SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C.  20549





FORM
10-Q





x
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF


THE
SECURITIES EXCHANGE ACT OF 1934





For
Quarterly Period Ended March 31, 2010





Commission
File Number 333-143845





GetFugu,
Inc.


(Exact
name of registrant issuer as specified in its charter)





Nevada
                
                20-8658254(State
      or other jurisdiction of incorporation or organization)
                
                (I.R.S.
      Employer Identification
No.)





8560
      West Sunset Boulevard, 7th Floor, West Hollywood, California
      90069(Address
      of principal executive offices, including zip
  code)





Registrant’s
      phone number, including area code    424
354-4800





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 
x
    NO   ̈


Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or such shorter period that the
registrant was required to submit and post such files).


Yes  ̈ No x





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act. (Check one):




Large
      Accelerated Filer  ̈
                  Accelerated
      Filer  ̈
                  Non-accelerated
      Filer  ̈
                  Smaller
      reporting company x




Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes  ̈ No x




Indicate
the number of shares outstanding of each of the issuer’s classes of common
stock, as of the latest practicable date.





Class
                
                Outstanding
      at May 17, 2010Common
      Stock, $.001 par value
                
                473,927,956












GetFugu,
Inc.


(A
Development Stage Company)


(Formally
Known as Madero, Inc.)





INDEX





Table
      of ContentsPART
      I.
                  FINANCIAL
      INFORMATION
                  3ITEM
      1.
                  FINANCIAL
      STATEMENTS:
                  3Condensed
      Consolidated Balance Sheets — March 31, 2010 (Unaudited) and December 31,
      2009
                  3Condensed
      Consolidated Statements of Operations (Unaudited) — Three Months
      ended March 31, 2010 and 2009 and Inception to March 31,
    2010
                  4Condensed
      Consolidated Statements of Shareholders’ Deficiency (Unaudited)
      — March 31, 2010
                  5Condensed
      Statements of Cash Flows (Unaudited) — Three Months ended March 31, 2010
      and 2009 and Inception to March 31, 2010
                  6Notes
      to Condensed Consolidated Financial Statements (Unaudited)
                  8ITEM
      2.
                  MANAGEMENT'S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS
                  16ITEM
      3.
                  QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
                  21ITEM
      4T.
                  CONTROLS
      AND PROCEDURES
                  21PART
      II.
                  OTHER
      INFORMATION
                  21ITEM 1.
                  LEGAL
      PROCEEDINGS
                  21ITEM 1A.
                  RISK
      FACTORS
                  21ITEM 2.
                  UNREGISTERED
      SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
                  21ITEM 3.
                  DEFAULTS
      UPON SENIOR SECURITIES
                  21ITEM 4.
                  SUBMISSION
      OF MATTERS TO A VOTE OF SECURITY HOLDERS
                  21ITEM
      5.
                  OTHER
      INFORMATION
                  22ITEM
      6.
                  EXHIBITS
                  22SIGNATURES
                  23




2





PART I -
FINANCIAL INFORMATION





ITEM
1. Financial Statements





GetFugu,
Inc. and Subsidiaries


(A
Development Stage Company)


(Formally
Known as Madero, Inc.)


Condensed
Consolidated Balance Sheets





March
      31,
                                              2010
                                            
                                            
                                            December
      31, 2009ASSETS
                                            
                                            (unaudited)Current
      assetsCash
                                            
                                            $
                                            15,890
                                            
                                            
                                            $
                                            500Advances
      to employees
                                            
                                            
                                            17,516
                                            
                                            
                                            
                                            30,000Prepaid
      expenses and other current assets
                                            
                                            
                                            47,012
                                            
                                            
                                            
                                            61,769Total
      current assets
                                            
                                            
                                            80,418
                                            
                                            
                                            
                                            92,269Property
      and equipment, net
                                            
                                            
                                            236,803
                                            
                                            
                                            
                                            278,287Total
      assets
                                            
                                            $
                                            317,221
                                            
                                            
                                            $
                                            370,556LIABILITIES
      AND SHAREHOLDERS' DEFICIENCYCurrent
      liabilitiesAccounts
      payable
                                            
                                            $
                                            2,166,804
                                            
                                            
                                            $
                                            1,429,968Accrued
      payroll tax liabilities
                                            
                                            
                                            2,047,010
                                            
                                            
                                            
                                            932,267Accrued
      expenses
                                            
                                            
                                            849,947
                                            
                                            
                                            
                                            759,590Advances
      from related parties
                                            
                                            
                                            1,052,131
                                            
                                            
                                            
                                            865,542Accrued
      stock issuance for compensation
                                            
                                            
                                            583,333
                                            
                                            
                                            
                                            458,333Accrued
      stock issuance for in-process research and development
                                            
                                            
                                            2,000,000
                                            
                                            
                                            
                                            2,000,000Derivative
      liability
                                            
                                            
                                            552,332
                                            
                                            
                                            
                                            229,635Short
      term notes payable
                                            
                                            
                                            450,000
                                            
                                            
                                            
                                            300,000Short
      term convertible notes payable, net of debt discount of $200,000 as of
      March 31, 2010
                                            
                                            
                                            25,000
                                            
                                            
                                            
                                            -Total
      current liabilities
                                            
                                            
                                            9,726,557
                                            
                                            
                                            
                                            6,975,335Shareholders'
      deficiencyCommon
      stock, 500,000,000 shares authorized; $0.001 par value;439,927,968
      and 191,523,525 shares issued and outstanding as of March 31, 2010 and
      December 31, 2009, respectively
                                            
                                            
                                            439,928
                                            
                                            
                                            
                                            191,524Additional
      paid-in capital
                                            
                                            
                                            50,951,567
                                            
                                            
                                            
                                            33,947,518Shares
      issuable, net
                                            
                                            
                                            1,300,000
                                            
                                            
                                            
                                            12,109,000Deficit
      accumulated during development stage
                                            
                                            
                                            (62,100,831
                                            )
                                            
                                            
                                            (52,852,821
                                            )Total
      shareholders’ deficiency
                                            
                                            
                                            (9,409,336
                                            )
                                            
                                            
                                            (6,604,779)Total
      liabilities and shareholders’ deficiency
                                            
                                            $
                                            317,221
                                            
                                            
                                            $
                                            370,556




The
accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.





3





GetFugu,
Inc. and Subsidiaries


(A
Development Stage Company)


(Formally
Known as Madero, Inc.)


Condensed
Consolidated Statements of Operations


(Unaudited)




Inception(March 14, 2007)Three
      Months Ended March 31,
                                              
                                              
                                              through2010
                                              
                                              
                                              2009
                                              
                                              
                                              March
      31,2010Revenue
                                              
                                              $
                                              -
                                              
                                              
                                              $
                                              -
                                              
                                              
                                              $
                                              -Operating
      expensesCompensation
      and related benefits
                                              
                                              
                                              3,027,549
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              12,032,570Legal
      and professional fees
                                              
                                              
                                              3,500
                                              
                                              
                                              
                                              236,850
                                              
                                              
                                              
                                              1,138,701Marketing
                                              
                                              
                                              79,158
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              1,076,561Occupancy
      related costs
                                              
                                              
                                              70,658
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              261,761Research
      and development
                                              
                                              
                                              1,352,512
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              5,713,456Travel
      and entertainment
                                              
                                              
                                              44,849
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              710,983Consulting
      and outside services
                                              
                                              
                                              5,048,478
                                              
                                              
                                              
                                              7,886,250
                                              
                                              
                                              
                                              41,870,764Office
      and other
                                              
                                              
                                              116,232
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              607,012Depreciation
                                              
                                              
                                              41,484
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              58,695Total operating expenses
                                              
                                              
                                              9,784,420
                                              
                                              
                                              
                                              8,123,100
                                              
                                              
                                              
                                              63,470,503Other
      income (expense)Interest
      expense
                                              
                                              
                                              (63,479
                                              )
                                              
                                              
                                              -
                                              
                                              
                                              
                                              (63,479
                                              )Gain
      on derivative financial instrument
                                              
                                              
                                              599,889
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              1,416,126Forgiveness
      of debt
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              17,025Net
      Loss
                                              
                                              $
                                              (9,248,010
                                              )
                                              
                                              $
                                              (8,123,100
                                              )
                                              
                                              $
                                              (62,100,831
                                              )Loss
      per share:Basic
      and dilutive loss per share
                                              
                                              $
                                              (0.04
                                              )
                                              
                                              $
                                              (0.08)Basic
      and diluted weighted average shares outstanding (1)
                                              
                                              
                                              247,193,696
                                              
                                              
                                              
                                              106,430,220





(1)
            Weighted
      average shares outstanding for the three months ended March 31, 2010
      includes the underlying shares exercisable with respect to the
      issuance of 1,500,000 warrants exercisable at $0.01 per
      share.  In accordance with Accounting Standards
      Codification (“ASC”) 260 "Earnings Per Share", the Company has given
      effect to the issuance of these warrants in computing basic net loss
      per share.





The
accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.





4





GetFugu,
Inc. and Subsidiaries


(A
Development Stage Company)


(Formally
Known as Madero, Inc.)


