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

FORM 10-Q

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: June 30, 2010

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to _____________

Commission File No. 333-146209

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  þ  No  o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   Yes o   No þ

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.

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

Yes  o  No  þ

The number of shares outstanding of each of the issuer’s classes of common stock as of June 30, 2010:  34,616,298

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TABLE OF CONTENTS

Part I – Financial Information

Item 1.  Financial Statements

Item 2.  Management’s Discussion and Analysis and Results Of Operation

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

Item 4T.  Controls And Procedures

Part II – Other Information 

Item 2.  Unregistered Sales of Equity Securities And Use Of Proceeds

Item 5.  Other Information

Item 6.  Exhibits

Signatures

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PART I – FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS

Vision Industries Corp.

Balance Sheet

As of March 31, 2010 (Unaudited) and December 31, 2009 (Audited)

See accompanying notes and accountant’s report.

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Vision Industries Corp.

Statement of Operations

See accompanying notes and accountant’s report.

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Vision Industries Corp.

Statement of Cash Flows

See accompanying notes and accountant’s report.

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VISION INDUSTRIES CORP.

Notes to Financial Statements

June 30, 2010

(Unaudited)

1.

General background and business environment

The Company was incorporated May 11, 2004 in the State of Florida.  The Company provides consulting services to the transportation industry.   

Management’s immediate vision for the high performance hydrogen drive system is to provide a pollution free transportation solution for today’s drivers in California and to expedite availability of hydrogen fueling stations in and around the ports of Long Beach and Los Angeles, California.

We are a company focused on marketing these zero-emission Vehicles to a variety of alternate energy and green- minded individuals, OEM dealer networks, as well as for sale to end-user consumers.  We are uniquely positioned to leverage our knowledge and experience about alternative fuels, electronic controls, hydrogen and hybrid hydrogen/electric drive systems, and hydrogen handling and refueling.  We intend to become part of the truly pollution free or reduced pollution solution and alternative energy conversion systems solution for today’s drivers.

2.

Summary of significant accounting policies

Basis for Presentation

In the opinion of management, all adjustments consisting of normal recurring adjustments necessary for a fair statement of (a) the result of operations for the three and six months ended June 30, 2010 and June 30, 3009; (b) the financial position at June 30, 2010 and December 31, 2009, and (c) cash flows for the three and six months ended June 30, 2010 and June 30, 2009 have been made.

The Company prepares its financial statements in conformity with generally accepted accounting principles in the United States of America.  These principals require 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 revenues and expenses during the reporting period.  Management believes that these estimates are reasonable and have been discussed with the Board of Directors; however, actual results could differ from those estimates.

The financial statement and notes are presented as permitted by Form 10-K.  Accordingly, certain information and note disclosures normally included in the financial statements prepared in accordance with accounting principles generally accepted in the United States of America may have been omitted.  The accompanying  financial statements should be read in conjunction with the financial statements for the year ended December 31, 2009 (presented in last audited filing) and notes thereto in the Company’s annual report on Form 10-K for the year ended December 31, 2009, filed with the Securities and Exchange Commission.

Critical Accounting Policies and Use of Estimates

The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires the Company to make estimates and judgments that affect the reported amounts of assets,

On an on-going basis, the Company evaluates its estimates and judgments, including those related to revenue recognition, inventories, adequacy of allowances for doubtful accounts, valuation of long-lived assets, income taxes, equity based compensation, litigation and warranties.  The Company bases its estimates on historical and anticipated results and trends and on carious other assumptions that the Company believes are reasonable under the circumstances, including assumptions as to future events.

The policies discussed below are considered by management to be critical to an understanding of the Company’s financial statements.  These estimates form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent for other sources.  By their nature, estimates are subject to an inherent degree of uncertainty.  Actual results may differ from those estimates.

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VISION INDUSTRIES CORP.

Notes to Financial Statements

June 30, 2010

(Continued)

2.

Summary of significant accounting policies (continued)

Cash and Cash Equivalents

For purposes of the statement of cash flows, the Company considers all short-term securities with a maturity of three months or less to be cash equivalents.

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation and amortization.  Significant improvements and betterments are capitalized, while maintenance and repairs are charged to operations as incurred.  When items of property or equipment are sold or retired, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is included in the results of operations.

Depreciation is recorded on the straight-line basis over the estimated useful lives of the assets, which range from five to seven years.

