.1 **† Lucid, Inc. 2010 Long-Term Equity Incentive Plan

                     10.2 **† Lucid, Inc. 2007 Long-Term Incentive Plan

                     10.3 **† Lucid, Inc. Year 2000 Stock Option Plan

                     10.4 ** Colocation License Agreement, by and between the Company and PAETEC
                             Communications, Inc., dated September 4, 2007

                     10.5 ** Joint Venture Agreement, by and between the Company and Mavig Austria GmbH, an Austrian
                             limited liability company, dated October 2006

                     10.6 ** Supply Agreement, by and between the Company and Mavig Austria GmbH, an Austrian limited
                             liability company, dated December 2006, and letter amendment thereto, dated May 25, 2011

                     10.7 ** Promissory Note, given by the Company in favor of Jay M. Eastman, dated March 24, 2011

                     10.8 **† Form of Indemnification Agreement by and between the Company and its directors and executive
                              officers

                     10.9 ** Form of Lucid, Inc. Distribution Agreement

                    10.10    Loan and Security Agreement, entered into as of July 20, 2011, by and between Square 1 Bank
                             and the Company

                    10.11    Intellectual Property Security Agreement, entered into as of July 20, 2011, by and between Square
                             1 Bank and the Company

                    10.12    Form of Subordination Agreement, given by the Creditors as defined therein in favor of Square 1
                             Bank

                    10.13    Pledge and Security Agreement, dated July 20, given by Northeast LCD Capital, LLC in favor of
                             Square 1 Bank

                    10.14    Pledge Account Fee Agreement, dated as of July 29, 2011, by and between the Company and
                             Northeast LCD Capital, LLC
10.15   Unconditional Guaranty of Jay M. Eastman, dated July 20, 2011, given in favor of Square 1 Bank
Table of Contents

                 Exhibit
                  No.                                                 Description of Exhibit
                    10.16     Unconditional Guaranty of William J. Shea, dated July 20, 2011, given in favor of Square 1 Bank

                    10.17 ** Form of 90-day Lock-Up and Waiver Agreement, dated May 27, 2011

                    10.18 ** Form of 180-day Lock-Up and Waiver Agreement, dated May 27, 2011

                    10.19 **† Employment Agreement between the Company and Mr. Shea, dated January 11, 2011

                    10.20 **† Employment Agreement between the Company and Mr. Joyce, dated March 22, 2011

                    10.21 **† Employment Agreement between the Company and Mr. Hone, dated January 11, 2011

                    10.22 **† Employment Agreement between the Company and Ms. Davis-McHugh, dated January 11, 2011

                    10.23 **† Employment Agreement between the Company and Mr. Fox, dated January 11, 2011

                    10.24 **† Employment Agreement between the Company and Mr. Eastman, dated January 11, 2011

                    10.25 ** Agreement of Lease, dated December 30, 2002, by and between the Company, as Tenant, and
                             Richard K. LeFrois, as Landlord, as amended October 14, 2003, as amended October 14, 2005, as
                             assigned to Hub Properties Trust on December 1, 2007, as amended February 6, 2009, as amended
                             November 4, 2010

                    10.26 ** Form of Lucid, Inc. Employee Invention, Copyright, Proprietary Information and Conflicts of
                             Interest Agreement

                    10.27 ** Distributor Agreement, dated September 1, 2004, by and between the Company and Integral
                             Corporation

                    10.28 ** Distributor Agreement, dated February 8, 2008, by and between the Company and ConBio
                             (China) Co., Ltd.

                    10.29 *   Form of Lock-Up Agreement

                    10.30 ** Pledged Account Fee Agreement, dated July 9, 2010, by and between the Company and Northeast
                             LCD Capital, LLC

                    10.31 ** Amendment No. 1 to Pledged Account Fee Agreement, dated June 16, 2011, by and between the
                             Company and Northeast LCD Capital, LLC

                    10.32     Promissory Note, given by the Company in favor of Dale Crane, dated December 31, 2010

                     21.1 ** List of Subsidiaries (as of 6/31/2011)

                     23.1     Consent of Independent Registered Public Accounting Firm

                     23.2     Consent of Harris Beach PLLC (included in Exhibit 5.1)

                     24.1 ** Power of Attorney

                     99.1 ** Consent of Chair of Scientific Advisory Board


             *
                      To be filed by amendment.

             **
    Previously filed.

†
    Denotes management contract or compensatory plan or arrangement.
                                                                                                                                    Exhibit 4.5

                                                                                                                               August 29, 2002

                                                            PROMISSORY NOTE

         FOR VALUE RECEIVED, the undersigned (“Debtor”) hereby promises to pay to [*] (“Payee”), the principal amount of $22,485.00
(the “Principal”), without any interest on the unpaid balance. The Principal shall become due and payable when, as and if the Debtor collects
any “Contingent Consideration” royalty payments (the “Royalty Payments”) pursuant to Section 3.1(a) of that certain Asset Purchase
Agreement, dated as of May 11, 2002 (the “Royalty Agreement”), by and between the Debtor and [*], Inc; provided , that such payment of
Principal shall be further subject to the intercreditor provisions set forth in Section 5 of the Security Agreement (as hereafter defined).

        This Note is subject to the terms of, and the payment hereof is secured by, a certain Security Agreement dated as of the date hereof by
and between Debtor and Payee (the “Security Agreement”).

        This Note is a nonrecourse obligation of the Debtor and Payee agrees that the sole source of payment of this Note shall be from
Royalty Payments when, as and if collected by Debtor; accordingly, Payee shall have recourse only against the Collateral under the Security
Agreement to the extent described therein.

          This Note may not be changed, modified or terminated orally, but only by an agreement in writing and signed by the Debtor and
Payee. This Note shall be governed by and construed in accordance with the laws of the state of the State of New York, without regard to
conflict of law principles.

                                                                     DEBTOR :

                                                                     LUCID, INC.


                                                                     By:
                                                                     Name:
                                                                     Title:
                                                                                                                                       Exhibit 4.6

                                                          SECURITY AGREEMENT

         This SECURITY AGREEMENT (the “ Security Agreement ”), dated as of August 29, 2002, is made by LUCID, INC., a New York
corporation (the “ Debtor ”), in favor of [*] a New York resident (the “ Secured Party ”).

                                                    W     I   T   N   E   S   S   E    T   H:

        WHEREAS, this Security Agreement is being made by the Debtor concurrently with the execution of a Promissory Note (the “Note”)
by the Debtor for the payment of the principal amount of $ [*], without interest (the “Payment Obligation”);

       WHEREAS, the Payment Obligation is contingent upon Debtor having received certain royalties under that certain Asset Purchase
Agreement, dated as of May 11, 2002 (the “Royalty Agreement”), by and between the Debtor and [*] (the “Third Party”).

         NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Debtor
agrees, for the benefit of the Secured Party, as follows:

         Section 1.           Grant of Security . The Debtor hereby grants to the Secured Party a security interest in the Collateral (as hereafter
defined), subject to Section 5 hereof. For purposes hereof, “Collateral” shall mean all of Debtor‟s interest in and right to receive payments of
Contingent Consideration (as defined in the Royalty Agreement) under Section 3.1(a) of the Royalty Agreement, including any and all
proceeds collected by the Debtor in respect thereof.

          Section 2.         Security for Obligations . This Security Agreement secures the payment in cash of the Payment Obligation of the
Debtor.

          Section 3.           Continuing Security Interest; Termination . This Security Agreement shall create a continuing security interest in
the Collateral and shall terminate upon Debtor‟s payment in full to the Secured Party of the Payment Obligation. Upon such termination, the
Secured Party shall execute and deliver to the Debtor all instruments and other documents as may be necessary or proper to release any and all
liens on, and the security interest in, the Collateral.

         Section 4.          Collection . Notwithstanding anything contained herein to the contrary, the Secured Party acknowledges and
agrees that Debtor is vested with the exclusive right to control the collection of any Contingent Consideration due under the Royalty
Agreement, and that at no time shall the Secured Party have any right to collect, compromise, endorse, sell or otherwise deal with the
Contingent Consideration or proceeds thereof, or the Third Party. The Debtor shall apply forthwith upon receipt thereof all Contingent
Consideration collected to the outstanding balance of the Payment Obligation, subject to Section 5 hereof.
          Section 5.          Intercreditor Acknowledgement . The Secured Party acknowledges that Debtor has entered, or will enter, into
similar security agreements (collectively with this Security Agreement, the “Royalty Security Agreements”) with one or more of its other
creditors (collectively with the Secured Party, the “Royalty Secured Creditors”). Debtor represents that the obligations owed to all Royalty
Secured Creditors secured by the Royalty Security Agreements will not exceed $975,000 in the aggregate (collectively, the “Royalty Secured
Obligations”). In light of the multiple Royalty Secured Creditors and the non-recourse nature of the Royalty Secured Obligations, the Secured
Party agrees that (1) all amounts payable by Debtor to the Royalty Secured Creditors under their respective Royalty Security Agreements and
related promissory notes will be shared pro rata (based on the outstanding amount of Royalty Secured Obligations owed to each Royalty
Secured Creditor at the time of such payment) among all Royalty Secured Creditors, (2) prior to the occurrence of an Event of Default, no
Royalty Secured Creditor will have any rights to enforce or otherwise take action to collect any amounts under their respective Royalty
Security Agreements or realize on the Collateral, and (3) notwithstanding any priorities that otherwise would attach among the respective
security interests of the Royalty Secured Creditors based on the timing of filing of financing statements, each security interest perfected by
filing pursuant to the Royalty Security Agreements will have equal priority and all Royalty Secured Obligations will be pari passu.

         Section 6.          Event of Default . For purposes hereof, an “Event of Default” shall mean (i) the filing of a voluntary petition
under applicable federal bankruptcy law, or the Debtor‟s being subjected involuntarily to such a petition, which involuntary petition is not
discharged within 90 days after its date, or (ii) the formal dissolution, liquidation and winding-up of the Debtor. Upon an Event of Default, the
Secured Party may exercise any rights and remedies accorded a secured party by the Uniform Commercial Code in the relevant jurisdiction,
subject to Section 5 hereof.

          Section 7.         Amendments; etc . No amendment of any provision of this Security Agreement shall be effective unless the same
shall be in writing and signed by the Secured Party and the Debtor.

         Section 8.            Governing Law, Entire Agreement, etc . This Security Agreement is and shall be governed by and construed and
enforced in accordance with the laws of the State of New York without regard to the principles of conflict of laws. This Security Agreement
constitutes the entire understanding among the parties hereto with respect to the subject matter hereof and supersedes any prior agreements,
written or oral, with respect thereto.

                                                 [Remainder of Page Intentionally Left Blank]

                                                                        2
          IN WITNESS WHEREOF, the parties hereto have caused this Security Agreement to be duly executed and delivered by its respective
officer thereunto duly authorized as of the date first above written.

                                                                    LUCID, INC.


                                                                    By:
                                                                          Name:
                                                                          Title:

                                                                          Address:




                                                                    [*]
                                                                    as Secured Party

                                                                    By:
                                                                          Name:
                                                                          Title:

                                                                          Address:




                                                                   3
                                                                                                                                        Exhibit 4.19

        THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE
        COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN EXEMPTION FROM
        REGISTRATION UNDER REGULATION D PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
        “ACT”). THIS WARRANT SHALL NOT CONSTITUTE AN OFFER TO SELL NOR A SOLICITATION OF AN OFFER TO BUY
        THE SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL. THE
        SECURITIES ARE “RESTRICTED” AND MAY NOT BE RESOLD OR TRANSFERRED EXCEPT AS PERMITTED UNDER
        THE ACT PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.

Issue Date: April 30, 2007

                                                COMMON STOCK PURCHASE WARRANT

        To Purchase Shares of $0.01 Par Value Common Stock ( “Common Stock” ) of

                                                                  LUCID, INC.

         THIS CERTIFIES that, for value received,                         (the “Investor” ) is entitled, upon the terms and subject to the
conditions hereinafter set forth, at any time and from time to time to subscribe for and purchase from LUCID, INC., a New York corporation
(the “Company” ),                     shares of Common Stock (the “Warrant Shares” ) of the Company at an Exercise Price per share equal to
$2.00 per share (as adjusted from time to time pursuant to the terms hereof, the “Exercise Price” ). The Exercise Price and the number of
shares for which the Warrant is exercisable shall be subject to adjustment as provided herein.

1.             Title of Warrant . Subject to compliance with applicable laws, this Warrant and all rights hereunder are transferable, in whole
        or in part, at the office or agency of the Company by the Holder hereof in person or by duly authorized attorney, upon surrender of this
        Warrant together with (a) the Assignment Form annexed hereto properly endorsed, and (b) any other documentation reasonably
        necessary to satisfy the Company that such transfer is in compliance with all applicable securities laws, as provided in Section 8
        hereof. The term “Holder” shall refer to the Investor or any subsequent transferee of this Warrant.

2.             Authorization of Shares . The Company covenants that all shares of Common Stock which may be issued upon the exercise of
        rights represented by this Warrant will, upon exercise of the rights represented by this Warrant and payment of the Exercise Price as
        set forth herein will be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges in
        respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue or otherwise
        specified herein).

3.             This Warrant shall be exercisable, in whole or in part, during the term commencing on the Issue Date with no expiration date;
        provided, however, that in the event of (a) the closing of the Company‟s sale or transfer of all or substantially all of its assets, or (b)
        the closing of the acquisition of the Company by another entity by means of merger,
     consolidation or other transaction or series of related transactions resulting in the exchange of the outstanding shares of the
     Company‟s capital stock such that the stockholders of the Company prior to such transaction own, directly or indirectly, less than 50%
     of the voting power of the surviving entity, this Warrant shall, on the date of such events, no longer be exercisable and become null
     and void. In the event of a proposed transaction of the kind described above, the Company shall notify the holder of the Warrant at
     least 15 (15) days prior to the consummation of such event or transaction and shall provide the Holder with a description of the
     proposed terms and conditions of such transaction, including the amount and form of consideration to be received for each share of the
     Company‟s capital stock.

4.          Exercise of Warrant . The Holder may exercise this Warrant, in whole or in part, at any time and from time to time, by
     delivering to the offices of the Company this Warrant, together with a Notice of Exercise in the form annexed hereto specifying the
     number of Warrant Shares with respect to which this Warrant is being exercised, together with payment to the Company of the
     Exercise Price therefor.

     In the event that the Warrant is not exercised in full, the number of Warrant Shares shall be reduced by the number of such Warrant
     Shares for which this Warrant is exercised and/or surrendered, and the Company, at its expense, shall within three (3) Trading Days
     (as defined below) issue and deliver to the Holder a new Warrant of like tenor in the name of the Holder or as the Holder (upon
     payment by Holder of any applicable transfer taxes) may request, reflecting such adjusted Warrant Shares.

     The Company shall use its best efforts to deliver the certificates for shares of Common Stock purchased hereunder to the Holder
     hereof within ten (10) days after the date on which this Warrant shall have been exercised as aforesaid.

5.         No Fractional Shares or Scrip . No fractional shares or scrip representing fractional shares shall be issued upon the exercise of
     this Warrant. In lieu of issuance of a fractional share upon any exercise hereunder, the Company will round up to nearest whole
     number of shares.

6.          Charges, Taxes and Expenses . Issuance of certificates for shares of Common Stock upon the exercise of this Warrant shall be
     made without charge to the Holder hereof for any issue or transfer tax or other incidental expense in respect of the issuance of such
     certificate, all of which taxes and expenses shall be paid by the Company, and such certificates shall be issued in the name of the
     Holder of this Warrant or in such name or names as may be directed by the Holder of this Warrant; provided , however , that in the
     event certificates for shares of Common Stock are to be issued in a name other than the name of the Holder of this Warrant, this
     Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly executed by the Holder
     hereof; and provided further, that the Company shall not be required to pay any tax or taxes which may be payable in respect of any
     transfer involved in the issuance of any certificates for the Warrant Shares other than the issuance of a replacement Warrant to the
     Holder in connection with the Holder‟s surrender of this Warrant upon the exercise of this warrant as to less than all of the shares of
     Common Stock which may be purchase pursuant to the exercise her off.

                                                                   2
7.           Closing of Books . The Company will at no time close its shareholder books or records in any manner which interferes with
      the timely exercise of this Warrant.

8.           No Rights as Shareholder until Exercise . Subject to Section 12 of this Warrant and the provisions of any other written
      agreement between the Company and the Investor, the Investor shall not be entitled to vote or receive dividends or be deemed the
      holder of Warrant Shares or any other securities of the Company that may at any time be issuable on the exercise hereof for any
      purpose, nor shall anything contained herein be construed to confer upon the Investor, as such, any of the rights of a stockholder of the
      Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to
      give or withhold consent to any corporate action (whether upon any recapitalization, issuance of stock, reclassification of stock,
      change of par value, or change of stock to no par value, consolidation, merger, conveyance or otherwise) or to receive notice of
      meetings, or to receive dividends or subscription rights or otherwise until the Warrant shall have been exercised as provided herein.
      However, at the time of the exercise of this Warrant pursuant to Section 3 hereof, the Warrant Shares so purchased hereunder shall be
      deemed to be issued to such Holder as the record owner of such shares as of the close of business on the date on which this Warrant
      shall have been exercised.

9.           Assignment and Transfer of Warrant . This Warrant may be assigned by the surrender of this Warrant and the Assignment
      Form annexed hereto duly executed at the office of the Company (or such other office or agency of the Company or its transfer agent
      as the Company may designate by notice in writing to the registered Holder hereof at the address of such Holder appearing on the
      books of the Company); provided , however , that this Warrant may not be resold or otherwise transferred except (i) in a transaction
      registered under the Securities Act of 1933, as amended (the “Act” ), or (ii) in a transaction pursuant to an exemption, if available,
      from registration under the Act and whereby, if reasonably requested by the Company, an opinion of counsel reasonably satisfactory
      to the Company is obtained by the Holder of this Warrant to the effect that the transaction is so exempt.

10.          Loss, Theft, Destruction or Mutilation of Warrant; Exchange . The Company represents warrants and covenants that (a) upon
      receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of any Warrant or stock
      certificate representing the Warrant Shares, and in case of loss, theft or destruction, of indemnity reasonably satisfactory to it, and (b)
      upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the Company will make and deliver a new Warrant
      or stock certificate of like tenor and dated as of such cancellation, in lieu of this Warrant or stock certificate, without any charge
      therefor. This Warrant is exchangeable at any time for an equal aggregate number of Warrants of different denominations, as
      requested by the holder surrendering the same, or in such denominations as may be requested by the Holder following determination
      of the Exercise Price. No service charge will be made for such registration or transfer, exchange or reissuance.

11.         Saturdays, Sundays, Holidays, etc . If the last or appointed day for the taking of any action or the expiration of any right
      required or granted herein shall be a Saturday, Sunday or a legal holiday, then such action may be taken or such right may be
      exercised on the next succeeding day not a legal holiday.

                                                                       3
12.          Specific Enforcement . The Company and the Holder acknowledge and agree that irreparable damage would occur in the event
      that any of the provisions of this Warrant were not performed in accordance with their specific terms or were otherwise breached. It is
      accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent or cure breaches of the provisions of this
      Warrant and to enforce specifically the terms and provisions hereof, this being in addition to any other remedy to which either of them
      may be entitled by law or equity.

13.         Adjustments of Exercise Price and Number of Warrant Shares . The number of and kind of securities purchasable upon
      exercise of this Warrant and the Exercise Price shall be subject to adjustment from time to time as set forth in this Section 13.

(a)         Subdivisions, Combinations and Stock Dividends . If the Company shall, at any time while this Warrant is outstanding, (A) pay
      a stock dividend or otherwise make a distribution or distributions on any equity securities (including instruments or securities
      convertible into or exchangeable for such equity securities) in shares of Common Stock, (B) subdivide outstanding shares of Common
      Stock into a larger number of shares, or (C) combine outstanding Common Stock into a smaller number of shares, then the Exercise
      Price shall be multiplied by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding before
      such event and the denominator of which shall be the number of shares of Common Stock outstanding after such event. Any
      adjustment made pursuant to this Section 13(a) shall become effective immediately after the record date for the determination of
      stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the
      case of a subdivision or combination. The number of shares which may be purchased hereunder shall be increased proportionately to
      any reduction in Exercise Price pursuant to this paragraph 13(a), so that after such adjustments the aggregate Exercise Price payable
      hereunder for the increased number of shares shall be the same as the aggregate Exercise Price in effect just prior to such adjustments.

(b)          Other Distributions . If at any time after the date hereof the Company distributes to holders of its Common Stock, other than as
      part of its dissolution, liquidation or the winding up of its affairs, any shares of its capital stock, any evidence of indebtedness or any
      of its assets (other than Common Stock), then the number of Warrant Shares for which this Warrant is exercisable shall be increased to
      equal: (i) the number of Warrant Shares for which this Warrant is exercisable immediately prior to such event, (ii) multiplied by a
      fraction, (A) the numerator of which shall be the Fair Market Value (as defined below) per share of Common Stock on the record date
      for the dividend or distribution, and (B) the denominator of which shall be the Fair Market Value price per share of Common Stock on
      the record date for the dividend or distribution minus the amount allocable to one share of Common Stock of the value (as jointly
      determined in good faith by the Board of Directors of the Company and the Holder) of any and all such evidences of indebtedness,
      shares of capital stock, other securities or property, so distributed. For purposes of this Warrant, “Fair Market Value” shall equal (X)
      the closing price of the Common Stock on any stock exchange on which the Common Stock is listed or admitted to trading, or (Y) if
      the Common Stock is not listed or admitted to trading on any stock exchange but is traded in the over-the-counter markets, the average
      of the closing bid and asked prices in the over-the-counter markets or (Z) if the Common Stock is not listed or admitted to trading on
      any stock exchange and is not traded in the

                                                                      4
      over-the-counter markets and the average price cannot be determined as contemplated above, the Fair Market Value of the Common
      Stock shall be as reasonably determined in good faith by the Company‟s Board of Directors and the Holden. The Exercise Price shall
      be reduced to equal: (i) the Exercise Price in effect immediately before the occurrence of any such event (ii) multiplied by a fraction,
      (A) the numerator of which is the number of Warrant Shares for which this Warrant is exercisable immediately before the adjustment,
      and (B) the denominator of which is the number of Warrant Shares for which this Warrant is exercisable immediately after the
      adjustment.

(c)         Merger, etc . If at any time after the date hereof there shall be a merger or consolidation of the Company with or into or a
      transfer of all or substantially all of the assets of the Company to another entity, then the Holder shall be entitled to receive notice
      thereof not less than ten (10) days prior to the effective date of such transaction and, if this Warrant is not exercised within such ten
      (10) day period, then this Warrant shall expire at the end of such period

(d)         Reclassification, etc . If at any time after the date hereof there shall be a reorganization or reclassification of the securities as to
      which purchase rights under this Warrant exist into the same or a different number of securities of any other class or classes, then the
      Holder shall thereafter be entitled to receive upon exercise of this Warrant, during the period specified herein and upon payment of the
      Exercise Price then in effect, the number of shares or other securities or property resulting from such reorganization or reclassification,
      which would have been received by the Holder for the shares of stock subject to this Warrant had this Warrant at such time been
      exercised.

14.          Notice of Adjustment; Notice of Events . (i) Whenever the number of Warrant Shares or number or kind of securities or other
      property purchasable upon the exercise of this Warrant or the Exercise Price is adjusted, the Company shall promptly mail to the
      Holder of this Warrant a notice setting forth the number of Warrant Shares (and other securities or property) purchasable upon the
      exercise of this Warrant and the Exercise Price of such Warrant Shares after such adjustment and setting forth the computation of such
      adjustment and a brief statement of the facts requiring such adjustment. (ii) If: (A) the Company shall declare a dividend (or any other
      distribution) on its Common Stock; or (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of its
      Common Stock; or (C) the Company shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe
      for or purchase any shares of capital stock of any class or of any rights; or (D) the approval of any stockholders of the Company shall
      be required in connection with any reclassification of the Common Stock of the Company, any consolidation or merger to which the
      Company is a party, any sale or transfer of all or substantially all of the assets of the Company, or any compulsory share exchange
      whereby the Common Stock is converted into other securities, cash or property; or (E) the Company shall authorize the voluntary
      dissolution, liquidation or winding up of the affairs of the Company, then the Company shall cause to be mailed to the Holder of this
      Warrant, at least 30 calendar days prior to the applicable record or effective date, a notice stating (x) the date on which a record is to
      be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of
      which the holders of Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be
      determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected

                                                                       5
      to become effective or close, and the date as of which it is expected that holders of Common Stock of record shall be entitled to
      exchange their shares of Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation,
      merger, sale, transfer, share exchange, dissolution, liquidation or winding up.

14.          Authorized Shares . The Company covenants that during the period the Warrant is outstanding and exercisable, it will reserve
      from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of the Warrant Shares upon
      the exercise of any and all purchase rights under this Warrant. The Company further covenants that its issuance of this Warrant shall
      constitute full authority to its officers who are charged with the duty of executing stock certificates to execute and issue the necessary
      certificates for the Warrant Shares upon the exercise of the purchase rights under this Warrant. The Company will take all such
      reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided herein without violation of any
      applicable law, regulation, or rule of any applicable market or exchange.

15.         Compliance with Securities Laws . (a) The Holder hereof acknowledges that the Warrant Shares acquired upon the exercise of
      this Warrant, if not registered (or if no exemption from registration exists), will have restrictions upon resale imposed by state and
      federal securities laws. Each certificate representing the Warrant Shares issued to the Holder upon exercise (if not registered, for resale
      or otherwise, or if no exemption from registration exists) will bear substantially the following legend:

      THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND
      EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION
      FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND,
      ACCORDINGLY, MAY NOT BE OFFERED, TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT
      TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
      EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
      SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.

(b)         Without limiting the Investor‟s right to transfer, assign or otherwise convey the Warrant or Warrant Shares in compliance with
      all applicable securities laws, the Investor, by acceptance hereof, acknowledges that this Warrant and the Warrant Shares to be issued
      upon exercise hereof are being acquired solely for the Investor‟s own account and not as a nominee for any other party, and that the
      Investor will not offer, sell or otherwise dispose of this Warrant or any Warrant Shares to be issued upon exercise hereof except under
      circumstances that will not result in a violation of applicable federal and state securities laws.

16.         Miscellaneous .

(a)         Entire Agreement . This Agreement contains the entire agreement of the parties with respect to the subject matter hereof.

                                                                      6
(b)          Issue Date; Choice of Law; Venue: Jurisdiction . The provisions of this Warrant shall be construed and shall be given effect in
      all respects as if it had been issued and delivered by the Company on the date hereof. This warrant shall be binding upon any
      successors or assigns of the company. This warrant will be construed and enforced in accordance with and governed by the laws of the
      State of New York, except for matters arising under the act, without reference to principles of conflicts of law. Each of the parties
      consents to the exclusive jurisdiction of the federal and state courts sitting in the County of Monroe in the State of New York in
      connection with any dispute arising under this warrant and hereby waives, to the maximum extent permitted by law, any objection,
      including any objection based on forum non conveniens or venue, to the bringing of any such proceeding in such jurisdiction.
      Each party hereby agrees that if the other party to this warrant obtains a judgment against it in such a proceeding, the party which
      obtained such judgment may enforce same by summary judgment in the courts of any country having jurisdiction over the party
      against whom such judgment was obtained, and each party hereby waives any defenses available to it under local law and agrees to
      the enforcement of such a judgment. Each party to this warrant irrevocably consents to the service of process in any such proceeding
      by the mailing of copies thereof by registered or certified mail, postage prepaid, to such party at its address in accordance with section
      18(c). Nothing herein shall affect the right of any party to serve process in any other manner permitted by law.

(c)         Modification and Waiver . This Warrant and any provisions hereof may be changed, waived, discharged or terminated only by
      an instrument in writing signed by the party against which enforcement of the same is sought. Any amendment effected in accordance
      with this paragraph shall be binding upon the Investor, each future Holder of this Warrant and the Company. No waivers of, or
      exceptions to, any term, condition or provision of this Warrant, in any one or more instances, shall be deemed to be, or construed as, a
      further or continuing waiver of any such term, condition or provision.