Condensed
Consolidated Statements of Shareholders' Deficiency


From
The Three Months Ended March 31, 2010


(Unaudited)





DeficitAccumulatedAdditional
                        
                        
                        
                        
                        
                        duringCommon
      Stock
                        
                        
                        Paid
      in
                        
                        
                        Shares
                        
                        
                        Development
                        
                        
                        Shareholders'Shares
                        
                        
                        Amount
                        
                        
                        Capital
                        
                        
                        Issuable,
      net
                        
                        
                        Stage
                        
                        
                        DeficiencyBalance
      as of December 31, 2009 (Audited)
                        
                        
                        191,523,525
                        
                        
                        $
                        191,524
                        
                        
                        $
                        33,947,518
                        
                        
                        $
                        12,109,000
                        
                        
                        $
                        (52,852,821
                        )
                        
                        $
                        (6,604,779
                        )Amortization
      of employee stock option compensationaward
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        240,538
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        240,538Amortization
      of director stock option compensationaward
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        546,070
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        546,070Amortization
      of Director stock compensation award
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        195,000
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        195,000Amortization
      of employee stock compensation award
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        281,250
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        281,250Amortization
      of consulting stock compensation award
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        1,589,763
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        1,589,763Issuance
      of share issued previously accrued(December
      29, 2009 at $0.15)
                        
                        
                        5,333,333
                        
                        
                        
                        5,333
                        
                        
                        
                        644,667
                        
                        
                        
                        (650,000
                        )
                        
                        
                        -
                        
                        
                        
                        -Issuance
      of shares issued previously accrued(December
      18, 2009 at $0.18)
                        
                        
                        50,000
                        
                        
                        
                        50
                        
                        
                        
                        8,950
                        
                        
                        
                        (9,000)
                        
                        
                        
                        -
                        
                        
                        
                        -Issuance
      of shares issued previously accrued(December
      8, 2009 at $0.225)
                        
                        
                        1,111,110
                        
                        
                        
                        1,111
                        
                        
                        
                        248,889
                        
                        
                        
                        (250,000
                        )
                        
                        
                        -
                        
                        
                        
                        -Issuance
      of shares previously accrued for paymentof
      consulting services (October 1, 2009 at
      $0.62)
                        
                        
                        10,000,000
                        
                        
                        
                        10,000
                        
                        
                        
                        6,190,000
                        
                        
                        
                        (6,200,000
                        )
                        
                        
                        -
                        
                        
                        
                        -Issuance
      of shares issued previously accrued(September
      18, 2009 at $0.50)
                        
                        
                        3,000,000
                        
                        
                        
                        3,000
                        
                        
                        
                        1,297,000
                        
                        
                        
                        (1,300,000
                        )
                        
                        
                        -
                        
                        
                        
                        -Issuance
      of shares previously accrued for payment ofconsulting
      services (November 5, 2009 at
      $0.12)
                        
                        
                        20,000,000
                        
                        
                        
                        20,000
                        
                        
                        
                        2,380,000
                        
                        
                        
                        (2,400,000
                        )
                        
                        
                        -
                        
                        
                        
                        -Shares
      issued for services related to an investment inajoint
      venture (January 14, 2010 at $0.16)
                        
                        
                        3,000,000
                        
                        
                        
                        3,000
                        
                        
                        
                        477,000
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        480,000Shares
      issued for asset acquisition, in-processresearchand
      development  (January 15, 2010 at
      $0.16)
                        
                        
                        7,580,000
                        
                        
                        
                        7,580
                        
                        
                        
                        1,205,220
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        1,212,800Options
      granted to consultants for services(February
      15, 2010, 20,000,000 at
      $0.13)
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        659,676
                        
                        
                        
                        -
                        
                        
                        
                        
                        -
                        
                        
                        659,676Shares
      issued for asset acquisition, in-processresearchand
      development (March 2009 at
      $0.04)*
                        
                        
                        200,000,000
                        
                        
                        
                        200,000
                        
                        
                        
                        (200,000
                        )
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -Issuance
      of stock resulting from modification ofemployee
      stock option award (March 11, 2010 at $0.08))
                        
                        
                        10,000,000
                        
                        
                        
                        10,000
                        
                        
                        
                        1,844,742
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        1,854,742Issuance
      of stock to employee for services(March
      11, 2010 at $0.08)
                        
                        
                        1,000,000
                        
                        
                        
                        1,000
                        
                        
                        
                        79,000
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        80,000Issuance
      of stock for consulting services(March
      17, 2010 at $0.06)
                        
                        
                        100,000
                        
                        
                        
                        100
                        
                        
                        
                        5,900
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        6,000Issuance
      of stock to employee for services(March
      9, 2010 at $0.09)
                        
                        
                        180,000
                        
                        
                        
                        180
                        
                        
                        
                        16,020
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        16,200Return
      and retirement of shares previously issued
                        
                        
                        (10,000,000
                        )
                        
                        
                        (10,000
                        )
                        
                        
                        10,000
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        --Return
      and retirement of shares previously issued
                        
                        
                        (3,000,000
                        )
                        
                        
                        (3,000
                        )
                        
                        
                        3,000
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        -Issuance
      of stock to employee for services(March
      12, 2010 at $0.08)
                        
                        
                        50,000
                        
                        
                        
                        50
                        
                        
                        
                        3,950
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        4,000Reclassification
      of fully vested warrants toderivative
      liability
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        (722,586)
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        (722,586
                        )Net
      Loss
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        (9,248,010
                        )
                        
                        
                        (9,248,010
                        )Balance
      as of March 31, 2010 (Unaudited)
                        
                        
                        439,927,968
                        
                        
                        $
                        439,928
                        
                        
                        $
                        50,951,567
                        
                        
                        $
                        1,300,000
                        
                        
                        
                        (62,100,831)
                        
                        
                        
                        (9,409,336
                        )





*
            In
      consideration for the transfer of in-process research and development
      patents from Mobile Search Technologies, Inc. and Cellular Software
      Corporation.  Oscar Holdings, LLC is a shareholder of these
      entities and is beneficially owned by the President of the Company, Carl
      Freer. The Company recorded a deemed dividend of $8,000,000. See Note
      4





The
accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.


5







GetFugu,
Inc. and Subsidiaries


(A
Development Stage Company)


(Formally
Known as Madero, Inc.)


Consolidated
Statements of Cash Flows


(Unaudited)




Three
      Months
                                                          Ended
                                                          March
      31, 2010
                                                        
                                                        
                                                        Three
      Months Ended
                                                          March
      31, 2009
                                                        
                                                        
                                                        From
      Inception
                                                          (March
      14, 2007)
                                                          through
                                                          March 31, 2010Cash
      flows from operating activities:Net
      loss
                                                        
                                                        $
                                                        (9,248,010
                                                        )
                                                        
                                                        $
                                                        (8,123,100
                                                        )
                                                        
                                                        $
                                                        (62,100,831
                                                        )Adjustments
      to reconcile net loss to net cash used in operating
      activities:Stock-based
      compensation expense
                                                        
                                                        
                                                        5,953,239
                                                        
                                                        
                                                        
                                                        7,886,250
                                                        
                                                        
                                                        
                                                        48,043,028Accrued
      stock based compensation for future issuance of equity instruments for
      services
                                                        
                                                        
                                                        125,000
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        583,333Acquisition
      of in-process research and development
                                                        
                                                        
                                                        1,212,800
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        3,212,800Gain
      on derivative liability
                                                        
                                                        
                                                        (599,889
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        (1,416,126
                                                        )Depreciation
                                                        
                                                        
                                                        41,484
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        58,696Changes
      in current assets and liabilities:Employees
      advances
                                                        
                                                        
                                                        12,484
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        (17,516
                                                        )Prepaid
      expenses and other current assets
                                                        
                                                        
                                                        14,757
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        (47,012
                                                        )Accounts
      payable
                                                        
                                                        
                                                        736,836
                                                        
                                                        
                                                        
                                                        131,850
                                                        
                                                        
                                                        
                                                        2,776,804Accrued
      payroll tax liabilities
                                                        
                                                        
                                                        1,1144,743
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        1,437,010Accrued
      expenses
                                                        
                                                        
                                                        90,357
                                                        
                                                        
                                                        
                                                        105,000
                                                        
                                                        
                                                        
                                                        1,664,947Net
      cash used in operating activities
                                                        
                                                        
                                                        (546,199
                                                        )
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        (5,804,867
                                                        )Cash
      flows used in investing activities:Purchase
      of property and equipment
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        (295,499
                                                        )Cash
      flows from financing activitiesProceeds
      from short term notes
                                                        
                                                        
                                                        150,000
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        550,000Repayment
      of short term notes
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        (100,000
                                                        )Proceeds
      from short term convertible notes
                                                        
                                                        
                                                        225,000
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        225,000Advances
      from related parties
                                                        
                                                        
                                                        196,589
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        1,846,938Repayment
      of advances from related parties
                                                        
                                                        
                                                        (10,000
                                                        )
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        (794,807
                                                        )Proceeds
      received from shares issuable, net
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        2,300,000Proceeds
      received from sale of common stock, net
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        52,500
                                                        
                                                        
                                                        
                                                        2,042,500Capital
      contribution from related parties
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        46,625Net
      cash provided by financing activities
                                                        
                                                        
                                                        561,589
                                                        
                                                        
                                                        
                                                        52,500
                                                        
                                                        
                                                        
                                                        6,116,256Increase in
      cash
                                                        
                                                        
                                                        15,390
                                                        
                                                        
                                                        
                                                        52,500
                                                        
                                                        
                                                        
                                                        15,890Cash  -
      beginning balance
                                                        
                                                        
                                                        500
                                                        
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -Cash  -
      ending balance
                                                        
                                                        $
                                                        15,890
                                                        
                                                        
                                                        $
                                                        52,500
                                                        
                                                        
                                                        $
                                                        15,890




The
accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.





