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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, 2012

[ ] 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

 

	FLORIDA		14-1908451
	(State or other jurisdiction of incorporation or organization)		(I.R.S. Tax. I.D. No.)
1560 W. 190th Street, Torrance, California 90501
(Address of Principal Executive Offices)
(310) 450-0299
(Registrant’s Telephone Number, Including Area Code)

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 þ   No o

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.

Large accelerated filer.o	Accelerated filer.   o
Non-accelerated filer.  o (Do not check if a smaller reporting company)	Smaller reporting company.  þ

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, 2012:  80,022,702

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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 4.  Controls and Procedures

Part II – Other Information 

Item 1.  Legal Proceedings

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

Item 3.  Defaults Upon Senior Securities

Item 4.  Mine Safety Disclosures

Item 5.  Other Information

Item 6.  Exhibits

Signatures

XBRL EXPLANATORY NOTE

The purpose of this Amendment No. 1 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2012 is to submit Exhibit 101 in accordance with Rule 405 of Regulation S-T. Exhibit 101 consists of the Interactive Data Files relating to this Amendment No. 1 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2012.

Pursuant to Rule 406T of Regulation S-T, the XBRL files contained in Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

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PART I – FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS

Vision Industries Corp.

Balance Sheet

As of		June 30, 2012				December 31,2011
		(unaudited)				(Audited)
ASSETS
Current assets:
Cash and cash equivalents	$		35,692	$			3,480
Accounts Receivable			2,750				2,750
Note Receivable			57,760
Inventory			47,184				211,564
Prepaid expenses			36,216				34,848
Supply inventory			11,450				11,450
Total current assets			191,052				264,092
Property and equipment, net			341,210				203,418
Intangible assets, net			266,117				292,887
Other assets:
Deferred loss			140,166
Research and Development			3,184
Employee advances			7,000				4,208
Security deposits & other			13,807				21,200
Total other assets			164,157				25,408
Total assets	$		962,536	$			785,805
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Accounts payable and accrued expenses	$		622,123		$			523,615
Current portion of lease liability			87,252
Current portion notes payable			112,500					318,500
Total current liabilities			821,875					842,115
Noncurrent Liabilities:
Lease Liability			197,748
Notes payable - noncurrent portion								1,100,000
Total noncurrent liabilities			197,748					1,100,000
Total liabilities			1,019,623					1,942,115
Stockholders' deficit:
Preferred stock, $.001 par value, 2,000,000 authorized, 250,000  issued and outstanding as of June 30, 2012, and December 31, 2011, respectively			250					250
Common stock, $.001 par value, 500,000,000 authorized 80,022,702 issued and outstanding as of June 30, 2012, and 46,159,016 as of December 31, 2011, respectively			80,022					46,159
Additional paid in capital			16,995,493					13,338,990
Deferred compensation			(87,000)					(217,500)
Accumulated deficit			(17,045,852)					(14,324,209)
Total stockholders' deficit			(58,087)					(1,156,310)
Total liabilities and stockholders' deficit	$		962,536		$			785,805

See accompanying notes

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Vision Industries Corp.

Statement of Operations

		For the six months ended				For the three months ended
		June 30, 2012		June 30, 2011		June 30, 2012		June 30 2011
		(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
Revenue:
Sales	$	10,500	$	469,907	$	0	$	263,600
Total revenue		10,500		469,907		0		263,600
Direct Costs				201,852				108,913
Gross profit		10,500		268,055		0		154,687
Operating expenses:
Research and development		3,923		92,041		2,210		75,663
General & administrative		490,135		820,978		226,916		399,331
Equity based compensation		2,133,038		2,455,322		1,044,869		1,356,350
Depreciation and amortization		47,536		70,348		23,768		35,174
Total operating expenses		2,674,632		3,438,689		1,297,763		1,866,518
Loss before other expense		(2,664,132)		(3,170,634)		(1,297,763)		(1,711,831)
Other income (expense)
Miscellaneous Income		20,522
Interest income		5,340				5,340
Foreign exchange gain (loss)				(26,696)				(26,696)
Interest expense		(84,573)		(94,695)		(32,453)		(40,300)
Rental Income		1,200
Total other income (expense)		(57,511)		(121,391)		(27,113)		(66,996)
Net loss	$	(2,721,643)	$	(3,292,025)	$	(1,324,876)	$	(1,778,827)
Gain (Loss) per share: basic and diluted	$	(0.06)	$	(0.08)	$	(0.03)	$	(0.05)
Weighted average number of common shares outstanding: basic and diluted		42,367,539		38,794,841		43,685,772		38,794,841

See accompanying notes

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Vision Industries Corp.

