VENDUM BATTERIES INC.

(FORMERLY WISHART ENTERPRISES LIMITED)

(A DEVELOPMENT STAGE COMPANY)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2011

NOTE 1 – ORGANIZATION AND NATURE OF BUSINESS

Vendum Batteries Inc. (formerly Wishart Enterprises Limited) (the "Company" or “Vendum”) was incorporated in Nevada on December 13, 2006.  Vendum is an environmentally friendly mobile battery company with the sole focus on identifying, evaluating, acquiring, developing and partnering for the commercialization of proprietary eco-friendly power sources.

As further described in Note 9, the Company closed a share exchange transaction effective May 3, 2010 with the shareholders of Vendum Batteries Limited, which was incorporated under the laws of the United Kingdom on November 16, 2009 (“Vendum UK”). This share exchange transaction constituted a reverse merger and a recapitalization of Vendum.  In conjunction with this reverse merger, the historical accounts of Vendum become the historical accounts of Wishart for accounting purposes and, in conjunction therewith, Wishart changed its fiscal year-end to December 31 to coincide with the historical year-end of Vendum. Vendum Batteries Limited is a wholly-owned subsidiary of Vendum Batteries Inc.

The accompanying interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission (“SEC”).  In the opinion of management, all adjustments necessary in order for the financial statements to be not misleading have been reflected herein.  The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year.

NOTE 2 – GOING CONCERN

The financial statements have been prepared on a going concern basis which assumes the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. The Company has a working capital deficit, and has incurred losses since inception resulting in an accumulated deficit of $724,786 as of March 31, 2011, and further losses are anticipated in the development of its business raising substantial doubt about the Company’s ability to continue as a going concern. The ability to continue as a going concern is dependent upon the Company generating profitable operations in the future and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management intends to finance operating costs over the next twelve months with existing cash on hand and loans from directors and or private placement of common stock.

NOTE 3 – SUMMARY OF SIGNIFCANT ACCOUNTING POLICIES

Development Stage Company

The accompanying financial statements have been prepared in accordance with generally accepted accounting principles related to development stage companies. A development-stage company is one in which planned principal operations have not commenced or if its operations have commenced, there has been no significant revenues there from.

Basis of Presentation

The financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America and are presented in US dollars.

VENDUM BATTERIES INC.

(FORMERLY WISHART ENTERPRISES LIMITED)

(A DEVELOPMENT STAGE COMPANY)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2011

NOTE 3 – SUMMARY OF SIGNIFCANT ACCOUNTING POLICIES (CONTINUED

Accounting Basis

The Company uses the accrual basis of accounting and accounting principles generally accepted in the United States of America (“GAAP” accounting).  The Company has adopted a December 31 fiscal year end.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiary. All significant intercompany transactions and balances have been eliminated in consolidation.

Cash and Cash Equivalents

The Company considers all highly liquid investments with the original maturities of three months or less to be cash equivalents. The Company had $59,066 and $21,766 of cash as of March 31, 2011 and December 31, 2010, respectively.

Income Taxes

Income taxes are computed using the asset and liability method. Under the asset and liability method, deferred income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the currently enacted tax rates and laws. A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Revenue Recognition

The Company recognizes revenue when products are fully delivered or services have been provided and collection is reasonably assured.

Foreign Currency Translation

The Company's functional currency is the Pound Sterling and its reporting currency is the United States dollar.

Advertising Costs

The Company’s policy regarding advertising is to expense advertising when incurred. The Company incurred advertising expense of $0 and $0 during the periods ended March 31, 2011 and 2010, respectively.

Stock-Based Compensation

Stock-based compensation is accounted for at fair value in accordance with ASC Topic 718. To date, the Company has not adopted a stock option plan and has not granted any stock options.

VENDUM BATTERIES INC.

(FORMERLY WISHART ENTERPRISES LIMITED)

(A DEVELOPMENT STAGE COMPANY)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2011

NOTE 3 – SUMMARY OF SIGNIFCANT ACCOUNTING POLICIES (CONTINUED)

Dividends

The Company has not adopted any policy regarding payment of dividends. No dividends have been paid during any of the periods shown.

Basic Income (Loss) Per Share

Basic income (loss) per share is calculated by dividing the Company’s net loss applicable to common shareholders by the weighted average number of common shares during the period. Diluted earnings per share is calculated by dividing the Company’s net income available to common shareholders by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity. There are no such common stock equivalents outstanding as of March 31, 2011.

