VISION INDUSTRIES CORP

Depreciation expense was $26,187 and $34,781for the three months ended June 30, 2014 and 2013 and $52,308 and $59,178 for the six months ended June 30, 2014 and 2013, respectively. Added to the depreciation expense is pro rata recognition of deferred loss on a sales/leaseback arrangement in the amount of $7,008 for the three months ended June 30, 2014 and 2013 and $14,016 for the six months ended June 30, 2014 and 2013.

On June 12, 2014, Vision Industries Corporation announced that it would introduce its “Intelligent Range Extender” system in its next generation Class 8 trucks, originally designed for short-haul cargo transportation. Coined, Intelligent Range Extension (IREx™)^{, IRExTM} is the integration of GPS and Fleet Management Software to build an optimal fuel cell-profile that governs the electric drivetrain, fuel cell and battery management systems.  The end result is a zero-emission transportation fleet that optimizes its energy consumption per mile.

^{On May 13, 2014, Vision held second-round talks with a top-tier Canadian Energy Solutions Company to prototype a fleet Tyrano™ trucks at a remote mining site in Northern Canada. The mining site has a massive wind turbine facility which can produce hydrogen through an electrolyzer.  With the capability to produce on-site hydrogen, the mining company hopes to eliminate the need for shipping large quantities of diesel fuel (to the remote site) before onset of winter.  During the winter season, the shipping lanes are usually frozen.  In attendance, were also government officials from Natural Resources Canada and Industry Canada.  An official request for proposal from the Canadian Energy Solutions Company is expected sometime in the 4th} Quarter of this year.

Alternative and Renewable Fuel and Vehicle Technology Program (ARFVTP)^{. The ARFVTP is a competitive grant program administered by the California Energy Commission (CEC) that provides up to $100 million annually towards the development of innovative transportation and fuel technologies that help California meet its energy, clean air, and climate-change goals.  The 2014-2015 funding allotment for medium-duty and heavy-duty alternative vehicles is $24,873,512.  Vision has been actively working with the CEC on shaping the program policy for heavy-duty FCE trucks.  The solicitation window is expected to open in the 3th} Quarter of 2014.

Equity-based compensation expense decreased by $1,342,320 to $(539,652) in the three months ended June 30, 2014 from $802,668 in the three months ended June 30, 2013.  Equity-based compensation expense decreased by $1,537,220 to $9,022 in the six months ended June 30, 2014 from $1,546,242 in the six months ended June 30, 2013.  During the three months we had a change in our estimate of equity-based compensation, resulting in a credit balance.  We amortize the value of equity-based compensation over the periods the awards vest.  As a result the compensation expense may vary from period to period as vesting periods end.   In addition, we have not recently granted equity based compensation awards and have few outstanding awards at June 30, 2014.