Statement of Cash Flows

		For the six months ended
		June30, 2012		June 30, 2011
		(Unaudited)		(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss)	$	(2,721,643)	$	(3,292,025)
Adjustments to reconcile net (loss) to net cash provided (used) by operating activities:
Stock-based compensation		2,133,038		2,455,322
Depreciation and amortization		47,536		70,348
Cancellation of Asher note derivative				(210,104)
Adjustment to carrying value of fixed assets		(82,272)
Foreign exchange loss				26,695
Changes in operating assets and liabilities:
Change in inventory		(52,072)		(159,888)
Change in Accounts receivables				(124,676)
Change in Research and Development		(3,184)
Change in Employee Advances		(2,792)
Change in Note Receivable		227,240
Trade deposits				95,405
Change in Other assets		6,079		(7,807)
Prepaid expenses		(1,368)		11,624
Accounts payable and accrued expense		(41,065)		146,347
Cash used by operating activities		(490,503)		(988,759)
CASH FLOWS FROM INVESTING ACTIVITIES:
Leaseback of fixed assets- capitalized		(285,000)
Cash used by investing activities		(285,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on notes payable				(400)
Note Receivable -Sale-Leaseback of fixed assets		285,000
Issuance of common stock		35,220		(1,715)
Interest reduction- conversion of notes payable		139,573		13,050
Additional paid in capital -conversion of notes		1,524,922
Conversion of notes payable		(1,418,500)		212,584
Subscription agreement for stock and warrants		129,000
Short term borrowings		112,500		200,000
Cash provided by financing activities		807,715		423,519
Net increase(decrease) in cash and cash equivalents		32,212		(565,240)
Cash and cash equivalents, beginning of period		3,480		641,069
Cash and cash equivalents, end of period	$	35,692	$	75,829
NONCASH INVESTING AND FINANCING ACTIVITIES:
Issuance of common stock	$		$	8,604
Paid in capital	$		$	2,776,532
Deferred compensation				99,188
Sales  Leaseback - Consideration		(285,000)
Sales  Leaseback – Sale from fixed assets (net of accumulated depreciation - $244,559)		425,166
Sales  Leaseback – Deferred Loss		(140,166)
Interest expense	$	84,573	$	94,695

See accompanying notes

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VISION INDUSTRIES CORP.

Notes to Financial Statements

June 30, 2012

 (Unaudited)

[«E3J04XPN|LEVEL=1|LABEL=NOTE 1 BUSINESS DESCRIPTION AND ACCOUNTING POLICIES|LABEL=NOTE 1 GENERAL BACKGROUND AND BUSINESS ENVIRONMENT|TAG=US-GAAP:BUSINESSDESCRIPTIONANDACCOUNTINGPOLICIESTEXTBLOCK»

Note 1 Business Description and Accounting Policies

Business Description

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, California, 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.

Note 2  Significant Accounting Policies

[«21J5RDGJ|LEVEL=2|LABEL=BASIS FOR PRESENTATION AND CRITICAL ACCOUNTING POLICIES AND USE OF ESTIMATES|LABEL=BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES|TAG=US-GAAP:BASISOFPRESENTATIONANDSIGNIFICANTACCOUNTINGPOLICIESTEXTBLOCK»

Basis for Presentation and Critical Accounting Policies and Use of Estimates

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 six months ended June 30, 2012 and 2011; (b) the financial position at June 30, 2012; and (c) cash flows for the six months ended June 30, 2012 and 2011, 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 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 various 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.

«21J5RDGJ»]

[«21J5RGDS|LEVEL=2|LABEL=CASH AND CASH EQUIVALENTS|LABEL=CASH AND CASH EQUIVALENTS DISCLOSURE|TAG=US-GAAP:CASHANDCASHEQUIVALENTSDISCLOSURETEXTBLOCK»

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

June 30, 2012

 (Unaudited)

«21J5RGDS»]

[«21J1RCHK|LEVEL=2|LABEL=ACCOUNTS RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS|LABEL=ACCOUNTS RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS|TAG=FIL:ACCOUNTSRECEIVABLEANDALLOWANCEFORDOUBTFULACCOUNTS»

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable represent amounts due from customers in the ordinary course of business.  The Company considers accounts more than 90 days old to be past due. The Company uses the allowance method for recognizing bad debts. When an account is deemed uncollectible, it is written off against the allowance. The Company generally does not require collateral for its accounts receivable. The Company considers all accounts receivable to be collectable and consequently has provided no allowance for doubtful accounts.

«21J1RCHK»]

[«21J5RXHH|LEVEL=2|LABEL=INVENTORY POLICY|LABEL=INVENTORY, POLICY|TAG=US-GAAP:INVENTORYPOLICYTEXTBLOCK»

Inventory

Inventories are stated at the lower of cost or market.

«21J5RXHH»]

[«23J5RWW4|LEVEL=2|LABEL=PROPERTY AND EQUIPMENT|LABEL=PROPERTY, PLANT AND EQUIPMENT, POLICY|TAG=US-GAAP:PROPERTYPLANTANDEQUIPMENTPOLICYTEXTBLOCK»

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.

«23J5RWW4»]

[«21J1RZR3|LEVEL=2|LABEL=ADVERTISING COSTS|LABEL=ADVERTISING COSTS, POLICY|TAG=US-GAAP:ADVERTISINGCOSTSPOLICYTEXTBLOCK»

Advertising Costs

The costs of advertising are expensed as incurred and are included in the Company’s operating expenses.  Advertising expenses for the six months ended June 30, 2012 and June 30, 2011 were [«21J5X86P|TAG=US-GAAP:ADVERTISINGEXPENSE|LABEL=*|TIME=2012-01-01~2012-06-30|UNIT=USD|PRECISION=INF»$377 «21J5X86P»]and [«23J1XC9E|TAG=US-GAAP:ADVERTISINGEXPENSE|LABEL=*|TIME=2011-01-01~2011-06-30|UNIT=USD|PRECISION=INF»$20,195«23J1XC9E»], respectively.

«21J1RZR3»]

[«21J5RT75|LEVEL=2|LABEL=INCOME TAX|LABEL=INCOME TAX, POLICY|TAG=US-GAAP:INCOMETAXPOLICYTEXTBLOCK»

Income Tax

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.

«21J5RT75»]

[«23J1PF95|LEVEL=2|LABEL=SHARE-BASED COMPENSATION|LABEL=SHARE-BASED COMPENSATION|TAG=FIL:SHAREBASEDCOMPENSATION1»

Share-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

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VISION INDUSTRIES CORP.