Comprehensive Income

The Company has which established standards for reporting and display of comprehensive income, its components and accumulated balances. When applicable, the Company would disclose this information on its Statement of Stockholders’ Equity. Comprehensive income comprises equity except those resulting from investments by owners and distributions to owners. The Company has not had any significant transactions that are required to be reported in other comprehensive income.

Impairment of Long-Lived Assets

The Company continually monitors events and changes in circumstances that could indicate carrying amounts of long-lived assets may not be recoverable. When such events or changes in circumstances are present, the Company assesses the recoverability of long-lived assets by determining whether the carrying value of such assets will be recovered through undiscounted expected future cash flows. If the total of the future cash flows is less than the carrying amount of those assets, the Company recognizes an impairment loss based on the excess of the carrying amount over the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or the fair value less costs to sell.

Recent Accounting Pronouncements

Vendum does not expect the adoption of recently issued accounting pronouncements to have a significant impact on the Company’s results of operations, financial position or cash flow.

NOTE 4 – INTELLECTUAL PROPERTY

On January 4, 2010 the Company entered into an asset purchase agreement with Cornerstone Holdings Ltd. The Company agreed to purchase intellectual property from the seller for total proceeds of $500,000. The Company paid a $10,000 deposit on January 6, 2010. The remaining $490,000 was to be paid in varying installments over the next 21 months. The rights, title and interest of the intellectual property was transferred to the Company on the date of the first $10,000 payment. On May 3, 2010, the remaining $490,000 outstanding was converted into 232,749,907 shares of common stock of the Company.

VENDUM BATTERIES INC.

(FORMERLY WISHART ENTERPRISES LIMITED)

(A DEVELOPMENT STAGE COMPANY)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2011

NOTE 4 – INTELLECTUAL PROPERTY (CONTINUED)

The Company analyzed the intellectual property for impairment at December 31, 2010 and determined that the fair market value was $200,000. As such, an impairment charge of $300,000 was recorded.

NOTE 5 – ACCRUED EXPENSES

Accrued expenses and interest at March 31, 2011 and December 31, 2010 consisted of the following:

NOTE 6 – ACCRUED EXPENSES – RELATED PARTY

Accrued expenses – related party consisted amounts due to an officer and shareholder of the Company for consulting services. There was $8,680 and $8,680 of accrued expenses – related party as of March 31, 2011 and December 31, 2010, respectively.

NOTE 7 – CONVERTIBLE NOTES PAYABLE

On December 10, 2009, a related party issued the company a 12% convertible note payable of $50,000. Interest will accrue beginning from the date of the loan however no interest is due until the loan comes due on December 10, 2010.

On March 3, 2010 another $25,000 was loaned to the company under the same terms as the original loan.

On May 3, 2010, the convertible loans of $75,000 were converted into 33,750,013 shares of common stock.

On May 18, 2010, the Company issued a 12% convertible note payable of $25,000 to a related party due September 3, 2011.

On July 26, 2010, the Company issued a 12% convertible note payable of $50,000 to a related party. Interest will accrue beginning from the date of the loan however no interest is due until the loan comes due on July 27, 2011.

The balance of the convertible notes to related parties as of March 31, 2011 and December 31, 2010 was $75,000 and $75,000, respectively.

Accrued interest payable related to the above loans totaled $9,438 and $7,188 at March 31, 2011 and December 31, 2010, respectively.

VENDUM BATTERIES INC.

(FORMERLY WISHART ENTERPRISES LIMITED)

(A DEVELOPMENT STAGE COMPANY)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2011

NOTE 7 – CONVERTIBLE NOTES PAYABLE (CONTINUED)

On March 23, 2011, the Company entered into a Securities Purchase Agreement with an accredited investor for the sale of a Convertible Promissory Note in the aggregate principal amount of $65,000. The net proceeds of the financing, after deducting placement agent fees, are to be used for general working capital purposes. The Notes bear interest at the rate of 8% per annum and matures on December 28, 2011. The Note is convertible into shares of our common stock beginning 180 days from the date of the Note at a conversion price of 60% of the average of the lowest three trading prices of the Company’s common stock during the ten trading days on the OTCBB proceeding the conversion date. The number of shares issuable upon conversion shall be proportionally adjusted to reflect any stock dividend, split or similar event.

Unless waived in writing by the Holder, the Company is prohibited from effecting the conversion of the Note to the extent that as a result of such conversion the Holder thereof would beneficially own more than 4.99% in the aggregate of the issued and outstanding common stock immediately after giving effect to the issuance of common stock upon conversion. While the Note is outstanding, the Holder is entitled to a reduction in the conversion price if we issue any securities for a per share price less than the conversion price in effect available to the Holder.

