UNITED
STATES
 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 the
quarterly period ended March 31, 2010
 OR
 o   
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
  
 Commission
file number: 001-53510
 
 WINDTAMER
CORPORATION
 (Exact
name of Registrant as specified in its charter)
 
 New
      York
              
              16-1610794(State
      or other jurisdiction of incorporation or organization)
              
              (I.R.S.
      Employer Identification No.)  156
      Court Street, Suite # 7Geneseo,
      New York
              
              14454(Address
      of principal executive offices)
              
              (Zip
      Code)
 
 (585)
243-4040
 (Registrant's telephone number,
including area code)
 
 Indicate
by check mark whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
 Yes  
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 for such shorter period that the
registrant has been required to submit and post such files).*
Yes   ̈
No   ̈
 *
Registrant is not yet required to submit Interactive Data Files pursuant to Rule
405 of Regulation S-T
 
 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.
 
 Large
      accelerated filer  ̈
              Accelerated
      filer  ̈Non-accelerated
      filer  ̈(Do not
      check if a smaller reporting company)
              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
 
 As of
April 27, 2010, the Registrant had outstanding 86,407,848 shares common stock,
$0.0001 par value.
    
   WINDTAMER
CORPORATION
 TABLE OF CONTENTS
 
 PART
      I. FINANCIAL INFORMATIONItem
      1. Financial Statements
              1Condensed
      Balance Sheets as of March 31, 2010 (unaudited) and December 31,
      2009
              1Unaudited
      Condensed Statements of Operations for the Three Months
    EndedMarch
      31, 2010 and 2009, and the Period from Date of Inception (March 30,
      2001)through
      March 31, 2010
              2Unaudited
      Condensed Statements of Cash Flows for the Three Months
    EndedMarch
      31, 2010 and 2009, and the Period from Date of Inception (March 30,
      2001)through
      March 31, 2010
              3Unaudited
      Statement of Stockholders' Equity from Inception through March 31,
      2010
              4Notes
      to Unaudited Condensed Financial Statements
              5Item
      2.
              Management’s
      Discussion and Analysis of Financial Condition
      and Results of Operations.
              12Item
      3.
              Quantitative
      and Qualitative Disclosures About Market Risk
              17Item
      4.
              Controls
      and Procedures
              17PART
      II. OTHER INFORMATION
              18Item
      1.
              Legal
      Proceedings
              18Item
      1A.
              Risk
      Factors
              18Item
      2.
              Unregistered
      Sales of Equity Securities and Use of Proceeds
              19Item
      3.
              Defaults
      Upon Senior Securities
              19Item
      5.
              Other
      Information
              19Item
      6.
              Exhibits
              20Signatures
              
              21Exhibits
 
 
 
 
 
 PART
I – FINANCIAL INFORMATION
 
 Item 1.
Financial Statements and Notes
 WINDTAMER
CORPORATION
 (A
Development Stage Company)
 Balance
Sheets
  March31,
                
                
                December31,2010
                
                
                2009(unaudited)ASSETSCurrent
      assetsCash
                
                $
                213,988
                
                
                $
                1,027,977Accounts
      Receivable
                
                
                8,750
                
                
                
                0Prepaid
      expenses and other current assets
                
                
                150,144
                
                
                
                84,948Inventory
                
                
                354,672
                
                
                
                47,101Total
      current assets
                
                
                727,554
                
                
                
                1,160,026Long-lived
      assets, net
                
                
                37,101
                
                
                
                37,277Property
      and equipment, net
                
                
                198,111
                
                
                
                175,109Total
      assets
                
                $
                962,766
                
                
                $
                1,372,412LIABILITIES AND STOCKHOLDERS'
      EQUITYCurrent
      liabilitiesAccounts
      payable
                
                $
                521,600
                
                
                $
                302,806Customer
      deposits
                
                
                224,438
                
                
                
                95,000Accrued
      liabilities
                
                
                106,869
                
                
                