Notes to Financial Statements

June 30, 2012

 (Unaudited)

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.

«23J1PF95»]

[«23J1P8GR|LEVEL=2|LABEL=INTANGIBLE ASSETS|LABEL=INTANGIBLE ASSETS, FINITE-LIVED, POLICY|TAG=US-GAAP:INTANGIBLEASSETSFINITELIVEDPOLICY»

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.  

«23J1P8GR»]

[«23J1PC1E|LEVEL=2|LABEL=REVENUE RECOGNITION|LABEL=REVENUE RECOGNITION, POLICY|TAG=US-GAAP:REVENUERECOGNITIONPOLICYTEXTBLOCK»

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.

«23J1PC1E»]

[«E3J1HEZM|LEVEL=2|LABEL=RESEARCH AND DEVELOPMENT RECOGNITION POLICY|LABEL=NOTE 12 RESEARCH AND DEVELOPMENT COSTS|TAG=US-GAAP:RESEARCHANDDEVELOPMENTEXPENSEPOLICY»

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.

«E3J1HEZM»]

[«21J1PUVR|LEVEL=2|LABEL=EFFECTS OF RECENT ACCOUNTING PRONOUNCEMENTS|TAG=FIL:EFFECTSOFRECENTACCOUNTINGPRONOUNCEMENTS»

[«21J1PU2W|LEVEL=2|LABEL=EFFECTS OF RECENT ACCOUNTING PRONOUNCEMENTS|LABEL=EFFECTS OF RECENT ACCOUNTING PRONOUNCEMENTS|TAG=FIL:EFFECTSOFRECENTACCOUNTINGPRONOUNCEMENTS»

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.”

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VISION INDUSTRIES CORP.

Notes to Financial Statements

June 30, 2012

 (Unaudited)

«21J1PU2W»]

«21J1PUVR»]

[«23J5H948|LEVEL=2|LABEL=PER SHARE COMPUTATIONS|LABEL=EARNINGS PER SHARE POLICY, BASIC|TAG=US-GAAP:EARNINGSPERSHAREPOLICYBASIC»

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.

«23J5H948»]

«E3J04XPN»]

 

[«E1J47DC2|LEVEL=1|LABEL=NOTE 3 INVENTORIES|LABEL=INVENTORY DISCLOSURE|TAG=US-GAAP:INVENTORYDISCLOSURETEXTBLOCK»

Note 3 Inventories

Inventories consisted of the following as of June 30, 2012 and December 31, 2011:

[«21J5LGTG|LEVEL=3|LABEL=SCHEDULE OF INVENTORY|LABEL=SCHEDULE OF INVENTORY, CURRENT|TAG=US-GAAP:SCHEDULEOFINVENTORYCURRENTTABLETEXTBLOCK»

Schedule of Inventory

	[«21J1YFVC|»June 30, 2012«21J1YFVC»]	[«23J1YF7Z|» December 31, 2011«23J1YF7Z»]
[«21J1VGJ5|LABEL=RAW MATERIALS|TAG=FIL:RAWMATERIALS»Raw Materials«21J1VGJ5»]	27,165	26,027
[«23J1VG2S|LABEL=WORK IN PROCESS|TAG=FIL:WORKINPROCESS»Work in Process«23J1VG2S»]	20,019	185,537
[«23J5VFRT|LABEL=FINISHED GOODS|TAG=FIL:FINISHEDGOODS»Finished Goods«23J5VFRT»]		0
	47,184	211,564

«21J5LGTG»]

«E1J47DC2»]

[«E3J07FR4|LEVEL=1|LABEL=NOTE 4 PROPERTY AND EQUIPMENT|LABEL=NOTE 4 PROPERTY AND EQUIPMENT|TAG=US-GAAP:PROPERTYPLANTANDEQUIPMENTDISCLOSURETEXTBLOCK»

Note 4 Property and equipment

Property and equipment as of June 30, 2012.and as of December 31, 2011 consist of the following:

[«23J1LWJ1|LEVEL=3|LABEL=SCHEDULE OF PROPERTY AND EQUIPMENT|LABEL=SCHEDULE OF PROPERTY AND EQUIPMENT|TAG=FIL:SCHEDULEOFPROPERTYANDEQUIPMENT»

Schedule of Property and Equipment

			June 30, 2012		December 31, 2011
[«21J5TZPK|LABEL=AUTOMOBILES|TAG=FIL:AUTOMOBILES»Automobiles «21J5TZPK»]		$	11,238	$	11,238
[«23J5VEXC|LABEL=COMPUTERS|TAG=FIL:COMPUTERS»Computers «23J5VEXC»]			5,139		5,139
[«21J5VD2U|LABEL=FURNITURE AND FIXTURES|TAG=FIL:FURNITUREANDFIXTURES»Furniture and fixtures «21J5VD2U»]			1,550		1,550
[«21J1VFD6|LABEL=OFFICE EQUIPMENT|TAG=FIL:OFFICEEQUIPMENT»Office equipment «21J1VFD6»]			1,000		1,000
[«21J5V9EC|LABEL=LEASED ASSETS|TAG=FIL:LEASEDASSETS»Leased assets«21J5V9EC»]			285,000
[«23J1VX6H|LABEL=SHOP EQUIPMENT|TAG=FIL:SHOPEQUIPMENT»Shop equipment «23J1VX6H»]			44,034		44,034
[«21J1VW2M|LABEL=PRODUCTION PROTOTYPES|TAG=FIL:PRODUCTIONPROTOTYPES»Production prototypes «21J1VW2M»]			73,480		526,753
[«21J5VSD4|LABEL=PROPERTY AND EQUIPMENT -- GROSS|TAG=FIL:PROPERTYANDEQUIPMENTGROSS» Property and Equipment -- gross«21J5VSD4»]			421,441		589,714
[«23J1VV3R|LABEL=DEPRECIATION|TAG=FIL:DEPRECIATION1»Less accumulated depreciation	«23J1VV3R»]		(80,231)		(386,296)
[«23J5VUUY|LABEL=PROPERTY AND EQUIPMENT -- NET|TAG=FIL:PROPERTYANDEQUIPMENTNET»Property and Equipment -- net«23J5VUUY»]		$	341,210	$	203,418

«23J1LWJ1»]

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 leased production prototypes uses the straight-line method over four years; however, the prototypes are evaluated on a yearly basis for impairment due to changes in estimates or net realizable value.  

