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: March 31, 2011

[ ] 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, or 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 March 31, 2011:  38,139,480

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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 1.  Legal Proceedings

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

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, 2011 (Unaudited) and December 31, 2010 (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

March 31, 2011

 (Unaudited)

1.

General background and business environment

The Company was incorporated May 11, 2004 in the State of Florida with the intent of providing consulting services to the transportation industry.  In 2009 the company moved its headquarters to EL, Segundo Ca, to concentrate on the development and production of zero-emission drivetrains for heavy duty vehicles as well as high performance sports cars.

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.

The Company is uniquely positioned to leverage its knowledge and experience about alternative fuels, electronic controls, hydrogen and hybrid hydrogen/electric drive systems, and hydrogen handling and refueling.  The Company intends 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 months ended March 31, 2011 and 2010; (b) the financial position at March 31, 2011 and (c) cash flows for the three months ended March 31, 2011 and 2010, 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.

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.

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.

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VISION INDUSTRIES CORP.

Notes to Financial Statements

March 31, 2011

(Continued)

2.

Summary of significant accounting policies (continued)

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 three to ten 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.   

Revenue Recognition

The Company typically operates on a project basis and recognizes revenue when it has completed tasks specified in the particular contract for a specific project.  From time to time Vision may sell all or part of a development project for parts or components and recognizes the revenue from the sale when items are shipped. Revenue is recognized net of sales taxes and upon transfer of significant risks and rewards of ownership to the buyer. Revenue is not recognized to the extent where there are significant uncertainties regarding recovery of the consideration due, associated costs or the possible return of goods.  The direct costs of a project are recorded as incurred and recognized as direct expense of a sale at time of invoice.

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VISION INDUSTRIES CORP.

Notes to Financial Statements

March 31, 2011

(Continued)

2.

Summary of significant accounting policies (continued)

Research and Development Recognition Policy

Research expenditure is recognized as an expense when it is incurred. Development expenditure is recognized as an expense except that expenditure incurred on development projects are capitalized as long-term assets to the extent that such expenditure is expected to generate future economic benefits. Development expenditure is capitalized if, and only if an entity can demonstrate all of the following:

a)

its ability to measure reliably the expenditure attributable to the asset under development;

b)

the product or process is technically and commercially feasible;

c)

its future economic benefits are probable;

d)

its ability to use or sell the developed asset;

e)

the availability of adequate technical, financial and other resources to complete the asset under development; and

f)

its intention to complete the intangible asset and use or sell.

Capitalized development expenditure is measured at cost less accumulated amortization and impairment losses, if any. Development expenditure initially recognized as an expense is not recognized as assets in the subsequent period. The development expenditure is amortized on a straight-line method over a period of not exceeding 7 years when the products are ready for sale or use. In the event that the expected future economic benefits are no longer probable of being recovered, the development expenditure is written down to its recoverable amount.

Effects of Recent Accounting Pronouncements

There are no recently issued accounting standards that are expected to have a material impact on the Company’s consolidated results of operations, financial position or cash flows. We have considered accounting standards issued by FASB through Accounting Standard Update No. 2011-04, “Fair Value Measurement.”

Per Share Computations

Basic net earnings per share is 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

March 31, 2011

(Continued)

3.

Property and equipment

Property and equipment at March 31, 2011 and December 31, 2010 consist of the following:

Property and equipment are stated at cost whereas production prototypes are stated at net realizable value.  

Depreciation is computed using the straight-line method over the estimated useful lives of the assets.  Useful lives for computer equipment and software range from three to five years, and furniture, equipment, and production equipment from five to seven years. Depreciation on production prototypes uses the straight-line method over five to seven years, however, the prototypes are evaluated on a yearly basis for impairment due to changes in estimates or net realizable value.   

Depreciation expense for the three months ended March 31, 2011 and the year ended March 31, 2010 was $21,789 and $42,157 respectively.   

4.

Intangibles

Intangible assets at March 31, 2011 and December 31, 2010  consist of the following:

Amortization expense for the three months ended March 31, 2011 and March 31, 2010 was $13,385 and $8,597.

Impairment of Indefinite Lived Intangibles and Goodwill

As part of our annual impairment analysis, it was determined that the carrying amount of the Company’s indefinite lived intangible assets was impaired due to a change in estimates of future revenue streams and cashflows associated with the intellectual property acquired from ICE and a write down in the Intangibles of $150,000 was recognized in December, 2010. Since this asset was acquired from ICE the write down was off set against the related liability to ICE.

5.

Accrued expenses

Accounts payable and accrued expenses at Mach 31, 2011 and December 31, 2010 were $346,715 and $349,979, respectively and included operating expenses.  At March 31, 2011, the accrued expenses consist mainly of salary and payroll liabilities totaling $265,314.