(d)         Notices . Any notice, request or other document required or permitted to be given or delivered to the Investor or future Holders
      hereof or the Company shall be personally delivered or shall be sent by certified or registered mail, postage prepaid, to the Investor or
      each such Holder at its address as shown on the books of the Company or to the Company at the address set forth in the Loan
      Restructuring Agreement between the Company and the original holder of this Warrant, dated April 30, 2007. All notices under this
      Warrant shall be deemed to have been given when received.

      A party may from time to time change the address to which notices to it are to be delivered or mailed hereunder by notice given in
      accordance with the provisions of this Section 16(c).

(e)         Severability . Whenever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid
      under applicable law, but if any provision of this Warrant is held to be invalid, illegal or unenforceable in any respect under any
      applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect the validity, legality or
      enforceability of any other provision of this Warrant in such jurisdiction or affect the validity, legality or enforceability of any
      provision in any other jurisdiction, but this Warrant shall be reformed, construed and enforced in such

                                                                     7
       jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein.

(f)           No Impairment . The Company will not, by amendment of its Certificate of Incorporation or through any reorganization,
       transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the
       observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such
       terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the Holder against
       impairment. Without limiting the generality of the foregoing, the Company (a) will not increase the par value of any Warrant Shares
       above the amount payable therefor on such exercise, and (b) will take all such action as may be reasonably necessary or appropriate in
       order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares on the exercise of this Warrant.

       IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officers thereunto duly authorized.


                                                                            LUCID, INC.


                                                                            By: /s/ Jay M. Eastman
                                                                                Name: Jay M. Eastman
                                                                                Title:   Chairman & CEO


ATTEST:


/s/ [ILLEGIBLE]

                                                                        8
                                                           NOTICE OF EXERCISE

To:         LUCID, INC.

(1)       The undersigned hereby elects to exercise the attached Warrant for and to purchase thereunder,               shares of Common
Stock, and herewith makes payment therefor of $            .

(2)       Please issue a certificate or certificates representing said shares of Common Stock in the name of the undersigned or in such other
name as is specified below:


                                         (Name)


                                         (Address)


(3)        Please issue a new Warrant for the unexercised portion of the attached Warrant in the name of the undersigned or in such other name
as is specified below:


                                                                           (Name)


(Date)                                                                     (Signature)

                                                                           (Address)


Dated:

Signature
                                                          ASSIGNMENT FORM

                                                  (To assign the foregoing warrant, execute
                                                 this form and supply required information.
                                                Do not use this form to exercise the warrant.)

             FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby assigned to

                                                                          whose address is

                                                                                                    .


                                                                                         Dated:                    ,

                                                                        Holder‟s Signature:

                                                                        Holder‟s Address:




Signature Guaranteed:

NOTE: The signature to this Assignment Form must correspond with the name as it appears on the face of the Warrant, without alteration or
enlargement or any change whatsoever, and must be guaranteed by a bank or trust company. Officers of corporations and those acting in an
fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant.
                                                                                                                                      Exhibit 4.20

THE WARRANT AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY STATES. THEY MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH SALE OR TRANSFER
IS EXEMPT UNDER THE AFORESAID FEDERAL AND STATE SECURITIES LAWS.

                                                                  LUCID, INC.

                                       (WARRANT TO PURCHASE SHARES OF COMMON STOCK)

        FOR VALUE RECEIVED, LUCID, INC., a New York corporation with an office at 2320 Brighton-Henrietta Town Line Road,
Rochester, New York 14623 (the “Company”) grants the following rights to (the “Holder”):

1.                Issuance and Definitions . This Warrant is issued in accordance with the terms hereinafter set forth and has been issued in
connection with the issuance and delivery by the Company to the Holder of a promissory note of even date herewith (the “Note”). Capitalized
Terms not otherwise defined herein shall have the meanings ascribed to them in the Note. The term “Qualified Equity Round” shall mean the
issuance by the Company of equity interests (or debt interests convertible into equity interests) to investors in one or a series of related
transactions in which the Company receives gross proceeds of at least $3 million. There shall be excluded from the definition of Qualified
Equity Round any of the following: the issuance of equity securities upon the exercise of currently outstanding options, warrants or convertible
securities; the issuance of equity securities pursuant to the exercise of equity incentives granted by the Company; or securities issued in a public
offering of securities.

2.               Purchase of Common Stock . Subject to the terms and conditions hereinafter set forth, the Holder of this Warrant is entitled,
upon surrender of this Warrant at the principal office of the Company (or at such other place as the Company shall notify the Holder in
writing), to purchase from the Company 2,381 shares of fully paid and non-assessable shares of Common Stock of the Company (the
“Common Stock”). [ The number of shares will be the quotient obtained by dividing 15% of the principal amount of the Note by $3.15]

3.               Reservation of Common Stock . The Company shall at all times reserve and hold available sufficient shares of Common Stock
to satisfy all conversion and purchase rights represented by outstanding convertible securities, options and warrants, including this Warrant.
The Company covenants and agrees that all shares of Common Stock that may be issued upon the exercise of this Warrant shall, upon issuance,
be duly and validly issued, fully paid and nonassessable, and free from all taxes, liens and charges with respect to the purchase and the issuance
of the shares.

4.              Exercise Price . The Exercise Price of this Warrant, or the price at which a share of Common Stock purchasable upon exercise
of this Warrant may be purchased, will be the price per share paid for a common stock equivalent in the Qualified Equity Round, provided,
however, that, if no Qualified Equity Round has closed on or before January 1, 2010, then the exercise price shall be $3.15 per share.

5.              Exercise Period . The Holder may exercise the purchase rights evidenced hereby commencing upon the earlier of January 1,
2010 or the date of closing of the next “Qualified
Equity Round,” provided that this Warrant may only be exercised on or before September 1, 2013 (“Exercise Period”). If not exercised during
this period, this Warrant and all rights granted under this Warrant shall expire and lapse.

6.               Exercise .

(a) The exercise of this Warrant may be accomplished by actual delivery of this Warrant and the Exercise Price in cash, certified check, or
official bank draft in lawful money of the United States of America, or such other tender acceptable to the Company. The payment must be
delivered, personally or by mail, to the Company at the address first set forth above or such other address as may hereafter be specified by the
Company in a written notice to the Holder.

(b) Notwithstanding any provision herein to the contrary, if the Fair Market Value of one share of Common Stock is greater than the exercise
price (at the date of calculation as set forth below), in lieu of exercising this Warrant for cash, the Holder may elect to receive shares equal to
the value (as determined below) of this Warrant by surrender of this Warrant at the principal office of the Company together with a properly
executed notice of such election, in which event the Company shall issue to the Holder a number of shares of Common Stock computed using
the following formula:

                    X = Y (A-B)
                           A

         Where                X = the number of shares of Common Stock to be issued to the Holder

                              Y = the number of shares of Common Stock issuable under the Warrant

                              A = the fair market value of one share of Common Stock (at the date of calculation)

                              B = the Exercise Price of the Warrant (at the date of calculation)

(c) For the purpose of the calculation in subparagraph (b) above, the Fair Market Value of one share of Common Stock shall be determined by
the Company‟s Board of Directors in good faith; provided, however, that where there exists a public market for the Company‟s Common Stock
at the time of such exercise, the fair market value per share shall be the average of the closing bid and asked prices of the Common Stock as
quoted in the Over-the-Counter Market Summary or the last reported sale price of the Common Stock or the closing price quoted on the
Nasdaq Global Market or on any exchange on which the Common Stock is listed, whichever is applicable, for the five (5) trading days prior to
the date of determination. Notwithstanding the foregoing, if the Warrant is exercised in connection with the Company‟s initial public offering
of Common Stock, the fair market value per share shall be the per share offering price to the public of the Company‟s initial public offering.

7.              Certificates for Common Stock . Upon the exercise of the purchase rights evidenced by this Warrant, a certificate for the
shares of Common Stock so purchased shall be issued as soon as practicable thereafter, and in any event within thirty (30) days of the delivery
of this Warrant and the Exercise Price.

8.               Anti-Dilution . If this Warrant shall be exercised subsequent to any stock dividend, split-up, recapitalization, or
reorganization of the Company occurring after the date hereof, as a result of which shares of any class shall be issued in respect of outstanding
shares of Common Stock or shares of Common Stock shall be changed into the same or a different number shares of the same or another class
or classes, the Holder shall receive, for the

                                                                          2
aggregate price paid upon such exercise, the aggregate number and class of shares which such Holder would have received if this Warrant had
been exercised immediately prior to such stock-dividend, split-up, recapitalization, or reorganization.

9.              Pre-Exercise Rights . Prior to the exercise of this Warrant, the Holder shall not be entitled to any rights of a shareholder with
respect to the Common Stock, including (without limitation) the right to receive dividends or other distributions thereon, or be notified of
shareholder meetings, and such holder shall not be entitled to any notice or other communication concerning the business or affairs of the
Company.

10.             Restricted Securities . The Holder understands that this Warrant and the Common Stock purchasable hereunder constitute
“restricted securities” under the federal securities laws inasmuch as they are, or will be, acquired from the Company in transactions not
involving a public offering and accordingly may not, under such laws and applicable regulations, be resold or transferred without registration
under the Securities Act of 1933 or applicable state securities laws, or an applicable exemption from registration. The Holder further
acknowledges that the Common Stock and any other securities issued upon exercise of this Warrant shall bear a legend substantially in the
form of the legend appearing on the face hereof.

11.              Certification of Investment Purpose . Unless a current registration statement under the Securities Act of 1933 shall be in effect
with respect to the securities to be issued upon the exercise of this Warrant, the Holder hereof, by accepting this Warrant, covenants and agrees
that, at the time of exercise hereof, such Holder will deliver to the Company a written certification that the securities acquired by the Holder
upon exercise hereof are for the account of the Holder and acquired for investment purposes only and that such securities are not acquired with
a view to, or for sale in connection with, any public distribution thereof.

         IN WITNESS WHEREOF, the Company has signed this Warrant by its duly authorized officers this 28th day of August, 2008.


                                                                                   LUCID, INC.

                                                                         By:       /s/ Jay M. Eastman
                                                                         Name:     Jay M. Eastman
                                                                         Title:    Chief Executive Officer

                                                                         3
                                                                                                                                      Exhibit 4.21

THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE
WITH APPLICABLE LAW.

                                                    WARRANT TO PURCHASE STOCK

                                          Corporation:                       Lucid, Inc.
                                          Number of Shares:                  19,523
                                          Class of Stock:                    Common
                                          Initial Exercise Price:            $4.61per share
                                          Issue Date:                        July 20, 2011
                                          Expiration Date:                   July 20, 2016


          THIS WARRANT CERTIFIES THAT, for good and valuable consideration, the receipt of which is hereby acknowledged,
SQUARE 1 BANK or its assignee (“ Holder ”) is entitled to purchase the number of fully paid and nonassessable shares of the class of
securities (the “ Shares ”) of the corporation (the “ Company ”) at the initial exercise price per Share (the “ Warrant Price ”) all as set forth
above and as adjusted pursuant to Article 2 of this warrant, subject to the provisions and upon the terms and conditions set forth in this warrant.

                                                                    ARTICLE 1

                                                                    EXERCISE

          1.1            Method of Exercise. Holder may exercise this warrant by delivering this warrant and a duly executed Notice of
Exercise in substantially the form attached as Appendix 1 to the principal office of the Company. Unless Holder is exercising the conversion
right set forth in Section 1.2, Holder shall also deliver to the Company a check for the aggregate Warrant Price for the Shares being purchased.

         1.2             Conversion Right. In lieu of exercising this warrant as specified in Section 1.1, Holder may from time to time
convert this warrant, in whole or in part, into a number of Shares determined by dividing (a) the aggregate fair market value of the Shares or
other securities otherwise issuable upon exercise of this warrant minus the aggregate Warrant Price of such Shares by (b) the fair market value
of one Share. The fair market value of the Shares shall be determined pursuant to Section 1.3.

         1.3             Fair Market Value. If the Shares are traded regularly in a public market, the fair market value of the Shares shall be
the closing price of the Shares (or the closing price of the Company‟s stock into which the Shares are convertible) reported for the business day
immediately before Holder delivers its Notice of Exercise to the Company. If the Shares are not regularly traded in a public market, the Board
of Directors of the Company shall determine fair market value in its reasonable good faith judgment.

          1.4           Delivery of Certificate and New Warrant.        Promptly after Holder exercises or converts this warrant, the Company
shall deliver to Holder certificates for the Shares acquired or
make appropriate book-entries therefore and, if this warrant has not been fully exercised or converted and has not expired, a new warrant
representing the Shares not so acquired.

          1.5           Replacement of Warrants. On receipt of evidence reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of this warrant and, in the case of loss, theft or destruction, on delivery of an indemnity agreement reasonably
satisfactory in form and amount to the Company or, in the case of mutilation, on surrender and cancellation of this warrant, the Company at its
expense shall execute and deliver, in lieu of this warrant, a new warrant of like tenor.

         1.6            Repurchase on Sale, Merger, or Consolidation of the Company.

                    1.6.1          “ Acquisition . ” For the purpose of this warrant, “Acquisition” means (a) any sale, license, or other disposition
of all or substantially all of the assets (including intellectual property) of the Company, or (b) any reorganization, consolidation, merger or sale
of the voting securities of the Company or any other transaction where the holders of the Company‟s securities before the transaction
beneficially own less than 50% of the outstanding voting securities of the surviving entity after the transaction.

                   1.6.2         Assumption of Warrant. If upon the closing of any Acquisition the successor entity assumes the obligations
of this warrant, then this warrant shall be exercisable for the same securities, cash, and property as would be payable for the Shares issuable
upon exercise of the unexercised portion of this warrant as if such Shares were outstanding on the record date for the Acquisition and
subsequent closing. The Warrant Price shall be adjusted accordingly. The Company shall use reasonable efforts to cause the surviving
corporation to assume the obligations of this warrant.

                  1.6.3         Nonassumption. If upon the closing of any Acquisition the successor entity does not assume the obligations
of this warrant and Holder has not otherwise exercised this warrant in full, then Holder shall have the option either to (a) deem this warrant to
have been automatically converted pursuant to Section 1.2 and thereafter Holder shall participate in the Acquisition on the same terms as other
holders of the same class of securities of the Company; or (b) require the Company to purchase this warrant for cash upon the closing of the
Acquisition for an amount per Share equal to three (3) times the Warrant Price.

                                                                   ARTICLE 2

                                                      ADJUSTMENTS TO THE SHARES

          2.1            Stock Dividends, Splits, Etc. If the Company declares or pays a dividend on its common stock payable in common
stock, or other securities, or subdivides the outstanding common stock into a greater amount of common stock, then upon exercise of this
warrant, for each Share acquired, Holder shall receive, without cost to Holder, the total number and kind of securities to which Holder would
have been entitled had Holder owned the Shares of record as of the date the dividend or subdivision occurred.

          2.2            Reclassification, Exchange or Substitution.      Upon any reclassification, exchange, substitution, or other event that
results in a change of the number and/or class of the

                                                                          2
securities issuable upon exercise or conversion of this warrant, Holder shall be entitled to receive, upon exercise or conversion of this warrant,
the number and kind of securities and property that Holder would have received for the Shares if this warrant had been exercised immediately
before such reclassification, exchange, substitution, or other event. Such an event shall include any automatic conversion of the outstanding or
issuable securities of the Company of the same class or series as the Shares to common stock pursuant to the terms of the Company‟s Articles
of Incorporation upon the closing of a registered public offering of the Company‟s common stock. The Company or its successor shall
promptly issue to Holder a new warrant for such new securities or other property. The new warrant shall provide for adjustments which shall
be as nearly equivalent as may be practicable to the adjustments provided for in this Article 2 including, without limitation, adjustments to the
Warrant Price and to the number of securities or property issuable upon exercise of the new warrant. The provisions of this Section 2.2 shall
similarly apply to successive reclassifications, exchanges, substitutions, or other events.

        2.3              Adjustments for Combinations, Etc. If the outstanding Shares are combined or consolidated, by reclassification or
otherwise, into a lesser number of shares, the Warrant Price shall be proportionately increased. If the outstanding Shares are combined or
consolidated, by reclassification or otherwise, into a greater number of shares, the Warrant Price shall be proportionately decreased.

         2.4             Adjustments for Diluting Issuances. In the event of the issuance (a “ Diluting Issuance ”) by the Company after the
Issue Date of securities at a price per share less than the Warrant Price, then the number of shares of common stock issuable upon conversion of
the Shares shall be adjusted in accordance with those provisions of the Company‟s Articles (Certificate) of Incorporation that apply to Diluting
Issuances.

          2.5           Certificate as to Adjustments. Upon each adjustment of the Warrant Price, the Company at its expense shall
promptly compute such adjustment, and furnish Holder with a certificate of its Chief Financial Officer setting forth such adjustment and the
facts upon which such adjustment is based. The Company shall, upon written request, furnish Holder a certificate setting forth the Warrant
Price in effect upon the date thereof and the series of adjustments leading to such Warrant Price.

          2.6            Fractional Shares. No fractional Shares shall be issuable upon exercise or conversion of the Warrant and the Number
of Shares to be issued shall be rounded down to the nearest whole Share. If a fractional share interest arises upon any exercise or conversion of
the Warrant, the Company shall eliminate such fractional share interest by paying Holder amount computed by multiplying the fractional
interest by the fair market value of a full Share.

                                                                  ARTICLE 3

                                     REPRESENTATIONS AND COVENANTS OF THE COMPANY

         3.1           Representations and Warranties.        The Company hereby represents and warrants to the Holder as follows:

                                                                        3
                  (a)              The initial Warrant Price referenced on the first page of this warrant is not greater than the fair market value
of the Shares as of the date of this warrant.

                     (b)           All Shares which may be issued upon the exercise of the purchase right represented by this warrant, and all
securities, if any, issuable upon conversion of the Shares, shall, upon issuance, be duly authorized, validly issued, fully paid and nonassessable,
and free of any liens and encumbrances except for restrictions on transfer provided for herein or under applicable federal and state securities
laws.

                   (c)            The Company‟s capitalization, as described in its Registration Statement on Form S-1 (No. 333-17355), as
filed with the United States Securities and Exchange Commission (the “ SEC ”) on April 15, 2011, as amended by Amendment No. 1 to
Registration Statement on Form S-1 (No. 333-17355), as filed with the SEC on June 27, 2011 (as amended, the “ Registration Statement ”), is
true and complete as of the Issue Date.

          3.2            Notice of Certain Events. The Company shall provide Holder with not less than 10 days prior written notice,
including a description of the material facts surrounding, any of the following events: (a) declaration of any dividend or distribution upon its
common stock, whether in cash, property, stock, or other securities and whether or not a regular cash dividend; (b) offering for subscription pro
rata to the holders of any class or series of its stock any additional shares of stock of any class or series or other rights; (c) effecting any
reclassification or recapitalization of common stock; or (d) the merger or consolidation with or into any other corporation, or sale, lease,
license, or conveyance of all or substantially all of its assets, or liquidation, dissolution or winding up.

          3.3            Information Rights. If the Company is not subject to the reporting requirements of the Securities Exchange Act of
1934, as amended, then so long as the Holder holds this warrant and/or any of the Shares, the Company shall deliver to the Holder (a) promptly
after mailing, copies of all communiques to the shareholders of the Company, (b) within one hundred fifty (150) days after the end of each
fiscal year of the Company, the annual audited financial statements of the Company certified by independent public accountants of recognized
standing and (c) within forty-five (45) days after the end of each of the first three quarters of each fiscal year, the Company‟s quarterly,
unaudited financial statements.

          3.4            Registration Under Securities Act of 1933, as amended. The Company agrees to use commercially reasonable
efforts to cause the registration of the shares issuable upon the exercise of this warrant to be declared effective by the Securities and Exchange
Commission under the Securities Act of 1933, as amended, within thirty (30) days of the expiration of the 90-day lock-up period described in
the Registration Statement.

                                                                    ARTICLE 4

                                                               MISCELLANEOUS

         4.1            Term: Exercise Upon Expiration. This warrant is exercisable in whole or in part, at any time and from time to time
on or before the Expiration Date set forth above; provided, however, that if the Company completes its initial public offering within the
three-year

                                                                          4
period immediately prior to the Expiration Date, the Expiration Date shall automatically be extended until the third anniversary of the effective
date of the Company‟s initial public offering. If this warrant has not been exercised prior to the Expiration Date, this warrant shall be deemed
to have been automatically exercised on the Expiration Date by “cashless” conversion pursuant to Section 1.2.

         4.2             Legends. This warrant and the Shares (and the securities issuable, directly or indirectly, upon conversion of the
Shares, if any) shall be imprinted with a legend in substantially the following form:

THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH APPLICABLE LAW.

          4.3            Compliance with Securities Laws on Transfer. This warrant and the Shares issuable upon exercise of this warrant
(and the securities issuable, directly or indirectly, upon conversion of the Shares, if any) may not be transferred or assigned in whole or in part
without compliance with applicable federal and state securities laws by the transferor and the transferee. The Company shall not require
Holder to provide an opinion of counsel if the transfer is to an affiliate of Holder or if there is no material question as to the availability of
current information as referenced in Rule 144(c), Holder represents that it has complied with Rule 144 (d) and (e) in reasonable detail, the
selling broker represents that it has complied with Rule 144(f), and the Company is provided with a copy of Holder‟s notice of proposed sale.

         4.4            Transfer Procedure. Subject to the provisions of Section 4.3, Holder may transfer all or part of this warrant or the
Shares issuable upon exercise of this warrant (or the securities issuable, directly or indirectly, upon conversion of the Shares, if any) by giving
the Company notice of the portion of the warrant being transferred setting forth the name, address and taxpayer identification number of the
transferee and surrendering this warrant to the Company for reissuance to the transferee(s) (and Holder, if applicable). No surrender or
reissuance shall be required if the transfer is to an affiliate of Holder.

         4.5            Notices. All notices and other communications from the Company to the Holder, or vice versa, shall be deemed
delivered and effective when given personally or mailed by first-class registered or certified mail, postage prepaid, at such address as may have
been furnished to the Company or the Holder, as the case may be, in writing by the Company or such Holder from time to time. All notices to
the Holder shall be addressed as follows:

                  Square 1 Bank
                  Attn: Warrant Administrator
                  406 Blackwell Street, Suite 240
                  Crowe Building
                  Durham, NC 27701

        4.6             Amendments. This warrant and any term hereof may be changed, waived, discharged or terminated only by an
instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought.

                                                                         5
         4.7             Attorneys’ Fees. In the event of any dispute between the parties concerning the terms and provisions of this warrant,
the party prevailing in such dispute shall be entitled to collect from the other party all costs incurred in such dispute, including reasonable
attorneys‟ fees.

         4.8           Governing Law. This warrant shall be governed by and construed in accordance with the laws of the State of North
Carolina, without giving effect to its principles regarding conflicts of law.


                                                                       LUCID, INC.


                                                                       By:      /s/ Jay M. Eastman

                                                                       Name: Jay M. Eastman

                                                                       Title:   Chief Executive Officer

                                                                       6
                                                                  APPENDIX 1

                                                           NOTICE OF EXERCISE

         1.              The undersigned hereby elects to purchase                    shares of common stock of LUCID, INC. pursuant to
the terms of the attached warrant, and tenders herewith payment of the purchase price of such shares in full.

        1.              The undersigned hereby elects to convert the attached warrant into shares in the manner specified in the warrant. This
conversion is exercised with respect to                  of the shares covered by the warrant.

         [Strike paragraph that does not apply.]

          2.             Please issue a certificate or certificates representing said shares in the name of the undersigned or in such other name
as is specified below:

                  Square 1 Bank
                  Attn: Warrant Administrator
                  406 Blackwell Street, Suite 240
                  Fowler Building
                  Durham, NC 27701

         3.             The undersigned represents it is acquiring the shares solely for its own account and not as a nominee for any other
party and not with a view toward the resale or distribution thereof except in compliance with applicable securities laws.


SQUARE 1 BANK or Registered Assignee


(Signature)


(Date)
                                 Exhibit 4.22




    SUBSCRIPTION AGREEMENT

        in connection with

          LUCID, INC.

CONVERTIBLE NOTES AND WARRANTS




            July, 2011
THIS SUBSCRIPTION AGREEMENT AND THE INFORMATION CONCERNING LUCID, INC. (THE “ COMPANY ”)
(COLLECTIVELY, THE “ OFFERING DOCUMENTS ”) ARE FURNISHED ON A CONFIDENTIAL BASIS TO A LIMITED NUMBER
OF SOPHISTICATED INVESTORS FOR THE PURPOSE OF PROVIDING CERTAIN INFORMATION ABOUT AN INVESTMENT IN
CONVERTIBLE NOTES AND WARRANTS (THE “ SECURITIES ”) OF THE COMPANY, A NEW YORK CORPORATION, AND
MAY NOT BE USED FOR ANY OTHER PURPOSE. THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION (THE “ SEC ”) OR THE SECURITIES REGULATORY AUTHORITY OF ANY STATE
OR OF ANY OTHER JURISDICTION, NOR HAS THE SEC OR ANY SUCH SECURITIES REGULATORY AUTHORITY PASSED
UPON THE ACCURACY OR ADEQUACY OF ANY OF THE OFFERING DOCUMENTS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE. THE SECURITIES ARE OFFERED SUBJECT TO THE RIGHT OF LUCID TO REJECT ANY
SUBSCRIPTION IN WHOLE OR IN PART. IF LUCID REJECTS A SUBSCRIPTION, THE PROSPECTIVE INVESTOR WILL BE
NOTIFIED AS SOON AS IS PRACTICABLE. NONE OF THE OFFERING DOCUMENTS MAY BE REPRODUCED OR PROVIDED TO
OTHERS WITHOUT THE PROPER WRITTEN PERMISSION OF LUCID. BY ACCEPTING DELIVERY OF ANY OR ALL OF THE
OFFERING DOCUMENTS, EACH PROSPECTIVE INVESTOR AGREES TO THE FOREGOING.

THE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ SECURITIES
ACT ”), OR UNDER THE SECURITIES LAWS OF ANY STATE OR ANY OTHER JURISDICTION, NOR IS SUCH REGISTRATION
CONTEMPLATED. THE SECURITIES WILL BE OFFERED AND SOLD UNDER THE EXEMPTION PROVIDED BY SECTION 4(2)
OF THE SECURITIES ACT AND THE RULES PROMULGATED THEREUNDER AND OTHER EXEMPTIONS OF SIMILAR IMPORT
IN THE LAWS OF THE STATES WHERE THE OFFERING WILL BE MADE. THE SECURITIES MAY NOT BE SOLD OR
TRANSFERRED UNLESS SUCH SALE OR TRANSFER IS EXEMPTED FROM REGISTRATION UNDER THE SECURITIES ACT
AND UNDER ALL OTHER APPLICABLE LAWS AND REGULATIONS. EACH INVESTOR MUST BE AN “ ACCREDITED
INVESTOR ” WITHIN THE MEANING OF THE SECURITIES ACT. THERE IS NO PUBLIC MARKET FOR THE SECURITIES.

AN INVESTMENT IN THE COMPANY IS SUITABLE ONLY FOR SOPHISTICATED INVESTORS AND REQUIRES THE FINANCIAL
ABILITY AND WILLINGNESS TO ACCEPT THE HIGH RISKS AND LACK OF LIQUIDITY INHERENT IN AN INVESTMENT IN
THE COMPANY. INVESTORS IN THE COMPANY MUST BE PREPARED TO BEAR SUCH RISKS FOR AN INDEFINITE PERIOD
OF TIME. NO ASSURANCE CAN BE GIVEN THAT THE COMPANY‟S INVESTMENT OBJECTIVES WILL BE ACHIEVED.