                19,256Total
      current liabilities
                
                
                852,907
                
                
                
                417,062Commitments
      and ContingenciesStockholders'
      equityPreferred
      stock, 5,000,000 shares authorized, $.0001 par value; none issued or
      outstanding
                
                
                0
                
                
                
                0Common
      stock, 500,000,000 shares authorized, $0.0001 par value; 115,457,848 and
      115,297,000 shares issued and outstanding respectively
                
                
                11,545
                
                
                
                11,530Additional
      paid-in capital
                
                
                5,398,869
                
                
                
                4,998,421Deficit
      accumulated during development stage
                
                
                (5,300,555)
                
                
                
                (4,054,601)Total
      stockholders' equity
                
                
                109,859
                
                
                
                955,350Total
      liabilities and stockholders' equity
                
                $
                962,766
                
                
                $
                1,372,412
                                         The
accompanying notes are an integral part of the financial
statements.
  -1-
          
 WINDTAMER
CORPORATION
 (A
Development Stage Company)
 Statements
of Operations (unaudited)
  Three Months
                Ended
              
              
              Three Months
                Ended
              
              
              Period From
                Date of Inception
                (March 30, 2001)
                throughMarch
      31,
              
              
              March 31,
              
              
              March
      31,2010
              
              
              2009
              
              
              2010Research
      and development expenses:
              
              $
              567,418
              
              
              $
              112,262
              
              
              $
              1,691,595Selling,
      general and administrative expenses:
              
              
              680,189
              
              
              
              702,139
              
              
              
              3,612,193Total
      expenses
              
              
              1,247,607
              
              
              
              814,401
              
              
              
              5,303,788Loss
      from operations
              
              
              (1,247,607
              )
              
              
              (814,401
              )
              
              
              (5,303,788
              )Non-operating
      revenueInterest
              
              
              1,653
              
              
              
              0
              
              
              
              3,233Net
      loss before income taxes
              
              
              (1,245,954
              )
              
              
              (814,401
              )
              
              
              (5,300,555
              )Income
      taxes
              
              
              0
              
              
              
              0
              
              
              
              0Net
      loss
              
              $
              (1,245,954
              )
              
              $
              (814,401
              )
              
              $
              (5,300,555
              )Net
      loss per common share - basic and diluted
              
              $
              (.01
              )
              
              $
              (.01
              )
              
              
              (.08
              )Weighted
      average number of common shares outstanding - basic and
      diluted
              
              
              115,457,848
              
              
              
              81,187,000
              
              
              
              66,738,976
 
 The
accompanying notes are an integral part of the financial
statements.
 
 
 -2-
 
 WINDTAMER
CORPORATION
 (A
Development Stage Company)
 Statements
of Cash Flows (unaudited)
  Three
      Months Ended March 31,
                  2010
              
              
              Three
      Months Ended March 31,
                  2009
              
              
              Period
      from Date of Inception
                  (March 30,
      2001)
                  Through
      March 31,
                  2010Operating
      activitiesNet
      loss
              
              $
              (1,245,954
              )
              
              $
              (814,401
              )
              
              $
              (5,300,555
              )Adjustments
      to reconcile net loss to net cash used in operating activities:Amortization
      and depreciation expense
              
              
              13,021
              
              
              
              2,485
              
              
              
              31,339Stock-based
      compensation
              
              
              302,380
              
              
              
              449,538
              
              
              
              1,724,165Stock issued for service
              
              
              98,083
              
              
              
              0
              
              
              
              189,083Changes
      in operating assets and liabilities:Increase in prepaid expenses and
      other current assets
              
              
              (65,196
              )
              
              
              841
              
              
              
              (150,144
              )Increase in trade accounts
      receivable
              
              
              (8,750
              )
              
              
              0
              
              
              
              (8,750
              )Increase in inventory
              
              
              (307,571
              )
              
              
              0
              
              
              
              (354,672
              )Increase in Customer deposits
              
              
              129,438
              
              
              