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VISION INDUSTRIES CORP.

Notes to Financial Statements

March 31, 2011

(Continued)

6.

Income Tax

The Company is subject to taxation in the U.S. and various state jurisdictions. As of December 31, 2010 the Company’s tax years for 2007, 2008 and 2009 are subject to examination by the tax authorities. With few exceptions, as of December 31, 2010, the Company is no longer subject to U.S. federal and state examinations by tax authorities for years before 2007.

The Company’s actual tax rate varies from the statutory rate (federal and state) due to utilization of full valuation allowances.  As of March 31, 2011, the Company notes that ASC 740-10 has had no material changes. 

7.

Stockholders’ equity

On December 31, 2010, there were 37,320,631 shares of common stock issued and outstanding

On January 7, 2011 the Company issued 78,333 shares of common stock subject to the restrictions of SEC Rule 144 to Casale Alliance, LLP per agreement for legal services to be performed on behalf of the company for the first quarter of 2011.   

During the months of January and February, 2011, Asher Enterprises, Inc. converted its $60,000 convertible note into common stock.  The total number of shares converted during this period totaled 740,516.  See note 8 below for additional detail on Asher note conversions.

On March 31, 2011, there were 38,139,480 shares of common stock issued and outstanding.

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VISION INDUSTRIES CORP.

Notes to Financial Statements

March 31, 2011

(Continued)

8.

Debenture Financing

On June 23, 2010, to obtain funding for working capital, the Company entered into securities purchase agreement with Asher Enterprises, Inc. (“Asher”) pursuant to which the Company agreed to issue it 8% Convertible Debentures for an aggregate purchase price of $60,000.  The Debenture bears interest at 8% per annum and matures 9 months from the date of issuance on March 24, 2011. The Debenture will be convertible at the option of the holder at any time after 90 days into shares of common stock, at a conversion price equal to 61% of the market price paid per share. In connection with the issuance of this convertible debenture 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.  In accordance with ASC Topic 815 “Derivatives and Hedging”, 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 $150,922 in derivative liability for the year ended December 31, 2010. 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.

On January 3, 2011, the Company was notified by Asher Enterprises Inc. (“Asher”) that it was converting $15,000 of the $60,000 note outstanding stock at $0.1444 per share based on the formula laid out in section 1.2(a) of the note, which is the average of the 3 lowest prices multiplied by 61%.  This conversion resulted in the issuance of 103,878 shares to Asher and left a balance on the note of $45,000.

On January 18, 2011, the Company was notified by Asher that it was converting an additional $8,000 of the $45,000 note outstanding at $0.1017 per share based on the formula laid out in section 1.2(a) of the note, which is the average of the 3 lowest prices multiplied by 61%.  This conversion resulted in the issuance of 78,663 shares to Asher and left a balance on the note of $37,000.

On February 3, 2011, the Company was notified by Asher that it was converting an additional $10,000 of the $37,000 note outstanding at $0.0741 per share based on the formula laid out in section 1.2(a) of the note, which is the average of the 3 lowest prices multiplied by 61%.  This conversion resulted in the issuance of 134,953 shares to Asher and left a balance on the note of $27,000.

On February 16, 2011, the Company was notified by Asher that it was converting an additional $10,000 of the $27,000 note outstanding at $0.0695 per share based on the formula laid out in section 1.2(a) of the note, which is the average of the 3 lowest prices multiplied by 61%.  This conversion resulted in the issuance of 143,885 shares to Asher and left a balance on the note of $17,000.

On February 24, 2011, the Asher notified the Company that the remaining note outstanding for $17,000 plus interest of $2,400 would be fully converted into stock at $0.0695 per share based on the formula laid out in section 1.2(a) of the note, (i.e., the average of the 3 lowest prices multiplied by 61%).  This final conversion resulted in the issuance of an additional 279,137 shares to Asher and completed the note transaction between Asher and the Company.

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VISION INDUSTRIES CORP.

Notes to Financial Statements

March 31, 2011

(Continued)

9.

Commitment and contingencies

The Company has entered into two leases for the corporate offices and a production facility.  The lease on the on the corporate offices and the production facility expire January 31, 2012.   Monthly base rent is $1,992 and $8,323, respectively.   Minimum future lease payments on the corporate offices and production facilities are as follows for leases in place as of March 31, 2011:

The Company has no known lawsuits or any pending litigation.

10.

Notes Payable

On May 7, 2009 Donald Hejmanowski, then Vice President of Corporate Communications, lent the Company $50,000.  After a partial payment of $14,000, a balance remains of $36,000 which is due and payable.