                                                   i
IN MAKING AN INVESTMENT DECISION, INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE COMPANY AND
THE TERMS OF THIS OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED. PROSPECTIVE INVESTORS SHOULD
NOT CONSTRUE THE CONTENTS OF ANY INFORMATION FURNISHED ABOUT THE COMPANY AS LEGAL, TAX,
INVESTMENT OR ACCOUNTING ADVICE. PROSPECTIVE INVESTORS ARE URGED TO CONSULT WITH THEIR OWN
ADVISORS WITH RESPECT TO LEGAL, TAX, REGULATORY, FINANCIAL AND ACCOUNTING CONSEQUENCES OF THEIR
INVESTMENT IN THE COMPANY. EACH INVESTOR SHOULD MAKE HIS, HER, OR ITS OWN INQUIRIES AND CONSULT HIS,
HER, OR ITS OWN ADVISERS AS TO THE COMPANY AND THIS OFFERING AND AS TO ALL LEGAL, TAX AND RELATED
MATTERS CONCERNING AN INVESTMENT IN THE COMPANY.

THE OFFERING DOCUMENTS HAVE BEEN FURNISHED ON A CONFIDENTIAL BASIS SOLELY FOR THE INFORMATION OF
THE PERSON TO WHOM THEY HAVE BEEN DELIVERED ON BEHALF OF THE COMPANY; THEY MAY NOT BE REPRODUCED
OR USED IN WHOLE OR IN PART FOR ANY OTHER PURPOSES AND MAY NOT BE FURNISHED TO ANY OTHER PERSON. BY
ACCEPTING THE OFFERING DOCUMENTS, THE RECIPIENT AGREES TO KEEP THEM AND THEIR CONTENTS CONFIDENTIAL
AND NOT TO DISCLOSE ANY OF THE OFFERING DOCUMENTS OR THEIR CONTENTS TO ANYONE EXCEPT THE
RECIPIENT‟S LEGAL AND FINANCIAL ADVISORS, IN EACH CASE UNDER DUTIES OF MAINTAINING THE
CONFIDENTIALITY THEREOF. EACH PERSON ACCEPTING ANY OF THE OFFERING DOCUMENTS HEREBY AGREES TO
RETURN THEM TO THE COMPANY PROMPTLY UPON REQUEST.

EACH PROSPECTIVE INVESTOR IS INVITED TO MEET WITH REPRESENTATIVES OF THE COMPANY AND TO DISCUSS WITH,
ASK QUESTIONS OF AND RECEIVE ANSWERS FROM SUCH REPRESENTATIVES CONCERNING THE TERMS AND
CONDITIONS OF THIS OFFERING AND THE COMPANY, AND TO OBTAIN ANY ADDITIONAL INFORMATION, TO THE
EXTENT THAT SUCH REPRESENTATIVES POSSESS THE REQUESTED INFORMATION OR CAN ACQUIRE IT WITHOUT
UNREASONABLE EFFORT OR EXPENSE, NECESSARY TO VERIFY THE INFORMATION CONTAINED HEREIN.

NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH THIS OFFERING TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATIONS OTHER THAN AS CONTAINED IN THE OFFERING DOCUMENTS, AND ANY REPRESENTATIONS OTHER
THAN AS CONTAINED IN THE OFFERING DOCUMENTS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY
THE COMPANY, OR ANY OF ITS AFFILIATES.

                                                  ii
                                    INSTRUCTIONS TO SUBSCRIPTION AGREEMENT

NAME OF SUBSCRIBER:

SECURITIES OFFERED: Convertible Notes and Warrants of Lucid, Inc.

IMPORTANT INSTRUCTIONS FOR COMPLETION :

1.      COMPLETE YOUR NAME ABOVE; and

2.      PROVIDE THE AMOUNT OF YOUR SUBSCRIPTION AND ALL INFORMATION REQUESTED ON PAGES A-10 AND A-10,
       AND COMPLETE THE INVESTOR QUESTIONNAIRE ATTACHED AS ANNEX A ; and

3.      SIGN ALL OF THE FOLLOWING THE SUBSCRIPTION AGREEMENT IN THE APPROPRIATE PLACE ON PAGE A-10; and

4.      WIRE YOUR PAYMENT TO LUCID PURSUANT TO THE WIRING INSTRUCTIONS ATTACHED AS ANNEX B ; and

5.      DELIVER THE ORIGINAL SUBSCRIPTION AGREEMENT AND ALL OF THE SIGNED SIGNATURE PAGES TO:

                                       Lucid, Inc.
                                       2320 Brighton-Henrietta T/L Road
                                       Rochester, New York 14623
                                       Attention: Jay M. Eastman
                                       Telephone No.: (585) 239-9800

                                                             A-1
                                                      SUBSCRIPTION AGREEMENT

         This Subscription Agreement (the “ Agreement ”) is executed by the undersigned (the “Subscriber”) in connection with the offering
(the “ Offering ”) by Lucid, Inc., a New York corporation (the “ Company ”), of Convertible Notes of the Company (the “ Notes ”) and
Warrants to purchase shares of Common Stock of the Company (the “ Warrants ”)(collectively, the “ Securities ”).

                                                                  SECTION 1

1.1.     Subscription . The Subscriber, intending to be legally bound, hereby irrevocably subscribes for and agrees to purchase a Note with a
        principal amount equal to the Subscriber‟s Subscription Amount indicated on Page 9 hereof on the terms and conditions described
        herein (the “ Subscription Amount ”). The Subscriber will also be entitled to receive Warrants registered in the name of the
        Subscriber to purchase a number of shares of Common Stock equal to 70% of the principal amount of the Notes purchased by the
        Subscriber divided by the IPO Price (as that term is defined in the Note and Warrant) at a per share exercise price of $4.61.

1.2.     Payment for Purchase . Concurrently with the Subscriber‟s execution and delivery of this Subscription Agreement the Subscriber
        has delivered payment, via wire transfer, equal to such Subscriber‟s Subscription Amount. Wire transfer instructions are attached
        hereto as Annex D.

                                                                  SECTION 2

2.1.      Acceptance or Rejection .

        (a)       The Subscriber understands and agrees that the Company reserves the right to reject the Subscriber‟s subscription for
                 Securities in whole or in part if, in its reasonable judgment, it deems such action in the best interest of the Company.

        (b)       In the event of rejection of the Subscriber‟s subscription, this Agreement and any other agreement entered into between the
                 Subscriber and the Company relating to this subscription shall thereafter have no force or effect and the Company shall
                 promptly return or cause to be returned to the Subscriber its Subscription Amount, without interest, remitted to the Company
                 by the Subscriber in exchange for the Securities.

                                                                  SECTION 3

3.1.     Subscriber Representations and Warranties . The Subscriber hereby acknowledges, represents and warrants to, and agrees with, the
        Company and its affiliates as follows:

        (a)       The Subscriber is acquiring the Securities for the Subscriber‟s own account as principal, not as a nominee or agent, for
                 investment purposes only, and not with a view to, or for, resale, distribution or fractionalization thereof in whole or in part

                                                                       A-2
      and no other person has a direct or indirect beneficial interest in such interest. Further, the Subscriber does not have any
      contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participations to such person or to
      any third person, with respect to any of the interests to be acquired hereunder.

(b)    The Subscriber acknowledges the Subscriber‟s understanding that the offering and sale of the Securities is intended to be
      exempt from registration under the Securities Act by virtue of Section 4(2) of the Securities Act of 1933, as amended (the
      “Securities Act”), and the provisions of Regulation D promulgated thereunder (“Regulation D”). In furtherance thereof, the
      Subscriber represents and warrants to and agrees with the Company and its affiliates as follows:

      (i)       The Subscriber is a sophisticated investor and has substantial experience in evaluating and investing in securities of
               companies similar to the Company so that it is capable of evaluating, and has independently evaluated, the merits
               and risks of its investment in the Company. The Subscriber has a pre-existing relationship with the Company and
               that relationship was the cause of the solicitation giving rise to the Subscriber‟s investment.

      (ii)      The Subscriber has the financial ability to bear the economic risk of the Subscriber‟s investment for an indefinite
               period of time, has adequate means for providing for the Subscriber‟s current needs and personal contingencies and
               has no need for liquidity with respect to the Subscriber‟s investment in the Company; and

      (iii)      The Subscriber has such knowledge and experience in financial and business matters as to be capable of evaluating
               the merits and risks of the prospective investment. If other than an individual, the Subscriber also represents it has
               not been organized for the purpose of acquiring the Securities.

(c)    The Subscriber represents and warrants to the Company as follows:

      (i)       The Subscriber has received such information about the Company and the Offering that it has deemed necessary or
               desirable to make an investment decision; and

      (ii)      The Subscriber has been given the opportunity for a reasonable time prior to the date hereof to ask questions of,
               and receive answers from, the Company or its management concerning the terms and conditions of the this offering,
               and other matters pertaining to this investment, and has been given the opportunity for a reasonable time prior to the
               date hereof to obtain such additional information in connection with the Company in order for the Subscriber to
               evaluate the merits and risks of purchase of the Securities; and

                                                          A-3
(iii)     The Subscriber has determined that the Securities are a suitable investment for the Subscriber and that the
         Subscriber can bear a complete loss of the Subscriber‟s investment; and

(iv)       The Subscriber realizes that it may not be able to resell readily any of the Securities purchased hereunder because
         (A) there may only be a limited public market for any such securities and (B) none of such securities have been
         registered under the Securities Act or any state “blue sky” laws; and

(v)       The Subscriber understands that the Company has the absolute right to refuse to consent to the transfer or
         assignment of the Securities, if such transfer or assignment does not comply with applicable state and federal
         securities laws; and

(vi)       The Subscriber and the Subscriber‟s attorney, accountant, representative and/or tax advisor, if any (collectively, the
         “Advisors”), have received the documents, if any, requested by the Subscriber and/or the Advisors, have carefully
         reviewed them and understand the information contained therein, if any, prior to the execution of this Agreement;
         and

(vii)      All documents, records, and books pertaining to the investment in the Securities have been made available for
         inspection by the Subscriber and the Advisors, if any, to the extent the Company possesses such information or can
         acquire it without unreasonable effort or expense; and

(viii)     The Subscriber is unaware of, is no way relying on, and did not become aware of the offering of the Securities
         through or as a result of, any form of general solicitation or general advertising including, without limitation, any
         article, notice, advertisement or other communication published in any newspaper, magazine or similar media or
         broadcast over television or radio, in connection with the offering and sale of the Securities and is not subscribing
         for Securities and did not become aware of the offering of the Securities through or as a result of any seminar or
         meeting to which the Subscriber was invited by, or any solicitation of a subscription by, a person not previously
         known to the Subscriber in connection with investments in securities generally; and

(ix)       The Subscriber and the Advisors have such knowledge and experience in financial, tax, and business matters, and,
         in particular, investments in securities, so as to enable them to utilize the information made available to them in
         connection with the offering of the Securities to evaluate the merits and risks of an investment in the Securities and
         the Company and to make an informed investment decision with respect thereto; and

(x)        The Subscriber is acquiring the Securities solely for such Subscriber‟s own account for investment and not with a
         view to resale or distribution thereof, in whole or in part. The Subscriber has no agreement or

                                                     A-4
                 arrangement, formal or informal, with any person to sell or transfer all or any part of the Securities subscribed for
                 hereunder; and the Subscriber has no plans to enter into any such agreement or arrangement; and

        (xi)       The Subscriber understands that it must bear the substantial economic risks of the investment in the Securities
                 offered hereby indefinitely because none of the Securities may be sold, hypothecated or otherwise disposed of unless
                 subsequently registered under the Securities Act and applicable state securities laws or an exemption from such
                 registration is available. Legends shall be placed on any certificates evidencing the Securities subscribed for
                 hereunder to the effect that they have not been registered under the Securities Act or applicable state securities laws;
                 and

        (xii)      Within five days after receipt of a request from the Company, the Subscriber will provide such information and
                 deliver such documents as may reasonably be necessary to comply with any and all laws and regulations to which
                 the Company is subject.

(d)      If the Subscriber is a corporation, partnership, trust or other entity, it represents that: (i) it is duly organized, validly existing
        and in good standing under the laws of the jurisdiction of its organization and has all requisite power and authority to invest
        in the Company as provided herein; and (ii) the investment made hereby has been duly authorized by all necessary action on
        behalf of the Subscriber.

(e)      This Subscription Agreement has been duly executed and delivered by or on behalf of the Subscriber and constitutes a legal,
        valid and binding obligation of the Subscriber, enforceable against the Subscriber in accordance with its terms, and the
        Subscriber‟s investment will not result in any violation of, or conflict with, any term of the charter or by-laws or other
        organizational documents, if any, of the Subscriber, or any agreement or instrument to which the Subscriber is bound or any
        law, regulation, judgment, decree or order applicable to the Subscriber.

(f)       In making its decision to purchase the Securities herein subscribed for, the Subscriber has relied solely upon independent
        investigations made by it and materials furnished to it by the Company as referenced in this Agreement. The Subscriber has
        consulted outside tax and/or legal counsel and is not relying on the Company, or any references herein or in the documents
        attached hereto, with respect to tax or legal considerations involved in this investment. The Subscriber acknowledges that
        Harris Beach PLLC has represented only the Company and the in connection with this Subscription Agreement and the
        Offering, and that the Subscriber has not engaged Harris Beach PLLC to represent its interests in connection therewith.

The foregoing representations, warranties and agreements shall survive the sale of the Securities and acceptance by the Company of
the Subscriber‟s subscription.

                                                                A-5
                                                                 SECTION 4

4.1.     Non-Issuance Payment . In the event that the Company fails to complete either a Qualified IPO or a Non-Qualified Financing (as
       such terms are defined in the Note) prior to January 1, 2012 (the “Issuance Cut Off Date”) then, in addition to any other rights or
       remedies the Subscriber may have hereunder, at law, or in equity, on each of the date immediately after the Issuance Cut Off Date and
       on each monthly anniversary thereof until the Company completes a Qualified IPO or Non-Qualified Financing, a payment (each an “
       Accrual ” and collectively, the “ Total Payment ”) from the Company to the Subscriber shall accrue. Each Accrual (to be paid in cash
       as set forth below), which constitutes partial liquidated damages and is not a penalty, shall be equal to 1.5% of the Subscriber‟s
       Subscription Amount; provided, however , that the Total Payment paid by the Company shall not exceed 10% of the Subscriber‟s
       Subscription Amount. The Total Payment accrued shall be transferred to the Subscriber immediately after the first to occur of (i) a
       Qualified IPO, (ii) a Non-Qualified Financing or (iii) the maturity of the Note.

4.2      Lock-Up Agreement . The Subscriber agrees, in connection with the proposed Underwriting Agreement (the “ Underwriting
       Agreement ”) to be entered into by the Company and its designated underwriter (the “ Underwriter ”), with respect to the public
       offering (the “ Offering ”) of common stock, $0.01 par value, of the Company (the “ Common Stock ”) and warrants to purchase
       Common Stock of the Company (the “ Warrants ”), as follows. To induce the Underwriter to enter into the Underwriting Agreement,
       the Subscriber agrees that, for a period (the “ Lock-Up Period ”) beginning on the date hereof and ending on, and including, the date
       that is 90 days after the date that the Company‟s Registration Statement on Form S-1 filed by the Company with the Securities and
       Exchange Commission (the “ Commission ”) is declared effective by the Commission, the Subscriber will not, without the prior
       written consent of the Underwriter, (i) sell, offer to sell, contract or agree to sell, hypothecate, pledge, grant any option to purchase or
       otherwise dispose of or agree to dispose of, directly or indirectly, or file (or participate in the filing of) a registration statement with
       the Commission in respect of, or establish or increase a put equivalent position or liquidate or decrease a call equivalent position
       within the meaning of Section 16 of the Securities Exchange Act of 1934, as amended, and the rules and regulations of the
       Commission promulgated thereunder (the “ Exchange Act ”) with respect to, any Common Stock, Warrants, or any other securities of
       the Company that are substantially similar to the Common Stock, Warrants, or any securities convertible into or exchangeable or
       exercisable for, or any other rights to purchase, the foregoing, (ii) enter into any swap or other arrangement that transfers to another, in
       whole or in part, any of the economic consequences of ownership of any Common Stock, Warrants, or any other securities of the
       Company that are substantially similar to the Common Stock, Warrants, or any securities convertible into or exchangeable or
       exercisable for, or any other rights to purchase, the foregoing, whether any such transaction is to be settled by delivery of any
       Common Stock or Warrants or such other securities, in cash or otherwise, or (iii) publicly announce an intention to effect any
       transaction specified in clause (i) or (ii).

       The foregoing paragraph shall not apply to (a) the registration of the offer and sale of the Common Stock and Warrants as
       contemplated by the Underwriting Agreement and the

                                                                      A-6
      sale of the Common Stock and Warrants to the Underwriter (as defined in the Underwriting Agreement) in the Offering, (b) the
      registration of the offer and sale of the shares of Common Stock issuable upon exercise of the Warrants as contemplated by this
      Agreement, (c) bona fide gifts, provided the recipient thereof agrees in writing with the Underwriter to be bound by the terms of this
      Lock-Up Agreement, (d) dispositions to any trust for the direct or indirect benefit of the Subscriber or the immediate family of the
      Subscriber, provided that a duly authorized representative of such trust agrees in writing with the Underwriter to be bound by the
      terms of this Lock-Up Agreement, (e) transfers of any Common Stock, Warrants, or securities convertible into Common Stock on
      death by will or intestacy, (f) sales or transfers of any Common Stock solely in connection with the “cashless” exercise of Company
      stock options outstanding on the date hereof for the purpose of exercising such stock options (provided that any remaining Common
      Stock received upon such exercise will be subject to the restrictions provided for in this Lock-Up Agreement) or (g) sales or transfers
      of any Common Stock, Warrants, or securities convertible into Common Stock pursuant to a sales plan entered into prior to the date
      hereof pursuant to Rule 10b5-1 under the Exchange Act, a copy of which has been provided to the Underwriter. In addition, the
      restrictions sets forth herein shall not prevent the Subscriber from entering into a sales plan pursuant to Rule 10b5-1 under the
      Exchange Act after the date hereof, provided that (i) a copy of such plan is provided to the Underwriter promptly upon entering into
      the same and (ii) no sales or transfers may be made under such plan until the Lock-Up Period ends or this Lock-Up Agreement is
      terminated in accordance with its terms. For purposes of this paragraph, “immediate family” shall mean the Subscriber and the
      spouse, any lineal descendent, father, mother, brother or sister of the Subscriber. Nothing in this Section 4.10 shall affect or limit the
      automatic conversion of the amounts outstanding under the Note into Common Stock upon the consummation of the Offering.

      Notwithstanding the above, if (a) during the period that begins on the date that is seventeen (17) days before the last day of the
      Lock-Up Period and ends on the last day of the Lock-Up Period, the Company issues an earnings release or material news or a
      material event relating to the Company occurs; or (b) prior to the expiration of the Lock-Up Period, the Company announces that it
      will release earnings results during the sixteen (16) day period beginning on the last day of the Lock-Up Period, then the restrictions
      imposed by this Lock-Up Agreement shall continue to apply until the expiration of the date that is eighteen (18) days after the date on
      which the issuance of the earnings release or the material news or material event occurs.

      The Subscriber hereby confirms that the Subscriber has not, directly or indirectly, taken, and hereby covenants that the Subscriber will
      not, directly or indirectly, take, any action designed, or which has constituted or will constitute or might reasonably be expected to
      cause or result in the stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the
      Common Stock or Warrants.

4.3     Modification . Neither this Agreement nor any provisions hereof shall be waived, amended, modified, discharged or terminated
      except by an instrument in writing signed by the party against whom any waiver, amendment, modification, discharge or termination
      is sought.

                                                                     A-7



4.4     Notices . Any notice, demand or other communication which any party hereto may be required, or may elect, to give to anyone
      interested hereunder shall be in writing and shall be deemed given when (a) deposited, postage prepaid, in a United States mail letter
      box, registered or certified mail, return receipt requested, addressed to such address as may be given herein, or (b) delivered
      personally, to the other party hereto at their address set forth in this Agreement or such other address as a party hereto may request by
      notifying the other party hereto.

4.5    Counterparts . This Agreement may be executed through the use of separate signature pages or in any number of counterparts, and
      each of such counterparts shall, for all purposes, constitute one agreement binding on all parties, notwithstanding that all parties are
      not signatories to the same counterpart.

4.6    Binding Effect . Except as otherwise provided herein, this Agreement shall be binding upon and inure to the benefit of the parties
      and their heirs, executors, administrators, successors, legal representatives and assigns. If the Subscriber is more than one person, the
      obligation of the Subscriber shall be joint and several and the agreements, representations, warranties and acknowledgments herein
      contained shall be deemed to be made by and be binding upon each such person and his heirs, executors, administrators and
      successors.

4.7     Entire Agreement . This Agreement, the Note and the Warrant contain the entire agreement of the parties with respect to the
      transactions contemplated hereby and there are no representations, covenants or other agreements except as stated or referred to herein
      or in the Note and the Warrant.

4.8    Assignability . This Agreement is not transferable or assignable by the Subscriber.
4.9      Applicable Law . This Agreement shall be governed by and construed in accordance with the laws of the State of New York relating
       to contracts entered into and to be performed wholly within such State. The Subscriber hereby irrevocably submits to the jurisdiction
       of any New York State court or United States Federal court sitting in New York County over any action or proceeding arising out of
       or relating to this Agreement or any agreement contemplated hereby, and the Subscriber hereby irrevocably agrees that all claims in
       respect of such action or proceeding may be heard and determined in such New York State or Federal court. The Subscriber further
       waives any objection to venue in such State and any objection to an action or proceeding in such State on the basis of a
       non-convenient forum. The Subscriber further agrees that any action or proceeding brought against the Company shall be brought
       only in New York State or United States Federal courts sitting in New York County. THE SUBSCRIBER AGREES TO WAIVE ITS
       RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS
       AGREEMENT OR ANY DOCUMENT OR AGREEMENT CONTEMPLATED HEREBY.

4.10     Amendments . The provisions of this Agreement may be amended at any time and from time to time, and particular provisions of
       this Agreement may be waived, with and only with an agreement or consent in writing signed by the Company and by the Subscriber.

                                                                   A-8
4.11     Neutral Gender . The use in this Agreement of words in the male, female or neutral gender are for convenience only and shall not
       affect or control any provisions of this Agreement.

4.12    Captions . The Section headings contained in this Agreement are for reference purposes only and shall not affect in any way the
       meaning or interpretation of this Agreement.

4.13     Confidentiality . The Subscriber acknowledges and agrees that any information or data it has acquired from or about the Company,
       not otherwise properly in the public domain, was received in confidence. The Subscriber agrees not to divulge, communicate or
       disclose, except as may be required by law or for the performance of this Agreement, or use to the detriment of the Company or for
       the benefit of any other person or persons or otherwise, or misuse in any way, any confidential information of the Company and any
       information that is treated by the Company as confidential or proprietary, including, but not limited to, ideas, discoveries, inventions,
       developments and improvements belonging to the Company and confidential information obtained by or given to the Company about
       or belonging to third parties.

                                                                     A-9
A.       SUBSCRIPTION :

Subscription Amount =

B.       MANNER IN WHICH TITLE IS TO BE HELD                 (Please check One ):

1.                Individual

2.               Joint Tenants with Rights
                   of Survivorship

3.               Community Property

4.               Corporation/Partnership

5.               Trust/Estate/Pension or
                   Profit Sharing Plan, and
                   Date Opened:

6.               Other

C.       ACCREDITED INVESTOR REPRESENTATION :

         Subscriber must complete and sign the Accredited Investor Questionnaire attached as Annex A to this Agreement.

D.       TITLE :

         PLEASE GIVE THE EXACT AND COMPLETE NAME IN WHICH TITLE TO THE SECURITIES ARE TO BE HELD:

                                                        [Continues on Next Page]

                                                                  A-10
         IN WITNESS WHEREOF, the Subscriber has agreed to be irrevocably bound by this Agreement by signing below on
the          day of                   2011.


Signature:                                                            Signature:
Name:                                                                 Name:

Name of organization (if applicable)

Title (if applicable)


Street Address:

City:                                       State:                                          Zip:

Telephone: (            )

E-Mail Address:

Social Security or Federal Tax ID No.:


                                         ***DO NOT WRITE BELOW DOTTED LINE***

ACCEPTED ON BEHALF OF THE COMPANY:

LUCID, INC.

By:
Name:
Title:

                                                               A-11
                                                              ANNEX A
                                                     TO SUBSCRIPTION AGREEMENT

                                              ACCREDITED INVESTOR QUESTIONNAIRE

A.         APPLICABLE TO INDIVIDUALS ONLY: Please answer the following questions concerning your financial condition as an
         “accredited investor” (within the meaning of Rule 501 of Regulation D). If the Subscriber is more than one individual, each
         individual must initial an answer where the question indicates a “yes” or “no” response, indicating to which individual it applies. The
         Subscriber must answer “yes” in response to question 1 or 2 below to be considered an “accredited investor.” If the Subscriber is
         purchasing jointly with his or her spouse, one answer may be indicated for the couple as a whole:

         1.       Does your net worth, or joint net worth with your spouse, exceed $1,000,000 (exclusive of the value of your primary
                  residence)?

                  Yes                        No 

         2.       Did you have an individual income in excess of $200,000, or joint income together with your spouse in excess of $300,000,
                  in each of the two most recent years (2009 and 2010) and do you reasonably expect to reach the same income level in the
                  current year (2011)?

                  Yes                        No 

B.        APPLICABLE TO CORPORATIONS, PARTNERSHIPS AND OTHER ENTITIES ONLY:

The Subscriber is an accredited investor because the Subscriber falls within at least one of the following categories (Check all appropriate
lines):

                 (i)        a bank as defined in Section 3(a)(2) of the Securities Act or a savings and loan association or other institution as
                             defined in Section 3(a)(5)(A) of the Securities Act whether acting in its individual or fiduciary capacity;

                 (ii)       a broker-dealer registered pursuant to Section 15 of the Securities Exchange Act of 1934, as amended;

                 (iii)      an insurance company as defined in Section 2(13) of the Securities Act;

                                                                      A-12
   (iv)     an investment company registered under the Investment Company Act of 1940, as amended (the “ Investment
             Company Act ”) or a business development company as defined in Section 29(a)(48) of the Investment Company
             Act;

   (v)      a Small Business Investment Company licensed by the U.S. Small Business Administration under
             Section 301(c) or (d) of the Small Business Investment Act of 1958, as amended;

   (vi)     a plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state
             or its political subdivisions, for the benefit of its employees, where such plan has total assets in excess of
             $5,000,000;

   (vii)    an employee benefit plan within the meaning of Title 1 of the Employee Retirement Income Security Act of 1974,
             as amended (“ ERISA ”), where the investment decision is made by a plan fiduciary, as defined in Section 3(21)
             of ERISA, which is either a bank, savings and loan association, insurance company, or registered investment
             adviser, or an employee benefit plan that has total assets in excess of $5,000,000, or a self-directed plan the
             investment decisions of which are made solely by persons that are accredited investors;

   (viii)   a private business development company, as defined in Section 202(a)(22) of the Investment Advisers Act of
             1940, as amended;

   (ix)     an organization described in Section 501(c)(3) of the Internal Revenue Code, a corporation, a Massachusetts or
             similar business trust, or a partnership, not formed for the specific purpose of acquiring the securities offered, with
             total assets in excess of $5,000,000;

   (x)      a trust, with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the Securities,
             whose purchase is directed by a “sophisticated” person, who has such knowledge and experience in financial and
             business matters that he is capable of evaluating the merits and risks of the prospective investment;

   (xi)     an entity in which all of the equity owners are persons or entities described above (“accredited investors”). ALL
             SUCH EQUITY OWNERS MUST COMPLETE PART “A” ABOVE.

                                                      A-13
  Subscriber(s):



  Signature of Subscriber



  Print Name of Subscriber (and name of organization and title, if
  signing on behalf of an entity)



  Signature of Co-Subscriber (if any)



  Print Name of Co-Subscriber (and name of organization and title, if
  signing on behalf of an entity)

A-14
                                                            ANNEX B

                                                     WIRE INSTRUCTIONS

        To wire transfer money into the LUCID ACCOUNT (for Non-Interest Bearing Escrow payments), you will need to provide the
sender with the following information:

DOMESTIC WIRES

Bank:

Remark/Reference:

Routing # / ABA #:
Account Name:

Account #:

                                                               B-1
                                 Exhibit 4.23




    SUBSCRIPTION AGREEMENT


        in connection with

          LUCID, INC.