              50,000
              
              
              
              224,438Increase in trade accounts payable
      and accrued liabilities
              
              
              306,407
              
              
              
              22,701
              
              
              
              628,469Net
      cash used in operating activities
              
              
              (778,142
              )
              
              
              (288,836
              )
              
              
              (3,016,627
              )Investing
      ActivitiesAcquisition
      of fixed assets
              
              
              (35,847
              )
              
              
              (21,059
              )
              
              
              (227,164
              )Acquisition
      of intangible assets
              
              
              0
              
              
              
              (5,300
              )
              
              
              (39,387
              )Net
      cash used in investing activities
              
              
              (35,847
              )
              
              
              (26,359
              )
              
              
              (266,551
              )Financing
      activitiesProceeds
      from issuance of common stock
              
              
              0
              
              
              
              561,000
              
              
              
              1,866,510Proceeds
      from exercise of stock options
              
              
              0
              
              
              
              0
              
              
              
              (59,344
              )Stock
      offering expenses paid
              
              
              0
              
              
              
              (7,408
              )
              
              
              1,690,000Net
      cash provided by financing activities
              
              
              0
              
              
              
              553,592
              
              
              
              3,497,166Increase
      (decrease) in cash
              
              
              (813,989
              )
              
              
              238,397
              
              
              
              213,988Cash
      – beginning
              
              
              1,027,977
              
              
              
              204,771
              
              
              
              0Cash
      – ending
              
              $
              213,988
              
              
              $
              443,168
              
              
              $
              213,988Supplemental
      Information:Income
      Taxes Paid
              
              $
              0
              
              
              $
              0
              
              
              $
              0Interest
      Paid
              
              $
              0
              
              
              $
              0
              
              
              $
              2,095
 
 The
accompanying notes are an integral part of the financial
statements.
 
 -3-
 
 WINDTAMER
      CORPORATION
                (A
      Development Stage Company)
                Statements
      of Stockholders' Equity
                From
      Inception through March 31, 2010Treasury Stock
              
              Common Stock
              
              
              
              
              
              Deficit
      AccumulatedNumber
      of Shares
              
              
              Par
      Value
              
              Number
      of Shares
              
              
              Par
      Value
              
              
              Additional
      Paid-In Capital
              
              
              During
      the Development Stage
              
              Total
      Stockholders' EquityIssuance
      of common stock in exchange for services
              
              
              
              $
              -
              
              
              60,000,000
              
              
              $
              6,000
              
              
              $
              (3,000
              )
              $
              -
              
              $
              3,000Net
      loss for the period from March 30 through December 31,
      2001
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (3,100)
              
              
              (3,100)Balance,
      December 31, 2001
              
              0
              
              
              0
              
              
              60,000,000
              
              
              
              6,000
              
              
              
              (3,000
              )
              
              (3,100)
              
              
              (100)Expenses
      paid by shareholder
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              20,000
              
              
              
              
              
              20,000Issuance
      of common stock for cash
              
              
              
              
              
              
              
              93,320
              
              
              
              9
              
              
              
              49,991
              
              
              
              
              
              50,000Net
      loss for 2002
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (61,348)
              
              
              (61,348)Balance,
      December 31, 2002
              
              0
              
              
              0
              
              
              60,093,320
              
              
              
              6,009
              
              
              
              66,991
              
              
              (64,448)
              
              
              8,552Expenses
      paid by shareholder
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              3,510
              
              
              
              
              
              3,510Treasury
      stock received at no cost
              
              93,320
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              0Retirement
      of treasury stock
              
              (93,320
              )
              
              
              
              
              (93,320
              )
              
              
              (9
              )
              
              
              9
              
              
              
              
              
              0Net
      loss for 2003
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (428)
              
              
              (428)Balance,
      December 31, 2003
              
              0
              
              
              0
              
              
              60,000,000
              
              
              
              6,000
              
              
              