6





GetFugu,
Inc. and Subsidiaries


(A
Development Stage Company)


(Formally
Known as Madero, Inc.)


Condensed
Statements of Cash Flows


(Unaudited)





Three
      Months Ended
                  March 31, 2010
                
                
                Three
      Months Ended
                  March 31, 2010
                
                
                From
      Inception
                  (March
      14, 2007)
                  through
                  March 31, 2010Non-Cash
      Investing and Financing Activities:Reclassification
      of equity instruments to derivative liabilities
                
                $
                627,234
                
                
                $
                -
                
                
                $
                627,234Settlement
      of accrued stock compensation for no consideration
                
                $
                -
                
                
                $
                -
                
                
                $
                815,000





The
accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.





7





GETFUGU,
INC. AND SUBSIDIARIES


(Formally
Known as Madero, Inc.)


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(A
Development Stage Company)


(Unaudited)





NOTE
1 – DESCRIPTION OF BUSINESS


GetFugu,
Inc, (“We”, “Our”, “GetFugu,” or “Company”), is developing next generation
mobile search tools. The Company’s technology is designed to play on the
strengths of mobile handheld devices (mobile phones) and assist consumers in
retrieving content more expediently. Consumers will be able to download GetFugu
application tools to their mobile phone device.  The GetFugu
applications will allow consumers to retrieve content and eliminate the need to
type website addresses or search terms into the device’s Internet
browser.





The
Company currently has four products under development.





1.
            See It (ARL): “Vision
      recognition” This GetFugu application recognizes logos and products
      through any mobile phone camera. Consumers simply point their phone at a
      logo and retrieve content from the brand owner.2.
            Say It (VRL): “Voice
      recognition” The consumer can simply speak into the phone to retrieve
      content. In addition to brand names, the consumer can say generic keywords
      such as “best pizza” or “ATM”.3.
            Find It (GRL): “Location
      recognition” For local content, GetFugu is designed to work with the
      Global Positioning Systems (“GPS”) in mobile phones. The application will
      return content, based on the proximity to the user. A keyword of “pizza”
      will return the closest pizza parlors.  Local businesses can pay
      for voice-activated key words to position themselves at the top of the
      search list within a geographic area.4.
            Get it (Hot-Spotting):
      GetFugu provides advertisers with a way to monetize their marketing
      efforts through a mobile ecommerce tool called
      Hot-Spotting.  Hot-Spotting enables the consumer to purchase or
      retrieve information on any item featured in a video simply by touching
      products as displayed on the
screen.





NOTE
2 - BASIS OF PRESENTATION AND GOING CONCERN, LIQUIDITY AND FINANCIAL
CONDITION





Basis
of Presentation


The
accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with accounting principles
generally accepted in the United States of America (“GAAP”) and to the rules and
regulations of the Securities and Exchange Commission (“SEC”)for interim
financial information. Accordingly, these interim financial statements do not
include all of the information and footnotes required for annual financial
statements. In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary to make the financial statements not
misleading have been included.




The
operating results for the three months ended March 31, 2010, are not necessarily
indicative of the results that may be expected for the year ending December 31,
2010. These interim financial statements should be read in conjunction with the
audited financial statements and footnotes thereto for the year ended December
31 2009, included in the Company's Annual Report on Form 10-K for the year ended
December 31, 2009, filed with the SEC on April 16, 2010.





The
accompanying condensed consolidated financial statements have been prepared in
accordance with Accounting Standards Codification (“ASC”) 915, “Development
Stage Entities.” The Company's condensed consolidated statements of operations
and cash flows from inception (March 14, 2007 through March 31, 2010) represent
the financial information cumulative from inception as required by ASC
915.





Going
Concern, Liquidity and Financial Condition


The
Company incurred a net loss of approximately $9.3 million and $8.1 million for
the three months ended March 31, 2010 and 2009, respectively. As of
March 31, 2010, the Company’s accumulated deficit from inception amounted
to approximately $62.1 million and the Company’s working capital deficit
amounted to approximately $9.7 million.  During the three months ended
March 31, 2010, net cash used in operating activities amounted to approximately
$546,000. During the three months ended March 31, 2010, cash provided by
financing activities amounted to $562,000. As of March 31, 2010, the Company’s
cash position was $15,890. Subsequent to March 31, 2010, the Company raised
additional operating capital of approximately $100,000, by entering into
short-term debt financing arrangements. (See Note 11)





The
Company needs to raise additional capital from external sources in order to
sustain its operations while continuing the longer term efforts contemplated
under its business plan. The Company expects to continue incurring losses for
the foreseeable future and must raise additional capital to pursue its product
development initiatives, to penetrate markets for the sale of its products and
to continue as a going concern. The Company cannot provide any assurance that it
will raise additional capital. If the Company is unable to secure additional
capital, it may be required to curtail its research and development initiatives,
modify its existing business plan and take additional measures to reduce costs
in order to conserve its cash in amounts sufficient to sustain operations and
meet its obligations. These measures could cause significant delays in the
Company’s efforts to commercialize its products, which is critical to the
realization of its business plan and the future operations of the Company. These
matters raise substantial doubt about the Company’s ability to continue as a
going concern.   The accompanying condensed consolidated financial
statements do not include any adjustments that may be necessary should the
Company be unable to continue as a going concern.




8





NOTE
3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





Use
of Estimates


The
preparation of financial statements in conformity with GAAP requires management
to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the date of
the consolidated financial statements and the reported amounts of revenues and
expenses during the reporting period.





Management
bases its estimates on historical experience and on various assumptions that are
believed to be reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying value of assets and liabilities
that are not readily apparent from other sources.  The most
significant estimates, among other things, are used in accounting for allowances
for deferred income taxes, expected realizable values for long-lived assets
(primarily property and equipment and intangibles), and contingencies, as well
as the recording, presentation and valuation of its common stock, related
warrants, option issuances and derivative liabilities.  Estimates and
assumptions are periodically reviewed and the effects of any material revisions
are reflected in the consolidated financial statements in the period that they
are determined to be necessary.  Actual results could differ from
those estimates and assumptions.





Principle
of Consolidation


The
condensed consolidated financial statements of GetFugu, Inc. include accounts of
the Company and its wholly-owned subsidiaries.  Intercompany
transactions and balances are eliminated in consolidation.





Stock-Based
Compensation


The
Company reports stock-based compensation under ASC 718 “Compensation – Stock
Compensation”.  ASC 718 requires all share-based payments to
employees, including grants of employee stock options and warrants to
non-employee directors and consultants to be recognized in the consolidated
financial statements based on their fair values over the requisite service
periods.





The
Company accounts for stock option and warrant grants issued to non-employees for
goods and services using the guidance of ASC 718 and ASC 505 “Accounting for
Equity Instruments that are Issued to Other Than Employees for Acquiring, or in
Conjunction with Selling Goods or Services”, whereby fair value of such option
and warrant grants is determined using the Black Scholes option
valuation  model at the earlier of the date at which the
non-employee’s performance is completed or a performance commitment is
reached.





The
Black-Scholes option valuation model is used to estimate the fair value of the
warrants or options granted.  The model includes subjective input
assumptions that can materially affect the fair value estimates.  The
model was developed for use in estimating the fair value of traded options or
warrants.  The expected volatility is estimated based on the most
recent historical period of time equal to the weighted average life of the
warrants or options granted.





The
Company’s determination of fair value of share-based payment awards to employees
and directors on the date of grant uses the Black Scholes model, which is
affected by the Company’s stock price as well as assumptions regarding a number
of highly complex and subjective variables. These variables include but
are not limited to the risk free interest rate, the expected term, expected
volatility, and actual projected employee stock option exercise
behaviors.  The risk free interest rate is based on the U.S. Treasury
zero-coupon yield curve over the expected term of the option.  The
expected term assumption represents the average period the stock options are
expected to remain outstanding and is based on the expected term calculated
using the approach prescribed by SEC Staff Accounting Bulleting (“SAB”) 110 for
“plain vanilla” options.  Since the Company has limited historical
volatility information, it bases its expected volatility on the historical
volatility of similar entities whose share prices are publicly
available.  In making its determination as to similarity, the Company
considered the industry, stage of life cycle, size, and financial leverage of
such other entities.  The Company’s model includes a zero dividend
yield assumption, as the Company has not historically paid nor does it
anticipate paying dividends on its common stock. The periodic expense is then
determined based on the valuation of the options, and at that time an estimated
forfeiture rate is used to reduce the expense recorded.  The Company’s
estimate of pre-vesting forfeitures is primarily based on the Company’s
historical experience and is adjusted to reflect actual forfeitures as the
options vest.