On February 29, 2012 the Company leased back the production prototypes that were sold as part of the Sales-Leaseback agreement with Total Transportation Services Inc. mentioned in Note 9.  The Company has elected to capitalize the lease.

Depreciation expense for the six months ended June 30, 2012 and June 30, 2011 was[«E5J2JDPA|TAG=US-GAAP:DEPRECIATIONEXPENSE|LABEL=*|TIME=2011-01-01~2011-06-30|UNIT=USD|PRECISION=INF»$20,766 «E5J2JDPA»]and [«21J45XUY|TAG=US-GAAP:DEPRECIATIONEXPENSE|LABEL=*|TIME=2011-01-01~2011-06-30|UNIT=USD|PRECISION=INF»$43,578 «21J45XUY»]respectively.

«E3J07FR4»]

[«E3J4796L|LEVEL=1|LABEL=NOTE 5 INTANGIBLES|LABEL=NOTE 5 INTANGIBLES|TAG=US-GAAP:INTANGIBLEASSETSDISCLOSURETEXTBLOCK»

Note 5 Intangibles

Intangible assets at June 30, 2012 and December 31, 2011 consist of the following:

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VISION INDUSTRIES CORP.

Notes to Financial Statements

June 30, 2012

 (Unaudited)

[«23J1LYTT|LEVEL=3|LABEL=SCHEDULE OF INTANGIBLE ASSETS|LABEL=SCHEDULE OF INTANGIBLE ASSETS AND GOODWILL|TAG=US-GAAP:SCHEDULEOFINTANGIBLEASSETSANDGOODWILLTABLETEXTBLOCK»

Schedule of Intangible Assets

		[«21J45ZR5|»June 30, 2012«21J45ZR5»]		[«23J45ZL9|»December 31, 2011«23J45ZL9»]
Beginning Balance	$	292,887	$		346,427
Additions		-			0
Amortization		26,770			53,540
Impairment		-
	$	266,117	$		292,887

«23J1LYTT»]

Amortization expense for the six months ended June 30, 2012 and for the year ended December 31, 2011 was [«E5J2J8ZN|TAG=US-GAAP:FINITELIVEDINTANGIBLEASSETSAMORTIZATIONEXPENSE|LABEL=*|TIME=2011-01-01~2011-06-30|UNIT=USD|PRECISION=INF»$26,770 «E5J2J8ZN»]and [«E5J2JCG5|TAG=US-GAAP:FINITELIVEDINTANGIBLEASSETSAMORTIZATIONEXPENSE|LABEL=*|TIME=2011-01-01~2011-12-31|UNIT=USD|PRECISION=INF»$53,540«E5J2JCG5»].

«E3J4796L»]

[«E1J4780J|LEVEL=1|LABEL=NOTE 6 ACCRUED EXPENSES|LABEL=NOTE 6 ACCRUED EXPENSES|TAG=US-GAAP:ACCOUNTSPAYABLEANDACCRUEDLIABILITIESDISCLOSURETEXTBLOCK»

Note 6 Accrued expenses

Accounts payable and accrued expenses at June 30, 2012 and December 31, 2011 were [«E7J2JT79|TAG=US-GAAP:ACCOUNTSPAYABLEANDACCRUEDLIABILITIES|LABEL=*|TIME=2012-01-01~2012-06-30|UNIT=USD|PRECISION=INF»$622,123 «E7J2JT79»]and [«E7J6JYPS|TAG=US-GAAP:ACCOUNTSPAYABLEANDACCRUEDLIABILITIES|LABEL=*|TIME=2011-01-01~2011-12-31|UNIT=USD|PRECISION=INF»$523,615«E7J6JYPS»], respectively and included operating expenses.  At June 30, 2012, the accrued expenses consist mainly of salary, payroll liabilities and accrued interest expense totaling $263,926.

«E1J4780J»]

[«E1J07C6J|LEVEL=1|LABEL=NOTE 7 INCOME TAX|LABEL=NOTE 7 INCOME TAX|TAG=US-GAAP:INCOMETAXDISCLOSURETEXTBLOCK»

Note 7 Income Tax

The Company is subject to taxation in the U.S. and various state jurisdictions. As of December 31, 2011 the Company’s tax years for 2008, 2009 and 2010 are subject to examination by the tax authorities. With few exceptions, as of December 31, 2011, the Company is no longer subject to U.S. federal and state examinations by tax authorities for years before 2008.

The Company’s actual tax rate varies from the statutory rate (federal and state) due to utilization of full valuation allowances.  As of June 30, 2012, the Company notes that ASC 740-10 has had no material changes.