CONVERTIBLE NOTES AND WARRANTS




            July, 2011
THIS SUBSCRIPTION AGREEMENT AND THE INFORMATION CONCERNING LUCID, INC. (THE “ COMPANY ”)
(COLLECTIVELY, THE “ OFFERING DOCUMENTS ”) ARE FURNISHED ON A CONFIDENTIAL BASIS TO A LIMITED NUMBER
OF SOPHISTICATED INVESTORS FOR THE PURPOSE OF PROVIDING CERTAIN INFORMATION ABOUT AN INVESTMENT IN
CONVERTIBLE NOTES AND WARRANTS (THE “ SECURITIES ”) OF THE COMPANY, A NEW YORK CORPORATION, AND
MAY NOT BE USED FOR ANY OTHER PURPOSE. THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION (THE “ SEC ”) OR THE SECURITIES REGULATORY AUTHORITY OF ANY STATE
OR OF ANY OTHER JURISDICTION, NOR HAS THE SEC OR ANY SUCH SECURITIES REGULATORY AUTHORITY PASSED
UPON THE ACCURACY OR ADEQUACY OF ANY OF THE OFFERING DOCUMENTS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE. THE SECURITIES ARE OFFERED SUBJECT TO THE RIGHT OF LUCID TO REJECT ANY
SUBSCRIPTION IN WHOLE OR IN PART. IF LUCID REJECTS A SUBSCRIPTION, THE PROSPECTIVE INVESTOR WILL BE
NOTIFIED AS SOON AS IS PRACTICABLE. NONE OF THE OFFERING DOCUMENTS MAY BE REPRODUCED OR PROVIDED TO
OTHERS WITHOUT THE PROPER WRITTEN PERMISSION OF LUCID. BY ACCEPTING DELIVERY OF ANY OR ALL OF THE
OFFERING DOCUMENTS, EACH PROSPECTIVE INVESTOR AGREES TO THE FOREGOING.

THE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ SECURITIES
ACT ”), OR UNDER THE SECURITIES LAWS OF ANY STATE OR ANY OTHER JURISDICTION, NOR IS SUCH REGISTRATION
CONTEMPLATED. THE SECURITIES WILL BE OFFERED AND SOLD UNDER THE EXEMPTION PROVIDED BY
SECTION 4(2) OF THE SECURITIES ACT AND THE RULES PROMULGATED THEREUNDER AND OTHER EXEMPTIONS OF
SIMILAR IMPORT IN THE LAWS OF THE STATES WHERE THE OFFERING WILL BE MADE. THE SECURITIES MAY NOT BE
SOLD OR TRANSFERRED UNLESS SUCH SALE OR TRANSFER IS EXEMPTED FROM REGISTRATION UNDER THE SECURITIES
ACT AND UNDER ALL OTHER APPLICABLE LAWS AND REGULATIONS. EACH INVESTOR MUST BE AN “ ACCREDITED
INVESTOR ” WITHIN THE MEANING OF THE SECURITIES ACT. THERE IS NO PUBLIC MARKET FOR THE SECURITIES.

AN INVESTMENT IN THE COMPANY IS SUITABLE ONLY FOR SOPHISTICATED INVESTORS AND REQUIRES THE FINANCIAL
ABILITY AND WILLINGNESS TO ACCEPT THE HIGH RISKS AND LACK OF LIQUIDITY INHERENT IN AN INVESTMENT IN
THE COMPANY. INVESTORS IN THE COMPANY MUST BE PREPARED TO BEAR SUCH RISKS FOR AN INDEFINITE PERIOD
OF TIME. NO ASSURANCE CAN BE GIVEN THAT THE COMPANY‟S INVESTMENT OBJECTIVES WILL BE ACHIEVED.

                                                  i
IN MAKING AN INVESTMENT DECISION, INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE COMPANY AND
THE TERMS OF THIS OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED. PROSPECTIVE INVESTORS SHOULD
NOT CONSTRUE THE CONTENTS OF ANY INFORMATION FURNISHED ABOUT THE COMPANY AS LEGAL,
TAX, INVESTMENT OR ACCOUNTING ADVICE. PROSPECTIVE INVESTORS ARE URGED TO CONSULT WITH THEIR OWN
ADVISORS WITH RESPECT TO LEGAL, TAX, REGULATORY, FINANCIAL AND ACCOUNTING CONSEQUENCES OF THEIR
INVESTMENT IN THE COMPANY. EACH INVESTOR SHOULD MAKE HIS, HER, OR ITS OWN INQUIRIES AND CONSULT HIS,
HER, OR ITS OWN ADVISERS AS TO THE COMPANY AND THIS OFFERING AND AS TO ALL LEGAL, TAX AND RELATED
MATTERS CONCERNING AN INVESTMENT IN THE COMPANY.

THE OFFERING DOCUMENTS HAVE BEEN FURNISHED ON A CONFIDENTIAL BASIS SOLELY FOR THE INFORMATION OF
THE PERSON TO WHOM THEY HAVE BEEN DELIVERED ON BEHALF OF THE COMPANY; THEY MAY NOT BE REPRODUCED
OR USED IN WHOLE OR IN PART FOR ANY OTHER PURPOSES AND MAY NOT BE FURNISHED TO ANY OTHER PERSON. BY
ACCEPTING THE OFFERING DOCUMENTS, THE RECIPIENT AGREES TO KEEP THEM AND THEIR CONTENTS CONFIDENTIAL
AND NOT TO DISCLOSE ANY OF THE OFFERING DOCUMENTS OR THEIR CONTENTS TO ANYONE EXCEPT THE
RECIPIENT‟S LEGAL AND FINANCIAL ADVISORS, IN EACH CASE UNDER DUTIES OF MAINTAINING THE
CONFIDENTIALITY THEREOF. EACH PERSON ACCEPTING ANY OF THE OFFERING DOCUMENTS HEREBY AGREES TO
RETURN THEM TO THE COMPANY PROMPTLY UPON REQUEST.

EACH PROSPECTIVE INVESTOR IS INVITED TO MEET WITH REPRESENTATIVES OF THE COMPANY AND TO DISCUSS WITH,
ASK QUESTIONS OF AND RECEIVE ANSWERS FROM SUCH REPRESENTATIVES CONCERNING THE TERMS AND
CONDITIONS OF THIS OFFERING AND THE COMPANY, AND TO OBTAIN ANY ADDITIONAL INFORMATION, TO THE
EXTENT THAT SUCH REPRESENTATIVES POSSESS THE REQUESTED INFORMATION OR CAN ACQUIRE IT WITHOUT
UNREASONABLE EFFORT OR EXPENSE, NECESSARY TO VERIFY THE INFORMATION CONTAINED HEREIN.

NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH THIS OFFERING TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATIONS OTHER THAN AS CONTAINED IN THE OFFERING DOCUMENTS, AND ANY REPRESENTATIONS OTHER
THAN AS CONTAINED IN THE OFFERING DOCUMENTS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY
THE COMPANY, OR ANY OF ITS AFFILIATES.

                                                  ii
                                    INSTRUCTIONS TO SUBSCRIPTION AGREEMENT

NAME OF SUBSCRIBER:

SECURITIES OFFERED: Convertible Notes and Warrants of Lucid, Inc.

IMPORTANT INSTRUCTIONS FOR COMPLETION :

1.           COMPLETE YOUR NAME ABOVE; and

2.           PROVIDE THE AMOUNT OF YOUR SUBSCRIPTION AND ALL INFORMATION REQUESTED ON PAGES A-10 AND
       A-10, AND COMPLETE THE INVESTOR QUESTIONNAIRE ATTACHED AS ANNEX A ; and

3.           SIGN ALL OF THE FOLLOWING THE SUBSCRIPTION AGREEMENT IN THE APPROPRIATE PLACE ON PAGE
       A-10; and

4.           WIRE YOUR PAYMENT TO LUCID PURSUANT TO THE WIRING INSTRUCTIONS ATTACHED AS ANNEX B ; and

5.           DELIVER THE ORIGINAL SUBSCRIPTION AGREEMENT AND ALL OF THE SIGNED SIGNATURE PAGES TO:

                                       Lucid, Inc.
                                       2320 Brighton-Henrietta T/L Road
                                       Rochester, New York 14623
                                       Attention: Jay M. Eastman
                                       Telephone No.: (585) 239-9800

                                                             A-1
                                                     SUBSCRIPTION AGREEMENT

         This Subscription Agreement (the “ Agreement ”) is executed by the undersigned (the “Subscriber”) in connection with the offering
(the “ Offering ”) by Lucid, Inc., a New York corporation (the “ Company ”), of Convertible Notes of the Company (the “ Notes ”) and
Warrants to purchase shares of Common Stock of the Company (the “ Warrants ”)(collectively, the “ Securities ”).

                                                                 SECTION 1

1.1.          Subscription . The Subscriber, intending to be legally bound, hereby irrevocably subscribes for and agrees to purchase a Note
        with a principal amount equal to the Subscriber‟s Subscription Amount indicated on Page 9 hereof on the terms and conditions
        described herein (the “ Subscription Amount ”). The Subscriber will also be entitled to receive Warrants registered in the name of the
        Subscriber to purchase a number of shares of Common Stock equal to 70% of the principal amount of the Notes purchased by the
        Subscriber divided by the IPO Price (as that term is defined in the Note and Warrant) at a per share exercise price of $4.61.

1.2.          Payment for Purchase . Concurrently with the Subscriber‟s execution and delivery of this Subscription Agreement the
        Subscriber has delivered payment, via wire transfer, equal to such Subscriber‟s Subscription Amount. Wire transfer instructions are
        attached hereto as Annex D.

                                                                 SECTION 2

2.1.          Acceptance or Rejection .

        (a)            The Subscriber understands and agrees that the Company reserves the right to reject the Subscriber‟s subscription for
                 Securities in whole or in part if, in its reasonable judgment, it deems such action in the best interest of the Company.

        (b)            In the event of rejection of the Subscriber‟s subscription, this Agreement and any other agreement entered into between
                 the Subscriber and the Company relating to this subscription shall thereafter have no force or effect and the Company shall
                 promptly return or cause to be returned to the Subscriber its Subscription Amount, without interest, remitted to the Company
                 by the Subscriber in exchange for the Securities.

                                                                 SECTION 3

3.1.         Subscriber Representations and Warranties . The Subscriber hereby acknowledges, represents and warrants to, and agrees with,
        the Company and its affiliates as follows:

        (a)            The Subscriber is acquiring the Securities for the Subscriber‟s own account as principal, not as a nominee or agent, for
                 investment purposes only, and not with a view to, or for, resale, distribution or fractionalization thereof in whole or in part

                                                                      A-2
      and no other person has a direct or indirect beneficial interest in such interest. Further, the Subscriber does not have any
      contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participations to such person or to
      any third person, with respect to any of the interests to be acquired hereunder.

(b)         The Subscriber acknowledges the Subscriber‟s understanding that the offering and sale of the Securities is intended to
      be exempt from registration under the Securities Act by virtue of Section 4(2) of the Securities Act of 1933, as amended (the
      “Securities Act”), and the provisions of Regulation D promulgated thereunder (“Regulation D”). In furtherance thereof, the
      Subscriber represents and warrants to and agrees with the Company and its affiliates as follows:

      (i)              The Subscriber is a sophisticated investor and has substantial experience in evaluating and investing in
                securities of companies similar to the Company so that it is capable of evaluating, and has independently evaluated,
                the merits and risks of its investment in the Company. The Subscriber has a pre-existing relationship with the
                Company and that relationship was the cause of the solicitation giving rise to the Subscriber‟s investment.

      (ii)            The Subscriber has the financial ability to bear the economic risk of the Subscriber‟s investment for an
                indefinite period of time, has adequate means for providing for the Subscriber‟s current needs and personal
                contingencies and has no need for liquidity with respect to the Subscriber‟s investment in the Company; and

      (iii)           The Subscriber has such knowledge and experience in financial and business matters as to be capable of
                evaluating the merits and risks of the prospective investment. If other than an individual, the Subscriber also
                represents it has not been organized for the purpose of acquiring the Securities.

(c)           The Subscriber represents and warrants to the Company as follows:

      (i)             The Subscriber has received such information about the Company and the Offering that it has deemed
                necessary or desirable to make an investment decision; and

      (ii)             The Subscriber has been given the opportunity for a reasonable time prior to the date hereof to ask questions
                of, and receive answers from, the Company or its management concerning the terms and conditions of the this
                offering, and other matters pertaining to this investment, and has been given the opportunity for a reasonable time
                prior to the date hereof to obtain such additional information in connection with the Company in order for the
                Subscriber to evaluate the merits and risks of purchase of the Securities; and

                                                           A-3
(iii)         The Subscriber has determined that the Securities are a suitable investment for the Subscriber and that the
         Subscriber can bear a complete loss of the Subscriber‟s investment; and

(iv)          The Subscriber realizes that it may not be able to resell readily any of the Securities purchased hereunder
         because (A) there may only be a limited public market for any such securities and (B) none of such securities have
         been registered under the Securities Act or any state “blue sky” laws; and

(v)            The Subscriber understands that the Company has the absolute right to refuse to consent to the transfer or
         assignment of the Securities, if such transfer or assignment does not comply with applicable state and federal
         securities laws; and

(vi)           The Subscriber and the Subscriber‟s attorney, accountant, representative and/or tax advisor, if any
         (collectively, the “Advisors”), have received the documents, if any, requested by the Subscriber and/or the Advisors,
         have carefully reviewed them and understand the information contained therein, if any, prior to the execution of this
         Agreement; and

(vii)         All documents, records, and books pertaining to the investment in the Securities have been made available for
         inspection by the Subscriber and the Advisors, if any, to the extent the Company possesses such information or can
         acquire it without unreasonable effort or expense; and

(viii)         The Subscriber is unaware of, is no way relying on, and did not become aware of the offering of the Securities
         through or as a result of, any form of general solicitation or general advertising including, without limitation, any
         article, notice, advertisement or other communication published in any newspaper, magazine or similar media or
         broadcast over television or radio, in connection with the offering and sale of the Securities and is not subscribing
         for Securities and did not become aware of the offering of the Securities through or as a result of any seminar or
         meeting to which the Subscriber was invited by, or any solicitation of a subscription by, a person not previously
         known to the Subscriber in connection with investments in securities generally; and

(ix)            The Subscriber and the Advisors have such knowledge and experience in financial, tax, and business matters,
         and, in particular, investments in securities, so as to enable them to utilize the information made available to them in
         connection with the offering of the Securities to evaluate the merits and risks of an investment in the Securities and
         the Company and to make an informed investment decision with respect thereto; and

(x)             The Subscriber is acquiring the Securities solely for such Subscriber‟s own account for investment and not
         with a view to resale or distribution thereof, in whole or in part. The Subscriber has no agreement or

                                                     A-4
                 arrangement, formal or informal, with any person to sell or transfer all or any part of the Securities subscribed for
                 hereunder; and the Subscriber has no plans to enter into any such agreement or arrangement; and

        (xi)            The Subscriber understands that it must bear the substantial economic risks of the investment in the Securities
                 offered hereby indefinitely because none of the Securities may be sold, hypothecated or otherwise disposed of unless
                 subsequently registered under the Securities Act and applicable state securities laws or an exemption from such
                 registration is available. Legends shall be placed on any certificates evidencing the Securities subscribed for
                 hereunder to the effect that they have not been registered under the Securities Act or applicable state securities laws;
                 and

        (xii)          Within five days after receipt of a request from the Company, the Subscriber will provide such information
                 and deliver such documents as may reasonably be necessary to comply with any and all laws and regulations to
                 which the Company is subject.

(d)           If the Subscriber is a corporation, partnership, trust or other entity, it represents that: (i) it is duly organized, validly
        existing and in good standing under the laws of the jurisdiction of its organization and has all requisite power and authority to
        invest in the Company as provided herein; and (ii) the investment made hereby has been duly authorized by all necessary
        action on behalf of the Subscriber.

(e)            This Subscription Agreement has been duly executed and delivered by or on behalf of the Subscriber and constitutes a
        legal, valid and binding obligation of the Subscriber, enforceable against the Subscriber in accordance with its terms, and the
        Subscriber‟s investment will not result in any violation of, or conflict with, any term of the charter or by-laws or other
        organizational documents, if any, of the Subscriber, or any agreement or instrument to which the Subscriber is bound or any
        law, regulation, judgment, decree or order applicable to the Subscriber.

(f)           In making its decision to purchase the Securities herein subscribed for, the Subscriber has relied solely upon
        independent investigations made by it and materials furnished to it by the Company as referenced in this Agreement. The
        Subscriber has consulted outside tax and/or legal counsel and is not relying on the Company, or any references herein or in
        the documents attached hereto, with respect to tax or legal considerations involved in this investment. The Subscriber
        acknowledges that Harris Beach PLLC has represented only the Company and the in connection with this Subscription
        Agreement and the Offering, and that the Subscriber has not engaged Harris Beach PLLC to represent its interests in
        connection therewith.

The foregoing representations, warranties and agreements shall survive the sale of the Securities and acceptance by the Company of
the Subscriber‟s subscription.

                                                              A-5
                                                                 SECTION 4

4.1.          Non-Issuance Payment . In the event that the Company fails to complete either a Qualified IPO or a Non-Qualified Financing (as
       such terms are defined in the Note) prior to January 1, 2012 (the “Issuance Cut Off Date”) then, in addition to any other rights or
       remedies the Subscriber may have hereunder, at law, or in equity, on each of the date immediately after the Issuance Cut Off Date and
       on each monthly anniversary thereof until the Company completes a Qualified IPO or Non-Qualified Financing, a payment (each an “
       Accrual ” and collectively, the “ Total Payment ”) from the Company to the Subscriber shall accrue. Each Accrual (to be paid in cash
       as set forth below), which constitutes partial liquidated damages and is not a penalty, shall be equal to 1.5% of the Subscriber‟s
       Subscription Amount; provided, however , that the Total Payment paid by the Company shall not exceed 10% of the Subscriber‟s
       Subscription Amount. The Total Payment accrued shall be transferred to the Subscriber immediately after the first to occur of (i) a
       Qualified IPO, (ii) a Non-Qualified Financing or (iii) the maturity of the Note.

4.2           Lock-Up Agreement . The Subscriber agrees, in connection with the proposed Underwriting Agreement (the “ Underwriting
       Agreement ”) to be entered into by the Company and its designated underwriter (the “ Underwriter ”), with respect to the public
       offering (the “ Offering ”) of common stock, $0.01 par value, of the Company (the “ Common Stock ”) and warrants to purchase
       Common Stock of the Company (the “ Warrants ”), as follows. To induce the Underwriter to enter into the Underwriting Agreement,
       the Subscriber agrees that, for a period (the “ Lock-Up Period ”) beginning on the date hereof and ending on, and including, the date
       that is 180 days after the date that the Company‟s Registration Statement on Form S-1 filed by the Company with the Securities and
       Exchange Commission (the “ Commission ”) is declared effective by the Commission, the Subscriber will not, without the prior
       written consent of the Underwriter, (i) sell, offer to sell, contract or agree to sell, hypothecate, pledge, grant any option to purchase or
       otherwise dispose of or agree to dispose of, directly or indirectly, or file (or participate in the filing of) a registration statement with
       the Commission in respect of, or establish or increase a put equivalent position or liquidate or decrease a call equivalent position
       within the meaning of Section 16 of the Securities Exchange Act of 1934, as amended, and the rules and regulations of the
       Commission promulgated thereunder (the “ Exchange Act ”) with respect to, any Common Stock, Warrants, or any other securities of
       the Company that are substantially similar to the Common Stock, Warrants, or any securities convertible into or exchangeable or
       exercisable for, or any other rights to purchase, the foregoing, (ii) enter into any swap or other arrangement that transfers to another, in
       whole or in part, any of the economic consequences of ownership of any Common Stock, Warrants, or any other securities of the
       Company that are substantially similar to the Common Stock, Warrants, or any securities convertible into or exchangeable or
       exercisable for, or any other rights to purchase, the foregoing, whether any such transaction is to be settled by delivery of any
       Common Stock or Warrants or such other securities, in cash or otherwise, or (iii) publicly announce an intention to effect any
       transaction specified in clause (i) or (ii).

       The foregoing paragraph shall not apply to (a) the registration of the offer and sale of the Common Stock and Warrants as
       contemplated by the Underwriting Agreement and the

                                                                      A-6
      sale of the Common Stock and Warrants to the Underwriter (as defined in the Underwriting Agreement) in the Offering, (b) the
      registration of the offer and sale of the shares of Common Stock issuable upon exercise of the Warrants as contemplated by this
      Agreement, (c) bona fide gifts, provided the recipient thereof agrees in writing with the Underwriter to be bound by the terms of this
      Lock-Up Agreement, (d) dispositions to any trust for the direct or indirect benefit of the Subscriber or the immediate family of the
      Subscriber, provided that a duly authorized representative of such trust agrees in writing with the Underwriter to be bound by the
      terms of this Lock-Up Agreement, (e) transfers of any Common Stock, Warrants, or securities convertible into Common Stock on
      death by will or intestacy, (f) sales or transfers of any Common Stock solely in connection with the “cashless” exercise of Company
      stock options outstanding on the date hereof for the purpose of exercising such stock options (provided that any remaining Common
      Stock received upon such exercise will be subject to the restrictions provided for in this Lock-Up Agreement) or (g) sales or transfers
      of any Common Stock, Warrants, or securities convertible into Common Stock pursuant to a sales plan entered into prior to the date
      hereof pursuant to Rule 10b5-1 under the Exchange Act, a copy of which has been provided to the Underwriter. In addition, the
      restrictions sets forth herein shall not prevent the Subscriber from entering into a sales plan pursuant to Rule 10b5-1 under the
      Exchange Act after the date hereof, provided that (i) a copy of such plan is provided to the Underwriter promptly upon entering into
      the same and (ii) no sales or transfers may be made under such plan until the Lock-Up Period ends or this Lock-Up Agreement is
      terminated in accordance with its terms. For purposes of this paragraph, “immediate family” shall mean the Subscriber and the
      spouse, any lineal descendent, father, mother, brother or sister of the Subscriber. Nothing in this Section 4.10 shall affect or limit the
      automatic conversion of the amounts outstanding under the Note into Common Stock upon the consummation of the Offering.

      Notwithstanding the above, if (a) during the period that begins on the date that is seventeen (17) days before the last day of the
      Lock-Up Period and ends on the last day of the Lock-Up Period, the Company issues an earnings release or material news or a
      material event relating to the Company occurs; or (b) prior to the expiration of the Lock-Up Period, the Company announces that it
      will release earnings results during the sixteen (16) day period beginning on the last day of the Lock-Up Period, then the restrictions
      imposed by this Lock-Up Agreement shall continue to apply until the expiration of the date that is eighteen (18) days after the date on
      which the issuance of the earnings release or the material news or material event occurs.

      The Subscriber hereby confirms that the Subscriber has not, directly or indirectly, taken, and hereby covenants that the Subscriber will
      not, directly or indirectly, take, any action designed, or which has constituted or will constitute or might reasonably be expected to
      cause or result in the stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the
      Common Stock or Warrants.

4.3         Modification . Neither this Agreement nor any provisions hereof shall be waived, amended, modified, discharged or terminated
      except by an instrument in writing signed by the party against whom any waiver, amendment, modification, discharge or termination
      is sought.

                                                                     A-7



4.4          Notices . Any notice, demand or other communication which any party hereto may be required, or may elect, to give to anyone
      interested hereunder shall be in writing and shall be deemed given when (a) deposited, postage prepaid, in a United States mail letter
      box, registered or certified mail, return receipt requested, addressed to such address as may be given herein, or (b) delivered
      personally, to the other party hereto at their address set forth in this Agreement or such other address as a party hereto may request by
      notifying the other party hereto.

4.5         Counterparts . This Agreement may be executed through the use of separate signature pages or in any number of counterparts,
      and each of such counterparts shall, for all purposes, constitute one agreement binding on all parties, notwithstanding that all parties
      are not signatories to the same counterpart.

4.6         Binding Effect . Except as otherwise provided herein, this Agreement shall be binding upon and inure to the benefit of the
      parties and their heirs, executors, administrators, successors, legal representatives and assigns. If the Subscriber is more than one
      person, the obligation of the Subscriber shall be joint and several and the agreements, representations, warranties and
      acknowledgments herein contained shall be deemed to be made by and be binding upon each such person and his heirs, executors,
      administrators and successors.

4.7          Entire Agreement . This Agreement, the Note and the Warrant contain the entire agreement of the parties with respect to the
      transactions contemplated hereby and there are no representations, covenants or other agreements except as stated or referred to herein
      or in the Note and the Warrant.

4.8         Assignability . This Agreement is not transferable or assignable by the Subscriber.
4.9           Applicable Law . This Agreement shall be governed by and construed in accordance with the laws of the State of New York
       relating to contracts entered into and to be performed wholly within such State. The Subscriber hereby irrevocably submits to the
       jurisdiction of any New York State court or United States Federal court sitting in New York County over any action or proceeding
       arising out of or relating to this Agreement or any agreement contemplated hereby, and the Subscriber hereby irrevocably agrees that
       all claims in respect of such action or proceeding may be heard and determined in such New York State or Federal court. The
       Subscriber further waives any objection to venue in such State and any objection to an action or proceeding in such State on the basis
       of a non-convenient forum. The Subscriber further agrees that any action or proceeding brought against the Company shall be
       brought only in New York State or United States Federal courts sitting in New York County. THE SUBSCRIBER AGREES TO
       WAIVE ITS RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF
       THIS AGREEMENT OR ANY DOCUMENT OR AGREEMENT CONTEMPLATED HEREBY.

4.10         Amendments . The provisions of this Agreement may be amended at any time and from time to time, and particular provisions
       of this Agreement may be waived, with and only with an agreement or consent in writing signed by the Company and by the
       Subscriber.

                                                                    A-8
4.11         Neutral Gender . The use in this Agreement of words in the male, female or neutral gender are for convenience only and shall
       not affect or control any provisions of this Agreement.

4.12       Captions . The Section headings contained in this Agreement are for reference purposes only and shall not affect in any way the
       meaning or interpretation of this Agreement.

4.13         Confidentiality . The Subscriber acknowledges and agrees that any information or data it has acquired from or about the
       Company, not otherwise properly in the public domain, was received in confidence. The Subscriber agrees not to divulge,
       communicate or disclose, except as may be required by law or for the performance of this Agreement, or use to the detriment of the
       Company or for the benefit of any other person or persons or otherwise, or misuse in any way, any confidential information of the
       Company and any information that is treated by the Company as confidential or proprietary, including, but not limited to, ideas,
       discoveries, inventions, developments and improvements belonging to the Company and confidential information obtained by or given
       to the Company about or belonging to third parties.

                                                                   A-9
A.       SUBSCRIPTION :

Subscription Amount =

B.       MANNER IN WHICH TITLE IS TO BE HELD (Please check One ):

1.              Individual

2.              Joint Tenants with Rights
                 of Survivorship

3.              Community Property

4.              Corporation/Partnership

5.              Trust/Estate/Pension or
                 Profit Sharing Plan, and
                 Date Opened:

6.              Other

C.       ACCREDITED INVESTOR REPRESENTATION :

         Subscriber must complete and sign the Accredited Investor Questionnaire attached as Annex A to this Agreement.

D.       TITLE :

         PLEASE GIVE THE EXACT AND COMPLETE NAME IN WHICH TITLE TO THE SECURITIES ARE TO BE HELD:


                                                       [Continues on Next Page]

                                                                 A-10
         IN WITNESS WHEREOF, the Subscriber has agreed to be irrevocably bound by this Agreement by signing below on the   day
of            2011.


Signature:                                                          Signature:
Name:                                                               Name:

Name of organization (if applicable)
Title (if applicable)


Street Address:
City:                                    State:                                     Zip:

Telephone: (        )
E-Mail Address:
Social Security or Federal Tax ID No.:

                                           ***DO NOT WRITE BELOW DOTTED LINE***

ACCEPTED ON BEHALF OF THE COMPANY:

LUCID, INC.