              70,510
              
              
              (64,876)
              
              
              11,634Net
      loss for 2004
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (140)
              
              
              (140)Balance,
      December 31, 2004
              
              0
              
              
              0
              
              
              60,000,000
              
              
              
              6,000
              
              
              
              70,510
              
              
              (65,016)
              
              
              11,494Net
      loss for 2005
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (130)
              
              
              (130)Balance,
      December 31, 2005
              
              0
              
              
              0
              
              
              60,000,000
              
              
              
              6,000
              
              
              
              70,510
              
              
              (65,146)
              
              
              11,364Net
      loss for 2006
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (130)
              
              
              (130)Balance,
      December 31, 2006
              
              0
              
              
              0
              
              
              60,000,000
              
              
              
              6,000
              
              
              
              70,510
              
              
              (65,276)
              
              
              11,234Issuance
      of common stock for cash
              
              
              
              
              
              
              
              1,400,000
              
              
              
              140
              
              
              
              69,860
              
              
              
              
              
              70,000Offering
      costs
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (16,741
              )
              
              
              
              
              (16,741)Net
      loss for 2007
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (26,467)
              
              
              (26,467)Balance,
      December 31, 2007
              
              0
              
              
              0
              
              
              61,400,000
              
              
              
              6,140
              
              
              
              123,629
              
              
              (91,743)
              
              
              38,026Issuance
      of common stock for cash
              
              
              
              
              
              
              
              18,140,000
              
              
              
              1,814
              
              
              
              905,186
              
              
              
              
              
              907,000Issuance
      of common stock under stock award agreement
              
              
              
              
              
              
              
              700,000
              
              
              
              70
              
              
              
              34,930
              
              
              
              
              
              35,000Offering
      costs
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (26,258
              )
              
              
              
              
              (26,258)Stock
      option expense
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              372,752
              
              
              
              
              
              372,752Issuance
      of stock under stock options
              
              
              
              
              
              
              
              400,000
              
              
              
              40
              
              
              
              19,960
              
              
              
              
              
              20,000Net
      loss for 2008
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (1,139,806)
              
              
              (1,139,806)Balance,
      December 31, 2008
              
              0
              
              
              0
              
              
              80,640,000
              
              
              
              8,064
              
              
              
              1,430,199
              
              
              (1,231,549)
              
              
              206,714Issuance
      of common stock for services
              
              
              
              
              
              
              
              91,000
              
              
              
              9
              
              
              
              90,991
              
              
              
              
              
              91,000Issuance
      of common stock for cash
              
              
              
              
              
              
              
              866,000
              
              
              
              87
              
              
              
              815,915
              
              
              
              
              
              816,002Offering
      costs
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (16,344
              )
              
              
              
              
              (16,344)
              )Stock
      option expense
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              702,280
              
              
              
              
              
              702,280Issuance
      of common stock under stock award agreement
              
              
              
              
              
              
              
              300,000
              
              
              
              30
              
              
              
              308,720
              
              
              
              
              
              308,750Stock
      options exercised
              
              
              
              
              
              
              
              33,400,000
              
              
              
              3,340
              
              
              
              1,666,660
              
              
              
              
              
              1,670,000Net
      loss for 2009
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (2,823,052)
              
              
              (2,823,052)
              )Balance,
      December 31, 2009
              
              0
              
              $
              -
              
              
              115,297,000
              
              
              $
              11,530
              
              
              $
              4,998,421
              
              $
              (4,054,601)
              
              $
              955,350Issuance
      of common stock for services
              
              
              
              
              
              
              
              135,848
              
              
              $
              13
              
              
              $
              98,070
              
              
              
              
              $
              98,083Issuance
      of common stock under stock award
              
              
              
              
              
              
              
              25,000
              
              
              $
              2
              
              
              $
              2,500
              
              
              
              
              $
              2,502Stock
      option expense
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              $
              299,878
              
              
              
              
              $
              299,878Net
      loss for quarter
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              $
              (1,245,954)
              
              $
              (1,245,954)Balance,
      March 31, 2010
              
              0
              
              
              0
              
              
              115,457,848
              
              
              $
              11,545
              
              
              $
              5,398,869
              
              $
              (5,300,555)
              
              $
              109,859
 
 The accompanying notes are an integral
part of the financial statements.
 