«E1J07C6J»]

[«E1J07XWZ|LEVEL=1|LABEL=NOTE 8 STOCKHOLDERS’ EQUITY|LABEL=NOTE 8 STOCKHOLDERS' EQUITY|TAG=US-GAAP:STOCKHOLDERSEQUITYNOTEDISCLOSURETEXTBLOCK»

Note 8 Stockholders’ equity

On December 31, 2011, there were [«E7J6HCZZ|TAG=US-GAAP:COMMONSTOCKSHARESOUTSTANDING|LABEL=*|TIME=2011-12-31|UNIT=SHARES|PRECISION=INF»46,159,016 «E7J6HCZZ»]shares of common stock issued and outstanding .There was no issuance of preferred stock during the first quarter, the common stock issues were:.

On February 1, 2012, [«E5J2HXRJ|TAG=US-GAAP:COMMONSTOCKSHARESISSUED|LABEL=*|TIME=2012-02-01|UNIT=SHARES|PRECISION=INF»396,000 «E5J2HXRJ»]shares of common stock issued to Donald and Katherine Hejmanowski were cancelled

On March 3, 2012, an investor executed a subscription agreement to purchase [«E5J6HY4U|TAG=US-GAAP:COMMONSTOCKSHARESISSUED|LABEL=*|TIME=2012-03-03|UNIT=SHARES|PRECISION=INF|FTNT=UNITS COMPRISED OF 1 SHARE AND 1 WARRANT TO PURCHASE 1

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VISION INDUSTRIES CORP.

Notes to Financial Statements

June 30, 2012

 (Unaudited)

SHARE.»860,000 «E5J6HY4U»]units of securities of the Company, with each unit consisting of one (1) share of common stock at $0.15 per share and one common stock purchase warrant to purchase one (1) share at $.20 per share.  

In May 2012 Asher Enterprise Inc., over a series of five transactions during the month converted $68,500 of debt and $2,740 of accrued interest into [«E7J2HSW0|TAG=US-GAAP:COMMONSTOCKSHARESISSUED|LABEL=*|TIME=2012-05-31|UNIT=SHARES|PRECISION=INF»1,699,923 «E7J2HSW0»]of common stock at an average conversion price of $0.04216.

Asher Enterprise, Inc. converted its $50,000 note and $2,000 of accrued interest into [«E7J2LCHS|TAG=US-GAAP:COMMONSTOCKSHARESISSUED|LABEL=*|TIME=2012-06-30|UNIT=SHARES|PRECISION=INF»1,254,818 «E7J2LCHS»]of common stock at an average conversion price of $0.041325. There were a series of four conversions against the $50,000 note in the month of June, 2012

On June 18, 2012, Juha Halttunen converted a $200,000 notes, plus accrued interest of $25,000 into [«E5J2LATL|TAG=US-GAAP:COMMONSTOCKSHARESISSUED|LABEL=*|TIME=2012-06-18|UNIT=SHARES|PRECISION=INF»6,000,000 «E5J2LATL»]of common stock at a conversion price of $0.0375

On June 18, 2012, Quality Investment Fund (QIF) converted its $500,000 note, plus accrued interest of $37,636 into [«E5J6LA82|TAG=US-GAAP:COMMONSTOCKSHARESISSUED|LABEL=*|TIME=2012-06-18|UNIT=SHARES|PRECISION=INF»10.752,732 «E5J6LA82»]shares of common stock at a conversion price of $0.05.

On June 25, 2012, Quality Investment Fund (QIF) converted its $600,000 note, plus accrued interest of $72,197.25 into [«E5J2LXSD|TAG=US-GAAP:COMMONSTOCKSHARESISSUED|LABEL=*|TIME=2012-06-25|UNIT=SHARES|PRECISION=INF»13,443,945 «E5J2LXSD»]shares on common stock at a conversion price of $0.05.

Accordingly, on June 30, 2012, there were [«E5J2LY79|TAG=US-GAAP:COMMONSTOCKSHARESOUTSTANDING|LABEL=*|TIME=2012-06-30|UNIT=SHARES|PRECISION=INF»80,022,702 «E5J2LY79»]shares of common stock issued and outstanding and [«E5J6LSWA|TAG=US-GAAP:PREFERREDSTOCKSHARESOUTSTANDING|LABEL=*|TIME=2012-06-30|UNIT=SHARES|PRECISION=INF»250,000 «E5J6LSWA»]shares of preferred stock issued and outstanding. »

«E1J07XWZ»]

[«E3J07WTP|LEVEL=1|LABEL=NOTE 9 FINANCING|LABEL=NOTE 9 FINANCING|TAG=US-GAAP:FINANCIALINSTRUMENTSDISCLOSURETEXTBLOCK»

Note 9 Financing

On January 31, 2012 the Company entered into a subscription agreement with VP Bank (Switzerland) for the right to purchase 860,000 shares of common stock, and a similar number of warrants to purchase common stock at $ 0.20 per share for a total consideration of $129,000.

On February 29, 2012, Vision entered into a Sale Leaseback Agreement with Total Transportation Services, Inc. (TTSI) of Rancho Dominguez, California.  In the Agreement, TTSI would be allowed to purchase two (2) prototype hybrid Class 8 trucks from Vision for $285,000, payable with interest at a rate of eight percent (8%) per annum in five (5) installments of principal and interest in the amount of $58,145. The base lease obligation is $285,000, plus a 15% interest payable in forty-eight (48) monthly installments of $7,932 starting on or about August 1, 2012. At the end of the lease period, Vision will have the option to buy-back the vehicles for a $5,700 fee, plus a return of sales tax paid by TTSI.