By:
Name:
Title:

                                                                A-11
                                                                   ANNEX A

                                                    TO SUBSCRIPTION AGREEMENT

                                              ACCREDITED INVESTOR QUESTIONNAIRE

A.             APPLICABLE TO INDIVIDUALS ONLY: Please answer the following questions concerning your financial condition as
         an “accredited investor” (within the meaning of Rule 501 of Regulation D). If the Subscriber is more than one individual, each
         individual must initial an answer where the question indicates a “yes” or “no” response, indicating to which individual it applies. The
         Subscriber must answer “yes” in response to question 1 or 2 below to be considered an “accredited investor.” If the Subscriber is
         purchasing jointly with his or her spouse, one answer may be indicated for the couple as a whole:

         1.        Does your net worth, or joint net worth with your spouse, exceed $1,000,000 (exclusive of the value of your primary
                   residence)?

                   Yes             No 

         2.        Did you have an individual income in excess of $200,000, or joint income together with your spouse in excess of $300,000,
                   in each of the two most recent years (2009 and 2010) and do you reasonably expect to reach the same income level in the
                   current year (2011)?

                   Yes             No 

B.             APPLICABLE TO CORPORATIONS, PARTNERSHIPS AND OTHER ENTITIES ONLY:

The Subscriber is an accredited investor because the Subscriber falls within at least one of the following categories (Check all appropriate
lines):

                 (i)        a bank as defined in Section 3(a)(2) of the Securities Act or a savings and loan association or other institution as
                             defined in Section 3(a)(5)(A) of the Securities Act whether acting in its individual or fiduciary capacity;

                 (ii)       a broker-dealer registered pursuant to Section 15 of the Securities Exchange Act of 1934, as amended;

                 (iii)      an insurance company as defined in Section 2(13) of the Securities Act;

                                                                      A-12
   (iv)     an investment company registered under the Investment Company Act of 1940, as amended (the “ Investment
             Company Act ”) or a business development company as defined in Section 29(a)(48) of the Investment Company
             Act;

   (v)      a Small Business Investment Company licensed by the U.S. Small Business Administration under
             Section 301(c) or (d) of the Small Business Investment Act of 1958, as amended;

   (vi)     a plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state
             or its political subdivisions, for the benefit of its employees, where such plan has total assets in excess of
             $5,000,000;

   (vii)    an employee benefit plan within the meaning of Title 1 of the Employee Retirement Income Security Act of 1974,
             as amended (“ ERISA ”), where the investment decision is made by a plan fiduciary, as defined in Section 3(21)
             of ERISA, which is either a bank, savings and loan association, insurance company, or registered investment
             adviser, or an employee benefit plan that has total assets in excess of $5,000,000, or a self-directed plan the
             investment decisions of which are made solely by persons that are accredited investors;

   (viii)   a private business development company, as defined in Section 202(a)(22) of the Investment Advisers Act of
             1940, as amended;

   (ix)     an organization described in Section 501(c)(3) of the Internal Revenue Code, a corporation, a Massachusetts or
             similar business trust, or a partnership, not formed for the specific purpose of acquiring the securities offered, with
             total assets in excess of $5,000,000;

   (x)      a trust, with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the Securities,
             whose purchase is directed by a “sophisticated” person, who has such knowledge and experience in financial and
             business matters that he is capable of evaluating the merits and risks of the prospective investment;

   (xi)     an entity in which all of the equity owners are persons or entities described above (“accredited investors”). ALL
             SUCH EQUITY OWNERS MUST COMPLETE PART “A” ABOVE.

                                                      A-13
   Subscriber(s):



   Signature of Subscriber



   Print Name of Subscriber (and name of organization and title, if
   signing on behalf of an entity)



   Signature of Co-Subscriber (if any)



   Print Name of Co-Subscriber (and name of organization and title, if
   signing on behalf of an entity)

A-14
                                                            ANNEX B

                                                     WIRE INSTRUCTIONS

        To wire transfer money into the LUCID ACCOUNT (for Non-Interest Bearing Escrow payments), you will need to provide the
sender with the following information:

DOMESTIC WIRES

Bank:

Remark/Reference:

Routing # / ABA #:
Account Name:

Account #:

                                                               B-1
                                                                                                                                   Exhibit 4.24

                                                                                                                              - Execution Copy

THIS NOTE AND THE SECURITIES ISSUABLE UPON CONVERSION HEREOF HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “ SECURITIES ACT ”), APPLICABLE STATE SECURITIES LAWS, OR
APPLICABLE LAWS OF ANY FOREIGN JURISDICTION. THIS NOTE AND SUCH SECURITIES HAVE BEEN ACQUIRED
FOR INVESTMENT AND NOT WITH A VIEW TO DISTRIBUTION OR RESALE, AND MAY NOT BE OFFERED, SOLD,
PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS AND IN THE ABSENCE
OF COMPLIANCE WITH APPLICABLE LAWS OF ANY FOREIGN JURISDICTION, OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED AND SUCH FOREIGN
JURISDICTION LAWS HAVE BEEN SATISFIED.

                                                              LUCID, INC.
                                                   8% CONVERTIBLE PROMISSORY NOTE
                                                         DUE NOVEMBER 15, 2012

                                                                                                                                 Rochester, NY
$                                                                                                                                       , 2011

         1.             Principal and Interest .

                   FOR VALUE RECEIVED, LUCID, INC. (the “ Company ”), a New York corporation, for value received, hereby
promises to pay to the order of [ Insert Name of Holder ] or his, her or its assigns (“ Holder ”), in lawful money of the United States of
America at the address for notices to Holder set forth in the applicable Purchase Agreement (as defined below) (or such other address as Holder
shall provide to the Company in writing pursuant hereto), the principal amount of                                      dollars ($          ),
lawful money of the United States of America, together with interest thereon at the rate set forth below.

                    The Company promises to pay interest on the unpaid principal amount from the date hereof until such principal amount is
paid in full at the rate of eight percent (8%) per annum, or such lesser rate as shall be the maximum rate allowable under applicable
law. Interest from the date hereof shall be computed on the basis of a 360-day year of twelve 30-day months, shall compound annually and
shall be accrued and added to principal on an annual basis. Unless converted, accelerated or otherwise, all unpaid principal and unpaid accrued
interest on this Note shall be due and payable on November 15, 2012 or such earlier date as may be required hereby, whether by acceleration,
conversion or otherwise; provided , however , that upon an Event of Default (as defined in Section 10), the interest rate on this Note shall be
increased to fourteen percent (14%) per annum during the term of the default.

                   This Note is being issued pursuant to that certain Subscription Agreement between the Company and the Holder, dated as of
the date hereof (the “ Purchase Agreement ”), and is subject to its terms. Capitalized terms used herein but not defined shall have the meanings
given to such terms in the Purchase Agreement. The Company has heretofore issued and may hereafter issue notes containing the same terms
and conditions set forth herein and such notes are collectively referred to as the “ Bridge Notes .”
          2.             Rank . The Note ranks pari passu in right of payment with all other existing unsecured indebtedness of the Company
and no new indebtedness (with the exception of bank debt) which is secured or senior in right of payment to the Note may be issued by the
Company without the consent of the holders of Bridge Notes representing at least fifty-one percent (51%) of the aggregate principal amount of
all outstanding Bridge Notes. No consent of the holders of Bridge Notes will be required for issuances by the Company of unsecured
indebtedness that ranks pari passu in right of payment with, or junior in right of payment to, the Bridge Notes.

         3.              Conversion Provisions .

                   3.1              Automatic Conversion . All unpaid principal and any unpaid accrued interest on this Note shall be
automatically converted into shares of the Company‟s common stock, $0.01 par value per share (the “ Common Stock ”) upon the
consummation of an underwritten initial public offering by the Company (made in connection with the listing by the Company of the Common
Stock on a registered national stock exchange or the quotation of Common Stock on the OTC Bulletin Board or similar quotation service) of
shares of Common Stock and/or units consisting of Common Stock and warrants to purchase Common Stock resulting in aggregate gross cash
proceeds (before commissions or other expenses) to the Company of at least $10,000,000, inclusive of the converted principal and interest
value of these and any other converted promissory notes (a “ Qualified IPO ”), at a conversion price equal to 70% of the price at which shares
of Common Stock, or shares of Common Stock underlying units (for the sake of clarity, allocating no value to any warrants underlying such
units), as applicable, are sold in a Qualified IPO, and upon such other terms, conditions and agreements as may be applicable in such Qualified
IPO (determined on a fully diluted basis) (the “ Conversion Price ”).

                    3.2              Conversion Securities . Upon conversion of this Note in accordance with the terms of Section 3.1, the
outstanding unpaid principal and unpaid accrued interest of the Note shall be converted without any further action by the Holder and whether or
not the Note is surrendered to the Company or its transfer agent, and the indebtedness evidenced by this Note shall be satisfied in full and no
interest shall continue to accrue on this Note and all rights of the Holder hereunder shall terminate. The Company shall not be obligated to
issue certificates evidencing the shares of the securities issuable upon such conversion unless the Note is either delivered to the Company or its
transfer agent, or the Holder notifies the Company or its transfer agent that such Note has been lost, stolen or destroyed and executes an
agreement satisfactory to the Company to indemnify the Company from any loss incurred by it in connection with such Note. The Company
shall, as soon as practicable after such delivery, or such agreement and indemnification, issue and deliver to such Holder of such Note, a
certificate or certificates for the securities to which the Holder shall be entitled. Such conversion shall be deemed to have been made
concurrently with the close of the Qualified IPO. The Person or Persons entitled to receive securities issuable upon such conversion shall be
treated for all purposes as the record holder or holders of such securities on such date.

                  3.3            Optional Conversion .

                        (a)            In the event that, prior to the Maturity Date, the Company consummates a public offering of
Common Stock, other than a Qualified IPO, which requires the

                                                                        2
filing by the Company of a registration statement declared effective under the Securities Act or the Exchange Act and is made in connection
with the listing by the Company of the Common Stock on a registered national stock exchange or the quotation of Common Stock on the OTC
Bulletin Board or similar quotation service (a “ Non-Qualified Financing ”), then, at the option of the Holder, all unpaid principal and any
accrued interest on this Note shall be converted into shares of Common Stock issued by the Company in such Non-Qualified Financing. The
number of shares to be issued upon such conversion of this Note shall be equal to the quotient obtained by dividing (i) the outstanding principal
balance plus any accrued but unpaid interest under this Note as of such date by (ii) the Optional Conversion Price. For purposes hereof,
“Optional Conversion Price” means the lesser of (i) 70% of the lowest price per share at which the equity securities are issued in the
Non-Qualified Financing or (ii) $4.61.

                              (b)             In the event that, prior to the Maturity Date, the Company consummates a transaction described in
clause (i), (iii) or (iv) (whether or not the Voting Stock of the Company is exchanged for Voting Stock of the surviving Person) in the definition
of Change of Control (a “ Fundamental Transaction ”) in which the Successor Entity (defined below) is a Non-Public Entity (defined below),
then, at the option of the Holder, such Holder shall have the right to receive from the Company or Successor Entity in exchange for this Note an
amount equal to the sum of (i) the aggregate principal amount of this Note plus the accrued and unpaid interest hereon plus (ii) the product of
(x) the aggregate principal amount of this Note plus the accrued and unpaid interest hereon multiplied by (y) a fraction, the numerator of which
is the difference (but not less than zero) obtained by subtracting the Non-Public Conversion Price (defined below) from the Equity Value Per
Share (defined below), and the denominator of which is the Non-Public Conversion Price (as such Equity Value Per Share and Non-Public
Conversion Price may be adjusted pursuant to Section 3.9). An election by the Holder to convert this Note as provided in this
Section 3.3(b) shall be exercised by written notice to the Successor Entity. The Successor Entity shall pay, or cause to be paid, the amount due
the Holder under this Section 3.3(b) in immediately available funds to an account designated by the Holder.

                           (c)            For the purposes of this Note, the following terms shall have the respective meanings listed below:

         “ Equity Value ” means the value of the Company‟s fully-diluted common equity as determined in the Fundamental Transaction in
         which the Non-Public Entity was formed, resulted or survived, as agreed by the Successor Entity and the holders of a majority in
         aggregate principal amount of the outstanding Notes and the holders of a majority of the outstanding Warrants (such holders of Notes
         and Warrants being referred to as the “ Majority Holders ”). In the event that the determination of the Equity Value requires the
         appraisal or evaluation of non-cash components and the Successor Entity and the Majority Holders shall fail to agree regarding the
         results of such evaluation or appraisal within 15 days of a notice by any holder of a Note or Warrant requesting such agreement, then
         the value of the Company‟s fully-diluted common equity based upon the Fundamental Transaction shall be determined by an
         independent investment bank having experience in the valuation of companies similar to the Company, selected by the Successor
         Entity and reasonably acceptable to the Majority Holders. The Successor Entity shall select such investment bank within fifteen (15)
         days of notice from a Holder of the need to determine the Equity Value. If the investment bank selected by the

                                                                        3
         Successor Entity is not reasonably acceptable to the Majority Holders, and the Successor Entity and such Majority Holders cannot
         agree on a mutually acceptable investment bank within fifteen (15) days of its selection by the Successor Entity, then the Successor
         Entity and the Majority Holders shall each choose one such investment bank within fifteen (15) days and the respective chosen firms
         (or, if only one firm is chosen because the other party fails to choose, then such one chosen firm) shall jointly select within fifteen (15)
         days of their selection a third investment bank, which shall make the determination within thirty (30) days of its selection. The
         Successor Entity shall pay the costs and fees of each such investment bank (including any such investment bank selected by the
         Majority Holders), and the decision of the investment bank making such determination of Equity Value shall be final and binding on
         the Successor Entity and all affected Holders.

         “ Equity Value Per Share ” means the result obtained by dividing the Equity Value by the number of fully-diluted shares of Common
         Stock outstanding immediately prior to the consummation of the Fundamental Transaction in which the Non-Public Entity was
         formed, resulted or survived.

         “ Non-Public Conversion Price ” means the lesser of (i) the result obtained by multiplying the Equity Value Per Share by 0.70 and
         (ii) $4.61.

         “ Non-Public Entity ” means a Successor Entity whose outstanding common stock is not registered under the Exchange Act and listed
         on a registered national securities exchange.

         “ Successor Entity ” means the Person (or, if so elected by the Holder, the parent entity) formed by, resulting from or surviving any
         Fundamental Transaction or the Person (or, if so elected by the Holder, the parent entity) with which such Fundamental Transaction
         shall have been entered into.

                   3.4            Exercise of Right of Optional Conversion . In order to exercise the Optional Conversion right set forth in
Section 3.3, the Holder shall surrender this Note at the principal office of the Company set forth in the Purchase Agreement and shall give
written notice of such exercise, substantially in the form of Exhibit A attached hereto (the “Optional Conversion Notice”), to the Company at
such office. Such Optional Conversion shall be deemed to have been effected at the close of business on the date on which such Optional
Conversion Notice, duly completed and executed, shall have been given.

                   3.5           Reservation of Shares of Common Stock. The Company covenants that it will, on or before the Closing
Date, either reserve and keep available out of its authorized capital, or amend its authorized capital, as required in order to be able to issue, such
number of shares of its Common Stock as shall then be deliverable upon the conversion of this Note.

                   3.6           Fractional Shares . No fractional shares of Common Stock shall be issued upon conversion of this
Note. Instead of any fractional shares which would otherwise be issuable upon conversion of this Note, the Company shall pay to the Holder
of this Note a cash adjustment with respect to such fractional interest.

                  3.7            Termination of Automatic Conversion and Mandatory Redemption.               In the event the Company does not
close on a Qualified IPO on or before November 15, 2012, then

                                                                          4
the Automatic Conversion described herein shall have no force or effect and the Company or Successor Entity shall redeem this Note at 140%
of the face value of this Note plus any accrued and unpaid interest.

                   3.8            Successors and Assigns . In the event the Company completes (in one or a series of related transactions) a
merger, consolidation, sale or transfer of more than fifty percent (50%) of the Company‟s capital stock or all or substantially all of the
Company‟s assets determined on a consolidated basis, then the term “ Securities ” as used herein shall thereafter refer to the equity securities or
securities convertible into or exchangeable for equity securities of the surviving, resulting, combined or acquiring entity in such merger,
consolidation, sale or transfer.

                   3.9             Subdivision, Dividends or Combination of Stock . In the event the outstanding shares of the Company‟s
Common Stock shall be increased by a stock dividend payable in Common Stock, stock split, subdivision, or other similar transaction
occurring after the date hereof into a greater number of shares of Common Stock, the Conversion Price and Optional Conversion Price in effect
immediately prior to such subdivision shall be proportionately reduced and the number of shares Common Stock issuable upon conversion
hereunder proportionately increased. Conversely, in the event the outstanding shares of the Company‟s Common Stock shall be decreased by
reverse stock split, combination, consolidation, or other similar transaction occurring after the date hereof into a lesser number of shares of
Common Stock, the Conversion Price and Optional Conversion Price in effect immediately prior to such combination shall be proportionately
increased and the number of shares of Common Stock issuable upon conversion hereunder proportionately decreased.

         4.              Prepayment . This Note may not be prepaid at any time, in whole or in part, prior to its maturity.

         5.              Change of Control.

                            (a)            Upon the occurrence of a Change of Control, the Company or Successor Entity will make an offer to
purchase all of the Notes pursuant to the offer set forth below (the “ Change of Control Offer ”) at a price in cash (the “ Change of Control
Payment ”) equal to 140% of the outstanding aggregate principal amount thereof plus accrued and unpaid interest to the date of
purchase. Within 30 days following any Change of Control, the Company or Successor Entity shall send notice of such Change of Control
Offer to each Holder by first-class mail to the address of such Holder, stating: (i) that a Change of Control Offer is being made pursuant to the
Note provision entitled “Change of Control” and the circumstances and relevant facts regarding such Change of Control; (ii) the purchase price
and the purchase date, which will be no earlier than 30 days nor later than 60 days from the date of such notice (the “ Change of Control
Payment Date ”); (iii) that all Notes properly tendered pursuant to such Change of Control Offer will be accepted for payment by the Issuer,
that any Note not properly tendered will remain outstanding and continue to accrue interest, and that unless the Company defaults in the
payment of the Change of Control Payment, all Notes accepted for payment pursuant to the Change of Control Offer will cease to accrue
interest on the Change of Control Payment Date; and (iv) the instructions, as determined by the Company or Successor Entity, consistent with
this Section 5, that a Holder must follow in connection with the Change of Control Offer.

                                                                         5
                           (b)            The Company or Successor Entity shall comply, to the extent applicable, with the requirements of
Rule 14(e) of the Exchange Act and any other securities laws or regulations in connection with the repurchase of Notes pursuant to this
Section 5. To the extent that the provisions of any securities laws or regulations conflict with the provisions of this Section 5, the Company or
Successor Entity shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations
described under this Section 5 by virtue of its compliance with such securities laws or regulations.

                           (c)            On the Change of Control Payment Date, the Company or Successor Entity shall, to the extent
permitted by law, (i) accept for payment all Notes or portions thereof properly tendered pursuant to the Change of Control Offer (the “
Tendered Notes ”) and (ii) pay to the Holder of each such Tendered Note an amount equal to the aggregate Change of Control Payment in
respect of such Tendered Note, which payment shall be made in immediately available funds to an account designated by such Holder.

                            (d)             The Company shall not be required to make a Change of Control Offer following a Change of
Control if a third party makes an offer in the manner, at the times and otherwise in compliance with the requirements set forth in this Note
applicable to a Change of Control Offer made by the Company, and purchases all Notes validly tendered and not withdrawn under such offer.

                           (e)             For the purposes of this Section 5, the following terms shall have the respective meanings listed
below:

         “ Capital Stock ” means (i) in the case of a corporation, corporate stock, (ii) in the case of an association or business entity, any and all
         shares, interests, participations, rights or other equivalents (however designated) of corporate stock, (iii) in the case of a partnership or
         limited liability company, partnership or membership interests (whether general or limited) and (iv) any other interest or participation
         that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person.

         “ Change of Control ” means the occurrence of any of the following:

                            (i)              the sale, lease, transfer, conveyance or other disposition (other than by way of merger or
consolidation), in one or a series of related transactions, of all or substantially all of the assets of the Company taken as a whole to any “person”
(as such term is used in Section 13(d)(3) of the Exchange Act) other than in the ordinary course of business;

                           (ii)            the adoption of a plan relating to the liquidation or dissolution of the Company;

                             (iii)           any “person” (as defined above) is or becomes the “beneficial owner” (as such term is defined in
Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that a person shall be deemed to have “beneficial ownership” of all securities that
such person has the right to acquire, whether such right is currently exercisable or is exercisable only upon the occurrence of a subsequent
condition), directly or indirectly, of more than 50% of the Voting Stock of the Company (measured by voting power rather than number of
shares); or

                                                                          6
                            (iv)           the Company consolidates with, or merges with or into, any Person, or any Person consolidates with,
or merges with or into, the Company, in any such event pursuant to a transaction in which any of the outstanding Voting Stock (defined below)
of the Company is converted into or exchanged for cash, securities or other property, other than any such transaction where the Voting Stock of
the Company outstanding immediately prior to such transaction is converted into or exchanged for Voting Stock of the surviving or transferee
Person constituting a majority of the outstanding shares of such Voting Stock of such surviving or transferee Person (immediately after giving
effect to such issuance).

         “ Voting Stock ” of any Person as of any date means the Capital Stock of such Person that (i) if such Person is a corporation, is at the
         time entitled to vote in the election of such corporation‟s board of directors or any committee thereof duly authorized to act on behalf
         of such board or (ii) if such Person is an entity other than a corporation, is at the time entitled to vote in the election of the group or
         individual exercising the authority with respect to such Person generally vested in a board of directors of a corporation.

         6.           S-1 Filing Requirement . The Company has caused an S-1 Registration Statement (an “ S-1 ”) to be filed with the
Commission and agrees to use its reasonable best efforts to respond promptly to all Commission comments to facilitate the launch of a
Qualified IPO.

         7.               Attorney‟s Fees . If the indebtedness represented by this Note or any part thereof is collected in bankruptcy,
receivership or other judicial proceedings or if this Note is placed in the hands of attorneys for collection after default, the Company agrees to
pay, in addition to the principal and interest payable hereunder, reasonable attorneys‟ fees and costs incurred by Holder.

         8.              Notices . Any notice, other communication or payment required or permitted hereunder shall be in writing and shall
be deemed to have been given upon delivery to the address provided pursuant to the Purchase Agreement. In the case of notice to either party,
copies should be sent to Harris Beach PLLC, 99 Garnsey Road Pittsford, NY 14534, Facsimile: (585) 419-8817, Attn: Thomas E. Willett, Esq.

          9.               Notice of Proposed Transfers . Prior to any proposed transfer of this Note or the Securities, unless there is in effect a
registration statement under the Securities Act covering the proposed transfer, the Holder shall give written notice to the Company of such
Holder‟s intention to effect such transfer. Each such notice shall describe the manner and circumstances of the proposed transfer in sufficient
detail, and shall, if the Company so requests, be accompanied (except in transactions in compliance with Rule 144) by an unqualified written
opinion of legal counsel, who shall be reasonably satisfactory to the Company, addressed to the Company and reasonably satisfactory in form
and substance to the Company‟s counsel, to the effect that the proposed transfer of the Note or Securities may be effected without registration
under the Securities Act; provided , however , no such opinion of counsel shall be necessary for a transfer without consideration by a Holder to
any affiliate of such Holder, or a transfer by a Holder which is a partnership to a partner of such partnership or a retired partner of such
partnership who retires after the date hereof, or to the estate of any such partner or retired partner or the transfer by gift, will or intestate
succession of any partner to his spouse or lineal descendants or ancestors, if the transferee agrees in writing to be subject to the terms hereof to
the same extent as if such transferee were the original Holder hereunder. Each certificate evidencing Securities or the Note transferred as
above provided shall bear an appropriate restrictive legend, except that

                                                                          7
the Note or certificate shall not bear such restrictive legend if in the opinion of counsel for the Company such legend is not required in order to
establish compliance with any provisions of the Securities Act.

         10.             Event of Default . If any of the following events (an “ Event of Default ”) shall occur and be continuing:

                          (a)             the Company shall fail to pay the principal of, or shall fail to pay any interest on, this Note when due,
and the same has not been cured within five (5) business days of receipt by the Company of written notice thereof;

                            (b)               the Company shall (i) apply for or consent to the appointment of a receiver, trustee, liquidator,
custodian or similar official for itself or any of its properties or assets; (ii) make a general assignment for the benefit of creditors; (iii) become
bankrupt or insolvent; (iv) commence a voluntary case for relief as a debtor under the United States Bankruptcy Code or under any analogous
provision of applicable United States or foreign law or file a petition or an answer seeking reorganization, an arrangement with creditors or to
take advantage of any other present or future applicable United States or foreign law respecting bankruptcy, reorganization, insolvency,
readjustment of debts, dissolution, liquidation or relief of debtors; (v) file any answer admitting the material allegations of a petition under such
law; (vi) be unable to pay or admit in writing its inability to pay its debts generally as they become due; or (vii) take any action for the purpose
of effecting any of the foregoing;

                              (c)          (i) any case, proceeding or other action shall be commenced against the Company, or a substantial
part of the Company‟s properties or assets, under the United States Bankruptcy Code or under any analogous provision of United States or
foreign law, and such case, proceeding or other action shall remain undismissed for any period of sixty (60) days; or (ii) an order, judgment or
decree shall be entered without the application, approval or consent of the Company by any court of competent jurisdiction, approving a
petition seeking reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief with respect to the Company
or all or a substantial part of the Company‟s properties or assets, or appointing a receiver, trustee, liquidator, custodian or other official of the
Company or all or a substantial part of the Company‟s properties or assets, and such order, judgment or decree shall continue unstayed and in
effect for any period of sixty (60) days;

                          (d)             one or more judgments for the payment of money in excess of an aggregate of One Hundred
Thousand Dollars ($100,000) shall be rendered against the Company and the same shall remain undischarged for a period of sixty (60) days
during which execution shall not be effectively stayed or contested in good faith, and the same has not been cured within five (5) business days
of receipt by the Company of written notice thereof;

                            (e)             there is any material breach of any material covenant, warranty, representation or other term or
condition of this Note or the Purchase Agreement at any time which is not cured within the time periods permitted therein, or if no cure period
is provided therein, within thirty (30) days after the date on which the Company receives written notice of such breach; or

                                                                          8
                           (f)             the Company shall be dissolved or liquidated, or shall submit any application or other document to
any authority for the purpose of dissolving or liquidating the Company or of commencing the dissolution or liquidation of the Company, or an
action or administrative proceeding is commenced against the Company for its dissolution or liquidation which shall remain undismissed for
any period of sixty (60) days, or the Company shall state in writing its intention to dissolve or liquidate;

         then, or at any time thereafter during the continuance of any such Event of Default, this Note shall automatically be accelerated and
declare the same to be forthwith due and payable as to both principal and interest, in all cases without presentation, demand, protest or other
notice of any kind, all of which hereby are expressly waived by the Company, anything contained herein to the contrary notwithstanding.

          11.            No Dilution or Impairment . The Company will not, by amendment of its certificate of incorporation or bylaws or
through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid
or seek to avoid the observance or performance of any of the terms of this Note, but will at all times in good faith assist in the carrying out of
all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the Holder of this Note
against dilution or other impairment.

         12.             Waivers; Construction . The Company hereby waives presentment, demand for performance, notice of
non-performance, protest, notice of protest and notice of dishonor. No delay on the part of Holder in exercising any right hereunder shall
operate as a waiver of such right or any other right. This Note is being delivered in and shall be construed in accordance with the laws of the
State of New York, without regard to the conflicts of laws provisions thereof.

         13.             No Stockholder Rights . Nothing contained in this Note shall be construed as conferring upon the Holder or any other
Person the right to vote or to consent or to receive notice as a stockholder of the Company prior to the effectiveness of any conversion of this
Note. For the avoidance of doubt, upon the effectiveness of any conversion of this Note, the Holder shall have all rights as a stockholder of the
Company with respect to such shares.