Income Taxes

Income taxes are provided for the tax effects of transactions reported in the financial statements and consist of taxes currently due plus deferred taxes related primarily to differences between the basis of certain assets and liabilities for financial and tax reporting.  Deferred taxes represent the future tax return consequences of those differences, which will be taxable either when the assets and liabilities are recovered or settled.  Deferred taxes also are recognized for operating losses that are available to offset future federal income taxes.  Income tax expense is the current tax payable or refundable for the period plus or minus the net change in the deferred tax asset and liability accounts.

Stock-Based Compensation

In accordance with ASC 718-10 “Share-Based Payment” all forms of share-based payment (“SBP”) awards including shares issued under employee stock purchase plans, stock options, restricted stock and stock appreciation rights result in a cost that is measured at fair value on the awards’ grant date, based on the estimated number of awards that are expected to vest.

The Company accounts for equity instruments issued to non-employees in accordance with the provisions of ASC 505-50, “Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services,” which requires that such equity instruments are recorded at their fair value on the measurement date. The measurement of stock-based compensation is subject to periodic adjustment as the underlying equity instrument vests. Non-employee stock-based compensation charges are amortized over the vesting period or period of performance of the services.

Intangible Assets

Intangible assets are amortized using the straight-line method over their estimated period of benefit, ranging from one to fifteen years.  We evaluate the recoverability of intangible assets periodically and take into account events or circumstances that warrant revised estimates of useful lives or that indicate that impairment exists.  All of our intangible assets are subject to amortization.  No material impairments of intangible assets have been identified during any of the periods presented.

Per Share Computations

Basic net earnings per share are computed using the weighted-average number of common shares outstanding.  Diluted earnings per share is computed by dividing net income by the weighted-average number of common shares and the dilutive potential common shares outstanding during the period.

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VISION INDUSTRIES CORP.

Notes to Financial Statements

June 30, 2010

(Continued)

2.

Summary of significant accounting policies (continued)

Derivative Liabilities

In June 2008, a FASB approved guidance related to the determination of whether a freestanding equity-linked instrument should be classified as equity or debt under the provisions of FASB ASC Topic No. 815-40, Derivatives and Hedging – Contracts in an Entity’s Own Stock. The adoption of this requirement will affect accounting for convertible instruments and warrants with provisions that protect holders from declines in the stock price ("down-round" provisions). Warrants with such provisions will no longer be recorded in equity and would have to be reclassified to a liability. The Issue is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. Earlier application by an entity that has previously adopted an alternative accounting policy is not permitted.

Instruments with down-round protection are not considered indexed to a company's own stock under ASC Topic 815, because neither the occurrence of a sale of common stock by the company at market nor the issuance of another equity-linked instrument with a lower strike price is an input to the fair value of a fixed-for-fixed option on equity shares.

ASC Topic 815 guidance is to be applied to outstanding instruments as of the beginning of the fiscal year in which the Issue is applied. The cumulative effect of the change in accounting principle shall be recognized as an adjustment to the opening balance of retained earnings (or other appropriate components of equity) for that fiscal year, presented separately. If an instrument is classified as debt, it is valued at fair value, and this value is re-measured on an ongoing basis, with changes recorded on the statement of operations in each reporting period. The Company did not have outstanding instruments with down-round provisions as of the beginning of fiscal 2009 thus no adjustment will be made to the opening balance of retained earnings.

Effects of Recent Accounting Pronouncements

We have reviewed accounting pronouncements and interpretations thereof that have effectiveness dates during the periods reported and in future periods.  We believe that the following impending standards may have an impact on our future filings.  The applicability of any standard is subject to the formal review of our financial management and certain standards are under consideration.

In June 2009, the FASB issued new accounting guidance that established the FASB Accounting Standards Codification (“Codification”), as the single source of authoritative GAAP to be applied by nongovernmental entities, except for the rules and interpretive releases of the SEC under authority of federal securities laws, which are sources of authoritative GAAP for SEC registrants. The FASB will no longer issue new standards in the form of Statements, FASB Staff Positions, or Emerging Issues Task Force Abstracts; instead the FASB will issue Accounting Standards Updates. Accounting Standards Updates will not be authoritative in their own right as they will only serve to update the Codification. These changes and the Codification itself do not change GAAP. This new guidance became effective for interim and annual periods ending after September 15, 2009. Other than the manner in which new accounting guidance is referenced, the Codification did not have an effect on the Company’s consolidated financial statements.