«E3J07WTP»]

[«E3J07Z6E|LEVEL=1|LABEL=NOTE 10 COMMITMENT AND CONTINGENCIES|LABEL=NOTE 10 COMMITMENT AND CONTINGENCIES|TAG=US-GAAP:COMMITMENTSANDCONTINGENCIESDISCLOSURETEXTBLOCK»

Note 10 Commitment and contingencies

The Company’s leases for office and R&D facilities expired in January 2012. Starting June, 2012 the Company entered into a sublease agreement with Enova Systems. for its corporate office at 1560 W. 190^th Street, Second floor, Torrance, CA 90501.  The sublease is on a month to month basis. Negotiations are in progress on future lease commitments.

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.

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VISION INDUSTRIES CORP.

Notes to Financial Statements

June 30, 2012

 (Unaudited)

On December 21, 2011, Vision and Hejmanowski entered into a settlement agreement, whereby both parties released each other from any past and future claims.

On January 17, 2012, Lawrence Erwin Weisdorn, in his capacity as Debtor in Possession for the Bankruptcy Estate of Lawrence Erwin Weisdorn, filed an adversary claim against the Company.  The Company denies any wrongdoing and will continue to enforce its rights to the fullest extent of the law.

On April 13, 2012, the Company received a Summons from former Director of Investors Relations, Russell Miller, alleging Breach of Contract, Wrongful Termination and other claims.  The Company will defend its position to the fullest extent of the law, including seeking damages from the plaintiff where appropriate.

On February 29, 2012, Vision entered into a Sale Leaseback Agreement with Total Transportation Services, Inc. (TTSI) of Rancho Dominguez, California (see Note 9.) The lease is payable in forty eight (48) monthly installments of Seven Thousand Nine hundred Thirty-two-dollars ($7,932) starting on or prior to August 1, 2012.

Minimum future lease payments obligation on the leased equipment mentioned above, as of June 30, 2012, is as follows:

[«23J5KESM|LEVEL=3|LABEL=SCHEDULE OF LEASE PAYMENTS ON LEASE EQUIPMENT|LABEL=SCHEDULE OF FUTURE MINIMUM LEASE PAYMENTS FOR CAPITAL LEASES|TAG=US-GAAP:SCHEDULEOFFUTUREMINIMUMLEASEPAYMENTSFORCAPITALLEASESTABLETEXTBLOCK»

Schedule of Lease Payments on Lease Equipment

[«E1J6YC9X|LABEL=YEAR|TAG=FIL:YEAR»Year«E1J6YC9X»]		[«E1J2TDFK|LABEL=LEASE PAYMENTS|TAG=FIL:LEASEPAYMENTS»Amount«E1J2TDFK»]
2012		$47,592
2013		95,184
2014		95,184
2015		95,184
2016		47,592

«23J5KESM»]

«E3J07Z6E»]

[«E1J46SLF|LEVEL=1|LABEL=NOTE 11 NOTES PAYABLE|LABEL=NOTES PAYABLE|TAG=FIL:NOTESPAYABLE1»

Note 11 Notes Payable

Table below describes all current debentures and note payables as of June 30, 2012 and December 31, 2011:

[«21J5KGL5|LEVEL=3|LABEL=SCHEDULE OF DEBENTURES AND NOTES PAYABLE|LABEL=SCHEDULE OF ACCOUNTS PAYABLE AND ACCRUED LIABILITIES|TAG=US-GAAP:SCHEDULEOFACCOUNTSPAYABLEANDACCRUEDLIABILITIESTABLETEXTBLOCK»

Schedule of Debentures and Notes Payable

			[«E1J2ZS2A|LABEL=REMAINING YEARS TO MATURITY|TAG=FIL:REMAININGYEARSTOMATURI TY»Remaining years to Maturity«E1J2ZS2A»]	[«E3J5RGZF|LABEL=INTEREST RATE|TAG=FIL:INTERESTRATE|TYPE=TEXTBLOCK|PERIOD=DURATION»Interest Rate«E3J5RGZF»]	[«E1J6YDN1|LABEL=OUTSTANDING PRINCIPAL|TAG=FIL:OUTSTANDINGPRINCIPAL»Outstanding principal«E1J6YDN1»]
		[«E1J6ZTZ3|LABEL=ISSUE DATE|TAG=FIL:ISSUEDATE»Issue Date«E1J6ZTZ3»]			[«E1J2YFER|»2012«E1J2YFER»]	[«E3J6Y94F|»2011«E3J6Y94F»]
[«E1J6XUG3|LABEL=SHORT-TERM DEBT, LENDER|ABSTRACT=US-GAAP:SHORTTERMDEBTLINEITEMS|TAG=US-GAAP:SHORTTERMDEBTLENDER»Current portion notes payable  «E1J6XUG3»]
	Asher Enterprise, Inc.	11/17/2011	0	8%	0	50,000
	Asher Enterprise, Inc.	11/12/2011	0	8%	0	68,500
	Asher Enterprise, Inc.	2/1/2012		8%	30,000
	Asher Enterprise, Inc.	6/30/2012		8%	32,500
	Asher Enterprise, Inc.	5/14/2012		8%	50,000
	Juha Halttunen	1/31/2011	0	9%	0	200,000
	Quality Investment Fund	11/18/2010	0	12%	0	600,000
	QIF Malta 1 Ltd	12/28/2010	0	5%	0	500,000
Total current portion notes payable					112,500	1,418,500

«21J5KGL5»]

On February 1, 2012 the Company entered into a securities purchase agreement with Asher Enterprise, Inc. in connection with the issuance of an 8% convertible note in the aggregate principal amount of [«E5J6XSNN|TAG=US-GAAP:NOTESANDLOANSPAYABLE|LABEL=*|TIME=2012-02-01|UNIT=USD|PRECISION=INF»$32,500«E5J6XSNN»], convertible into shares of common stock.