          14.            Amendment . Any term of this Note may be amended with the written consent of the Company and the holders of not
less than sixty-six and two-thirds percent (66 2 / 3 %) of the then outstanding aggregate principal amount of the Bridge Notes, even without the
consent of the Holder hereof. Any amendment effected in accordance with this Section 14 shall be binding upon each holder of any Bridge
Note, each future holder of all such Bridge Notes and the Company; provided, however, that no special consideration or inducement may be
given to any such Holder in connection with such consent that is not given ratably to all such holders, and that such amendment must apply to
all such holders ratably in accordance with the principal amount of their then outstanding Bridge Notes. Pursuant to Section 1 of the Bridge
Notes, the Company may incur additional indebtedness that ranks in priority junior to, or pari passu with, the Bridge Notes without obtaining
the consent of any holder of Bridge Notes, provided, that the holder of the Bridge Notes are provided written notice at least five (5) business
days prior to the issuance

                                                                         9
thereof. The Company shall promptly give notice to all holders of outstanding Bridge Notes of any amendment effected in accordance with
this Section 14.

                                                               * * * * *

                                                                    10
ISSUED as of the date first above written.


                    LUCID, INC.


                    By:    /s/ Jay M. Eastman
                    Name: Jay M. Eastman, Ph.D.
                    Title: Chief Executive Officer
                                                                   Exhibit A

                                                           CONVERSION NOTICE

To: Lucid, Inc.

         The undersigned Holder of the attached Convertible Promissory Note, dated as of                     , 2011, executed by Lucid, Inc., a
Delaware corporation (the “Company”), in favor of                        (the “Holder”) hereby irrevocably exercises the option to convert the
Convertible Promissory Note in accordance with Section 3.3 of the Convertible Promissory Note, and directs that the stock certificates
representing shares of stock issuable and deliverable upon such conversion be issued and delivered to the registered Holder hereof.


Dated:




                                    Signature

                                                                      12
                                                                                                                                     Exhibit 4.25

                                                                                                                                 - Execution Copy

Warrant No. 2011-
Date of Issuance:              , 2011
                                                        LUCID, INC.
                                        WARRANT TO PURCHASE SHARES OF COMMON STOCK

THIS WARRANT AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “ ACT ”), APPLICABLE STATE SECURITIES LAWS, OR APPLICABLE LAWS OF
ANY FOREIGN JURISDICTION. THIS WARRANT AND SUCH SECURITIES HAS BEEN ACQUIRED FOR INVESTMENT AND NOT
WITH A VIEW TO DISTRIBUTION OR RESALE, AND MAY NOT BE OFFERED, SOLD, PLEDGED, HYPOTHECATED OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND ANY
APPLICABLE STATE SECURITIES LAWS AND IN THE ABSENCE OF COMPLIANCE WITH APPLICABLE LAWS OF ANY
FOREIGN JURISDICTION, OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS
NOT REQUIRED AND SUCH FOREIGN JURISDICTION LAWS HAVE BEEN SATISFIED

          THIS CERTIFIES THAT, for value received, [ Insert Name of Holder ] (the “ Holder ”), its designees or permitted assigns, subject to
the terms and conditions set forth herein, at any time prior to the Expiration Date (as defined below), is entitled to purchase from Lucid, Inc., a
New York corporation (the “ Company ”), that number of fully paid and nonassessable shares, as adjusted from time to time pursuant to the
provisions of this Warrant (the “ Warrant Shares ”), of the Company‟s common stock, $0.01 par value per share (the “ Common Stock ”), equal
to (i) seventy percent (70%) of the principal amount of that certain Convertible Promissory Note dated the date hereof in the principal amount
of $                      , issued by the Company to the Holder (the “ Note ”) pursuant to that certain Subscription Agreement dated the date
hereof between the Company and the Holder (the “ Purchase Agreement ”), divided by (ii) the IPO Price (if a Qualified IPO is the first of a
Qualified IPO, Non-Qualified Financing or Non-Registered Fundamental Transaction to occur), the price at which shares of Common Stock are
sold in a Non-Qualified Financing (if a Non-Qualified Financing is the first of a Qualified IPO, Non-Qualified Financing or Non-Registered
Fundamental Transaction to occur) or the Equity Value Per Share (defined below) (if a Fundamental Transaction is the first of a Qualified IPO,
Non-Qualified Financing or Non-Registered Fundamental Transaction to occur), upon surrender to the Company at its principal office (or at
such other location as the Company may advise the Holder in writing) of this Warrant properly endorsed with the Notice of Exercise attached
hereto duly completed and signed and upon payment of the aggregate Exercise Price (as defined below) for the number of Warrant Shares for
which this Warrant is being exercised determined in accordance with the provisions hereof. For purposes hereof, “ IPO Price ” means the price
at which shares of Common Stock, or shares of Common Stock underlying units (for the sake of clarity, allocating no value to any warrants
underlying such units), as applicable, are sold in a Qualified IPO. For purposes hereof, “ Qualified IPO ” means the consummation of an
underwritten initial public offering by the Company of shares of Common Stock and/or units consisting of Common Stock and warrants to
purchase Common Stock resulting in aggregate gross cash proceeds (before commissions or other expenses) to the Company of at least
$10,000,000 and made in connection with the listing by the Company of the Common Stock on a registered national stock exchange or the
quotation of Common Stock on the OTC Bulletin Board or similar quotation service. For purposes hereof, “ Non-Registered Fundamental
Transaction ” means a Fundamental Transaction in which the Successor Entity is an entity whose outstanding common stock is not registered
under the Exchange Act and listed on a registered national securities exchange. The exercise price per Warrant Share issuable pursuant to this
Common Stock Warrant shall be equal to $4.61 (the “ Exercise Price ”). Terms used
herein but not otherwise defined shall have the meaning set forth in Purchase Agreement. In the event that the Company does not consummate
a Qualified IPO, Non-Qualified Financing or Non-Registered Fundamental Transaction prior to November 15, 2012, the denominator set forth
above shall be equal to $4.61.

         This Warrant is issued subject to the following terms and conditions:

         1.        Exercise; Payment .

                  (a)        Exercise . Subject to Section 5 hereof, the Holder may exercise this Warrant, at any time or from time to time,
during the period (a) commencing on the earliest to occur of (i) the consummation of a Qualified IPO, (ii) the consummation of a
Non-Qualified Financing, (iii) the consummation of a Fundamental Transaction in which the Successor Entity is a Non-Public Entity or
(iv) November 15, 2012, and (b) expiring on November 15, 2015 at 5:00 p.m. (Eastern Time) (the “ Expiration Date ”). The Holder may
exercise this Warrant on or prior to the Expiration Date for all or any part of the Warrant Shares (but not for a fraction of a share) that may be
purchased hereunder, as that number may be adjusted pursuant to Section 3 of this Warrant. The Company agrees that the Warrant Shares
purchased under this Warrant shall be and are deemed to be issued to the Holder hereof as the record owner of such Warrant Shares as of the
close of business on the date on which this Warrant shall have been surrendered, properly endorsed, the completed and executed Notice of
Exercise delivered, and payment made for such Warrant Shares (such date, a “ Date of Exercise ”).

         In the event that the Holder elects to exercise this Warrant during such time as the issuer hereof is a Non-Public Entity, then, in lieu of
receiving Warrant Shares, the Holder shall receive an amount equal to the product of (i) the number of Warrant Shares as to which the Warrant
has been exercised by such Holder multiplied by (ii) the difference (but not less than zero) between the Equity Value Per Share and $4.61 (as
such amounts may be adjusted pursuant to Section 4 of this Warrant).

                  (b)        Issuance of Certificates .

                             (i)       Certificates for the Warrant Shares so purchased, together with any other securities or property to which
the Holder hereof is entitled upon such exercise, shall be delivered to the Holder hereof by the Company at the Company‟s expense as soon as
practicable after the rights represented by this Warrant have been so exercised, but in any event not later than ten (10) business days following
the Date of Exercise. In case of a purchase of less than all the Warrant Shares which may be purchased under this Warrant, the Company shall
cancel this Warrant and execute and deliver to the Holder hereof within a reasonable time a new Warrant or Warrants of like tenor for the
balance of the Warrant Shares purchasable under the Warrant surrendered upon such purchase. Each stock certificate so delivered shall be
registered in the name of such Holder and issued with a legend in substantially the form of the legend placed on the front of this Warrant.

                            (ii)       The Company‟s obligations to issue and deliver Warrant Shares in accordance with the terms hereof are
absolute and unconditional, irrespective of any action or inaction by the Holder to enforce the same. Nothing herein shall limit a Holder‟s right
to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or
injunctive relief with respect to the Company‟s failure to timely deliver certificates representing shares of Common Stock upon exercise of the
Warrant as required pursuant to the terms hereof.

                  (c)       Issue Tax . The issuance of certificates for Warrant Shares upon the exercise of this Warrant shall be made without
charge to the Holder for any issue tax (other than any applicable

                                                                         2
income taxes) in respect thereof; provided , however , that the Company shall not be required to pay any tax that may be payable in respect of
any transfer involved in the issuance and delivery of any certificate in a name other than that of the then Holder of the Warrant being exercised.

                  (d)       Payment of Exercise Price . The Holder shall pay the Exercise Price by delivering immediately available funds to
the Company.

          For the purposes hereof, “Equity Value Per Share” means the result obtained by dividing the Equity Value by the number of
fully-diluted shares of Common Stock outstanding immediately prior to the consummation of the Fundamental Transaction in which the
Non-Public Entity was formed, resulted or survived.

           For the purposes hereof, “Equity Value” means the value of the Company‟s fully-diluted common equity as determined in the
Fundamental Transaction in which the Non-Public Entity was formed, resulted or survived, as agreed by the Successor Entity and the holders
of a majority in aggregate principal amount of the outstanding Notes and the holders of a majority of the outstanding Warrants (such holders of
Notes and Warrants being referred to as the “ Majority Holders ”). In the event that the determination of the Equity Value requires the
appraisal or evaluation of non-cash components and the Successor Entity and the Majority Holders shall fail to agree regarding the results of
such evaluation or appraisal within 15 days of a notice by any holder of a Note or Warrant requesting such agreement, then the value of the
Company‟s fully-diluted common equity based upon the Fundamental Transaction shall be determined by an independent investment bank
having experience in the valuation of companies similar to the Company, selected by the Successor Entity and reasonably acceptable to the
Majority Holders. The Successor Entity shall select such investment bank within fifteen (15) days of notice from a Holder of the need to
determine the Equity Value. If the investment bank selected by the Successor Entity is not reasonably acceptable to the Majority Holders, and
the Successor Entity and such Majority Holders cannot agree on a mutually acceptable investment bank within fifteen (15) days of its selection
by the Successor Entity, then the Successor Entity and the Majority Holders shall each choose one such investment bank within fifteen (15)
days and the respective chosen firms (or, if only one firm is chosen because the other party fails to choose, then such one chosen firm) shall
jointly select within fifteen (15) days of their selection a third investment bank, which shall make the determination within thirty (30) days of
its selection. The Successor Entity shall pay the costs and fees of each such investment bank (including any such investment bank selected by
the Majority Holders), and the decision of the investment bank making such determination of Equity Value shall be final and binding on the
Successor Entity and all affected Holders.

         2.         Shares to be Fully Paid; Reservation of Shares . The Company covenants and agrees that all Warrant Shares, will, upon
issuance and payment of the applicable Exercise Price, be duly authorized, validly issued, fully paid and nonassessable, and free of all
preemptive rights, liens and encumbrances, except for restrictions on transfer provided for herein. The Company shall at all times reserve and
keep available out of its authorized and unissued Common Stock, solely for the purpose of providing for the exercise of the rights to purchase
all Warrant Shares granted pursuant to this Warrant, such number of shares of Common Stock as shall, from time to time, be sufficient therefor.

         3.        Closing of Books . The Company will at no time close its transfer books against the transfer of any warrant or of any
Warrant Shares issued or issuable upon the exercise of any warrant in any manner that interferes with the timely exercise of this Warrant,
subject to compliance with any applicable securities laws

                                                                        3
         4.        Adjustment of Exercise Price and Number of Shares . The Exercise Price and the total number of Warrant Shares shall be
subject to adjustment from time to time upon the occurrence of certain events described in this Section 4.

                    (a)       Reclassification . If any reclassification of the capital stock of the Company or any reorganization, consolidation,
merger, or any sale, lease, license, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all, of
the business and/or assets of the Company (the “ Reclassification Events ”) shall be effected in such a way that holders of Common Stock shall
be entitled to receive stock, securities, or other assets or property, then, as a condition of such Reclassification Event, lawful and adequate
provisions shall be made whereby the Holder hereof shall thereafter have the right to purchase and receive (in lieu of the shares of Common
Stock of the Company immediately theretofore purchasable and receivable upon the exercise of the rights represented hereby) such shares of
stock, securities, or other assets or property as may be issued or payable with respect to or in exchange for a number of outstanding shares of
such Common Stock equal to the number of shares of such stock immediately theretofore purchasable and receivable upon the exercise of the
rights represented hereby. In any Reclassification Event, appropriate provision shall be made with respect to the rights and interests of the
Holder of this Warrant to the end that the provisions hereof (including, without limitation, provisions for adjustments of the Exercise Price and
of the number of Warrant Shares), shall thereafter be applicable, as nearly as may be, in relation to any shares of stock, securities, or assets
thereafter deliverable upon the exercise hereof. For the sake of clarity, in the event that adjustments are made in accordance with Section 5
hereof, no adjustments shall be required under this Section 4(a).

                   (b)       Subdivision, Dividends or Combination of Stock . In the event the outstanding shares of the Company‟s Common
Stock shall be increased by a stock dividend payable in Common Stock, stock split, subdivision, or other similar transaction occurring after the
date hereof into a greater number of shares of Common Stock, the Exercise Price in effect immediately prior to such subdivision shall be
proportionately reduced and the number of Warrant Shares issuable hereunder proportionately increased. Conversely, in the event the
outstanding shares of the Company‟s Common Stock shall be decreased by reverse stock split, combination, consolidation, or other similar
transaction occurring after the date hereof into a lesser number of shares of Common Stock, the Exercise Price in effect immediately prior to
such combination shall be proportionately increased and the number of Warrant Shares issuable hereunder proportionately decreased.

                   (c)       Weighted Average Adjustment . Other than in the case of the issuance of Permitted Additional Stock (defined
below), if the Company issues additional shares of Common Stock, including shares of Common Stock ultimately issuable upon exercise or
conversion of a security convertible or exercisable into Common Stock, after the date of this Warrant and the consideration per additional
common share is less than the Exercise Price in effect immediately before such issue, the Exercise Price shall be reduced, concurrently with
such issue, to a price determined by multiplying the Exercise Price by a fraction:

                           (i)       the numerator of which is the number of shares of Common Stock outstanding immediately before such
issue plus the number of shares of Common Stock that the aggregate consideration received by the Company for the additional common shares
would purchase at the Exercise Price in effect immediately before such issue, and

                           (ii)      the denominator of which is the number of shares of Common Stock outstanding immediately before such
issue plus the number of such additional common shares.

         Upon each adjustment of the Exercise Price, the number of Warrant Shares issuable upon exercise of this Warrant shall be increased to
equal the quotient obtained by dividing (a) the product

                                                                           4
resulting from multiplying (i) the number of Warrant Shares issuable upon exercise of this Warrant and (ii) the Exercise Price, in each case as
in effect immediately before such adjustment, by (b) the adjusted Exercise Price.

          For purposes hereof, “ Permitted Additional Stock ” means (i) shares of Common Stock and options therefor, issued to directors,
officers, employees or consultants of the Company pursuant to a stock option plan, stock purchase plan, or other equity incentive plan or
agreement approved by the Board of Directors of the Company (the “ Board ”), (ii) Common Stock issued or issuable upon conversion or
exercise of the Notes and Warrants issued pursuant to the Transaction Documents, (iii) Common Stock issuable upon conversion or exercise of
any commitments, warrants, options, notes or other agreements to issue capital stock outstanding as of the date hereof, (iv) Common Stock
issued pursuant to a Qualified IPO, (v) Common Stock issuable in respect of any shares, options, warrants, or convertible securities as a result
of the application of anti-dilution provisions, similar to the provisions hereunder, contained in the original terms of such securities and
(vi) shares of Common Stock issued as a stock dividend or upon any subdivision or split described in Section 4(b).

                   (d)       Certain Events . If any change in the outstanding Warrant Shares of the Company occurs as to which the other
provisions of this Section 4 are not strictly applicable, the Board shall make an adjustment in the number and class of shares available under the
Warrant, the Exercise Price or the application of such provisions, so as to protect such purchase rights as aforesaid. The adjustment shall be
such as will give the Holder of the Warrant upon exercise for the same aggregate Exercise Price the total number, class and kind of shares as it
would have owned had the Warrant been exercised prior to the event and had it continued to hold such shares until after the event requiring
adjustment.

                   (e)       Issuance Adjustment . In addition to any other adjustments contemplated hereunder, in the event that (i) a
Qualified IPO or (ii) Non-Qualified Financing does not occur within six months after the Issuance Cut Off Date of January 1, 2012, the
Exercise Price as in effect on the Issuance Cut Off Date shall automatically be reduced by 5% and shall be reduced by an additional 5% on each
monthly anniversary thereof until the Company completes a Qualified IPO or Non-Qualified Financing, provided however, that the Exercise
Price shall not be reduced to an amount lower than $1.00 (as adjusted to reflect any stock dividend payable in Common Stock, stock split,
subdivision, or other similar transaction).

         5.        Fundamental Transactions .

                   (a)       Consent Required . The Company shall not enter into or be party to a Fundamental Transaction (as defined below)
unless the Successor Entity (as defined below) assumes in writing all of the obligations of the Company under this Warrant in accordance with
the provisions of this Section 5 pursuant to written agreements in form and substance satisfactory to the Required Holders and approved by the
Required Holders prior to such Fundamental Transaction, including agreements to deliver to each holder of Warrants in exchange for such
Warrants a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this Warrant,
including, without limitation, an adjusted exercise price equal to the value for the shares of Common Stock reflected by the terms of such
Fundamental Transaction, and exercisable for a corresponding number of shares of capital stock equivalent to the shares of Common Stock
acquirable and receivable upon exercise of this Warrant (without regard to any limitations on the exercise of this Warrant) prior to such
Fundamental Transaction, and satisfactory to the Required Holders. Upon the occurrence of any Fundamental Transaction, the Successor
Entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Warrant
referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shall

                                                                        5
assume all of the obligations of the Company under this Warrant with the same effect as if such Successor Entity had been named as the
Company herein.

                   (b)        Confirmation . Upon consummation of the Fundamental Transaction, the Successor Entity shall deliver to the
Holder confirmation that there shall be issued upon exercise of this Warrant at any time after the consummation of the Fundamental
Transaction, in lieu of the shares of the Common Stock (or other securities, cash, assets or other property) purchasable upon the exercise of this
Warrant prior to such Fundamental Transaction, such shares of stock, securities, cash, assets or any other property whatsoever (including
warrants or other purchase or subscription rights) which the Holder would have been entitled to receive upon the happening of such
Fundamental Transaction had this Warrant been converted immediately prior to such Fundamental Transaction, as adjusted in accordance with
the provisions of this Warrant. In addition to and not in substitution for any other rights hereunder, prior to the consummation of any
Fundamental Transaction pursuant to which holders of shares of Common Stock are entitled to receive securities or other assets with respect to
or in exchange for shares of Common Stock (a “ Corporate Event ”), the Company shall make appropriate provision to insure that the Holder
will thereafter have the right to receive upon an exercise of this Warrant at any time after the consummation of the Fundamental Transaction, in
lieu of the shares of the Common Stock (or other securities, cash, assets or other property) purchasable upon the exercise of this Warrant prior
to such Fundamental Transaction, such shares of stock, securities, cash, assets or any other property whatsoever (including warrants or other
purchase or subscription rights) which the Holder would have been entitled to receive upon the happening of such Fundamental Transaction
had this Warrant been exercised immediately prior to such Fundamental Transaction. Provision made pursuant to the preceding sentence shall
be in a form and substance reasonably satisfactory to the Required Holders. The provisions of this Section 5 shall apply similarly and equally
to successive Fundamental Transactions and Corporate Events and shall be applied without regard to any limitations on the exercise of this
Warrant.

                  (c)       Certain Definitions . For purposes of this Warrant, the following terms have the following meanings:

                             (i)       “ Fundamental Transaction ” means that the Company shall, directly or indirectly, in one or more related
transactions, (i) consolidate or merge with or into (whether or not the Company is the surviving corporation) another Person, (ii) sell, assign,
transfer, convey or otherwise dispose of all or substantially all of the properties or assets of the Company to another Person, (iii) allow another
Person to make a purchase, tender or exchange offer that is accepted by the holders of more than the 50% of the outstanding shares of Common
Stock (not including any shares of Common Stock held by the Person(s) making or party to, or associated or affiliated with the Persons making
or party to, such purchase, tender or exchange offer), (iv) consummate a stock purchase agreement or other business combination (including,
without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another Person whereby such other Person
acquires more than the 50% of the outstanding shares of Common Stock (not including any shares of Common Stock held by the other
Person(s) making or party to, or associated or affiliated with the other Person(s) making or party to, such stock purchase agreement or other
business combination), (v) reorganize, recapitalize or reclassify its Common Stock, or (vi) any “person” or “group” (as these terms are used for
purposes of Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) is or shall become the “beneficial owner” (as
defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended), directly or indirectly, of 50% of the aggregate ordinary voting
power represented by issued and outstanding Common Stock.

                           (ii)     “ Successor Entity ” means the Person (or, if so elected by the Holder, the parent entity) formed by,
resulting from or surviving any Fundamental Transaction or the Person (or, if so elected by the Holder, the parent entity) with which such
Fundamental Transaction shall have been entered into.

                                                                         6
                           (iii)      “ Person ” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a
trust, an unincorporated organization, any other entity and a government or any department or agency thereof, as applicable.

          6.        No Stockholder Rights . No holder of this Warrant shall be entitled, as a Warrant holder, to vote or receive dividends or be
deemed the holder of Warrant Shares or any other securities of the Company which may at any time be issuable on the exercise hereof for any
purpose, nor shall anything contained herein be construed to confer upon the holder of this Warrant, as such, any of the rights of a stockholder
of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give
or withhold consent to any corporate action (whether upon any recapitalization, issuance of stock, reclassification of stock, change of par value,
consolidation, merger, conveyance, or otherwise) or to receive notice of meetings, or to receive dividends or subscription rights or otherwise
until the Warrant shall have been exercised and the Warrant Shares purchasable upon the exercise hereof shall have become deliverable, as
provided herein.

         7.        Compliance with the Act . The Holder of this Warrant, by acceptance hereof, agrees that this Warrant is being acquired for
its own account and not for any other person or persons, for investment purposes and that it will not offer, sell, or otherwise dispose of this
Warrant except under circumstances which will not result in a violation of the Act or any applicable state securities laws.

         8.         Restriction Upon Transfer .

                    (a)       Unregistered Security . The Holder represents that by accepting this Warrant it understands that this Warrant and
any securities obtainable upon exercise of this Warrant have not been registered for sale under Federal or state securities laws and are being
offered and sold to the Holder pursuant to one or more exemptions from the registration requirements of such securities laws. In the absence
of an effective registration of such securities or an exemption therefrom, any certificates for such securities shall bear the legend set forth on the
first page hereof. The Holder understands that it must bear the economic risk of its investment in this Warrant and any securities obtainable
upon exercise of this Warrant for an indefinite period of time, as this Warrant and such securities have not been registered under Federal or
state securities laws and therefore cannot be sold unless subsequently registered under such laws, unless an exemption from such registration is
available.

                    (b)        Transferability . Subject to restriction set forth in Section 8(a), neither this Warrant nor the Warrant Shares shall be
transferable by the Holder without the prior written consent of the Company; provided, however , that Holder may transfer this Warrant to a
parent or subsidiary of the Holder without the prior written consent of the Company, subject to applicable laws and the restriction on transfer
set forth on the first page of this Warrant. Prior to the consummation of any such permitted transfer under this Section 8(b), Holder shall
provide the Company with notice of such transfer.

         9.        Amendment, Waiver, etc . Except as expressly provided herein, neither this Warrant nor any term hereof may be amended,
waived, discharged or terminated other than by a written instrument signed by the party against whom enforcement of any such amendment,
waiver, discharge or termination is sought.

          10.        Notices . All notices and other communications from the Company to the Holder and from the Holder to the Company as
required pursuant to this Section 10 or otherwise shall be in writing and shall be deemed sufficient upon delivery, when delivered personally or
by a nationally-recognized delivery service (such as Federal Express or UPS), or forty-eight (48) hours after being deposited in the U.S. mail,
as certified or registered mail, with postage prepaid, addressed to the party to be notified at

                                                                           7
such party‟s address as set forth below or as subsequently modified by written notice. The Company shall be required to provide notice to the
Holder hereunder as a result of the following:

                  (a)        Adjustment . Upon any adjustment of the Exercise Price or any increase or decrease in the number of Warrant
Shares pursuant to Section 4 hereof, the Company shall give written notice thereof, by first class mail postage prepaid, addressed to the
registered Holder of this Warrant at the address of such Holder as shown on the books of the Company. The notice shall be prepared and
signed by the Company‟s Chief Financial Officer and shall state the Exercise Price resulting from such adjustment and the increase or decrease,
if any, in the number of shares purchasable at such price upon the exercise of this Warrant, setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is based.

                   (b)        Qualified IPO . In the event that the Company shall propose at any time to effect a Qualified IPO, the Company
shall send to the Holder at least twenty (20) days‟ prior written notice of the date on which such offering is expected to occur.

                   (c)       Fundamental Transaction . In the event that the Company shall propose to consummate a Fundamental
Transaction after the issuance of this Warrant, in addition to the requirements set forth in Section 5 hereof, the Company shall send to the
Holder at least ten (10) days‟ prior written notice of the date on which such Fundamental Transaction is expected to occur.

         11.       Governing Law, Headings . This Warrant is being delivered in the State of New York and shall be construed and enforced
in accordance with and governed by the laws of such State, without reference to the conflicts of law provisions thereof. The headings in this
Warrant are for purposes of reference only, and shall not limit or otherwise affect any of the terms hereof.

          12.       Lost or Stolen Warrant . Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction, or
mutilation of this Warrant and, in the case of any such loss, theft or destruction, upon receipt of an indemnity reasonably satisfactory to the
Company, or in the case of any such mutilation, upon surrender and cancellation of such Warrant, the Company, at its expense, will make and
deliver a new Warrant, of like tenor, in lieu of the lost, stolen, destroyed or mutilated Warrant.

         13.        Fractional Shares . No fractional shares shall be issued upon exercise of this Warrant. The Company shall, in lieu of
issuing any fractional share, pay the Holder entitled to such fraction a sum in cash equal to such fraction (calculated to the nearest 1/100th of a
share) multiplied by the then effective Exercise Price on the date the Notice of Exercise is received by the Company.

         14.        Successors and Assigns . This Warrant and the rights evidenced hereby shall inure to the benefit of and be binding upon
the successors of the Company and the successors and assigns of the Holder. The provisions of this Warrant are intended to be for the benefit
of all Holders from time to time of this Warrant, and shall be enforceable by any such Holder.

          15.        Severability of Provisions . In case any one or more of the provisions of this Warrant shall be invalid or unenforceable in
any respect, the validity and enforceability of the remaining terms and provisions of this Warrant shall not in any way be affected or impaired
hereby and the parties will attempt in good faith to agree upon a valid and enforceable provision which shall be a commercially reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute provision in this Warrant.

                                      Remainder of Page Intentionally Left Blank; Signature Page Follows

                                                                         8
       IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by its officer, thereunto duly authorized as of
this     day of        , 2011.


                                                                 LUCID, INC.


                                                                 By:
                                                                 Name:    Jay M. Eastman, Ph.D.
                                                                 Title:   Chief Executive Officer


                                              Signature Page—Common Stock Warrant
                                                           NOTICE OF EXERCISE

(To be signed only upon exercise of Warrant)

To: Lucid, Inc.

        The undersigned, the holder of the attached Common Stock Warrant, hereby elects to exercise the purchase right represented by such
Warrant for, and to purchase thereunder,                      shares of Common Stock of Lucid, Inc. and such holder herewith makes
payment of $                 therefor.


         The undersigned requests that certificates for such shares be issued in the name of, and delivered
to:                                                                          whose address
is:                                                                        .