In January 2010, the FASB issued ASU No. 2010-06 regarding fair value measurements and disclosures and improvement in the disclosure about fair value measurements. This ASU requires additional disclosures regarding significant transfers in and out of Levels 1 and 2 of fair value measurements, including a description of the reasons for the transfers.  Further, this ASU requires additional disclosures for the activity in Level 3 fair value measurements, requiring presentation of information about purchases, sales, issuances, and settlements in the reconciliation for fair value measurements. This ASU is effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. We are currently evaluating the impact of this ASU; however, we do not expect the adoption of this ASU to have a material impact on our financial statements.

In February 2010, the FASB issued ASU No. 2010-09 regarding subsequent events and amendments to certain recognition and disclosure requirements. Under this ASU, a public company that is a SEC filer, as defined, is not required to disclose the date through which subsequent events have been evaluated. This ASU is effective upon the issuance of this ASU. The adoption of this ASU did not have a material impact on our financial statements.

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VISION INDUSTRIES CORP.

Notes to Financial Statements

June 30, 2010

(Continued)

2.

Summary of significant accounting policies (continued)

Effects of Recent Accounting Pronouncements

In April 2010, the FASB issued ASU No. 2010-18 regarding improving comparability by eliminating diversity in practice about the treatment of modifications of loans accounted for within pools under Subtopic 310-30 – Receivable – Loans and Debt Securities Acquired with Deteriorated Credit Quality (“Subtopic 310-30”). Furthermore, the amendments clarify guidance about maintaining the integrity of a pool as the unit of accounting for acquired loans with credit deterioration.  Loans accounted for individually under Subtopic 310-30 continue to be subject to the troubled debt restructuring accounting provisions within Subtopic 310-40, Receivables—Troubled Debt Restructurings by Creditors. The amendments in this Update are effective for modifications of loans accounted for within pools under Subtopic 310-30 occurring in the first interim or annual period ending on or after July 15, 2010. The amendments are to be applied prospectively. Early adoption is permitted. We are currently evaluating the impact of this ASU; however, we do not expect the adoption of this ASU to have a material impact on our financial statements.

Other recent accounting pronouncements issued by the FASB (including its EITF), the AICPA, and the SEC did not or are not believed by management to have a material impact on the Company's present or future financial statements.

3.

Property and equipment

Property and equipment at June 30, 2010 and December 31, 2009 consist of the following:

Property and equipment are stated at cost.  Depreciation is computed using the straight-line method over the estimated useful lives of the assets.  Useful lives for computer equipment and software range is five years, and furniture, equipment, production equipment and prototypes from five to seven years.

Depreciation expense for the six months ended June 30, 2010 and June 30, 2009 was $82,712 and $61,770, respectively.  

4.

Intangibles

Intangible assets at June 30, 2010 and December 31, 2009 consist of the following:

Amortization expense for the six months ended June 30, 2010 and June 30, 2009 was $17,194 and $17,194, respectively.

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VISION INDUSTRIES CORP.

Notes to Financial Statements

June 30, 2010

(Continued)

5.

Accrued expenses

Accounts payable and accrued expenses at June 30, 2010 and December 31, 2009 were $852,951 and $598,987, respectively and included operating expenses.

6.

Stockholders’ equity

On December 31, 2009, there were 37,298,571 shares of common stock issued and outstanding, of which 26,441,370 shares were restricted.  

On February 15, 2010, the Board of Directors awarded certain employees 260,000 shares of common stock.  

On March 24, 2010, the Company entered into a consulting agreement with the Casale Alliance, LLP.  The company issued 22,020 shares of restricted common stock all subject to the restrictions of SEC Rule 144.  We account for stock-based compensation in accordance ASC 718-10 “Share-Based Payment”.  Under the fair value recognition provisions of this statement, share-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense over the applicable vesting period of the stock award.

On March 31, 2010 the Company entered into a business consulting agreement with Janette Minasian Pires CPA, Inc.  The Company issued 195,000 shares of restricted common stock all subject to the restrictions of SEC Rule 144.  We account for stock-based compensation in accordance ASC 718-10 “Share-Based Payment”.  Under the fair value recognition provisions of this statement, share-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense over the applicable vesting period of the stock award.

On April 22, 2010 and April 30, 2010 the Company executed a contract with Del Mar Corporate Consulting, LLC and Grant Bettingen and approved the issuance of 200,000 and 120,707 shares, respectively of restricted common stock subject to the restrictions of SEC Rule 144.  We account for stock-based compensation in accordance ASC 718-10 “Share-Based Payment”.  Under the fair value recognition provisions of this statement, share-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense over the applicable vesting period of the stock award using the straight-line method.

On May 7, 2010, the Company accepted the resignation of Donald Hejmanowski, Vice President Corporate Communications and Director and accepted the surrender of 1,425,000 shares common stock and the cancellation of 2,000,000 unvested stock options.  These shares were historically recorded at par value and were returned at par.