 -4-
 
 WINDTAMER
CORPORATION
 (A
Development Stage Company)
 Notes
To The Financial Statements
 Three-Month
Period ended March 31, 2010
 (Unaudited)
 
 Note
1 – Description of Business and Summary of Significant Accounting
Policies
  WindTamer
Corporation (the Company) was incorporated on March 30, 2001 in the State of New
York as Future Energy Solutions, Inc. and in November 2008 changed its name to
WindTamer Corporation. The Company is an independent developer of wind turbine
technology to harness wind as a source of power generation.
 
 Basis
of Preparation
 
 The
accompanying unaudited condensed financial statements have been prepared in
accordance with accounting principles generally accepted in the United States of
America (“GAAP”) for interim financial information and with the instructions to
Form 10-Q.  Accordingly, they do not include all of the information
required by GAAP for complete annual financial statement
presentation.
 
 In the
opinion of management, all adjustments (consisting only of normal and recurring
adjustments) necessary for a fair presentation of the results of operations have
been included in the accompanying unaudited condensed financial
statements.  Operating results for the three-month period ended March
31, 2010, are not necessarily indicative of the results to be expected for other
interim periods or the full fiscal year.  These financial statements
should be read in conjunction with the consolidated financial statements and
accompanying notes contained in the WindTamer Corporation Form 10-K for the
fiscal year ended December 31, 2009.
 
 Method
of Accounting
 
 The
accompanying financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of America
(“GAAP”).  WindTamer Corporation maintains its books and prepares its
financial statements on the accrual basis of accounting.
 
 The
Company has operated as a development stage enterprise since its inception by
devoting substantially all of its efforts to planning, raising capital, research
and development, and developing markets for its
products.  Accordingly, the financial statements of the Company have
been prepared in accordance with the accounting and reporting principles
prescribed by Accounting Standards Codification (ASC) 915, “Development Stage
Entities”.
 
 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 disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period.  Actual results could differ from those
estimates.
 
 Cash
and Cash Equivalents
 
 For
financial statement presentation purposes, the Company considers all short-term,
highly liquid investments with original maturities of three months or less to be
cash and cash equivalents.  The Company maintains its cash and cash
equivalents in bank deposit accounts, which at times may exceed federally
insured limits.  The Company believes it is not exposed to any significant
credit risk as a result of any non-performance by the financial
institutions.
 
 Inventory
 
 Inventory
consists primarily of parts and subassemblies for wind turbines and is stated at
the lower of cost or market value.  The Company capitalizes applicable
direct and indirect costs incurred in the Company’s manufacturing operations to
bring its products to a sellable state.  As of March 31, 2010,
inventory consists of raw materials amounting to $236,972 and work-in-process
amounting to $117,700.
   -5-
 
 Fixed
Assets
 
 Fixed
assets are recorded at cost.  Depreciation is on a straight line basis
over the shorter of the estimated useful lives or the related lease for
leasehold improvements.  Leasehold improvements for space leased on a
month-to-month basis are expensed when incurred. Expenditures for renewals and
betterments are capitalized.  Expenditures for minor items, repairs
and maintenance are charged to operations as incurred.  Any gain or loss
upon sale or retirement due to obsolescence is reflected in the operating
results in the period the event takes place.
 
 Intangible
Assets
 
 Intangible
assets consist of costs associated with the application and acquisition of the
Company’s patents and trademarks. Patent application costs are capitalized and
amortized over the estimated useful life of the patent, which generally
approximates its legal life.
 