DATED:


                                                                        (Signature must conform in all respects to name of Holder as specified
                                                                        on the face of the Warrant)

                                                                        Name:

                                                                        Title:
                                                                                                                                      Exhibit 4.26

                                                                                                                                 - Execution Copy

Warrant No. [       ]
Date of Issuance: July 27, 2011

                                                      LUCID, INC.
                                      WARRANT TO PURCHASE SHARES OF COMMON STOCK

THIS WARRANT AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “ ACT ”), APPLICABLE STATE SECURITIES LAWS, OR APPLICABLE LAWS OF
ANY FOREIGN JURISDICTION. THIS WARRANT AND SUCH SECURITIES HAS BEEN ACQUIRED FOR INVESTMENT AND NOT
WITH A VIEW TO DISTRIBUTION OR RESALE, AND MAY NOT BE OFFERED, SOLD, PLEDGED, HYPOTHECATED OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND ANY
APPLICABLE STATE SECURITIES LAWS AND IN THE ABSENCE OF COMPLIANCE WITH APPLICABLE LAWS OF ANY
FOREIGN JURISDICTION, OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS
NOT REQUIRED AND SUCH FOREIGN JURISDICTION LAWS HAVE BEEN SATISFIED

           THIS CERTIFIES THAT, for value received, Maxim Partners, LLC (the “ Holder ”), its designees or permitted assigns, subject to
the terms and conditions set forth herein, at any time prior to the Expiration Date (as defined below), is entitled to purchase from Lucid, Inc., a
New York corporation (the “ Company ”), that number of fully paid and nonassessable shares, as adjusted from time to time pursuant to the
provisions of this Warrant (the “ Warrant Shares ”), of the Company‟s common stock, $0.01 par value per share (the “ Common Stock ”), equal
to (i) three percent (3%) of the Common Stock underlying the Securities, as defined in that certain Subscription Agreement dated on or about
the date hereof between the Company and Osiris Investment Partners, L.P. (the “ Purchase Agreement ”), divided by (ii) the IPO Price (if a
Qualified IPO is the first of a Qualified IPO, Non-Qualified Financing or Non-Registered Fundamental Transaction to occur), the price at
which shares of Common Stock are sold in a Non-Qualified Financing (if a Non-Qualified Financing is the first of a Qualified IPO,
Non-Qualified Financing or Non-Registered Fundamental Transaction to occur) or the Equity Value Per Share (defined below) (if a
Fundamental Transaction is the first of a Qualified IPO, Non-Qualified Financing or Non-Registered Fundamental Transaction to occur), upon
surrender to the Company at its principal office (or at such other location as the Company may advise the Holder in writing) of this Warrant
properly endorsed with the Notice of Exercise attached hereto duly completed and signed and upon payment of the aggregate Exercise Price (as
defined below) for the number of Warrant Shares for which this Warrant is being exercised determined in accordance with the provisions
hereof. For purposes hereof, “ IPO Price ” means the price at which shares of Common Stock, or shares of Common Stock underlying units
(for the sake of clarity, allocating no value to any warrants underlying such units), as applicable, are sold in a Qualified IPO. For purposes
hereof, “ Qualified IPO ” means the consummation of an underwritten initial public offering by the Company of shares of Common Stock
and/or units consisting of Common Stock and warrants to purchase Common Stock resulting in aggregate gross cash proceeds (before
commissions or other expenses) to the Company of at least $10,000,000 and made in connection with the listing by the Company of the
Common Stock on a registered national stock exchange or the quotation of Common Stock on the OTC Bulletin Board or similar quotation
service. For purposes hereof, “ Non-Registered Fundamental Transaction ” means a Fundamental Transaction in which the Successor Entity is
an entity whose outstanding common stock is not registered under the Exchange Act and listed on a registered national securities
exchange. The exercise price per Warrant Share issuable pursuant to this Common Stock Warrant shall be equal to $5.07 (the “ Exercise Price
”). Terms used herein but not otherwise defined shall have the meaning set forth in Purchase Agreement. In the event that the Company does
not
consummate a Qualified IPO, Non-Qualified Financing or Non-Registered Fundamental Transaction prior to November 15, 2012, the
denominator set forth above shall be equal to $4.61.

         This Warrant is issued subject to the following terms and conditions:

         1.        Exercise; Payment .

                  (a)        Exercise . Subject to Section 5 hereof, the Holder may exercise this Warrant, at any time or from time to time,
during the period (a) commencing on the earliest to occur of (i) the consummation of a Qualified IPO, (ii) the consummation of a
Non-Qualified Financing, (iii) the consummation of a Fundamental Transaction in which the Successor Entity is a Non-Public Entity or
(iv) November 15, 2012, and (b) expiring on November 15, 2015 at 5:00 p.m. (Eastern Time) (the “ Expiration Date ”). The Holder may
exercise this Warrant on or prior to the Expiration Date for all or any part of the Warrant Shares (but not for a fraction of a share) that may be
purchased hereunder, as that number may be adjusted pursuant to Section 3 of this Warrant. The Company agrees that the Warrant Shares
purchased under this Warrant shall be and are deemed to be issued to the Holder hereof as the record owner of such Warrant Shares as of the
close of business on the date on which this Warrant shall have been surrendered, properly endorsed, the completed and executed Notice of
Exercise delivered, and payment made for such Warrant Shares (such date, a “ Date of Exercise ”).

         In the event that the Holder elects to exercise this Warrant during such time as the issuer hereof is a Non-Public Entity, then, in lieu of
receiving Warrant Shares, the Holder shall receive an amount equal to the product of (i) the number of Warrant Shares as to which the Warrant
has been exercised by such Holder multiplied by (ii) the difference (but not less than zero) between the Equity Value Per Share and $4.52 (as
such amounts may be adjusted pursuant to Section 4 of this Warrant).

                  (b)        Issuance of Certificates .

                             (i)       Certificates for the Warrant Shares so purchased, together with any other securities or property to which
the Holder hereof is entitled upon such exercise, shall be delivered to the Holder hereof by the Company at the Company‟s expense as soon as
practicable after the rights represented by this Warrant have been so exercised, but in any event not later than ten (10) business days following
the Date of Exercise. In case of a purchase of less than all the Warrant Shares which may be purchased under this Warrant, the Company shall
cancel this Warrant and execute and deliver to the Holder hereof within a reasonable time a new Warrant or Warrants of like tenor for the
balance of the Warrant Shares purchasable under the Warrant surrendered upon such purchase. Each stock certificate so delivered shall be
registered in the name of such Holder and issued with a legend in substantially the form of the legend placed on the front of this Warrant.

                            (ii)       The Company‟s obligations to issue and deliver Warrant Shares in accordance with the terms hereof are
absolute and unconditional, irrespective of any action or inaction by the Holder to enforce the same. Nothing herein shall limit a Holder‟s right
to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or
injunctive relief with respect to the Company‟s failure to timely deliver certificates representing shares of Common Stock upon exercise of the
Warrant as required pursuant to the terms hereof.

                  (c)       Issue Tax . The issuance of certificates for Warrant Shares upon the exercise of this Warrant shall be made without
charge to the Holder for any issue tax (other than any applicable income taxes) in respect thereof; provided , however , that the Company shall
not be required to pay any

                                                                         2
tax that may be payable in respect of any transfer involved in the issuance and delivery of any certificate in a name other than that of the then
Holder of the Warrant being exercised.

                  (d)       Payment of Exercise Price . The Holder shall pay the Exercise Price by delivering immediately available funds to
the Company.

          For the purposes hereof, “Equity Value Per Share” means the result obtained by dividing the Equity Value by the number of
fully-diluted shares of Common Stock outstanding immediately prior to the consummation of the Fundamental Transaction in which the
Non-Public Entity was formed, resulted or survived.

           For the purposes hereof, “Equity Value” means the value of the Company‟s fully-diluted common equity as determined in the
Fundamental Transaction in which the Non-Public Entity was formed, resulted or survived, as agreed by the Successor Entity and the holders
of a majority in aggregate principal amount of the outstanding Notes and the holders of a majority of the outstanding Warrants (such holders of
Notes and Warrants being referred to as the “ Majority Holders ”). In the event that the determination of the Equity Value requires the
appraisal or evaluation of non-cash components and the Successor Entity and the Majority Holders shall fail to agree regarding the results of
such evaluation or appraisal within 15 days of a notice by any holder of a Note or Warrant requesting such agreement, then the value of the
Company‟s fully-diluted common equity based upon the Fundamental Transaction shall be determined by an independent investment bank
having experience in the valuation of companies similar to the Company, selected by the Successor Entity and reasonably acceptable to the
Majority Holders. The Successor Entity shall select such investment bank within fifteen (15) days of notice from a Holder of the need to
determine the Equity Value. If the investment bank selected by the Successor Entity is not reasonably acceptable to the Majority Holders, and
the Successor Entity and such Majority Holders cannot agree on a mutually acceptable investment bank within fifteen (15) days of its selection
by the Successor Entity, then the Successor Entity and the Majority Holders shall each choose one such investment bank within fifteen (15)
days and the respective chosen firms (or, if only one firm is chosen because the other party fails to choose, then such one chosen firm) shall
jointly select within fifteen (15) days of their selection a third investment bank, which shall make the determination within thirty (30) days of
its selection. The Successor Entity shall pay the costs and fees of each such investment bank (including any such investment bank selected by
the Majority Holders), and the decision of the investment bank making such determination of Equity Value shall be final and binding on the
Successor Entity and all affected Holders.

                   (e)        Cashless Exercise . In lieu of exercising this Warrant by the payment to the Company of immediately available
funds, as set forth in Section 1(d) above, the Holder may surrender this Warrant for a number of Warrant Shares determined by multiplying the
maximum number of Warrant Shares to which the Holder would have been entitled had the Holder paid the Exercise Price in cash by a
fraction, the numerator of which is the fair market value of one Warrant Share at that time less the Exercise Price of one Warrant Share, and the
denominator of which is the fair market value of one Warrant Share at that time. The fair market value of a Warrant Share shall be determined
pursuant to Section 1(f).

                   (f)       Fair Market Value . If the Warrant Shares are traded regularly in a public market, the fair market value of the
Warrant Shares shall be the closing price of the Warrant Shares (or the closing price of the Company‟s stock into which the Warrant Shares are
convertible) reported for the business day immediately before the Holder delivers its Notice of Exercise to the Company. If the Warrant
Shares are not regularly traded in a public market, the board of directors of the Company shall determine the fair market value of the Warrant
Shares in its reasonable good faith judgment.

                                                                         3
         2.         Shares to be Fully Paid; Reservation of Shares . The Company covenants and agrees that all Warrant Shares, will, upon
issuance and payment of the applicable Exercise Price, be duly authorized, validly issued, fully paid and nonassessable, and free of all
preemptive rights, liens and encumbrances, except for restrictions on transfer provided for herein. The Company shall at all times reserve and
keep available out of its authorized and unissued Common Stock, solely for the purpose of providing for the exercise of the rights to purchase
all Warrant Shares granted pursuant to this Warrant, such number of shares of Common Stock as shall, from time to time, be sufficient therefor.

         3.        Closing of Books . The Company will at no time close its transfer books against the transfer of any warrant or of any
Warrant Shares issued or issuable upon the exercise of any warrant in any manner that interferes with the timely exercise of this Warrant,
subject to compliance with any applicable securities laws

         4.        Adjustment of Exercise Price and Number of Shares . The Exercise Price and the total number of Warrant Shares shall be
subject to adjustment from time to time upon the occurrence of certain events described in this Section 4.

                    (a)       Reclassification . If any reclassification of the capital stock of the Company or any reorganization, consolidation,
merger, or any sale, lease, license, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all, of
the business and/or assets of the Company (the “ Reclassification Events ”) shall be effected in such a way that holders of Common Stock shall
be entitled to receive stock, securities, or other assets or property, then, as a condition of such Reclassification Event, lawful and adequate
provisions shall be made whereby the Holder hereof shall thereafter have the right to purchase and receive (in lieu of the shares of Common
Stock of the Company immediately theretofore purchasable and receivable upon the exercise of the rights represented hereby) such shares of
stock, securities, or other assets or property as may be issued or payable with respect to or in exchange for a number of outstanding shares of
such Common Stock equal to the number of shares of such stock immediately theretofore purchasable and receivable upon the exercise of the
rights represented hereby. In any Reclassification Event, appropriate provision shall be made with respect to the rights and interests of the
Holder of this Warrant to the end that the provisions hereof (including, without limitation, provisions for adjustments of the Exercise Price and
of the number of Warrant Shares), shall thereafter be applicable, as nearly as may be, in relation to any shares of stock, securities, or assets
thereafter deliverable upon the exercise hereof. For the sake of clarity, in the event that adjustments are made in accordance with Section 5
hereof, no adjustments shall be required under this Section 4(a).

                   (b)       Subdivision, Dividends or Combination of Stock . In the event the outstanding shares of the Company‟s Common
Stock shall be increased by a stock dividend payable in Common Stock, stock split, subdivision, or other similar transaction occurring after the
date hereof into a greater number of shares of Common Stock, the Exercise Price in effect immediately prior to such subdivision shall be
proportionately reduced and the number of Warrant Shares issuable hereunder proportionately increased. Conversely, in the event the
outstanding shares of the Company‟s Common Stock shall be decreased by reverse stock split, combination, consolidation, or other similar
transaction occurring after the date hereof into a lesser number of shares of Common Stock, the Exercise Price in effect immediately prior to
such combination shall be proportionately increased and the number of Warrant Shares issuable hereunder proportionately decreased.

                  (c)       Weighted Average Adjustment . Other than in the case of the issuance of Permitted Additional Stock (defined
below), if the Company issues additional shares of Common Stock, including shares of Common Stock ultimately issuable upon exercise or
conversion of a security convertible or exercisable into Common Stock, after the date of this Warrant and the consideration per additional
common share is less than the Exercise Price in effect immediately before such issue, the

                                                                           4
Exercise Price shall be reduced, concurrently with such issue, to a price determined by multiplying the Exercise Price by a fraction:

                           (i)       the numerator of which is the number of shares of Common Stock outstanding immediately before such
issue plus the number of shares of Common Stock that the aggregate consideration received by the Company for the additional common shares
would purchase at the Exercise Price in effect immediately before such issue, and

                           (ii)      the denominator of which is the number of shares of Common Stock outstanding immediately before such
issue plus the number of such additional common shares.

         Upon each adjustment of the Exercise Price, the number of Warrant Shares issuable upon exercise of this Warrant shall be increased to
equal the quotient obtained by dividing (a) the product resulting from multiplying (i) the number of Warrant Shares issuable upon exercise of
this Warrant and (ii) the Exercise Price, in each case as in effect immediately before such adjustment, by (b) the adjusted Exercise Price.

          For purposes hereof, “ Permitted Additional Stock ” means (i) shares of Common Stock and options therefor, issued to directors,
officers, employees or consultants of the Company pursuant to a stock option plan, stock purchase plan, or other equity incentive plan or
agreement approved by the Board of Directors of the Company (the “ Board ”), (ii) Common Stock issued or issuable upon conversion or
exercise of the Notes and Warrants issued pursuant to the Transaction Documents, (iii) Common Stock issuable upon conversion or exercise of
any commitments, warrants, options, notes or other agreements to issue capital stock outstanding as of the date hereof, (iv) Common Stock
issued pursuant to a Qualified IPO, (v) Common Stock issuable in respect of any shares, options, warrants, or convertible securities as a result
of the application of anti-dilution provisions, similar to the provisions hereunder, contained in the original terms of such securities and
(vi) shares of Common Stock issued as a stock dividend or upon any subdivision or split described in Section 4(b).

                   (d)       Certain Events . If any change in the outstanding Warrant Shares of the Company occurs as to which the other
provisions of this Section 4 are not strictly applicable, the Board shall make an adjustment in the number and class of shares available under the
Warrant, the Exercise Price or the application of such provisions, so as to protect such purchase rights as aforesaid. The adjustment shall be
such as will give the Holder of the Warrant upon exercise for the same aggregate Exercise Price the total number, class and kind of shares as it
would have owned had the Warrant been exercised prior to the event and had it continued to hold such shares until after the event requiring
adjustment.

                   (e)     Issuance Adjustment . In addition to any other adjustments contemplated hereunder, in the event that (i) a
Qualified IPO or (ii) Non-Qualified Financing does not occur within six months after the Issuance Cut Off Date, the Exercise Price as in effect
on the Issuance Cut Off Date shall automatically be reduced by 5% and shall be reduced by an additional 5% on each monthly anniversary
thereof until the Company completes a Qualified IPO or Non-Qualified Financing, provided however, that the Exercise Price shall not be
reduced to an amount lower than $1.00 (as adjusted to reflect any stock dividend payable in Common Stock, stock split, subdivision, or other
similar transaction).

         5.        Fundamental Transactions .

                   (a)       Consent Required . The Company shall not enter into or be party to a Fundamental Transaction (as defined below)
unless the Successor Entity (as defined below) assumes in writing all of the obligations of the Company under this Warrant in accordance with
the provisions of this Section 5 pursuant to written agreements in form and substance satisfactory to the Required Holders and

                                                                        5
approved by the Required Holders prior to such Fundamental Transaction, including agreements to deliver to each holder of Warrants in
exchange for such Warrants a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to
this Warrant, including, without limitation, an adjusted exercise price equal to the value for the shares of Common Stock reflected by the terms
of such Fundamental Transaction, and exercisable for a corresponding number of shares of capital stock equivalent to the shares of Common
Stock acquirable and receivable upon exercise of this Warrant (without regard to any limitations on the exercise of this Warrant) prior to such
Fundamental Transaction, and satisfactory to the Required Holders. Upon the occurrence of any Fundamental Transaction, the Successor
Entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Warrant
referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shall
assume all of the obligations of the Company under this Warrant with the same effect as if such Successor Entity had been named as the
Company herein.

                   (b)        Confirmation . Upon consummation of the Fundamental Transaction, the Successor Entity shall deliver to the
Holder confirmation that there shall be issued upon exercise of this Warrant at any time after the consummation of the Fundamental
Transaction, in lieu of the shares of the Common Stock (or other securities, cash, assets or other property) purchasable upon the exercise of this
Warrant prior to such Fundamental Transaction, such shares of stock, securities, cash, assets or any other property whatsoever (including
warrants or other purchase or subscription rights) which the Holder would have been entitled to receive upon the happening of such
Fundamental Transaction had this Warrant been converted immediately prior to such Fundamental Transaction, as adjusted in accordance with
the provisions of this Warrant. In addition to and not in substitution for any other rights hereunder, prior to the consummation of any
Fundamental Transaction pursuant to which holders of shares of Common Stock are entitled to receive securities or other assets with respect to
or in exchange for shares of Common Stock (a “ Corporate Event ”), the Company shall make appropriate provision to insure that the Holder
will thereafter have the right to receive upon an exercise of this Warrant at any time after the consummation of the Fundamental Transaction, in
lieu of the shares of the Common Stock (or other securities, cash, assets or other property) purchasable upon the exercise of this Warrant prior
to such Fundamental Transaction, such shares of stock, securities, cash, assets or any other property whatsoever (including warrants or other
purchase or subscription rights) which the Holder would have been entitled to receive upon the happening of such Fundamental Transaction
had this Warrant been exercised immediately prior to such Fundamental Transaction. Provision made pursuant to the preceding sentence shall
be in a form and substance reasonably satisfactory to the Required Holders. The provisions of this Section 5 shall apply similarly and equally
to successive Fundamental Transactions and Corporate Events and shall be applied without regard to any limitations on the exercise of this
Warrant.

                  (c)       Certain Definitions . For purposes of this Warrant, the following terms have the following meanings:

                             (i)       “ Fundamental Transaction ” means that the Company shall, directly or indirectly, in one or more related
transactions, (i) consolidate or merge with or into (whether or not the Company is the surviving corporation) another Person, (ii) sell, assign,
transfer, convey or otherwise dispose of all or substantially all of the properties or assets of the Company to another Person, (iii) allow another
Person to make a purchase, tender or exchange offer that is accepted by the holders of more than the 50% of the outstanding shares of Common
Stock (not including any shares of Common Stock held by the Person(s) making or party to, or associated or affiliated with the Persons making
or party to, such purchase, tender or exchange offer), (iv) consummate a stock purchase agreement or other business combination (including,
without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another Person whereby such other Person
acquires more than the 50% of the outstanding shares of Common Stock (not including any shares of Common Stock held by the other

                                                                         6
Person(s) making or party to, or associated or affiliated with the other Person(s) making or party to, such stock purchase agreement or other
business combination), (v) reorganize, recapitalize or reclassify its Common Stock, or (vi) any “person” or “group” (as these terms are used for
purposes of Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) is or shall become the “beneficial owner” (as
defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended), directly or indirectly, of 50% of the aggregate ordinary voting
power represented by issued and outstanding Common Stock.

                           (ii)     “ Successor Entity ” means the Person (or, if so elected by the Holder, the parent entity) formed by,
resulting from or surviving any Fundamental Transaction or the Person (or, if so elected by the Holder, the parent entity) with which such
Fundamental Transaction shall have been entered into.

                           (iii)      “ Person ” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a
trust, an unincorporated organization, any other entity and a government or any department or agency thereof, as applicable.

          6.        No Stockholder Rights . No holder of this Warrant shall be entitled, as a Warrant holder, to vote or receive dividends or be
deemed the holder of Warrant Shares or any other securities of the Company which may at any time be issuable on the exercise hereof for any
purpose, nor shall anything contained herein be construed to confer upon the holder of this Warrant, as such, any of the rights of a stockholder
of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give
or withhold consent to any corporate action (whether upon any recapitalization, issuance of stock, reclassification of stock, change of par value,
consolidation, merger, conveyance, or otherwise) or to receive notice of meetings, or to receive dividends or subscription rights or otherwise
until the Warrant shall have been exercised and the Warrant Shares purchasable upon the exercise hereof shall have become deliverable, as
provided herein.

         7.        Compliance with the Act . The Holder of this Warrant, by acceptance hereof, agrees that this Warrant is being acquired for
its own account and not for any other person or persons, for investment purposes and that it will not offer, sell, or otherwise dispose of this
Warrant except under circumstances which will not result in a violation of the Act or any applicable state securities laws.

         8.         Restriction Upon Transfer .

                    (a)       Unregistered Security . The Holder represents that by accepting this Warrant it understands that this Warrant and
any securities obtainable upon exercise of this Warrant have not been registered for sale under Federal or state securities laws and are being
offered and sold to the Holder pursuant to one or more exemptions from the registration requirements of such securities laws. In the absence
of an effective registration of such securities or an exemption therefrom, any certificates for such securities shall bear the legend set forth on the
first page hereof. The Holder understands that it must bear the economic risk of its investment in this Warrant and any securities obtainable
upon exercise of this Warrant for an indefinite period of time, as this Warrant and such securities have not been registered under Federal or
state securities laws and therefore cannot be sold unless subsequently registered under such laws, unless an exemption from such registration is
available.

                    (b)        Transferability . Subject to restriction set forth in Section 8(a), neither this Warrant nor the Warrant Shares shall be
transferable by the Holder without the prior written consent of the Company; provided, however , that Holder may transfer this Warrant to a
parent or subsidiary of the Holder without the prior written consent of the Company, subject to applicable laws and the restriction on transfer
set forth on the first page of this Warrant. Prior to the consummation of any such permitted transfer under this Section 8(b), Holder shall
provide the Company with notice of such transfer.

                                                                           7
         9.        Amendment, Waiver, etc . Except as expressly provided herein, neither this Warrant nor any term hereof may be amended,
waived, discharged or terminated other than by a written instrument signed by the party against whom enforcement of any such amendment,
waiver, discharge or termination is sought; provided, however, that any provisions hereof may be amended, waived, discharged or terminated
upon the written consent of the Company and the holders (the “ Required Holders ”) of not less than sixty-six and two-thirds percent (66 2 / 3
%), in the aggregate, of the Warrant Shares then issuable upon exercise of then outstanding warrants of like tenor to this Warrant issued by the
Company in connection with the issuance of Bridge Notes (as defined in the Note).

          10.        Notices . All notices and other communications from the Company to the Holder and from the Holder to the Company as
required pursuant to this Section 10 or otherwise shall be in writing and shall be deemed sufficient upon delivery, when delivered personally or
by a nationally-recognized delivery service (such as Federal Express or UPS), or forty-eight (48) hours after being deposited in the U.S. mail,
as certified or registered mail, with postage prepaid, addressed to the party to be notified at such party‟s address as set forth below or as
subsequently modified by written notice. The Company shall be required to provide notice to the Holder hereunder as a result of the following:

                  (a)        Adjustment . Upon any adjustment of the Exercise Price or any increase or decrease in the number of Warrant
Shares pursuant to Section 4 hereof, the Company shall give written notice thereof, by first class mail postage prepaid, addressed to the
registered Holder of this Warrant at the address of such Holder as shown on the books of the Company. The notice shall be prepared and
signed by the Company‟s Chief Financial Officer and shall state the Exercise Price resulting from such adjustment and the increase or decrease,
if any, in the number of shares purchasable at such price upon the exercise of this Warrant, setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is based.

                   (b)        Qualified IPO . In the event that the Company shall propose at any time to effect a Qualified IPO, the Company
shall send to the Holder at least twenty (20) days‟ prior written notice of the date on which such offering is expected to occur.

                   (c)       Fundamental Transaction . In the event that the Company shall propose to consummate a Fundamental
Transaction after the issuance of this Warrant, in addition to the requirements set forth in Section 5 hereof, the Company shall send to the
Holder at least ten (10) days‟ prior written notice of the date on which such Fundamental Transaction is expected to occur.

         11.       Governing Law, Headings . This Warrant is being delivered in the State of New York and shall be construed and enforced
in accordance with and governed by the laws of such State, without reference to the conflicts of law provisions thereof. The headings in this
Warrant are for purposes of reference only, and shall not limit or otherwise affect any of the terms hereof.

          12.       Lost or Stolen Warrant . Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction, or
mutilation of this Warrant and, in the case of any such loss, theft or destruction, upon receipt of an indemnity reasonably satisfactory to the
Company, or in the case of any such mutilation, upon surrender and cancellation of such Warrant, the Company, at its expense, will make and
deliver a new Warrant, of like tenor, in lieu of the lost, stolen, destroyed or mutilated Warrant.

         13.        Fractional Shares . No fractional shares shall be issued upon exercise of this Warrant. The Company shall, in lieu of
issuing any fractional share, pay the Holder entitled to such fraction a sum in cash equal to such fraction (calculated to the nearest 1/100th of a
share) multiplied by the then effective Exercise Price on the date the Notice of Exercise is received by the Company.

                                                                         8
         14.        Successors and Assigns . This Warrant and the rights evidenced hereby shall inure to the benefit of and be binding upon
the successors of the Company and the successors and assigns of the Holder. The provisions of this Warrant are intended to be for the benefit
of all Holders from time to time of this Warrant, and shall be enforceable by any such Holder.

          15.        Severability of Provisions . In case any one or more of the provisions of this Warrant shall be invalid or unenforceable in
any respect, the validity and enforceability of the remaining terms and provisions of this Warrant shall not in any way be affected or impaired
hereby and the parties will attempt in good faith to agree upon a valid and enforceable provision which shall be a commercially reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute provision in this Warrant.

                                     Remainder of Page Intentionally Left Blank; Signature Page Follows

                                                                        9
          IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by its officer, thereunto duly authorized as of
this 27 th day of July, 2011.


                                                                    LUCID, INC.


                                                                    By:      /s/ Jay M. Eastman
                                                                    Name:    Jay M. Eastman, Ph.D.
                                                                    Title:   Chief Executive Officer


                                                Signature Page—Common Stock Warrant
                                                           NOTICE OF EXERCISE

(To be signed only upon exercise of Warrant)

To: Lucid, Inc.

        The undersigned, the holder of the attached Common Stock Warrant, hereby elects to exercise the purchase right represented by such
Warrant for, and to purchase thereunder,                shares of Common Stock of Lucid, Inc. and such holder herewith makes payment
of $                          therefor.


         The undersigned requests that certificates for such shares be issued in the name of, and delivered
to:                                                                          whose address is:                                    .