On May 14, 2012 the Company entered into a securities purchase agreement with Asher Enterprise, Inc. in connection with the issuance of an 8% convertible note in the aggregate principal amount of [«E7J6XV42|TAG=US-GAAP:NOTESANDLOANSPAYABLE|LABEL=*|TIME=2012-05-14|UNIT=USD|PRECISION=INF»$50,000«E7J6XV42»], convertible into shares of common stock.

On June 30, 2012 the Company entered into a securities purchase agreement with Asher Enterprise, Inc.  in connection with the issuance of an 8% convertible note in the aggregate principal amount of [«E7J2XU6P|TAG=US-GAAP:NOTESANDLOANSPAYABLE|LABEL=*|TIME=2012-06-30|UNIT=USD|PRECISION=INF»$30,000«E7J2XU6P»], convertible into shares of common stock

In May 2012 Asher Enterprise Inc., over a series of five transactions during the month converted $68,500 of debt and $2,740 of accrued interest into 1,699,923 of common stock at an average conversion price of $0.04216.

Asher Enterprise, Inc. converted its $50,000 note and $2,000 of accrued interest into 1,254,818 of common stock at an average conversion price of $0.041325.

On June 18, 2012, Juha Halttunen converted a $200,000 notes, plus accrued interest of $25,000 into 6,000,000 of common stock at a conversion price of $0.0375

On June 18, 2012, Quality Investment Fund (QIF) converted its $500,000 note, plus accrued interest of $37,636 into 10,752,732 shares of common stock at a conversion price of $0.05.

On June 25, 2012, Quality Investment Fund (QIF) converted its $600,000 note, plus accrued interest of $72,197.25 into 13,443,945 shares on common stock at a conversion price of $0.05

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VISION INDUSTRIES CORP.

Notes to Financial Statements

June 30, 2012

 (Unaudited)

«E1J46SLF»]

[«E1J0GTWZ|LEVEL=1|LABEL=NOTE 12 PROTOTYPE RESEARCH AND DEVELOPMENT COSTS|TAG=FIL:PROTOTYPE»

Note 12 Prototype Research and development costs

The Company is currently designing and developing several Class8 and terminal tractor prototypes for usage in and around the port facilities.  Some of them will have alternative uses as demonstration models, anticipated to be used at trade shows and marketing events.  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.

«E1J0GTWZ»]

[«E3J01A6J|LEVEL=1|LABEL=NOTE 13 GOING CONCERN ISSUE|LABEL=LIQUIDITY DISCLOSURE|TAG=US-GAAP:LIQUIDITYDISCLOSURETEXTBLOCK»

Note 13 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 August 1, 2012, the Company entered into an engagement agreement with investment bankers Viant Green Capital LLC and Viant Capital LLC to serve as its strategic and financial advisor. Viant was brought on to assist the Company in developing a strategy to effectuate a financing, licensing and/or business combination transaction, including identifying prospective transaction participants and investor prospects.

The Company has announced that the Company and Cargotec USA have agreed to cooperate to complete a zero-emission terminal tractor demonstration project for the Technology Advancement Program (TAP). The TAP is a clean-air initiative sponsored by the twin Ports of Los Angeles and Long Beach. The project calls for demonstrating the efficacy of deploying zero-emission hydrogen fuel cell-electric hybrid terminal tractors to move containerized cargo within the Port facilities

As of June 30, 2012, the Company has retained earnings (accumulated deficit) of [«E3J5TVAV|TAG=US-GAAP:RETAINEDEARNINGSACCUMULATEDDEFICIT|LABEL=*|TIME=2012-06-30|UNIT=USD|PRECISION=INF»$(17,045,852)«E3J5TVAV»].  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.

«E3J01A6J»]

[«E3J49EN0|LEVEL=1|LABEL=NOTE 14 SUBSEQUENT EVENTS|TAG=US-GAAP:SUBSEQUENTEVENTSTEXTBLOCK»

Note 14 Subsequent events

On July 31, 2012, the Board of Directors appointed current Executive Vice President of Operations ("EVP"), Jerome Torresyap, to the position of President, effective August 1, 2012. Director Martin Schuermann nominated Mr. Torresyap to replace him as President due to Mr. Torresyap's outstanding performance as EVP since his appointment to the office on June 3, 2011 and Mr. Torresyap accepted the nomination. Director Schuermann vacated the office of Presidency as of close of business July 31, 2012, but retained his positions as Chief Executive Officer, Secretary, Treasurer, and Director. According to the terms of his new employment agreement, Mr. Torresyap, age 44, shall serve as President until August 1, 2014, unless, per the By Laws, he is removed by the Board at the regular Board of Directors meeting following the Annual Shareholders meeting, which will be held this year on September 28, 2012 in Torrance, California.

On August 3, 2012, Lawrence Weisdorn, as Debtor in Possession, filed a Motion in the United States Bankruptcy Court, Central District of California, San Fernando Valley Division, Case No. 10-BK-24366-GM, for an order approving a settlement agreement with the Company, which was approved and executed by all parties involved on July 31, 2012.

On August 7, 2012 Asher Enterprise, Inc. noticed the Company of its intention to convert $15,000 principal amount of its note into 602,410 shares of common stock.

On August10, 2012 Asher Enterprise, Inc., has noticed the Company of its intention to convert $17,500 principal amount of its outstanding note, together with $1,300 of accrued and unpaid interest into 755,020 shares of common stock.

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VISION INDUSTRIES CORP.