On May 14, 2010, the Board of Directors awarded certain employees 1,500,000 shares of common stock.  

On May 21 the Company accepted the resignation of Lawrence Weisdorn, Secretary, Treasurer, Chief Operating Officer, Chief Financial Officer and Director and accepted the surrender of 5,775,000 shares common stock and the cancellation of 2,000,000 unvested stock options. These shares were historically recorded at par value and were returned at par.

As a result of private placement offerings authorized by the Board of Directors, the Company has raised $2,176,800 by issuing 7,886,200 shares to date.

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VISION INDUSTRIES CORP.

Notes to Financial Statements

June 30, 2010

(Continued)

7.

Debenture Financing

On June 23, 2010, to obtain funding for working capital, the Company entered into securities purchase agreement with an accredited investor pursuant to which the Company agreed to issue its 8% Convertible Debentures for an aggregate purchase price of $60,000.  The Debenture bears interest at 8% per annum and matures nine months from the date of issuance.  The Debenture will be convertible at the option of the holder at any time after ninety days into shares of common stock, at a conversion price equal to 61% of the market price paid per share.

In accordance with ASC Topic 815 “Derivatives and Hedging”, this convertible debenture includes a down-round provision under which the conversion price could be affected by future equity offerings. Instruments with down-round protection are not considered indexed to a company's own stock under ASC Topic 815, because neither the occurrence of a sale of common stock by the company at market nor the issuance of another equity-linked instrument with a lower strike price is an input to the fair value of a fixed-for-fixed option on equity shares. This convertible instrument was treated as a discount on the 8% Convertible debentures and was valued at $22,807 to be amortized over the debenture term. The fair value was estimated on the date of grant using the Black-Scholes option-pricing model using the following weighted-average assumptions: expected dividend yield of 0%; expected volatility of 266%; risk-free interest rate of 2.3% and an expected holding period of nine months.

8.

Commitment and contingencies

The Company has entered into two leases for the corporate offices and a production facility.  The lease on the production facility expires January 31, 2012.  Monthly rent is $2,274 and $9,314, respectively.  The Company has no know lawsuits or any pending litigation.

9.

Notes Payable

On May 7, 2009 Donald Hejmanowski, then Vice President of Corporate Communications, lent the Company $50,000.  After a partial repayment of $14,000, the Company still owes $36,000 which is due and payable.  In addition, pursuant to Mr. Hejmanowski’s termination agreement dated May 7, 2010, the Company owes Mr. Hejmanowski a $50,000 severance payment.

On June 23, 2009 M.M.E.D., LLC lent the Company $100,000 plus accrued interest of $11,000 was due August 31, 2009.  Under the terms of the note, 50,000 shares of the Company’s stock were transferred to the note holder.  The note was extended after payments of $81,000 were made.  M.M.E.D, LLC released the security interest in a Hydrogen Fuel Cell which served as collateral for this loan. On March 1, 2010 after further payments were made of $16,500, the remaining loan balance of $13,500 was forgiven.

On June 23, 2010 Asher Enterprises, Inc. provided the Company $60,000 in return for the issuance of an 8% convertible promissory note, maturing on March 24, 2010.  In connection with the issuance of the convertible debentures the Company has determined that the terms of the convertible debenture include a down-round provision under which the conversion price could be affected by future equity offerings undertaken by the Company until the 9 month anniversary of such convertible debenture. Accordingly, the convertible instrument is accounted for as a liability at the date of issuance and adjusted to fair value through earnings at each reporting date. The Company has recognized a derivative liability of $82,807 at the date of issuance. The loss, resulting from the increase in fair value of this convertible instrument was $10,328 for the quarter ended June 30, 2010.

10.

Research and development costs

The Company is currently developing several prototypes.  Some of them will have alternative uses as demonstration models, anticipated to be used at trade shows and marketing events.  Additionally, these prototypes are being developed from automobiles and trucks.  Successful testing of our modifications will result in a salable unit, retaining a future value.  There is residual value in these prototypes at all times.  Therefore we have capitalized three of our prototypes.

Vision Industries has been asked by FedEx to produce a prototype truck for their specific use.  The costs incurred in this production prototype are expensed as research and development costs in accordance with ASC 730-10-25.

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VISION INDUSTRIES CORP.

Notes to Financial Statements

June 30, 2010

(Continued)

11.