DATED:


                                                                        (Signature must conform in all respects to name of Holder as specified
                                                                        on the face of the Warrant)

                                                                        Name:

                                                                        Title:
                                                                                                                                    Exhibit 4.27

THE WARRANT AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY STATES. THEY MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH SALE OR TRANSFER
IS EXEMPT UNDER THE AFORESAID FEDERAL AND STATE SECURITIES LAWS.

                                                                 LUCID, INC.

                                       (WARRANT TO PURCHASE SHARES OF COMMON STOCK)

        FOR VALUE RECEIVED, LUCID, INC., a New York corporation with an office at 2320 Brighton-Henrietta Town Line Road,
Rochester, New York 14623 (the “Company”) grants the following rights to (the “Holder”):

1.         Issuance and Definitions . This Warrant is issued in accordance with the terms hereinafter set forth and has been issued in
connection with the issuance and delivery by the Company to the Holder of a promissory note of even date herewith (the “Note”). Capitalized
Terms not otherwise defined herein shall have the meanings ascribed to them in the Note. The term “Qualified Equity Round” shall mean the
Issuance by the Company of equity interests (or debt interests convertible into equity interests) to investors in one or a series of related
transactions in which the Company receives gross proceeds of at least $6 million. There shall be excluded from the definition of Qualified
Equity Round any of the following: the issuance of equity securities upon the exercise of currently outstanding options, warrants or convertible
securities; or the issuance of equity securities pursuant to the exercise of equity incentives granted by the Company.

2.        Purchase of Common Stock . Subject to the terms and conditions hereinafter set forth, the Holder of this Warrant is entitled, upon
surrender of this Warrant at the principal office of the Company (or at such other place as the Company shall notify the Holder in writing), to
purchase from the Company shares of fully paid and non-assessable shares of Common Stock of the Company (the “Common Stock”). The
number of shares will be the quotient obtained by dividing 20% of the principal amount of the Note by the Investor Price, or if no Qualified
Event Round has closed on or before March 31, 2009, then the exercise price shall be $3.15 per share.

3.          Reservation of Common Stock . The Company shall at all times reserve and hold available sufficient shares of Common Stock to
satisfy all conversion and purchase rights represented by outstanding convertible securities, options and warrants, including this Warrant. The
Company covenants and agrees that all shares of Common Stock that may be issued upon the exercise of this Warrant shall, upon issuance, be
duly and validly issued, fully paid and non-assessable, and free from all taxes, liens and charges with respect to the purchase and the issuance
of the shares.

4.         Exercise Price . The Exercise Price of this Warrant, or the price at which a share of Common Stock purchasable upon exercise of
this Warrant may be purchased, will be the price per share paid for a common stock equivalent in the Qualified Equity Round (“Investor
Price”), provided, however, that, if no Qualified Equity Round has closed on or before March 31, 2009, then the exercise price shall be $3.15
per share.
5.         Exercise Period . The Holder may exercise the purchase rights evidenced hereby commencing upon the earlier of January 1, 2010 or
the date of closing of the next “Qualified Equity Round,” provided that this Warrant may only be exercised on or before December 31, 2013
(“Exercise Period”). If not exercised during this period, this Warrant and all rights granted under this Warrant shall expire and lapse.

6.        Exercise .

(a) The exercise of this Warrant may be accomplished by actual delivery of this Warrant and the Exercise Price in cash, certified check, or
official bank draft in lawful money of the United States of America, or such other tender acceptable to the Company. The payment must be
delivered, personally or by mail, to the Company at the address first set forth above or such other address as may hereafter be specified by the
Company in a written notice to the Holder.

(b) Notwithstanding any provision herein to the contrary, if the Fair Market Value of one share of Common Stock is greater than the exercise
price (at the date of calculation as set forth below), in lieu of exercising this Warrant for cash, the Holder may elect to receive shares equal to
the value (as determined below) of this Warrant by surrender of this Warrant at the principal office of the Company together with a properly
executed notice of such election, in which event the Company shall issue to the Holder a number of shares of Common Stock computed using
the following formula:

                X = Y (A-B)
                      A

           Where       X = the number of shares of Common Stock to be Issued to the Holder
                       Y = the number of shares of Common Stock issuable under the Warrant
                       A = the fair market value of one share of Common Stock (at the date of calculation)
                       B = the Exercise Price of the Warrant (at the date of calculation)


(c) For the purpose of the calculation in subparagraph (b) above, the Fair Market Value of one share of Common Stock shall be determined
by the Company‟s Board of Directors in good faith; provided, however, that where there exists a public market for the Company‟s Common
Stock at the time of such exercise, the fair market value per share shall be the average of the closing bid and asked prices of the Common Stock
as quoted In the Over-the-Counter Market Summary or the last reported sale price of the Common Stock or the closing price quoted on the
Nasdaq Global Market or on any exchange on which the Common Stock is listed, whichever is applicable, for the five (5) trading days prior to
the date of determination. Notwithstanding the foregoing, if the Warrant Is exercised In connection with the Company‟s initial public offering
of Common Stock, the fair market value per share shall be the per share offering price to the public of the Company‟s initial public offering.

7.       Certificates for Common Stock . Upon the exercise of the purchase rights evidenced by this Warrant, a certificate for the shares of
Common Stock so purchased shall be issued as soon as practicable thereafter, and in any event within thirty (30) days of the delivery of this
Warrant and the Exercise Price.

8.       Anti-Dilution . If this Warrant shall be exercised subsequent to any stock dividend, split-up, recapitalization, or reorganization of
the Company occurring after the date hereof, as a result of which shares of any class shall be issued in respect of outstanding shares of

                                                                         2
Common Stock or shares of Common Stock shall be changed into the same or a different number shares of the same or another class or classes,
the Holder shall receive, for the aggregate price paid upon such exercise, the aggregate number and class of shares which such Holder would
have received if this Warrant had been exercised immediately prior to such stock-dividend, split-up, recapitalization, or reorganization.

9.        Pre-Exercise Rights . Prior to the exercise of this Warrant, the Holder shall not be entitled to any rights of a shareholder with respect
to the Common Stock, including (without limitation) the right to receive dividends or other distributions thereon, or be notified of shareholder
meetings, and such holder shall not be entitled to any notice or other communication concerning the business or affairs of the Company.

10.        Restricted Securities . The Holder understands that this Warrant and the Common Stock purchasable hereunder constitute
“restricted securities” under the federal securities laws inasmuch as they are, or will be, acquired from the Company in transactions not
involving a public offering and accordingly may not, under such laws and applicable regulations, be resold or transferred without registration
under the Securities Act of 1933 or applicable state securities laws, or applicable exemption from registration. The Holder further
acknowledges that the Common Stock and any other securities Issued upon exercise of this Warrant shall bear a legend substantially in the
form of the legend appearing on the face hereof.

11.        Certification of Investment Purpose . Unless a current registration statement under the Securities Act of 1933 shall be in effect with
respect to the securities to be issued upon the exercise of this Warrant, the Holder hereof, by accepting this Warrant, covenants and agrees that,
at the time of exercise hereof, such Holder will deliver to the Company a written certification that the securities acquired by the Holder upon
exercise hereof are for the account of the Holder and acquired for investment purposes only and that such securities are not acquired with a
view to, or for sale in connection with, any public distribution thereof.

         IN WITNESS WHEREOF, the Company has signed this Warrant by its duly authorized officers this 11th day of November, 2008.


                                                                                    LUCID, INC.

                                                                         By:        /s/ Jay M. Eastman
                                                                         Name:      M. Eastman
                                                                         Title:     Chief Executive Officer

                                                                         3
                                                                                                                                     Exhibit 5.1




                                                                                                99 GARNSEY ROAD
                                                                                                PITTSFORD, NY 14534
                                                                                                (585) 419-8800
July 29, 2011
                                                                                                THOMAS E. WILLETT

                                                                                                DIRECT:   (585) 419-8646
                                                                                                FAX:      (585) 419-8818
                                                                                                TWILLETT@HARRISBEACH.COM

Lucid, Inc.
2320 Brighton-Henrietta Townline Road
Rochester, New York 14623

         Re:           Lucid, Inc.
                  Registration Statement of Form S-1

Gentlemen:

         You have requested our opinion in connection with a Registration Statement on Form S-1 (Registration No. 333-173555), as amended
(the “Registration Statement”) filed by Lucid, Inc., a New York corporation (the “Company”), with the Securities and Exchange Commission
under the Securities Act of 1933, as amended (the “Act”), in connection with (a) the Company‟s issuance and sale of shares of its Common
Stock, par value $0.01 per share (the “Common Stock”), and additional shares of Common Stock to cover over-allotments (collectively, the
“Company Shares”), and (b) the offering and sale by certain stockholders of the Company (the “Selling Stockholders”) of the Company‟s
Common Stock (the “Selling Stockholder Shares” and, together with the Company Shares, the “Shares”). The sale of the Shares is to be
pursuant to an underwriting agreement to be entered into with Roth Capital Partners, LLC as underwriter (the “Underwriting Agreement”).
Capitalized terms, unless otherwise defined herein, shall have the meanings set forth in the Registration Statement.

          We are acting as counsel for the Company in connection with the sale by the Company and the Selling Stockholders of the Shares. In
such capacity, we have examined the Registration Statement, the Certificate of Incorporation and Bylaws of the Company as amended to date,
certificates of public officials and officers of the Company and such other documents and records as we have deemed necessary or appropriate
for purposes of our opinion. In our examination, we have assumed the genuineness of all signatures, the authenticity of all documents submitted
to us as originals, the conformity with the originals of all documents submitted to us as copies, the authenticity of the originals of such
documents and the legal competence of all signatories to such documents.

         We express no opinion herein as to the laws of any state or jurisdiction other than the laws of the State of New York and the federal
laws of the United States of America.

          Based on the foregoing, and subject to the qualifications and assumptions referred to herein, we are of the opinion that (i) the
Company Shares, when issued by the Company pursuant to the Registration Statement and sold in accordance with the Underwriting
Agreement, will be legally issued, fully paid and non-assessable shares of Common Stock of the Company, and (ii) the Selling Stockholder
Shares, when issued by the Company, at the completion of the offering, upon automatic conversion of the entire principal amount plus accrued
interest of a convertible note held by each such Selling Stockholder, and when sold by the Selling Stockholders in accordance with the
Underwriting Agreement, will be legally issued, fully paid and non-assessable shares of Common Stock of the Company.
        We hereby consent to the use of this opinion as an exhibit to the Registration Statement and to the reference to this firm under the
heading “Legal Matters” in the prospectus included in the Registration Statement.

                                                                       Very truly yours,

                                                                       Harris Beach PLLC


                                                                       By:     /s/ Thomas E. Willett
                                                                               Thomas E. Willett,
                                                                               Member of the Firm

                                                                        2
                              Exhibit 10.10

         LUCID, INC.

LOAN AND SECURITY AGREEMENT
This LOAN AND SECURITY AGREEMENT (the “Agreement”) is entered into as of July 20, 2011, by and between Square 1 Bank (“Bank”)
and Lucid, Inc. (“Borrower”).

                                                                 RECITALS

Borrower wishes to obtain credit from time to time from Bank, and Bank desires to extend credit to Borrower. This Agreement sets forth the
terms on which Bank will advance credit to Borrower, and Borrower will repay the amounts owing to Bank.

                                                                AGREEMENT

The parties agree as follows:

         1.             DEFINITIONS AND CONSTRUCTION .

                1.1            Definitions . As used in this Agreement, all capitalized terms shall have the definitions set forth on
Exhibit A. Any term used in the Code and not defined herein shall have the meaning given to the term in the Code.

                 1.2           Accounting Terms . Any accounting term not specifically defined on Exhibit A shall be construed in
accordance with GAAP and all calculations shall be made in accordance with GAAP (except for non-compliance with FAS 123R and fair value
accounting adjustments in monthly reporting). The term “financial statements” shall include the accompanying notes and schedules.

         2.             LOAN AND TERMS OF PAYMENT .

                  2.1            Credit Extensions .

                              (a)         Promise to Pay . Borrower promises to pay to Bank, in lawful money of the United States of
  America, the aggregate unpaid principal amount of all Credit Extensions made by Bank to Borrower, together with interest on the unpaid
  principal amount of such Credit Extensions at rates in accordance with the terms hereof.

                                (b)        Term Loan .

                                     (i)         Subject to and upon the terms and conditions of this Agreement, Bank agrees to make one
  (1) or more term loans to Borrower in an aggregate principal amount not to exceed Three Million Dollars ($3,000,000) (each a “Term Loan “
  and collectively the “Term Loans”). Borrower may request Term Loans at any time from the date hereof through the Availability End
  Date. The proceeds of the Term Loans shall be used for general working capital purposes and to refinance the Borrower‟s Indebtedness to
  Danversbank.

                                         (ii)      Interest shall accrue from the date of each Term Loan at the rate specified in
  Section 2.3(a). Any Term Loans that are outstanding on the Availability End Date shall be payable in 36 equal monthly installments of
  principal, plus all accrued interest, beginning on date that is one month immediately following the Availability End Date, and

                                                                       1
  continuing on the same day of each month thereafter through the Term Loan Maturity Date, at which time all amounts due in connection
  with the Term Loans and any other amounts due under this Agreement shall be immediately due and payable. Term Loans, once repaid, may
  not be reborrowed.

                                      (iii)      When Borrower desires to obtain a Term Loan, Borrower shall notify Bank (which notice shall
  be irrevocable) by facsimile transmission to be received no later than 3:30 p.m. Eastern time on the day on which the Term Loan is to be
  made. Such notice shall be substantially in the form of Exhibit C. The notice shall be signed by an Authorized Officer.

                  2.2           Intentionally Left Blank .

                  2.3           Interest Rates, Payments, and Calculations .

                               (a)         Interest Rates .

                                      (i)              Term Loans . Except as set forth in Section 2.3(b), the Term Loans shall bear interest,
  on the outstanding daily balance thereof, at a variable annual rate equal to the greater of: (A) 4.00% above the Prime Rate then in effect; or
  (B) 7.25%.

                                 (b)         Late Fee; Default Rate . If any payment is not made within 15 days after the date such payment is
  due, Borrower shall pay Bank a late fee equal to the lesser of (i) 5% of the amount of such unpaid amount or (ii) the maximum amount
  permitted to be charged under applicable law. All Obligations shall bear interest, from and after the occurrence and during the continuance
  of an Event of Default, at a rate equal to 5 percentage points above the interest rate applicable immediately prior to the occurrence of the
  Event of Default.

                               (c)          Payments . Bank shall, at its option, charge such interest, all Bank Expenses, and all Periodic
  Payments against any of Borrower‟s deposit accounts. Any interest not paid when due shall be compounded by becoming a part of the
  Obligations, and such interest shall thereafter accrue interest at the rate then applicable hereunder.

                                (d)          Computation . In the event the Prime Rate is changed from time to time hereafter, the applicable
  rate of interest hereunder shall be increased or decreased, effective as of the day the Prime Rate is changed, by an amount equal to such
  change in the Prime Rate. All interest chargeable under the Loan Documents shall be computed on the basis of a 360 day year for the actual
  number of days elapsed.

                  2.4            Crediting Payments . Prior to the occurrence of an Event of Default, Bank shall credit a wire transfer of
funds, check or other item of payment to such deposit account or Obligation as Borrower specifies, except that to the extent Borrower uses the
Term Loans to purchase Collateral, Borrower‟s repayment of the Term Loans shall apply on a “first-in-first-out” basis so that the portion of the
Term Loans used to purchase a particular item of Collateral shall be paid in the chronological order the Borrower purchased the
Collateral. After the occurrence and during the continuance of an Event of Default, Bank shall have the right, in its sole discretion, to
immediately apply any wire transfer of funds, check, or other item of payment

                                                                        2
Bank may receive to conditionally reduce Obligations, but such applications of funds shall not be considered a payment on account unless such
payment is of immediately available federal funds or unless and until such check or other item of payment is honored when presented for
payment. Notwithstanding anything to the contrary contained herein, any wire transfer or payment received by Bank after 5:30 p.m. Eastern
time shall be deemed to have been received by Bank as of the opening of business on the immediately following Business Day. Whenever any
payment to Bank under the Loan Documents would otherwise be due (except by reason of acceleration) on a date that is not a Business Day,
such payment shall instead be due on the next Business Day, and additional fees or interest, as the case may be, shall accrue and be payable for
the period of such extension.

                  2.5           Fees . Borrower shall pay to Bank the following:

                               (a)         Facility Fee . On or before the Closing Date, a fee equal to $15,000, which shall be nonrefundable;

                               (b)        Prepayment Fee. In the event Borrower prepays all or a portion of any Term Loans prior to the
  Term Loan Maturity Date, Borrower shall, simultaneous with any such prepayment, pay to Bank: (i) a fee of 3.0% of the aggregate principal
  amount so prepaid if such prepayment occurs on or before the first anniversary of the Closing Date; (ii) a fee of 2.0% of the aggregate
  principal amount so prepaid if such prepayment occurs on a date that is after the first anniversary of the Closing Date and on or before the
  second anniversary of the Closing Date; and (iii) a fee of 1.0% of the aggregate principal amount so prepaid if such prepayment occurs after
  the second anniversary of the Closing Date.

                                (c)       Bank Expenses . On the Closing Date, all Bank Expenses incurred through the Closing Date, and,
  after the Closing Date, all Bank Expenses, as and when they become due.

                   2.6            Term . This Agreement shall become effective on the Closing Date and, subject to Section 12.7, shall
continue in full force and effect for so long as any Obligations remain outstanding or Bank has any obligation to make Credit Extensions under
this Agreement. Notwithstanding the foregoing, Bank shall have the right to terminate its obligation to make Credit Extensions under this
Agreement immediately and without notice upon the occurrence and during the continuance of an Event of Default.

         3.             CONDITIONS OF LOANS .

                    3.1           Conditions Precedent to Closing . The agreement of Bank to enter into this Agreement on the Closing Date
is subject to the condition precedent that Bank shall have received, in form and substance satisfactory to Bank, each the following items and
completed each of the following requirements:

                               (a)         this Agreement;

                                (b)      an officer‟s certificate of Borrower with respect to incumbency and resolutions authorizing the
  execution and delivery of this Agreement;

                                                                       3
                                (c)       a financing statement (Form UCC-1);

                             (d)        payment of the fees and Bank Expenses then due specified in Section 2.5, which may be debited
  from any of Borrower‟s accounts with Bank;

                                (e)       current SOS Reports indicating that except for Permitted Liens, there are no other security interests
  or Liens of record in the Collateral;

                              (f)         current financial statements, including audited statements (or such other level required by the
  Investment Agreement) for Borrower‟s most recently ended fiscal year, together with an unqualified opinion (or an opinion qualified only for
  going concern so long as Borrower‟s investors provide additional equity as needed), company prepared consolidated and consolidating
  balance sheets and income statements for the most recently ended month in accordance with Section 6.2, and such other updated financial
  information as Bank may reasonably request;

                                (g)       current Compliance Certificate in accordance with Section 6.2;

                                (h)       a Warrant in form and substance satisfactory to Bank;

                                (i)       a Borrower Information Certificate;

                                (j)       Borrower shall have opened and funded not less than $50,000 in deposit accounts held with Bank;

                                (k)       a payoff letter from Danversbank in form and substance satisfactory to Bank;

                                (l)       a pledge and security agreement pertaining to the Cash Collateral Account;

                                (m)       a Guaranty from Jay M. Eastman in form and substance satisfactory to Bank;

                                (n)       a Guaranty from William J. Shea in form and substance satisfactory to Bank;

                               (o)        subordination agreements in form and substance satisfactory to Bank covering at least $3,000,000 of
  the Indebtedness described in the “Permitted Indebtedness” section on the Schedule; and

                                (p)       such other documents or certificates, and completion of such other matters, as Bank may reasonably
  request.

                   3.2            Conditions Precedent to all Credit Extensions . The obligation of Bank to make each Credit Extension,
including the initial Credit Extension, is contingent upon the Borrower‟s compliance with Section 3.1 above, and is further subject to the
following conditions:

                                                                       4
                                (a)         timely receipt by Bank of the Loan Advance/Paydown Request Form as provided in Section 2.1;

                             (b)        Borrower shall have transferred substantially all of its Cash assets into operating accounts held with
  Bank and otherwise be in compliance with Section 6.6 hereof; and

                                (c)         the representations and warranties contained in Section 5 shall be true and correct in all material
  respects on and as of the date of such Loan Advance/Paydown Request Form and on the effective date of each Credit Extension as though
  made at and as of each such date, and no Event of Default shall have occurred and be continuing, or would exist after giving effect to such
  Credit Extension (provided, however, that those representations and warranties expressly referring to another date shall be true, correct and
  complete in all material respects as of such date). The making of each Credit Extension shall be deemed to be a representation and warranty
  by Borrower on the date of such Credit Extension as to the accuracy of the facts referred to in this Section 3.2.

         4.              CREATION OF SECURITY INTEREST .

                    4.1             Grant of Security Interest . Borrower grants and pledges to Bank a continuing security interest in the
Collateral to secure prompt repayment of any and all Obligations and to secure prompt performance by Borrower of each of its covenants and
duties under the Loan Documents. Except for Permitted Liens or as disclosed in the Schedule, such security interest constitutes a valid, first
priority security interest in the presently existing Collateral, and will constitute a valid, first priority security interest in later-acquired
Collateral. Borrower also hereby agrees not to sell, transfer, assign, mortgage, pledge, lease, grant a security interest in, or encumber any of its
Intellectual Property except for the security interest therein granted to Bank hereunder. Notwithstanding any termination of this Agreement or
of any filings undertaken related to Bank‟s rights under the Code, Bank‟s Lien on the Collateral shall remain in effect for so long as any
Obligations are outstanding.

                    4.2            Perfection of Security Interest . Borrower authorizes Bank to file at any time financing statements,
continuation statements, and amendments thereto that (i) either specifically describe the Collateral or describe the Collateral as all assets of
Borrower of the kind pledged hereunder, and (ii) contain any other information required by the Code for the sufficiency of filing office
acceptance of any financing statement, continuation statement, or amendment, including whether Borrower is an organization, the type of
organization and any organizational identification number issued to Borrower, if applicable. Borrower shall have possession of the Collateral,
except where expressly otherwise provided in this Agreement or where Bank chooses to perfect its security interest by possession in addition to
the filing of a financing statement. Where Collateral is in possession of a third party bailee, Borrower shall take such steps as Bank reasonably
requests for Bank to (i) subject to Section 7.10 below, obtain an acknowledgment, in form and substance satisfactory to Bank, of the bailee that
the bailee holds such Collateral for the benefit of Bank, and (ii) obtain “control” of any Collateral consisting of investment property, deposit
accounts, letter-of-credit rights or electronic chattel paper (as such items and the term “control” are defined in Revised Article 9 of the Code)
by

                                                                         5
causing the securities intermediary or depositary institution or issuing bank to execute a control agreement in form and substance satisfactory to
Bank. Borrower will not create any chattel paper without placing a legend on the chattel paper acceptable to Bank indicating that Bank has a
security interest in the chattel paper. Borrower from time to time may deposit with Bank specific cash collateral to secure specific Obligations;
Borrower authorizes Bank to hold such specific balances in pledge and to decline to honor any drafts thereon or any request by Borrower or
any other Person to pay or otherwise transfer any part of such balances for so long as the specific Obligations are outstanding. Borrower shall
take such other actions as Bank requests to perfect its security interests granted under this Agreement.

         5.              REPRESENTATIONS AND WARRANTIES .

         Borrower represents and warrants as follows:

                   5.1             Due Organization and Qualification . Borrower and each Subsidiary is a corporation duly existing under the
laws of the state in which it is organized and qualified and licensed to do business in any state in which the conduct of its business or its
ownership of property requires that it be so qualified, except where the failure to do so would not reasonably be expected to cause a Material
Adverse Effect.

                  5.2           Due Authorization; No Conflict . The execution, delivery, and performance of the Loan Documents are
within Borrower‟s powers, have been duly authorized, and are not in conflict with nor constitute a breach of any provision contained in
Borrower‟s Articles of Incorporation or Bylaws, nor will they constitute an event of default under any material agreement by which Borrower
is bound. Borrower is not in default under any agreement by which it is bound, except to the extent such default would not reasonably be
expected to cause a Material Adverse Effect.

                  5.3            Collateral . Borrower has rights in or the power to transfer the Collateral, and its title to the Collateral is free
and clear of Liens, adverse claims, and restrictions on transfer or pledge except for Permitted Liens. Other than movable items of personal
property such as laptop computers, all Collateral having an aggregate book value not in excess of $100,000, is located solely in the Collateral
States. All Inventory is in all material respects of good and merchantable quality, free from all material defects, except for Inventory for which
adequate reserves have been made. Except as set forth in the Schedule, none of the Borrower‟s Cash is maintained or invested with a Person
other than Bank or Bank‟s affiliates.

                   5.4           Intellectual Property . Borrower is the sole owner of the Intellectual Property Collateral, except for licenses
granted by Borrower to its customers in the ordinary course of business. To the best of Borrower‟s knowledge, each of the Copyrights,
Trademarks and Patents is valid and enforceable, and no part of the Intellectual Property Collateral has been judged invalid or unenforceable, in
whole or in part, and no claim has been made to Borrower that any part of the Intellectual Property Collateral violates the rights of any third
party except to the extent such claim would not reasonably be expected to cause a Material Adverse Effect.

                 5.5           Name; Location of Chief Executive Office . Except as disclosed in the Schedule, Borrower has not done
business under any name other than that specified on the

                                                                          6
signature page hereof, and its exact legal name is as set forth in the first paragraph of this Agreement. The chief executive office of Borrower
is located at the address indicated in Section 10 hereof.

                 5.6           Litigation . Except as set forth in the Schedule, there are no actions or proceedings pending by or against
Borrower or any Subsidiary before any court or administrative agency in which a likely adverse decision would reasonably be expected to have
a Material Adverse Effect.

                   5.7           No Material Adverse Change in Financial Statements . All consolidated and consolidating financial
statements related to Borrower and any Subsidiary that are delivered by Borrower to Bank fairly present in all material respects Borrower‟s
consolidated and consolidating financial condition as of the date thereof and Borrower‟s consolidated and consolidating results of operations
for the period then ended. There has not been a material adverse change in the consolidated or in the consolidating financial condition of
Borrower since the date of the most recent of such financial statements submitted to Bank; except for a possible non-cash charge to earnings on
the Borrower‟s common stock related to a recent amendment to Borrower‟s Certificate of Incorporation, which provided, among other things,
for an equitable adjustment to the conversion ratio of Series A Preferred Stock and Series B Preferred Stock in connection with specified
recapitalizations of the Borrower.

                   5.8           Solvency, Payment of Debts . Borrower is able to pay its debts (including trade debts) as they mature; the
fair saleable value of Borrower‟s assets (including goodwill minus disposition costs) exceeds the fair value of its liabilities; and Borrower is not
left with unreasonably small capital after the transactions contemplated by this Agreement.

                  5.9            Compliance with Laws and Regulations . Borrower and each Subsidiary have met the minimum funding
requirements of ERISA with respect to any employee benefit plans subject to ERISA. No event has occurred resulting from Borrower‟s failure
to comply with ERISA that is reasonably likely to result in Borrower‟s incurring any liability that could have a Material Adverse
Effect. Borrower is not an “investment company” or a company “controlled” by an “investment company” within the meaning of the
Investment Company Act of 1940. Borrower is not engaged principally, or as one of its important activities, in the business of extending credit
for the purpose of purchasing or carrying margin stock (within the meaning of Regulations T and U of the Board of Governors of the Federal
Reserve System). Borrower has not violated any statutes, laws, ordinances or rules applicable to it, the violation of which would reasonably be
expected to have a Material Adverse Effect. Borrower and each Subsidiary have filed or caused to be filed all tax returns required to be filed,
and have paid, or have made adequate provision for the payment of, all taxes reflected therein except those being contested in good faith with
adequate reserves under GAAP or where the failure to file such returns or pay such taxes would not reasonably be expected to have a Material
Adverse Effect.

                  5.10           Subsidiaries . Except as disclosed in the Schedule, Borrower does not own any stock, partnership interest or
other equity securities o