Notes to Financial Statements

June 30, 2012

 (Unaudited)

Management has evaluated events subsequent to the balance sheet date for the six months ended June 30, 2012, through August 14, 2012, and determined that there is no 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.

«E3J49EN0»]

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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.

Employees

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As of June 30, 2012, there were five (5) full time employees and two (2) consultants at Vision Industries Corp.  This includes the officers who run 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 June 30, 2012.  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

PERIOD	REVENUE	TOTAL EXPENSES	NET INCOME (LOSS)
June 30, 2012	$10,500	$2,732,143	($2,721,643)
June 30, 2011	$469,907	$3,761,932	($3,292,025)
December 31, 2011	$764,157	$7,208,341	($6,444,184)
December 31, 2010	$24,962	$4,604,711	($4,579,749)

Liquidity and Capital Resources

As of June 30, 2012, we had cash and cash equivalents of $35,692.  

On February 29, 2012, Vision entered into a Sale Leaseback Agreement with Total Transportation Services, Inc. (TTSI) of Rancho Dominguez, California.  In the Agreement, TTSI would be allowed to purchase two (2) prototype hybrid Class 8 trucks from Vision for $285,000, payable in five installments of $58,145. Vision will then enter into a 48-month lease agreement for the right to use the trucks.  The lease portion is valued at $285,000, plus a 15% interest rate. At the end of the lease period, Vision will have the option to buy-back the vehicles for a $5,700 fee, plus a return of sales tax paid by TTSI.

On January 31, 2012 the Company entered into a subscription agreement with VP Bank (Switzerland) for the right to purchase 860,000 shares of common stock, and a similar number of warrants to purchase common stock at $ 0.20 per share for a total consideration of $129,000. The stock was purchased on March 3, 2012.

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Results of Operations for the three months ended June 30, 2012 and 2011

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 $10,500 in revenues for the six months ended June 30, 2012 which is a 97.77% decrease compared to $469,907 of revenues for the six months ended June 30, 2011.  These revenues over the first six months of 2012 represent our consulting arrangements.

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 decreased by $764,057 to $2,674,632, for the six months ended June 30, 2012 compared to 3,438,689 for June 30, 2011

Income (Loss) from Operations. For the six month periods ended June 30, 2012 and June 30, 2011, we incurred losses before other income and expenses of $2,664,132 and $3,170,634 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 decreased from $3,292,025 for the six months ended June 30, 2011 to a net loss of $2,721,643 for the six months ended June 30, 2012.

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

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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 4.

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 June 30, 2012. 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, 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 June 30, 2012.  Management concluded that there has been no change in our internal control over financial reporting during the period ended June 30, 2012, 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.

On December 21, 2011, Vision and Donald Hejmanowski entered into a settlement agreement, whereby both parties released each other from any past and future claims.

On January 17, 2012, Lawrence Erwin Weisdorn, in his capacity as Debtor in Possession for the Bankruptcy Estate of Lawrence Erwin Weisdorn, filed an adversary claim against Vision.  Vision denies any wrongdoing and will continue to enforce its rights to the fullest extent of the law.

On April 13, 2012, Vision received a Summons and Complaint from former Director of Investors Relations, Russell Miller, alleging Breach of Contract, Wrongful Termination and other claims.  Vision will defend its position to the fullest extent of the law, including seeking damages from the plaintiff where appropriate.

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 six months ended June 30, 2012.

(a)

On March 3, 2012, the Company issued 860,000 shares of stock to VP Bank (Switzerland) pursuant to a subscription to purchase 860,000 units ($0.15 per Unit; 1 Unit equaled 1 share of stock and 1 warrant to purchase 1 share of common stock at $0.20 per share) for $129,000 USD. 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.  

(b)

On or about April 27, 2012, Greenstreet Consulting Services, LLC, exercised a warrant to purchase 250,000 shares of stock. The Company issued 250,000 shares of restricted common stock subject to the restrictions of SEC Rule 144.    

(c)

On June 18, 2012, pursuant to a Note Conversion Agreement, the Company converted Juha Halttunen’s 9% Promissory Note into 6,000,000 shares of common stock.  The total amount due on the Note of $225,000 was converted at $0.0375 USD per share.  

(d)

On June 22, 2012, pursuant to a Note Conversion Agreement, the Company converted QIF Malta 1 Ltd. 5% Promissory Note into 10,750,000 shares of common stock.  The total amount due on the Note of $537,500.00 was converted at $0.05USD per share.  

(e)

On June 22, 2012, pursuant to the terms of the 12% Convertible Promissory Note Due November 15, 2012, the lender, Novium Opportunity Umbrella SICAV PLC-Quality Investment Fund converted the $672,197.25 due on the loan into 13,443,945 shares of common stock.   Due to recent note conversions at conversion prices less than the $0.10 per share Conversion Price in the 12 % Convertible Note (e.g., Halttunen’s note converted at a conversion price of $0.0375 per share on June 18, 2012; QIF Malta 1 note converted at a conversion price of $0.05 per share on June 21, 2012), the Company and the Novium agreed to change the Conversion Price under the Note to $0.05 per share, without any further consideration.

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4.

MINE SAFETY DISCLOSURES

Not Applicable

ITEM 5

OTHER INFORMATION

None

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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.

	VISION INDUSTRIES CORP.
Dated August 14, 2012	/s/ JEROME TORRESYAP
	Jerome Torresyap
	President
Dated August 14, 2012	/s/ MARTIN SCHUERMANN
	Martin Schuermann
	Chief Executive Officer, Secretary, Treasurer and Director
Dated:  August 14, 2012	/s/ DAVID MORENO
	David Moreno
	Acting Chief Financial Officer

  

 

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