Going concern issue

The Company’s cash and available credit are not sufficient to support its operations for the next year.  Accordingly, management needs to seek additional financing.  On May 1, 2009 management authorized a plan is to raise equity through a private placement offering of $2,500,000 to raise working capital and sustain operations.  The original offering includes 5,000,000 shares of common stock at $.50 per share, 5,000,000 Class A Common Stock Purchase Warrants with an exercise price of $.75 and 5-year expiration and 5,000,000 Class B Common Stock Warrants with an exercise price of $1.25 and 5-year expiration.  The offering was later amended to reduce the common stock price to $.25 per share.  The offering closed June 30, 2010 and raised $2,176,800.

As of June 30, 2010, the Company has an accumulated deficit of $5,631,789.  These financial statements have been prepared on the basis that adequate financing will be obtained.  These financial statements do not include any adjustments that might result from the outcome of this uncertainty.

12.

Related party transactions

The Company has an affiliate relationship with Ice Conversions, Inc. (ICE) with common ownership.  On December 12, 2008, the Company entered into an Agreement with ICE to acquire the rights to intellectual property and to certain assets and prototypes in exchange for common stock.

The former note holder M.M.E.D. is related to a shareholder in the Company.

13.

Subsequent events

On July 8, 2010, the Company entered into a non-exclusive placement agreement with Stonegate Securities, Inc., a Texas corporation, to raise capital via a private placement to be executed in the near future.  In exchange for their services, the Company issued 600,000 shares of restricted common stock all subject to the restrictions of SEC Rule 144.  We account for stock-based compensation in accordance ASC 718-10 “Share-Based Payment”.  Under the fair value recognition provisions of this statement, share-based compensation cost of $114,000 is measured at the grant date based on the fair value of the award and is recognized as expense over the applicable vesting period of the stock award.

Subsequent events have been evaluated through August 23, 2010 which is the date the financial statements were issued.  

14.

Restatement

The Company’s quarterly report on Form 10-Q for the period ending June 30, 2009 has been restated to reflect (1) the reclassification from prepaid consulting services and organization costs to deferred compensation for common stock issued in exchange for services and (2) the revaluation and correction of the recording of contributed fixed assets and intellectual property for common stock.  Fixed assets of $184,164 and intellectual property of $388,922, net of related amortization, have been recorded as well as a corresponding increase to additional paid in capital and a contingent liability of $150,000 to account for the potential future issuance of common stock in satisfaction of performance benchmarks.

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ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS AND RESULTS OF OPERATION

The following discussion should be read in conjunction with our financial statements and the notes thereto.

Forward-Looking Statements

This quarterly report contains forward-looking statements relating to us that are based on the beliefs of our management as well as assumptions made by, and information currently available to, our management. When used in this Report, the words “anticipate”, “believe”, “estimate”, “expect”, “intend”, “plan” and similar expressions, as they relate to us or our management, are intended to identify forward-looking statements. These statements reflect management’s current view of us concerning future events and are subject to certain risks, uncertainties and assumptions, including among many others: our potential inability to raise additional capital, the possibility that third parties hold proprietary rights that preclude us from marketing our products, the emergence of additional competing technologies, changes in domestic and foreign laws, regulations and taxes, changes in economic conditions, a general economic downturn, a downturn in the securities markets, Securities and Exchange Commission regulations which affect trading in the securities of “penny stocks,” and other risks and uncertainties. Should any of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described in this Report as anticipated, estimated or expected.

Use of Certain Defined Terms

Except as otherwise indicated by the context, references in this report to “Vision” “we,” “us,” or “our” and the “Company” are references to the business of Vision Industries Corp.   

Use of GAAP Financial Measures

We use GAAP financial measures in the section of this quarterly report captioned “Management’s Discussion and Analysis and Results of Operation.” All of the GAAP financial measures used by us in this report relate to the inclusion of financial information.

Overview

This subsection of MD&A is an overview of the important factors that management focuses on in evaluating our businesses, financial condition and operating performance, our overall business strategy and our earnings for the periods covered.

General

We are an operating company that has changed its core business and is seeking to expand its operations into a new core business segment. We have an operating history and have generated revenues from our prior business model activities that have produced both net incomes and losses in the periods in which it has been fully operational. We have yet to undertake any specific changes in our new core market while our business model is being perfected. As our company is considered to be in the early stages of business and there is no reasonable likelihood that increased revenues can be derived from our change in our core business offering in the foreseeable future, we consider that our operations will require us to retain additional management personnel that can lead the company in its expansion. 