The
following assumptions were used to estimate the fair value of options granted
for the three months ended March 31, 2010, using the Black-Scholes option
valuation model:





Risk
      free interest rate
                  
                  2.35
                  %Expected
      term (years)
                  
                  4.9Expected
      volatility (based on peer companies)
                  
                  
                  171
                  %Expected
      dividend yield
                  
                  
                  -
                  %





9





The
effect of recording stock-based compensation expense for the three months ended
March 31, 2010 and 2009, in accordance with the applicable provisions of ASC 718
is as follows:


Three
      Months Ended March 31,2010
                                  
                                  
                                  2009Compensation
      and related benefits
                                  $
                                  1,363,058
                                  
                                  
                                  $
                                  -Consulting
      and outside services
                                  
                                  4,715,181
                                  
                                  
                                  
                                  7,886,250Research
      and development
                                  
                                  1,212,800
                                  
                                  
                                  
                                  -Total
      stock based compensation
                                  $
                                  7,291,039
                                  
                                  
                                  $
                                  7,886,250








Loss
Per Common Share


The
Company computes loss per common share in accordance with ASC 260, “Earnings Per
Share.” ASC 260 requires dual presentation of basic and diluted loss per
share.  Basic loss per common share is computed by dividing net loss
by the weighted average number of common shares outstanding (including vested
restricted stock awards) during the period.  Diluted loss per common
share is computed by dividing net loss by the weighted average number of common
shares outstanding, plus the issuance of common shares, if dilutive, resulting
from the exercise of outstanding stock options and stock awards. These
potentially dilutive securities were not included in the calculation of loss per
common share for the three months ended March 31, 2010 and 2009, respectively,
because, due to the loss incurred during such periods, their inclusion would
have been anti-dilutive. Accordingly, basic and diluted losses per common share
are the same for all periods presented.





In
accordance with ASC 260 the Company has given effect to the issuance of
1,500,000 warrants issued in conjunction with the Company’s September 2009
financing and exercisable at $0.01 per share in computing basic net loss per
share classified as a derivative liability.





Total
shares issuable upon the exercise of warrants, options and conversion option for
the three months ended March 31, 2010 and 2009, were comprised as
follows:





As
      of March 31,2010
                    
                    
                    2009Warrants
                    
                    
                    12,083,392
                    
                    
                    
                    -Stock
      options
                    
                    
                    48,400,000
                    
                    
                    
                    -Convertible
      promissory notes
                    
                    
                    7,166,667
                    
                    
                    
                    -Unvested
      restricted stock grants
                    
                    
                    1,625,000
                    
                    
                    
                    -Total
      common stock equivalents
                    
                    
                    69,275,059
                    
                    
                    
                    -








Derivative
Financial Instruments


The
Company does not use derivative instruments to hedge exposures to cash flow,
market or foreign currency risks.  The Company evaluates all of its
financial instruments to determine if such instruments are derivatives or
contain features that qualify as embedded derivatives.  For derivative
financial instruments that are accounted for as liabilities, the derivative
instrument is initially recorded at its fair value and is then re-valued at each
reporting date, with changes in the fair value reported in the consolidated
statements of operations.  For stock-based derivative financial
instruments, the Company uses the Black-Scholes option valuation model to value
the derivative instruments at inception and on subsequent valuation
dates.  The classification of derivative instruments, including
whether such instruments should be recorded as liabilities or as equity, is
evaluated at the end of each reporting period.  Derivative instrument
liabilities are classified in the condensed consolidated balance sheet as
current or non-current based on whether or not net-cash settlement of the
derivative instrument could be required within 12 months of the balance sheet
date.





As
further discussed in Note 8, the Company was required under accounting guidance
prescribed by ASC 815 to reclassify certain fully vested warrants held by
consultants as a derivative liability.  The Company was not able to
determine that it had enough authorized shares of common stock to settle the
warrants.  As a result, the Company reclassified $722,586 of warrants
to derivative liability.  The derivative financial instruments were
revalued at March 31, 2010, with the change of $599,889 reflected as a component
of the gain on derivative financial instruments.  The warrants will
continue to be marked to market through earning at the end of each reporting
period.





As of
March 31, 2010, the derivative liability included warrants valued at $352,332
and the intrinsic value of the embedded conversion option related to convertible
promissory notes valued at $200,000. The derivative liability related to the
warrant was valued using the Black-Scholes option valuation model with the
following assumptions on the following dates:





10











March 31,
                    2010
                  
                  
                  December 31,
                    2009Risk-free
      interest rate
                  
                  
                  2.49%
      to 3.21
                  %
                  
                  
                  2.49
                  %Expected
      volatility
                  
                  
                  170%
      to 171
                  %
                  
                  
                  171
                  %Expected
      life (in years)
                  
                  
                  3
      to 4.47
                  
                  
                  
                  4.7Expected
      dividend yield
                  
                  
                  n/a
                  
                  
                  
                  n/aNumber
      of warrants
                  
                  
                  13,583,392
                  
                  
                  
                  1,500,000Fair
      value
                  
                  $
                  352,332
                  
                  
                  $
                  229,635





The
risk-free interest rate was based on rates established by the Federal
Reserve.  The Company’s expected volatility was based on the
historical volatility of similar entities whose share prices are publicly
available.  The expected life of the warrants was determined by the
expiration date of the warrants.  The expected dividend yield was
based upon the fact that the Company has not historically paid dividends, and
does not expect to pay dividends in the future.





Subsequent
Events


Management
has evaluated subsequent events or transactions occurring through the date the
financial statements were issued, to determine if such events or transactions
require adjustment or disclosure in the condensed consolidated financial
statements.





Recent
Accounting Pronouncements





In June
2009, the Financial Accounting Standards Board (“FASB”) issued ASC Topic 810-10
“Consolidation – Variable Interest Entities” (“ASC Topic 810-10”), to improve
financial reporting by enterprises involved with variable interest entities and
to provide more relevant and reliable information to users of financial
statements.  The Statement is effective as of the beginning of each
reporting entity’s first annual reporting period that begins after November 15,
2009, for interim periods within that first annual reporting period, and for
interim and annual reporting periods thereafter.  Earlier application
is prohibited.  The adoption of this Statement did not have a material
impact on the Company’s condensed consolidated financial
statements.


In June
2009, the FASB issued ASC Topic 860-20 “Transfers and Servicing - Sale of
Financial Assets”, to improve the reporting for the transfer of financial assets
resulting from 1) practices that have developed since the issuance of ASC Topic
860, “Transfers and Servicing,” that are not consistent with the original intent
and key requirements of that Statement and (2) concerns of financial statement
users that many of the financial assets (and related obligations) that have been
derecognized should continue to be reported in the financial statements of
transferors.  ASC Topic 860-20 must be applied as of the beginning of
each reporting entity’s first annual reporting period that begins after November
15, 2009, for interim periods within that first annual reporting period and for
interim and annual reporting periods thereafter.  Earlier application
is prohibited.  The Company does not currently engage in the transfer
of financial assets and, therefore, adoption of ASC Topic 860-20 did not have a
material impact on the Company’s condensed consolidated financial
statements.


In August
2009, the FASB issued Accounting Standards Update 2009-05 which includes
amendments to Subtopic 820-10, “Fair Value Measurements and
Disclosure--Overall.”  The update provides clarification that in
circumstances in which a quoted price in an active market for the identical
liability is not available, a reporting entity is required to measure fair value
using one or more of the techniques provided for in this update.  The
amendments in this update clarify that a reporting entity is not required to
include a separate input or adjustment to other inputs relating to the existence
of a restriction that prevents the transfer of the liability and also clarifies
that both a quoted price in an active market for the identical liability at the
measurement date and the quoted price for the identical liability when traded as
an asset in an active market when no adjustments to the quoted price of the
asset are required are Level 1 fair value measurements.  The adoption
of this standard did not have a material impact on the Company’s condensed
consolidated financial statements.


The FASB
has published FASB Accounting Standards Update 2009-13, “Revenue Recognition
(Topic 605)-Multiple Deliverable Revenue Arrangements,” which addresses the
accounting for multiple-deliverable arrangements to enable vendors to account
for products or services (deliverables) separately rather than as a combined
unit.  Specifically, this guidance amends the criteria in Subtopic
605-25, “Revenue Recognition-Multiple-Element Arrangements,” for separating
consideration in multiple-deliverable arrangements.  This guidance
establishes a selling price hierarchy for determining the selling price of a
deliverable, which is based on: (a) vendor-specific objective evidence; (b)
third-party evidence; or (c) estimates.  This guidance also eliminates
the residual method of allocation and requires that arrangement consideration be
allocated at the inception of the arrangement to all deliverables using the
relative selling price method and also requires expanded
disclosures.  FASB Accounting Standards Update 2009-13 is effective
prospectively for revenue arrangements entered into or materially modified in
fiscal years beginning on or after June 15, 2010.  Early adoption is
permitted.  The adoption of this standard is not expected to have a
material impact on the Company’s condensed consolidated financial
statements.