On December 28, 2010 the Company borrowed $500,000 from QIF Malta 1 Ltd.  The note bears simple interest of 5% per annum and matures on December 28, 2012. The company has classified the QIF Malta note as part of non-current liabilities with a balance of $500,000 at December 31, 2010.

On January 31, 2011 the Company executed a unsecured short term promissory note with Juha Halttunen for $200,000.  The note contains interest of 9% and both principal and accrued interest are due and payable on December 15, 2011.  Juha Halttunen received 500,000 warrants at a $0.25 per share purchase price and an additional 500,000 warrants at a $0.40 per share purchase price. In return for the loan, the Company will issue 100,000 shares of common stock and 250,000 warrants at $0.25 per share purchase price to C&M Capital

Table below describes all current and non-current debentures and notes payable as of March 31, 2011 and December 31, 2010:

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VISION INDUSTRIES CORP.

Notes to Financial Statements

March 31, 2011

(Continued)

11.

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.  Therefore we have capitalized our prototypes in property and equipment on our balance sheet.  See Note 3 for further discussion on the carrying value of these 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.

12.

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.  As stated above, 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.  Due to current global sentiment towards alternative energy and fuel efficiency in the HEV/EV markets, management is in active discussions with Stonegate about the potential to raise approximately $10,000,000-$12,000,000 in 2011 to fund continued development and commercialization of products in the heavy duty truck market.

As of March 31, 2011, the Company has an accumulated deficit of $9,219,622.  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.

13.

Subsequent events

On April 22, 2010 the Company was awarded a purchase order from the Port of Los Angeles to Enhance/Upgrade Fifteen (15) Harbor Department-Owned Electric Trucks to Hydrogen Fuel Cell Hybrid Trucks.  The contract is for $1,275,000.00 (not including tax).

Management has evaluated events subsequent to the balance sheet date for the three months ended March 31, 2011, through May 16, 2011, and determined that there are no other material events that have occurred that would require adjustments to or disclosure in our Consolidated Financial Statements.   Management has also considered all accounting pronouncements issued subsequent to year end and do not expect to have any retroactive restatement of these financial statements as a result of the subsequent implementation of any  new accounting principles.

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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 a company focused on marketing zero-emission vehicles to a variety of alternative 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.

We believe that a substantial commercial market will begin to develop for these products over the next two (2) to seven (7) years. However, we also believe that these Vehicles will reach significant production volumes only if fuel cell and hydrogen-based vehicles and hydrogen fueling products enter the marketplace in sufficient quantities to create a demand for a broad network of hydrogen fueling stations owned and operated by Vision or others.

A number of automotive and industrial manufacturers are developing alternative clean power systems using fuel cells or clean burning gaseous fuels in order to decrease fuel costs, lessen dependence on crude oil, and reduce harmful emissions. Our products for the clean power market, featuring off-the-shelf components that provide fuel storage, fuel delivery, and electronic vehicle control systems, will compete directly with other OEM offerings.

The current market for our vehicles is the emerging world market for passenger, fleet, industrial, and military vehicles powered by fuel cells and hybrid engines using hydrogen. Vision plans to continue the development of our electric/hydrogen hybrid vehicles to meet market opportunities. We are focusing our alt-fuel enabling technology marketing efforts on North America!particularly Southern California. Vision plans to continue the development of our products to meet market opportunities. Vision also plans to expand our capabilities and products to new customers.

This quarter we saw our first revenues from the sales of our products, since the date of the inception of our business.

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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.  During the fourth quarter of 2010 and the first quarter of 2011, we raised $1.7 million in short and long term notes to fund current operations. Our future financial success will be dependent on the success of our expansion, which may take years to complete, and our 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 March 31, 2011, there were seven (7) full time employees and two (2) consultants at Vision Industries Corp.  This includes the officer/director who runs the corporation.

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 March 31, 2011.  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 1.0 Summary of Results of Operations

Liquidity and Capital Resources

As of March 31, 2011, we had cash and cash equivalents of $400,338.  

On September 22, 2010, we entered into a Finders’ Fee Agreement with Christian Kolster for the purpose of giving Mr. Kolster and affiliates (“CK”) the non-exclusive right to introduce prospective “accredited investors” (as that term is defined in Rule 501 of the Rules promulgated under the Securities Act of 1933) (hereinafter referred to as “Qualified Investors”) to the Company. Pursuant to the terms of the proposed Agreement, in the event that a Qualified Investor is presented to and accepted by the Company and then closes on the investment, the Company will pay a “Finder’s” fee to CK equal to 10% of the dollar amount of securities purchased by the Qualified Investor payable as 50% in cash and 50% in common stock of the Company at a conversion rate of $0.025 per share.  And, for every $100,000 invested, the Company shall issue 500,000 warrants to CK, priced at $0.10 per share.  