Our Board of Directors believes that we can expand as an on-going business during the next twelve months since we will be generating profits from our operations that can pay for our expansion of operations.  We may raise cash from sources other than our operations. Our only other source for cash at this time is investment by others in the Company.  We conducted private placements under U.S. Securities and Exchange Commission Regulation 506 and raised $2,176,800 as of June 30, 2010.

Our future financial success will be dependent on the success of our expansion. Such expansion may take years to complete and future cash flows, if any, are impossible to predict at this time. The realization value from any expansion is largely dependent on factors beyond our control such as the market for our services.

Employees

As of June 30, 2010, there were seven (7) full time employees at Vision Industries Corp.  This includes the officers and directors who run the corporation.

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Critical Accounting Policies

The preparation of our financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period.  Our actual results could differ from those estimates.  To be as accurate with our estimates as possible, we use our historical data to forecast our future results.  Deviations from our projections are addressed when our financials are reviewed on a monthly basis.  This allows us to be proactive in our approach to managing our business.  It also allows us to rely on proven data rather than having to make assumptions regarding our estimates.

Management does not believe that our actual results are related to any sensitivity in estimates made by management.  The year-end consistency of our results has shown that our prior year’s historical data is the best projector of our future results.

Income Taxes

The Company utilizes a liability approach to financial accounting and reporting for income taxes.  The difference between the financial statement and tax bases of assets and liabilities is determined annually.  Deferred income tax assets and liabilities are computed for those differences that have future tax consequences using the currently enacted tax laws and rates that apply to the periods in which they are expected to affect taxable income. Valuation allowances are established, if necessary, to reduce deferred tax asset accounts to the amounts that will more likely than not be realized.  No valuation allowance was deemed necessary by management as of June 30, 2010.  Income tax expense is the current tax payable or refundable for the period, plus or minus the net change in the deferred tax asset and liability accounts.  

Impairment of Long-Lived Assets

Accounting Standards Codification (“ASC”) 360 requires that long-lived assets and certain identifiable intangibles held and used by an entity be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.  We assess the potential impairment of long-lived assets, principally property and equipment, whenever events or changes in circumstances indicate that the carrying value may not be recoverable. We determine if there is impairment by comparing undiscounted future cash flows from the related long-lived assets with their respective carrying values. In determining future cash flows, significant estimates are made by us with respect to future operating results of the restaurant over its remaining lease term. If assets are determined to be impaired, the impairment charge is measured by calculating the amount by which the asset carrying amount exceeds its fair value. This process of assessing fair values requires the use of estimates and assumptions, which are subject to a high degree of judgment. If these assumptions change in the future, we may be required to record impairment charges for these assets. The adoption of ASC 360 has not materially affected the Company’s reported earnings, financial condition or cash flows.

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Results of Operations

The following table provides a summary of the results of operations for our last two full fiscal years.

Table 2.0 Summary of Results of Operations

Liquidity and Capital Resources

As of June 30, 2010, we had cash and cash equivalents of $25,805.  

Since May of 2004 the company concentrated its efforts in providing consulting services to a niche market targeting small to medium sized businesses where management is seeking a method of divesting itself of the business.  Management believed it could capitalize on the number of business owners seeking to develop an appropriate exit strategy.

We have incurred liabilities that make our company illiquid at this time.  Management filed a Form D with the S.E.C. on January 1, 2009 to raise $980,000 through a private placement under Regulation 506.  A total of $410,500 was raised in this offering.  This infusion of capital allowed the company to acquire and test the test vehicles, pay its legal and accounting expenses, as well as fund the daily operational expenses.   Specifically, both the first and second stage performance testing of the prototype zero emission plug-in electric/hydrogen fuel cell Tyrano ™ truck was successfully completed at the Los Angeles Freightliner facilities in Whittier, California during the month of April.  On August 11, 2009, the Company filed another Form D to raise an additional $2,500,000 through a private placement under SEC Regulation 506.  As a result of the private placement offerings, the Company raised $2,176,800 by issuing 7,886,200 shares.  

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Results of Operations for the six months ended June 30, 2010 and 2009

The following tables set forth key components of our results of operations for the periods indicated, in dollars and key components of our revenue for the periods indicated in dollars.

Table 3.0 Comparison of our Statement of Operations

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Revenues. There were no revenues for the six months ended June 30, 2010 and for the six months ended June 30, 2009.  Management directly attributes this to the fact that the Company’s focus has been on product development.

With the acquisition of the new technology under the licensing agreement, we believe that capital will be available through private investors and we can take advantage of the new Clean Truck Programs at the Ports of Long Beach and Los Angeles, California to generate revenue.