The loans may be converted into the Company’s common stock at any point during the term of the loan by the note holder. The number of shares to be issued will be determined by the fair market value of the common stock on the date of the conversion. If fair market value is not determinable at the conversion date the stock will be converted based on the lesser of either the share price of the

last private offering or the thirty day average of the Company’s stock in the event a public listing has taken place.

NOTE 8 – DUE TO DIRECTOR

A director and shareholder of the Company advanced $1,005 (December 31, 2010 - $505) to Vendum during the period ended March 31, 2011. The amount is unsecured, non-interest bearing and due on demand.

NOTE 9 – COMMON STOCK

The Company has 750,000,000 shares of $0.001 par value common stock authorized.

On November 17, 2009, the Company issued 1 share of common stock for total proceeds of $2. As of December 31, 2009 the proceeds had not been collected. The funds for the stock were deposited into the company bank account on March 4, 2010.

In a share exchange transaction that closed on May 3, 2010, Wishart acquired all the issued and outstanding shares of Vendum Batteries Limited through the issuance of 8,500,023 shares of Wishart. The Company treated the purchase of Vendum Batteries Limited as a reverse acquisition pursuant to the guidance in Appendix B of SEC Accounting Disclosure Rules and Practices Official Text. Accordingly, these transactions are recorded as capital transactions in substance rather than business combinations.

VENDUM BATTERIES INC.

(FORMERLY WISHART ENTERPRISES LIMITED)

(A DEVELOPMENT STAGE COMPANY)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2011

NOTE 9 – COMMON STOCK (CONTINUED)

Therefore, the transaction is equivalent to the issuance of stock by the private company for the net monetary assets of Wishart, accompanied by a recapitalization. Accordingly, the reverse acquisition has been accounted for as a recapitalization.  

For accounting purposes, Vendum is considered the acquirer in the reverse acquisition.  The historical financial statements are those of Vendum consolidated with the parent, Wishart Enterprises, Inc. Earnings per share for periods prior to the merger are restated to reflect the number of equivalent shares received by the acquiring company.

On May 3, 2010, the Company agreed to convert a note payable of $490,000 into 232,749,907 shares of common stock.

Also on May 3, 2010, the Company converted two convertible notes payable totaling $75,000 into 33,750,013 shares of common stock.

On November 1, 2010, the Company issued 500,000 common shares of stock for $70,000 cash.

On May 24, 2010, the Company completed an approximately 3:1 forward stock split.

On November 29, 2010, the Company completed a 5:1 forward stock split and increased its authorized share capital to 750,000,000 shares of common stock.

All share information presented in these financial statements and accompanying footnotes have been retroactively adjusted to reflect the increased number of shares resulting from these actions.

There were 500,499,965 and 14 shares of common stock issued and outstanding as of March 31, 2011 and December 31, 2010, respectively.

NOTE 10 – COMMITMENTS AND CONTINGENCIES

The Company neither owns nor leases any real or personal property. An officer has provided office services without charge. There is no obligation for the officer to continue this arrangement. Such costs are immaterial to the financial statements and accordingly are not reflected herein. The officers and directors are involved in other business activities and most likely will become involved in other business activities in the future.

The Company entered into two consulting agreements during the year ended December 31, 2010. Both agreements are for twelve months and began in June and July 2010, respectively.

VENDUM BATTERIES INC.

(FORMERLY WISHART ENTERPRISES LIMITED)

(A DEVELOPMENT STAGE COMPANY)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2011

NOTE 10 – COMMITMENTS AND CONTINGENCIES (CONTINUED)

The following are minimum annual payments due under those agreements:

NOTE 11 – INCOME TAXES

As of March 31, 2011, the Company had net operating loss carry forwards of approximately $725,000 that may be available to reduce future years’ taxable income through 2030. Future tax benefits which may arise as a result of these losses have not been recognized in these financial statements, as their realization is determined not likely to occur and accordingly, the Company has recorded a valuation allowance for the deferred tax asset relating to these tax loss carry-forwards.

The provision for the Federal income tax consists of the following:

The cumulative tax effect at the expected rate of 34% of significant items comprising our net deferred tax amount is as follows:

VENDUM BATTERIES INC.

(FORMERLY WISHART ENTERPRISES LIMITED)

(A DEVELOPMENT STAGE COMPANY)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2011

NOTE 12 – SUBSEQUENT EVENTS

Subsequent to year end, the Company entered into a promissory note agreement in the amount of $7,000, with the entire amount of the principal plus interest at 5 % per annum to be repaid on April 30, 2011.