The FASB,
the Emerging Issues Task Force and the SEC have issued certain other accounting
standards updates and regulations as of March 31, 2010 that will become
effective in subsequent periods; however, management of the Company does not
believe that any of those updates would have significantly affected the
Company’s financial accounting measures or disclosures had they been in effect
during 2010 or 2009, and it does not believe that any of those pronouncements
will have a significant impact on the Company’s condensed consolidated financial
statements at the time they become effective.





11





NOTE 4– EQUITY TRANSACTIONS





Shares
for Services


On March
9, 2010 the Company issued 180,000 shares of common stock for services to an
employee. The shares were fully vested on the date of issuance. The fair value
of the shares was calculated to be $16,200 based on the share price on the date
of the issuance and accordingly, the Company recorded a stock based compensation
charge to the condensed consolidated financial statements for the three months
ended March 31, 2010.





On March
11, 2010 the Company issued 1,000,000 shares of common stock for services to an
employee. The shares were fully vested on the date of issuance. The fair value
of the shares was calculated to be $80,000 based on the share price on the date
of the issuance and accordingly, the Company recorded a stock based compensation
charge to the condensed consolidated financial statements for the three months
ended March 31, 2010.





On March
12, 2010 the Company issued 50,000 shares of common stock for services to an
employee. The shares were fully vested on the date of issuance. The fair value
of the shares was calculated to be $4,000 based on the share price on the date
of the issuance and accordingly, the Company recorded a stock based compensation
charge to the condensed consolidated financial statements for the three months
ended March 31, 2010.





On March
11, 2010, the Company accepted the resignation of a consultant and the
simultaneous agreement to enter into a master sales agreement.  The
Company agreed to terminate the 10,000,000 options previously granted and issued
10,000,000 shares of the Company’s common stock to the consultant. The shares
fully vested on the date of issuance. Accordingly, the Company accounted for the
transaction as a modification of a stock based compensation award under ASC
718.  The Company recorded a charge of $1,854,742 for stock based
compensation with respect to the modification of the original
award.





On March
17, 2010, the Company entered into a consulting agreement pursuant to which
100,000 shares of the Company’s common stock were issued, the shares were fully
vested on the date of issuance.  The Company recorded this as stock
based compensation expense of $6,000 based on the share price of $0.06 per
share.





Other


On
January 14, 2010, the Company entered into an agreement for services related to
establishing a joint venture and operating entity in Japan.  Under the
terms of the agreement the Company will obtain a 75% interest in the joint
venture. Pursuant to this agreement the Company


issued
3,000,000 shares of its common stock. The shares were fully vested on the date
of the issuance and accordingly the Company recorded a stock based compensation
charge of $480,000, which represented the fair value of the shares on the date
of the agreement.





On
January 15, 2010, the Company, through GetFugu Research Inc, its wholly-owned
subsidiary, entered into an agreement with Health Matrix, Inc.  Under
the terms of the agreement, 7,580,000 shares of the Company’s common stock were
issued in exchange for all of the ownership interest in Health Matrix. The
former owners of Health Matrix also entered into employment agreements which
included six-month non-competition provisions.  The Company evaluated
the transaction and determined that the transaction was an asset acquisition of
in-process research and development comprising of trademarks and tradenames. The
Company was unable to determine alternate future uses of the trademark and
tradenames and determined that the employment agreement and non-compete
agreement had no intrinsic value.  Accordingly, the Company recorded a
charge of $1,212,800 for the three months ended March 31, 2010, for in-process
research and development.




On March
24, 2010, the Company entered into an agreement with each of Mobile Search
Technologies, Inc. and Cellular Software Corporation, pursuant to which the
Company acquired both companies as wholly-owned subsidiaries in exchange for
100,000,000 shares of common stock each. Mobile Search Technologies, Inc. and
Cellular Software Corporation was owned by Oscar Holdings, LLC, which is
beneficially owned by the President of the Company, Carl Freer. The primary
assets of each company are intellectual property rights relating to next
generation mobile search technology. Each of the principals also executed a
standard form confidentiality and intellectual property assignment agreement.
The Company evaluated the transaction and determined that the transaction was an
asset acquisition of in-process research and development comprising of patent
pending algorithms with no alternate future uses.Through Carl Freer’s role
as co-founder and one of the single largest indirect shareholders of the
Company, Carl Freer is considered to have management control in accordance with
ASC 850, “Related Party Disclosures.” The principals were determined to
be affiliates and accordingly the Company recorded the transaction as a deemed
dividend of $8,000,000.





Stock
Options


On
February 15, 2010, the Company entered into consulting agreements with two
individuals including monthly fees totaling $25,000 and the issuance of
non-qualified stock options totaling 20,000,000. On the date of the grant 25% of
the options vest immediately and the remaining will vest over a term of 5 years.
The options granted are exercisable at $0.13 per share and have a contractual
life of 5 years.  The fair value of the awards based on the Black
Scholes option valuation model totaled $2,454,608.  The Company
recorded a charge to operations for $659,676for
the three months ended March 31, 2010, which represented the vested portion of
the awards. As of March 31, 2010, options with a value of $1,794,932 remains
non-vested and will be charged to operations over the remaining vesting period
of 4.9 years.




12





Nonvested
Shares


A summary
of the status of the Company’s nonvested shares of common stock as of March 31,
2010, and changes during the three months  then ended is presented
below:




WeightedAverageGrant DateNonvested Shares
                                      
                                      
                                      Shares
                                      
                                      
                                      
                                      Fair ValueNonvested
      at January 1, 2010
                                      
                                      
                                      10,312,500
                                      
                                      
                                      $
                                      0.52Granted
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -Vested
                                      
                                      
                                      (1,375,000
                                      )
                                      
                                      
                                      0.47Cancelled
                                      
                                      
                                      (7,312,500
                                      )
                                      
                                      
                                      -Nonvested
      at March 31, 2010
                                      
                                      
                                      1,625,000
                                      
                                      
                                      $
                                      0.52





NOTE
5 — FAIR VALUE





ASC 820
“Fair Value Measurements and Disclosures” defines fair value, establishes a
framework for measuring fair value and requires enhanced disclosures about fair
value measurements.  As defined in ASC 820, fair value is the price
that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date. The
standard clarifies that the exchange price is the price in an orderly
transaction between market participants to sell an asset or transfer a liability
at the measurement date and emphasizes that fair value is a market-based
measurement and not an entity-specific measurement.





ASC 820
establishes the following hierarchy used in fair value measurements and expands
the required disclosures of assets and liabilities measured at fair
value:





·
            Level
      1 – Inputs use quoted prices in active markets for identical assets or
      liabilities that the Company has the ability to
  access.





·
            Level
      2 – Inputs use other inputs that are observable, either directly or
      indirectly. These inputs include quoted prices for similar assets and
      liabilities in active markets as well as other inputs such as interest
      rates and yield curves that are observable at commonly quoted
      intervals.





·
            Level
      3 – Inputs are unobservable inputs, including inputs that are available in
      situations where there is little, if any, market activity for the related
      asset or liability.





In
instances where inputs used to measure fair value fall into different levels in
the above fair value hierarchy, fair value measurements in their entirety are
categorized based on the lowest level input that is significant to the
valuation. The Company’s assessment of the significance of particular inputs to
these fair value measurements requires judgment and considers factors specific
to each asset or liability.





Liabilities
measured at fair value on a recurring basis at March 31, 2010 are as
follows:




Fair Value Measurements at March
      31, 2010Total carrying
                      value at
                      March 31,
                      2010
                    
                    
                    Quoted prices
                      in active
                      markets
                      (Level 1)
                    
                    
                    Significant
                      other
                      observable
                      inputs
                      (Level 2)
                    
                    
                    Significant
                      unobservable
                      inputs
                      (Level 3)Derivative
      liability
                    
                    $
                    552,332
                    
                    
                    $
                    -
                    
                    
                    $
                    -
                    
                    
                    $
                    552,332





Financial
assets are considered Level 3 when their fair values are determined using
pricing models, discounted cash flow methodologies or similar techniques and at
least one significant model assumption or input is unobservable. The Company’s
Level 3 liabilities consist of derivative liabilities associated with the
1,500,000 of warrants granted that contains a reset price provision, the
embedded conversion option with respect to convertible notes payable, and the
12,083,392 of nonemployee warrants.




13





The
following table provides a summary of the changes in fair value, including net
transfers in and/or out, of all financial assets measured at fair value on a
recurring basis using significant unobservable inputs during the three months
ended March 31, 2010.





Warrants
                                    
                                    
                                    Embedded
      conversion options
                                    
                                    
                                    TotalBalance
      at January 1, 2010
                                    
                                    $
                                    229,635
                                    
                                    
                                    $
                                    -
                                    
                                    
                                    $
                                    229,635Additions
                                    
                                    
                                    722,586
                                    
                                    
                                    
                                    200,000
                                    
                                    
                                    
                                    922,586Reductions
                                    
                                    
                                    (599,889
                                    )
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (599,889
                                    )Transfer
      in and /or out of Level 3
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -Balance
      at March 31, 2010
                                    
                                    $
                                    352,332
                                    
                                    
                                    $
                                    200,000
                                    
                                    
                                    $
                                    552,332





The
carrying amounts of cash, accounts payable, and accrued liabilities approximate
their fair value due to their short maturities.  There were no changes
in the valuation techniques during the three months ended March 31,
2010.