Operating Expenses. Expenses increased by $867,008 to $2,302,931 for the six months ended June 30, 2010 from $1,435,923 for the six months ended June 30, 2009.  The bulk of this increase is attributed the equity based compensation awarded to employees, however, $198,918 of the increase is due to increased focus on research and development.

Income (Loss) from Operations. For the six month periods ended June 30, 2010 and June 30, 2009, we incurred net losses of $2,331,512 and $1,513,041, respectively.  This significant loss from operations is primarily attributable to our equity based compensation and research and development expenses and our lack of any revenues.

Net Loss. As a result of the factors described above, net loss increased from $1,513,041 for the six months ended June 30, 2009 to a net loss of $2,331,512 for the six months ended June 30, 2010.

Inflation  

Inflation does not materially affect our business or the results of our operations.

Recent Accounting Pronouncements

The Financial Accounting Standards Board and other entities issued new or modifications to, or interpretations of, existing accounting guidance during this quarter. The Company has carefully considered the new pronouncements that altered generally accepted accounting principles and does not believe that any new or modified principles will have a material impact on the Company’s reported financial position or operations in the near term.

Off-Balance Sheet Arrangements

We do not have any off-balance arrangements.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company does not have exposure to many market risks, such as potential loss arising from adverse change in market rates and prices, such as foreign currency exchange and interest rates.  We do not hold any derivatives or other financial instruments for trading or speculative purposes.

ITEM 4T.

CONTROLS AND PROCEDURES

Disclosure Controls and Procedures.

The management of the Corporation is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control system is a process designed to provide reasonable assurance to management and to the board of directors regarding the preparation and fair presentation of published financial statements.

Our internal control over financial reporting includes policies and procedures that pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of assets; provide reasonable assurances that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles and that receipts and expenditures are being made only in accordance with authorizations of management and the directors of the Corporation; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Corporation’s assets that could have a material effect on our financial statements.

All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

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Management assessed the effectiveness of the Corporation’s internal control over financial reporting as of June 30, 2010. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework. Based on our assessment management believes that, as of June 30, 2010, the Corporation’s internal control over financial reporting is effective based on those criteria.

This quarterly report does not include an attestation report of the Corporation’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this quarterly report.

Changes in Internal Controls over Financial Reporting.

We had no significant changes in our internal controls during the period ended June 30, 2010.  Management concluded that there has been no change in our internal control over financial reporting during the period ended June 30, 2010, that has materially affected or is reasonably likely to affect our internal control over financial reporting.

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PART II – OTHER INFORMATION

ITEM 2

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
 

Except as specified below, we have not sold any of our securities in a private placement transaction or otherwise during the past three years.

Set forth below is information regarding the issuance and sales of Vision Industries Corp.’s common stock without registration under the Securities Act of 1933during the last three years.

For the transactions listed in (a) and (b) below, no sales involved the use of an underwriter and no underwriter discounts or commissions were paid in connection with the sale of any securities.

(a)

On August 7, 2006, the Board of Directors issued 25,000 shares of stock (at $0.01 per share) to then President Diane J. Harrison for paid in capital of $250.    The Company relied on the exemption from registration under Section 4(2) of the 1933 Securities Act, as amended.  After giving effect to the change in par value from $0.01 to $0.001 per share that occurred on February 28, 2007, which the Company treated as a forward stock split of 1:10, and the true forward stock split of 1:10 that occurred on March 31, 2007, Ms. Harrison received a total of 2,500,000 shares. 

(b)

On August 31, 2006 the Board of Directors authorized the sale of up to 15,000 additional shares of stock (at $0.01 per share). The Company filed a Form D with the U.S. Securities and Exchange Commission for sales under Regulation D Section 506.  Shares were sold to U.S. citizens under the Regulation D 506 exemption claimed under Section 4(2) of the Securities Act of 1933, as amended.  The company sold 10,500 of the authorized 15,000 shares and then closed the sale of additional shares. The sales to the individuals listed below were for shares issued from the authorized capital stock for paid-in-capital. These shares were exempt from registration pursuant to Section 4(2) of the Securities Act of 1933 as the shares were not a part of a public offering and pursuant to Rule 506 of the Rules and Regulations of the Securities Act of 1933. There was no distribution of a prospectus, private placement memorandum, or business plan to the public. Shares were sold to friends, family and personal business acquaintances of the Officers and Directors. Each individual had specific knowledge of the Company’s operation that was given to them personally by the Officers and Directors. Each individual is considered educated and informed concerning small investments, such as the $3.00 investment in our company. The sale of the shares occurred between September 1, 2006 and March 31, 2007 to the individuals below. Upon receipt of the executed subscription agreements, the sale of any additional shares was closed by the Board of Directors.  Each stock subscription agreement executed by the purchaser was formally accepted by the company on March 31, 2007 and shares were issued effective upon the acceptance by the company. After giving effect to the change in par value from $0.01 to $0.001 per share that occurred on February 28, 2007, which the Company treated as a forward stock split of 1:10, and the true forward stock split of 1:10 that occurred on March 31, 2007, a total of 1,050,000 shares were sold to sold to thirty-five (35) friends, family and personal business acquaintances of the Officers and Directors.