Additionally, on May 3, 2011, the Company entered into a convertible note agreement in the amount of $32,500 plus interest at 8% per annum to be repaid on February 2, 2012. The conversion price as per the convertible note agreement is generally 58% of the market price of the Company’s common stock, as defined in the agreement.

In accordance with ASC 855-10, the Company has analyzed its operations subsequent to March 31, 2011 through May 20, 2011 and has determined that it does not have any other material subsequent events to disclose in these financial statements.

Item 2.     Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

Certain statements, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements generally are identified by the words “believes,” “project,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,” “may,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. We intend such forward-looking statements to be covered by the safe-harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and are including this statement for purposes of complying with those safe-harbor provisions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse affect on our operations and future prospects on a consolidated basis include, but are not limited to: changes in economic conditions, legislative/regulatory changes, availability of capital, interest rates, competition, and generally accepted accounting principles. These risks and uncertainties should also be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. Further information concerning our business, including additional factors that could materially affect our financial results, is included herein and in our other filings with the SEC.

Overview

We are developing an innovative new cellulose-based power source that will revolutionize the automotive and aeronautical industries when it is brought to market.

This revolutionary battery is entirely biodegradable, as it is primarily composed of cellulose and uses none of the toxic elements used in traditional batteries, such as mercury, lead, chromium, or cadmium.

Using the cutting edge Carbon Nanotube (CNT), we hope this non-toxic power source will, in the future, be capable of providing higher power output for much longer periods of time. The batteries have the potential to be small and light-weight, therefore should be possible to revolutionize human implant technology for those found in pacemakers and cochlear implants.

Similarly, we are aiming in the future to power mobile phones, PDA’s, iPods, music players, games consoles, laptops and the like. Also home appliances such as power tools, all kinds of toys, watches, cameras, toothbrushes and electric razors can be powered by our batteries. Finally, these batteries could be used in power surveying instruments, flashlights, CCTV cameras, roadwork lighting and signs, gift cards, and even clothing and books. In the long term, however, we hope that we will help transform the automotive and aeronautical industry forever.

The properties that CNT brings to batteries and the expertise of our scientists mean that we can explore and potentially develop paper based supercapacitor technology, used in devices requiring a surge of power, like flashes for camera and now in Smart Phones, but many industries could be impacted if our research expectations can be met.

For 2011, further R&D will be carried out during the pre production prototype stage, and this will be done to ascertain the thermal conductive and field emission display properties of CNT based composite materials that have been observed by other scientists and university studies.

For 2012, we hope to be able to diversify our business into cellulose paper based electronic display materials, for smart packaging, or for paper based sensors and actuators for various industries, including the healthcare industry.

Research into the thermal conductive properties of cellulose and CNT materials may offer exciting new ways of developing smart materials that capture body heat and release it when required. The applications in professional sports and military clothing could be considerable and even the construction industry could benefit in numbers of ways, if we are able to create materials for insulation, heat capture and even energy generation.

Results of Operations for the three months ended March 31, 2011 and 2010 and for the Period from November 16, 2009 (Date of Inception) to March 31, 2011

We generated no revenue for the period from November 16, 2009 (Date of Inception) until March 31, 2011. Without revenues, we are forced to rely on fundraising activities in order to continue as a going concern. If we are unable to generate revenues or raise funds in the near future, we will be forced to consider other business opportunities or cease operations.

Our operating expenses were $63,195 for the three months ending March 31, 2011, as compared with $45,069 for the same period ended 2010. The increase in our operating expenses is largely the result of $2,115 more spent on professional fees and $16,399 more spent on consulting fees for the three months ended March 31, 2011.

Our operating expenses were $415,348 for the period from November 16, 2009 (Inception) to March 31, 2011. Our operating expenses for the period from November 16, 2009 (Inception) to March 31, 2011 were primarily related to consulting fees of $331,352, professional fees of $48,347 and general and administrative expenses of $35,649.

We had an interest expense of $2,250 for the three months ended March 31, 2011 that we did not have for the three months ended March 31, 2010.

We therefore recorded a net loss of $65,445 for the three months ended March 31, 2011, as compared with $45,069 for the three months ended March 31, 2010. We recorded a net loss of $724,786 for the period from November 16, 2009 (Inception) to March 31, 2011.

Liquidity and Capital Resources

As of March 31, 2011, we had total current assets of $59,066, consisting entirely of cash, and total assets in the amount of $259,066. We had current liabilities in the amount of $353,607 as of March 31, 2011. Thus, we had a working capital deficit of $294,541 as of March 31, 2011.