NOTE
6—NOTES PAYABLE




On
November 6, 2009, the Company entered into an unsecured note payable which
matures on December 6, 2009, in the amount of $250,000 accruing interest at 10%
per annum.  The note balance at March 31, 2010 was
$250,000.   As of May 17, 2010, this note is in default of the
applicable repayment provisions.





On
December 21, 2009, the Company entered into an unsecured note payable which
matured on January 20, 2010, in the amount of $50,000.   The note
balance at March 31, 2010 was $50,000.   At May 17, 2010, this
note is in default of the applicable repayment provisions.





On
February 5, 2010, the Company entered into a short-term secured promissory note.
  Under the terms of this secured promissory note, the Company
received $150,000.   Interest accrues at an annual rate of 10%
and the note is payable on demand.  Security for this note includes a
first priority interest in all of the Company’s assets owned on the date of the
loan as well as all assets acquired while the loan is outstanding. The principal
balance of the note at March 31, 2010 was $150,000.   At May 17,
2010, this note is in default of the applicable repayment
provisions.





NOTE
7—CONVERTIBLE NOTES PAYABLE





On March 12, 2010, the
Company entered into a $75,000 short-term convertible promissory note which may
be converted at any time prior to the maturity date at the option of the lender
into the Company’s common stock based on a 40% discount to the weighted average
price of the Company’s common stock for the three lowest closing share prices
during the ten trading days prior to the conversion date.The gross
proceeds from the note were recorded net of a discount of $50,000, related to
the fair value of the embedded conversion option.  The debt discount
will be charged to interest expense ratably over the term of the convertible
note. The note
matures on June 23, 2010.Under accounting guidance provided by ASC 815,
the conversion price of the loans did not have a determinable number of shares
the loans could be settled in and as a result, have been presented as a
derivative liability.  Accordingly, the conversion option will be
marked to market through earnings at the end of each reporting
period.





On March
23, 2010, the Company entered into a $150,000 short-term convertible promissory
note with a stated interest rate of 10% per annum.


The note matures on June
23, 2010. At any time prior to the maturity date, the note can be converted at
the option of the lender into the Company’s common stock at a price of $0.02 per
share. If the lender demands repayment on the maturity date the conversion
feature is terminated and the Company is obligated to pay the lender
$200,000.  In addition the lender was also granted a warrant to
acquire 3,000,000 shares of the Company’s common stock at $0.10 per share for
three years.The gross proceeds from the note were recorded
net of a discount of $150,000, consisting of an allocation of the fair values
attributed to the warrants and to the embedded conversion feature in accordance
with ASC 815.  The debt discount consisted of a $95,351 value related
to the warrants and a value attributed to the embedded conversion feature of
$150,000.  The debt discount was first allocated to the embedded
conversion feature based on its fair value.  After reducing the gross
proceeds by the value allocated to the embedded conversion feature, the
remaining unallocated debt discount was allocated to the
warrants.  The excess of the fair value of the warrants above the debt
discount allocated to the warrants was $95,351 and was recorded as a charge to
operations partially offsetting the gain of derivative financial
instruments.  The note’s embedded conversion feature and warrants will
be marked to market through earnings at the end of each reporting
period.





NOTE
8 – RELATED PARTY TRANSACTIONS





The Company has an unsecured revolving promissory note with a lender
whose owners include a founder and shareholder of the Company.  
Interest will be accrued at an annual rate of 10% and will be payable on demand
by the lender.  For the three months ended March 31, 2010, the Company
had received no new borrowings and made no payments under the unsecured
promissory note.  As of March 31, 2010, the amount due under this
facility totaled $538,213.





The
Company has a revolving promissory note with a founder and shareholder
of the Company. For the three months ended March 31, 2010, the Company received
no new borrowings and made no payments.  The note has a stated
interest rate of 10% and is payable on demand. As of March 31, 2010 the amount
due under this facility totaled $111,518.





The
Company has received borrowings from a company owned by two individuals, one
being an officer and Director, and the other a founder and shareholder of the
Company. For the three months ended March 31, 2010, the Company received
advances of $128,900 and repaid $10,000.  As of March 31, 2010, the
total amount owed to this related party was $319,400.




14





On March
2, 2010, the Company received an advance totaling $83,000 from a former officer
of the Company. Interest accrues at an annual rate of 10% and the note is
payable on demand.  As of March 31, 2010, the total amount owed to
this related party was $83,000.





NOTE
9 - COMMITMENTS AND CONTINGENCIES





Other


At March
31, 2010, the Company has an obligation totaling $2,047,010 related to unpaid
payroll tax, including an estimate of penalties and interest.  The
Company has filed the applicable payroll tax returns.





The
Company has not filed either federal or state income tax returns for the years
ended 2009, 2008, and 2007.  There are no penalties or interest due,
nor is a liability recorded, as in all periods the Company reported
losses.





Litigation


A lawsuit
was filed on November 25, 2009 against the Company, numerous former and current
Company officers and directors, and other individuals and entities. Plaintiffs
have made no direct claims against the Company, but have instead named it as a
“nominal” defendant, and have alleged “derivative” causes of action on its
behalf.   The Plaintiffs appear at present to only claim damages
of approximately $26,000,000 resulting from loans they made to previous
companies, which Carl Freer, the President of the Company, allegedly personally
guaranteed.  The Company’s counsel is preparing a motion to dismiss.
The Company and those officers and directors deny plaintiffs’ allegations, and
plan to vigorously defend the action.  Accordingly, the Company has no
liability accrued as it relates to this matter.





By letter
dated February 24, 2010, fourteen former employees of a separate company made a
demand for $430,000 in unpaid wages against that company, and threatened to file
suit against the Company, on the ground that the separate company was merely an
instrumentality of GetFugu, Inc. To the Company’s knowledge, no claim has been
filed to date, and the Company believes the demand is not an obligation of the
Company.  Accordingly, as of March 31, 2010, the Company has no
liability accrued as it relates to this matter.





Although
the Company believes it will be successful in defending these matters there can
be no assurances that these legal matters will not result in any negative
outcomes.





On April
1, 2010, Hutton International Investments, Ltd (“Hutton”) filed a claim that it
suffered damages as a result of the Company's breach of a securities purchase
agreement with the Company. The parties stipulated to settle the claim in
exchange for issuance to Hutton of 40,000,000 shares of the Company’s common
stock, subject to adjustment and the Court’s approval of the settlement under
Section 3(a)(10). The court approved the settlement and dismissed the action on
April 6, 2010 at which time 40,000,000 shares of the Company’s common stock were
issued to Hutton. The Company recorded a charge of approximately $1,200,000 for
the year ended December 31, 2009, based on the share price of the Company’s
common stock on the date of settlement.





A demand
for arbitration was filed on April 13, 2010, by six former employees and
independent contractors, seeking unpaid wages and unspecified
damages.  At March 31, 2010, the Company had accrued $147,000 for all
such wages.





NOTE
10 – SUBSEQUENT EVENTS





On April
2, 2010, the Company entered into a short-term convertible promissory note.
  Under the terms of this promissory note, the Company received
$100,000.  The note matures on July 2, 2010. At any time prior to the
maturity date, the note can be converted at the option of the lender into the
Company’s common stock at a price of $0.02 per share.  If the lender
demands repayment on the maturity date the conversion feature is terminated and
the Company is obligated to pay the lender $133,333.  The lender was
also granted a warrant to acquire 3,000,000 shares of the Company’s common stock
at $0.10 per share for three years.





On May
14, 2010, the Company’s board of directors accepted the resignations of Michael
Solomon from the positions of Chairman of the Board and Chief Executive Officer,
Michael O’Connor as director, and Alan Bailey as director.  The board
appointed Richard Jenkins as a director and Chief Executive Officer and Vrajesh
Chokshi as a director.





15




ITEM
2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS





The
information contained in this Form 10-Q is intended to update the information
contained in our Annual Report on Form 10-K for the year ended December 31,
2009, and presumes that readers have access to, and will have read, the
“Management’s Discussion and Analysis of Financial Condition and Results of
Operations” and other information contained in such Form 10-K.  The
following discussion and analysis also should be read together with our
condensed consolidated financial statements and the notes to the condensed
consolidated financial statements included elsewhere in this Form
10-Q.