(c)

On December 15, 2008, the Board of Directors authorized the sale of up to 980,000 units (at $1.00 per unit) with each unit comprised of one common share and one-half of a transferable common share purchase warrant (a “Warrant”) with a minimum purchase of $25,000.00 (25,000 units) (the “Offering”). Each whole Warrant was exercisable into one common share for a period of 36 months from closing of this offering at a price of $1.50 per share. The Company filed a Form D with the U.S. Securities and Exchange Commission for sales under Regulation D Section 506.  Shares were sold to U.S. citizens under the Regulation D 506 exemption claimed under Section 4(2) of the Securities Act of 1933, as amended.  The terms of the Offering were amended on May 5, 2009 from $1.00 per unit to $.50 per unit, with each unit comprised of one common share and two transferable common share purchase warrants.  The first Warrant was exercisable into one common share for a period of 60 months from closing of the offering at a price of $0.75 per share. The second Warrant was exercisable into one common share for a period of 60 months from closing of the offering at a price of $1.25 per share. The Company sold 821,000 of the authorized 980,000 units for total of $410,500.00 and then closed the offering on June 15, 2009.   Broker commissions totaled $27,365.00.   The shares were exempt from registration pursuant to Section 4(2) of the Securities Act of 1933 as the shares were not a part of a public offering and pursuant to Rule 506 of the Rules and Regulations of the Securities Act of 1933. Each purchaser received an Offering Memorandum and the purchasers executed subscription agreements.  The offering was limited to accredited investors. The sale transactions occurred between January 26, 2009 and June 9, 2009.

(d)

 On May 4, 2009, the Board of Directors authorized the sale of up to 5,000,000 units (at $0.50 per unit) with each unit comprised of one common share and two common share purchase warrants (“Warrants”). The first Warrant is exercisable into one common share for a period of 60 months from closing of this offering at a price of $0.75 per share, and the second Warrant is exercisable into one common share for a period of 60 months from closing of this offering at a price of $1.25 per share.  The minimum investment is $20,000 or 40,000 units. The Company filed a Form D with the U.S. Securities and Exchange Commission for sales under Regulation D Section 506.  Shares are being sold to U.S. citizens under the Regulation D 506 exemption claimed under

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Section 4(2) of the Securities Act of 1933, as amended.  These shares were exempt from registration pursuant to Section 4(2) of the Securities Act of 1933 as the shares were not a part of a public offering and pursuant to Rule 506 of the Rules and Regulations of the Securities Act of 1933. The Offering began on June 29, 2009 with a scheduled termination date of September 29, 2009.  The following terms of the Offering were amended on September 28, 2009: effective both immediately and retroactively, the price per unit was changed from $0.50 per unit to $0.25 per unit, increasing the number of units authorized to 10,000,000, and the offering was extended fifteen (15) days to October 15, 2009.  On October 14, 2009, the offering was extended again to November 30, 2009. The Offering was subsequently extended to June 30, 2010.  Each purchaser received an Offering Memorandum, and as of June 30, 2010, the Company sold 7,065,200 of the authorized 10,000,000 units for total of $1,766,300 with broker commissions of $35,000.  

ITEM 5

OTHER INFORMATION

On May 7, 2010, Donald Hejmanowski resigned as Director and Vice-President of Corporate Communications.  On May 12, 2010, Lawrence Weisdorn resigned as Director, Secretary, Treasurer, Chief Financial Officer, and Chief Operating Officer.

Neither Mr. Hejmanowski’s nor Mr. Weisdorn’s departures are the result of any disagreement with the Company regarding the Company’s operations, policies or practices.

The Company has not made a decision for replacement directors at this time but has begun pursuing candidate(s) for the vacant director positions, with said candidate(s) to be presented for shareholder vote at the next annual shareholders meeting.

There have been no changes, material or otherwise, to the procedures by which security holders may recommend nominees to our board of directors. 

ITEM 6

EXHIBITS

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SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

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