On October 1, 2010 the Company entered into a convertible 12% convertible promissory note for $414,300 with Novium Opportunity Umbrella SICAV PLC-Quality Investment Fund.  Interest is due quarterly.  In exchange for arranging this financing, the Company issued 800,000 shares to CK for bringing the investor to the Company.  In addition, the Company issued CK affiliates 2,100,000 warrants, at $.10 per share.

On November 15, 2010 the Company was engaged by the City of Long Beach through the Long Beach Harbor Department to develop and place into demonstration service one hydrogen fuel cell/plug-in electric class 8 on-road truck (TYRANO^TM) and one hydrogen fuel cell/plug-in zero emission terminal tractor  (ZETT).  This project will demonstrate zero emission heavy-duty vehicles in cargo handling and short haul drayage operations within the San Pedro Bay Ports.  The contract provides for City of Long Beach and City of Los Angeles (the “joint ports”) Technology Advancement Program (TAP) Funding in the amount of $425,000.  TAP was created as part of the joint ports’ Clean Air Action Program to accelerate the verification or commercial availability of new, clean technologies that are applicable to the port industry and result in significant reductions of diesel particulate matter, nitrogen oxides, sulfur oxides and other pollutants.

On November 15, 2010, the Company entered into a convertible 12% convertible promissory note for $600,000 with Novium Opportunity Umbrella SICAV PLC-Quality Investment Fund.  Interest is due quarterly.

On December 28, 2010 the Company borrowed $500,000 from QIF Malta 1 Ltd.  The note bears simple interest of 5% per annum and matures on December 28th, 2012.

On January 31, 2011 the Company executed a unsecured short term promissory note with Juha Halttunen for $200,000.  The note contains interest of 9% and both principal and accrued interest are due and payable on December 15, 2011.  

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Results of Operations for the three months ended March 31, 2011 and 2010

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

Table 2.0 Comparison of our Statement of Operations

Revenues. We had $206,307 in revenues for the three months ended March 31, 2011, which is a 100% increase compared to the zero revenues for the three months ended March 31, 2010.  These revenues in the first quarter of March 2011, represent our first sales of components to the Port of Los Angeles for the ongoing joint development Tyranno truck program which is designed for drayage in and out of  the port.

We believe that capital will be available through private investors and we can take advantage of the new Clean Truck Program at the Ports of Long Beach and Los Angeles, California to generate revenue.  We are also in the process of qualifying our trucks for potential State and Federal subsidy programs.

Operating Expenses. Expenses increased by $99,439 to $1,571,507, for the three months ended March 31, 2011 from $1,472,068 for the three months ended March 31, 2010.  The bulk of the increase is attributed to the equity based compensation awarded to consultants involved in capital raises to fund ongoing operations..

Income (Loss) from Operations. For the three month periods ended March 31, 2011 and March 31, 2010, we incurred losses before other income and expenses of $1,457,882 and $1,472,068, respectively.  This significant loss from operations is primarily attributable to our equity based compensation coupled with our lack of significant revenues.

Net Loss. As a result of the factors described above, net loss increased from $1,459,499 for the three months ended March 31, 2010 to a net loss of $1,512,277 for the three months ended March 31, 2011.

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

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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.

Management assessed the effectiveness of the Corporation’s internal control over financial reporting as of March 31, 2011. 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 March 31, 2011, the Corporation’s internal control over financial reporting is effective based on those criteria.

Changes in Internal Controls over Financial Reporting.

We had no significant changes in our internal controls during the period ended March 31, 2011.  Management concluded that there has been no change in our internal control over financial reporting during the period ended March 31, 2011, 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 1

LEGAL PROCEEDINGS

On April 8, 2011, Vision Industries, Corp. (“Vision”) commenced litigation against Lawrence Weisdorn and Donald Hejmanowski as well as ICE Conversions, Inc. (collectively the “Defendants”).   Weisdorn and Hejmanowski are former employees and executives of Vision.  The litigation includes causes of action for alleged breach of fiduciary duty, fraud, conversion and unfair competition (amongst other causes) as charged by Vision against the Defendants.   Vision intends to enforce its rights to the fullest extent of the law through the subject litigation.

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.

(a)

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 September 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 September 9, 2009.

(b)

 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 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 September 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 had sold 7,065,200 of the authorized 10,000,000 units for total of $1,766,300 with broker commissions of $35,000.  

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ITEM 6

EXHIBITS

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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