The
following discussion contains certain statements that may be deemed
“forward-looking statements” within the meaning of the Private Securities
Litigation Reform Act of 1995.  Such statements appear in a number of
places in this Form 10-Q, including, without limitation, “Management’s
Discussion and Analysis of Financial Condition and Results of Operations.” 
These forward-looking statements can be identified by the use of words such as
“believes,” “estimates,” “could,” “possibly,” “probably,” anticipates,”
“projects,” “expects,” “may,” “will,” or “should” or other variations or similar
words. These statements are not guarantees of future performance and involve
risks, uncertainties and requirements that are difficult to predict or are
beyond our control.  Forward-looking statements speak only as of the
date of this quarterly report. You should not put undue reliance on any
forward-looking statements.  Forward-looking statements reflect
management’s current expectations and are inherently uncertain.  We
strongly encourage investors to carefully read the factors described in our
Annual Report on Form 10-K for the year ended December 31, 2009 in the section
entitled “Risk Factors” for a description of certain risks that could, among
other things, cause actual results to differ from these forward-looking
statements. We assume no responsibility to update the forward-looking statements
contained in this quarterly report on Form 10-Q. The following should also be
read in conjunction with the unaudited Financial Statements and notes thereto
that appear elsewhere in this report.





Overview





GetFugu,
Inc, (“We”, “Our”, “GetFugu,” or “Company”), is developing next generation
mobile search tools. The Company’s technology is designed to play on the
strengths of mobile handheld devices (mobile phones) and assist consumers in
retrieving content more expediently. Consumers will be able to download GetFugu
application tools to their mobile phone device.  The GetFugu
applications will allow consumers to retrieve content and eliminate the need to
type website addresses or search terms into the device’s internet
browser.





We
currently have four products under development.





1.
            See It (ARL): “Vision
      recognition” This GetFugu application recognizes logos and products
      through any mobile phone camera. Consumers simply point their phone at a
      logo and retrieve content from the brand owner.2.
            Say It (VRL): “Voice
      recognition” The consumer can simply speak into the phone to retrieve
      content. In addition to brand names, the consumer can say generic keywords
      such as “best pizza” or “ATM”.3.
            Find It (GRL): “Location
      recognition” For local content, GetFugu is designed to work with the
      Global Positioning Systems (“GPS”) in mobile phones. The application will
      return content, based on the proximity to the user. A keyword of “pizza”
      will return the closest pizza parlors.  Local businesses can pay
      for voice-activated key words to position themselves at the top of the
      search list within a geographic area.4.
            Get it (Hot-Spotting):
      GetFugu provides advertisers with a way to monetize their marketing
      efforts through a mobile ecommerce tool called
      Hot-Spotting.  Hot-Spotting enables the consumer to purchase or
      retrieve information on any item featured in a video simply by touching
      products as displayed on the
screen.





The
Company was incorporated in the State of Nevada on March 14, 2007 under the name
Madero, Inc.  On August 29, 2008, the Company entered into a stock
purchase agreement (the “Stock Purchase Agreement”) with Mike Lizarraga (sole
director, former President, Chief Executive Officer, and Chief Financial Officer
of Madero, Inc.), and Media Power, Inc. (“MPI”). Pursuant to the terms and
conditions of the Stock Purchase Agreement, MPI acquired 48,000,000 shares of
the Company’s common stock (this number, and all other share amounts presented,
is post the 12 for 1 forward stock split which was effectuated on February 11,
2009), or approximately 48.07% of the Company’s then issued and outstanding
shares of common stock from Mr. Lizarraga.





Prior to
the closing of the transactions referenced in the Stock Purchase Agreement, the
Company was a development stage company in an unrelated
industry.  Through March 14, 2007, the Company’s activities had been
limited to its formation, business planning and raising capital, and since
August 29, 2008 involved in the development of next generation mobile search
tools.





On
January 23, 2009, the Company amended its Articles of Incorporation to increase
the number of authorized common stock, par value $0.001 per share, from
75,000,000 to 500,000,000.  On February 11, 2009, there was a forward
split of common stock whereby each issued and outstanding share of common stock
was split into 12 shares of common stock.





Effective
March 25, 2009, our Articles of Incorporation were amended to change the name to
GetFugu, Inc.




16




Effective April 9, 2009, we entered
into an Agreement for the Assignment of Patent Rights (the “Assignment
Agreement”) with MARA Group Ltd.  Pursuant to the Assignment Agreement
we acquired eight patent applications (the “Patent Applications”) from MARA
Group Ltd. in exchange for 25 million shares of common stock of the
Company.  Prior to the closing of this transaction, MARA Group Ltd.
was deemed to be an “affiliate”, as it owned more than ten (10%) percent of our
outstanding common stock.





On
October 19, 2009, the Company’s Board of Directors approved (i) the
reincorporation of the Company from Nevada to Delaware, (ii) increasing the
number of authorized shares of common stock from 500,000,000 to 750,000,000,
(iii) issuing up to 200,000,000 shares of “blank check” preferred stock, and
(iv) the creation of the 2009 Incentive Compensation Plan with a maximum of
250,000,000 shares of common stock to be issued with no more than 100,000,000
shares permitted to be issued in any fiscal year.  As of April 15,
2010, the Company had not formally adopted the Incentive Compensation
Plan.  All of the above noted items require shareholder
approval.  Accordingly, at this meeting, the Board approved the filing
with the Securities and Exchange Commission (“SEC”) of a written consent
statement.  As of May 17, 2010 the Company has not filed its amended
articles of incorporation with the appropriate regulatory bodies.




Critical Accounting Policies
and Estimates





The
preparation of our financial statements in conformity with accounting principles
generally accepted in the United States of America ("GAAP") requires management
to make estimates, judgments and assumptions that affect the reported amounts of
assets and liabilities, disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amount of expenses during the
reporting period. On an ongoing basis, we evaluate our estimates, which are
based on historical experience and on various other assumptions that are
believed to be reasonable under the circumstances. The result of these
evaluations forms the basis for making judgments about the carrying values of
assets and liabilities and the reported amount of expenses that are not readily
apparent from other sources. Actual results may differ from these estimates
under different assumptions. Our significant accounting policies are described
in the notes to our annual consolidated financial statements included in Form
10-K for the year ended December 31, 2009.





Results of Operations for
the Three Months Ended March 31, 2010 compared to the Three Months Ended March
31, 2009





Revenues


Revenues
were zero for the three months ended March 31, 2010 and 2009,
respectively.





Cost
of Sales


Cost of
sales were zero for the three months ended March 31, 2010 and 2009,
respectively.





Operating
Expenses


Operating
expenses totaled $9,784,420 and $8,123,100 for the three months ended March 31,
2010 and 2009, respectively.  Following are the primary components of
operating expenses:





Compensation and Related
Benefits —Compensation and related benefits totaled $3,027,549 and $0 for
the three months ended March 31, 2010 and 2009, respectively, of which
$1,756,479 related to employees and $1,271,070 related to the Company’s Board of
Directors. Included in the total expense for the three months ended March 31,
2010 and 2009, respectively, are $1,363,058 and $0 of non-cash expenses
consisting of $240,538 associated with employee stock options, $381,450
associated with the issuance of the Company’s common stock to various employees,
$546,070 and $0 associated with director stock options, and $195,000 and $0
associated with the amortization of the previous issuance of the Company’s
common stock to the Company’s directors.





Legal and Professional
Fees —Legal and professional fees totaled $3,500 and $236,850 for the
three months ended March 31, 2010 and 2009, respectively.  The amounts
in 2009 related to legal efforts associated with compliance and other similar
activities.





Marketing —Marketing
expenses totaled $79,159 and $0 for the three months ended March 31, 2010 and
2009, respectively, primarily consisting of public relations related activities,
development of the corporate website, media related activities, and development
of the marketing campaign for the Company’s consumer launch.





Occupancy and Related
Costs —Occupancy and related costs totaled $70,658 and $0 for the three
months ended March 31, 2010 and 2009, respectively.  Rent and related
expense of the Company’s office in Los Angeles totaled
$65,816.





Research and
Development — Research and development expense relates to the development
and purchase of existing in-process research and development of new products and
processes including improvements to existing products. These costs are expensed
as incurred and totaled $1,352,312 and $0 for the three months ended March 31,
2010 and 2009, respectively, which includes a charge of $1,212,800 related to
in-process research and development.




17





Travel and
Entertainment —Travel and entertainment expenses totaled $44,849 and $0
for the three months ended March 31, 2010 and 2009, respectively.  The
majority of such costs were travel, meals, and lodging related to financing
activities and similar costs related to consultants traveling to work in the
Company’s offices.





Consulting and Outside
Services —Consulting and outside services totaled $5,048,478 and
$7,886,250 for the three months ended March 31, 2010 and 2009,
respectively.  Due to the liquidity issues related to a new venture,
the Company utilized its common stock as a primary means of compensating
consultants.  The Company issued stock and options resulting in
non-cash expenses of $4,715,181 and $7,886,250 for the three months ended March
31, 2010 and 2009, respectively.  In addition, the Company contracted
with specialized developers and contractors on an as needed basis to assist in
the development of the Company’s mobile search technology.





Office and Other
Expenses —Office and other expenses totaled $116,232 and $0 for the three
months ended March 31, 2010 and 2009, respectively.  These expenses
included postage and delivery charges, telephone, Internet services, stock
transfer agent fees, closing down and relocation of the San Francisco office to
Los Angeles, insurance, and other miscellaneous office related
expenses.