Operating activities used $212,184 in cash for the period from November 16, 2009 (Date of Inception) until March 31, 2011. Our net loss of $724,786 was the sole reason for our negative operating cash, offset by the impairment of intellectual property of $300,000, an increase in accrued expenses of $194,484, an increase in related party accrued expenses of $8,680, and an increase in related party accrued interest of $9,438. Investing activities used $10,000 for the period from November 16, 2009 (Date of Inception) until March 31, 2011 for the acquisition of intellectual property. Financing activities during the period from November 16, 2009 (Date of Inception) until March 31, 2011 generated $286,007 in cash during the period, largely represented by $215,000 in proceeds from convertible notes, and $70,000 in proceeds from the sale of common stock.

On March 23, 2011, we entered into a Securities Purchase Agreement with an accredited investor for the sale of a Convertible Promissory Note in the aggregate principal amount of $65,000. Additionally, on May 3, 2011, we entered into a Securities Purchase Agreement with an accredited investor for the sale of a Convertible Promissory Note in the aggregate principal amount of $32,500. The net proceeds of these financing, after deducting placement agent fees, are to be used for general working capital purposes.

Despite our recent financings, we have insufficient cash to operate our business at the current level for the next twelve months and insufficient cash to achieve our business goals. The success of our business plan beyond the next 12 months is contingent upon us obtaining additional financing. We intend to fund operations through debt and/or equity financing arrangements, which August be insufficient to fund our capital expenditures, working capital, or other cash requirements. We do not have any formal commitments or arrangements for the sales of stock or the advancement or loan of funds at this time. There can be no assurance that such additional financing will be available to us on acceptable terms, or at all.

Going Concern

We have a working capital deficit, and have incurred losses since inception resulting in an accumulated deficit of $724,786 as of March 31, 2011, and further losses are anticipated in the development of our business raising substantial doubt about our ability to continue as a going concern. The ability to continue as a going concern is dependent upon our generating profitable operations in the future and/or to obtain the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they come due. Management intends to finance operating costs over the next twelve months with existing cash on hand and loans from directors and or private placement of common stock.

Off Balance Sheet Arrangements

As of March 31, 2011, there were no off balance sheet arrangements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

A smaller reporting company is not required to provide the information required by this Item.

Item 4T.     Controls and Procedures

Disclosure Controls and Procedures

We carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of March 31, 2011. This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of March 31, 2011, our disclosure controls and procedures were not effective due to the presence of material weaknesses in internal control over financial reporting.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. Management has identified the following material weaknesses which have caused management to conclude that, as of March 31, 2011, our disclosure controls and procedures were not effective: (i) inadequate segregation of duties and effective risk assessment; and (ii) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of both US GAAP and SEC guidelines.

Remediation Plan to Address the Material Weaknesses in Internal Control over Financial Reporting

Our company plans to take steps to enhance and improve the design of our internal controls over financial reporting. During the period covered by this quarterly report on Form 10-Q, we have not been able to remediate the material weaknesses identified above. To remediate such weaknesses, we plan to implement the following changes during our fiscal year ending September 30, 2011: (i) appoint additional qualified personnel to address inadequate segregation of duties and ineffective risk management; and (ii) adopt sufficient written policies and procedures for accounting and financial reporting. The remediation efforts set out are largely dependent upon our securing additional financing to cover the costs of implementing the changes required. If we are unsuccessful in securing such funds, remediation efforts may be adversely affected in a material manner.

We are unable to remedy our controls related to the inadequate segregation of duties and ineffective risk management until we receive financing to hire additional employees. In January 2011, we hired an outsourced controller to improve the controls for accounting and financial reporting.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the three months ended March 31, 2011 that have materially affected, or are reasonable likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1.     Legal Proceedings

We are not a party to any pending legal proceeding. We are not aware of any pending legal proceeding to which any of our officers, directors, or any beneficial holders of 5% or more of our voting securities are adverse to us or have a material interest adverse to us.

Item 1A: Risk Factors

A smaller reporting company is not required to provide the information required by this Item.

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

On May 5, 2011, we issued 128,453 restricted shares of our common stock for services rendered in the amount of $20,000.

These securities were issued pursuant to Section 4(2) of the Securities Act and/or Rule 506 promulgated thereunder. The holders represented their intention to acquire the securities for investment only and not with a view towards distribution. The investors were given adequate information about us to make an informed investment decision. We did not engage in any general solicitation or advertising. We directed our transfer agent to issue the stock certificates with the appropriate restrictive legend affixed to the restricted stock.

Item 3.     Defaults upon Senior Securities