Depreciation
—Depreciation expense for the three months ended March 31, 2010 and 2009,
totaled $41,483 and $0, respectively.  The Company began depreciating
computer and other fixed assets beginning the month following the quarter in
which the assets were acquired.  The primary fixed assets are
computers and related equipment which are being depreciated over 3 years on a
straight-line basis.








18




Other
Income (Expense)





Interest
Expense—Interest expense for the three months ended March 31, 2010 and
2009, totaled $63,479 and $0, respectively.





Gain on Derivative Financial
Instrument —The gain on derivative financial instrument totaled $599,889
and $0 for the three months ended March 31, 2010 and 2009,
respectively.  Financial instruments which do not have fixed
settlement provisions are deemed to be derivative
instruments.   The warrants issued with the Company’s September
18, 2009 common stock financing did not have fixed settlement provisions because
the exercise price may be lowered if the Company issues securities at lower
prices in the future.  The Company was required to include the reset
provisions in order to protect the warrant holders from the potential dilution
associated with future financings.  In accordance with ASC 815-40, the
warrants were recognized as a derivative instrument. In addition, the conversion price of a
short-term note payable did not have a determinable number of shares the loans
could be settled into and as a result this and an additional convertible note
payable, together with non-employee warrants have been presented as a derivative
liability.   Accordingly, the conversion options of these notes and
embedded conversion features of non-employee warrants will be marked to market
through earnings at the end of each reporting
period.





Going
Concern, Liquidity and Financial Condition


The
Company incurred a net loss of approximately $9.3 million and $8.1 million for
the three months ended March 31, 2010 and 2009, respectively. As of
March 31, 2010, the Company’s accumulated deficit from inception amounted
to approximately $62.1 million and the Company’s working capital deficit
amounted to approximately $9.7 million.  During the three months ended
March 31, 2010, net cash used in operating activities amounted to approximately
$546,000. During the three months ended March 31, 2010, cash provided by
financing activities amounted to $562,000. As of March 31, 2010, the Company’s
cash position was $15,890. Subsequent to March 31, 2010, the Company raised
additional operating capital of approximately $100,000, by entering into
short-term debt financing arrangements.





The
Company needs to raise additional capital from external sources in order to
sustain its operations while continuing the longer term efforts contemplated
under its business plan. The Company expects to continue incurring losses for
the foreseeable future and must raise additional capital to pursue its product
development initiatives, to penetrate markets for the sale of its products and
to continue as a going concern. The Company cannot provide any assurance that it
will raise additional capital. If the Company is unable to secure additional
capital, it may be required to curtail its research and development initiatives,
modify its existing business plan and take additional measures to reduce costs
in order to conserve its cash in amounts sufficient to sustain operations and
meet its obligations. These measures could cause significant delays in the
Company’s efforts to commercialize its products, which is critical to the
realization of its business plan and the future operations of the Company. These
matters raise substantial doubt about the Company’s ability to continue as a
going concern.   The accompanying consolidated financial statements do not
include any adjustments that may be necessary should the Company be unable to
continue as a going concern.





Recent
Accounting Pronouncements





For a
discussion of the impact of recent accounting pronouncements, see Note 3 of the
accompanying condensed consolidated financial statements.





Off-Balance
Sheet Arrangements





We do not
have any off-balance sheet arrangements.





19




Safe
Harbor





The
discussions of the results of operations and financial condition of the Company
should be read in conjunction with the financial statements and notes pertaining
to them that appear elsewhere in this Form 10-Q. Statements made in this Form
10-Q that are not historical or current facts are "forward- looking statements"
made pursuant to the safe harbor provisions of Section 27A of the Securities Act
of 1933 (the "Act") and Section 21E of the Securities Exchange Act of 1934.
These statements often can be identified by the use of terms such as "may,"
"will," "expect," "believe," "anticipate," "estimate," "approximate" or
"continue," or the negative thereof. The Company intends that such
forward-looking statements be subject to the safe harbors for such statements.
The Company wishes to caution readers not to place undue reliance on any such
forward-looking statements, which speak only as of the date made. Any
forward-looking statements represent management's best judgment as to what may
occur in the future. However, forward-looking statements are subject to risks,
uncertainties and important factors beyond the control of the Company that could
cause actual results and events to differ materially from historical results of
operations and events and those presently anticipated or projected. These
factors include adverse economic conditions, risks of foreign operation, entry
of new and stronger competitors, inadequate capital and unexpected costs. The
Company disclaims any obligation subsequently to revise any forward-looking
statements to reflect events or circumstances after the date of such statement
or to reflect the occurrence of anticipated or unanticipated
events.





20





ITEM
3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK





Not
applicable.





ITEM
4T.   CONTROLS AND PROCEDURES





Evaluation
of Disclosure Controls and Procedures





Our chief executive officer and Principal Financial and
Accounting Officer has reviewed and evaluated the effectiveness of our
disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule
15d-15(e) of the Securities Exchange Act of 1934), as of March 31,
2010.  Based on such review and evaluation, our chief executive
officer and chief financial officer have concluded that, as of March 31, 2010,
our disclosure controls and procedures were not effective to ensure that
information required to be disclosed by us in the reports that we file or submit
to the Securities and Exchange Commission pursuant to the reporting obligations
of the Exchange Act, including this Quarterly Report on Form 10-Q, is recorded,
processed, summarized and reported, within the time periods specified in the
rules and forms of the SEC.  Disclosure controls and procedures
include, without limitation, controls and procedures designed to ensure that
information required to be disclosed by an issuer in the reports that it files
or submits under the Exchange Act is accumulated and communicated to the
issuer’s management, including its principal executive and principal financial
officers, or persons performing similar functions, as appropriate to allow
timely decisions regarding required disclosure.





A control
system, no matter how well conceived and operated, can provide only reasonable,
not absolute, assurance that the objectives of the control system are
met.  The design of any system of controls also is based in part on
certain assumptions regarding the likelihood of future events, and there can be
no assurance that any design will succeed in achieving its stated goals under
all potential future conditions.  Given these and other inherent
limitations of control systems, there is only reasonable assurance that our
controls will succeed in achieving their stated goals under all potential future
conditions.





As
reported in our Annual Report in Form 10-K for our fiscal year ended December
31, 2009, our management identified material weaknesses in internal controls
over financial reporting as of December 31, 2009 and March 31, 2010 as
follows:





Due to
the small size of the operations, we have limited personnel and therefore
segregation of duties is limited.  As our operations expand,
additional personnel will be employed and respective controls and procedures
will be enhanced accordingly.   We have not formally documented our entity
level controls for policies and procedures in place.  We lack proper
documentation of the performance of key controls and appropriate document
retention procedures. Our current staffing levels were not sufficient to support
the complexity of our financial reporting requirements; we lacked the expertise
we needed to apply complex accounting principles relating to our equity
transactions and lacked the structure we need to ensure the timely and accurate
filing of employee income tax withholding and our corporate tax returns. Our
record retention policies need to be enhanced as supporting records were not
always easily accessible. We have limited staff and therefore lack proper
segregation of duties in part due to the small size of the Company and the
constraints of funds to hire additional staff to provide assistance with the
preparation of the year end financial statements. Management has hired outside
consultants with the necessary expertise to ensure the accuracy of the year end
financial records as they are being reported.





There was
no change in our internal control over financial reporting identified in
connection with the evaluation required by paragraph (d) of Rule 13a-15 or
15d-15 under the Securities Exchange Act of 1934 that occurred during our most
recent fiscal quarter that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.





PART
II – OTHER INFORMATION





21





Item
5. Other Information





5.02(b) Departure of Directors or Principal Officers;
Election of Directors; Appointment of Principal Officers.





On May 14,
2010, the Company’s board of directors accepted the resignations of Michael
Solomon from the positions of Chairman of the Board and Chief Executive Officer,
Michael O’Connor as director, and Alan Bailey as director.  The board
appointed Richard Jenkins as a director and Chief Executive Officer and Vrajesh
Chokshi as a director.





Item
6. Exhibits and Reports on Form 8-K





Exhibits





(a)
Exhibit 31. Certifications required by Rule 13a-14(a) or Rule 15d-
14(a)





31.1 and
32.2 Certification of Chief Executive Officer and Principal Financial Officer
pursuant to 18 U.S.C.ss.1850 as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.





(b)
Exhibit 32. Certifications required by Rule 13a-14(b) or Rule 15d- 14(b) and
section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section
1350





32.1 and
32.2 Certification of Chief Executive Officer and Principal Financial Officer
pursuant to 18 U.S.C.ss.1850 as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.




(c)
Other Exhibits




None







22





SIGNATURES





In
accordance with the Securities Exchange Act of 1934, the registrant caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.





/s/
      Richard JenkinsPrincipal Executive Officer and Principal Financial OfficerDate:
      May 17, 2010









23










EXHIBIT
INDEX





Exhibit
                
                Description31
                
                Certification
      of Chief Executive Officer, and Principal Financial Officer pursuant to
      Exchange Act Rule 13a-14 and 15d-14 as adopted pursuant to section 302 of
      the Sarbanes-Oxley Act of 2002.32
                
                Certification
      of the Company’s Principal Executive Officer, and Principal Financial
      Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section
      906 of the Sarbanes-Oxley Act of
2002.






24