 Impairment
of Long-Lived Assets
 
 Long-lived
assets are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be
recoverable.  Recoverability of assets to be held and used is measured
by a comparison of the carrying amount of an asset to future net undiscounted
cash flows expected to be generated by the asset, including its ultimate
disposition.  If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying
amount of the assets exceeds the fair value of the assets.  Fair value
is determined based on discounted cash flows or appraised values, depending on
the nature of the assets.  During the quarter ended March 31, 2010,
and for the year ended December 31, 2009 no impairment was considered
necessary.
 
 Fair
Value of Financial Instruments
 The
carrying amount of cash, accounts payable and accrued expenses are reasonable
estimates of their fair value due to their short maturity.
 
 Revenue
Recognition
 
 Revenue
is recognized when all of the following conditions are satisfied: (1) there
is persuasive evidence of an arrangement; (2) the service or product has been
provided to the customer; (3) the sale price to be paid by the customer is fixed
or determinable; and (4) the collection of the sale price is reasonably
assured.  Amounts billed and/or collected prior to satisfying our
revenue recognition policy are reflected as customer deposits.
 
 Research
and Development Costs
 
 All costs
related to research and development are expensed when incurred. Research and
development costs consist of expenses to develop prototypes. Specifically, these
costs consist of engineering fees, labor and manufacturing, materials, and
generators.
 
 Warranty
Costs
 
 The
Company’s standard warranty on each turbine sold protects against defects in
design, material and workmanship under normal use for a six year period.
Historical data is not available to enable the Company to estimate the expense
associated with the future warranty costs, therefore no liability has been
recorded in the financial statements.
   -6-
 
 Stock-Based
Compensation
 
 The
Company accounts for stock option awards granted under the Company’s Equity
Incentive Plans in accordance with ASC 718. Under ASC 718, compensation expense
related to stock-based payments is recorded over the requisite service period
based on the grant date fair value of the awards. Compensation previously
recorded for unvested stock options that are forfeited is reversed upon
forfeiture. The Company uses the Black-Scholes option pricing model for
determining the estimated fair value for stock-based awards. The Black-Scholes
model requires the use of assumptions which determine the fair value of
stock-based awards, including the option’s expected term and the price
volatility of the underlying stock.
 
 The
Company’s accounting policy for equity instruments issued to consultants and
vendors in exchange for goods and services follows the provisions of ASC
505-50.  Accordingly, the measurement date for the fair value of the
equity instruments issued is determined at the earlier of (i) the date at
which a commitment for performance by the consultant or vendor is reached or
(ii) the date at which the consultant or vendor’s performance is complete.
In the case of equity instruments issued to consultants, the fair value of the
equity instrument is recognized over the term of the consulting
agreement.
 
 Income
Taxes
 
 The
Company accounts for income taxes using the asset and liability approach, which
requires recognition of deferred tax liabilities and assets for the expected
future tax consequences of temporary differences between the carrying amounts
and the tax basis of such assets and liabilities.  This method
utilizes enacted statutory tax rates in effect for the year in which the
temporary differences are expected to reverse and gives immediate effect to
changes in income tax rates upon enactment.  Deferred assets are
recognized, net of any valuation allowance, for temporary differences and net
operating loss and tax credit carry forwards.  Deferred income tax
expense represents the change in net deferred assets and liability
balances.
 
 Basic
and Diluted Loss Per Share
 
 Basic
earnings per share reflect the actual weighted average of shares issued and
outstanding during the period.  Diluted earnings per share are
computed including the number of additional shares that would have been
outstanding if dilutive potential shares had been issued. In a loss year, the
calculation for basic and diluted earnings per share is considered to be the
same, as the impact of potential common shares is anti-dilutive.
 
 As of
March 31, 2010 there were 5,745,000 stock options outstanding that could dilute
future earnings.
 
 Reclassifications
 
 Certain
prior year amounts have been reclassified to conform to the current year
presentation.
  Note
2 - Going Concern
 
 The
financial statements have been prepared assuming that the Company will continue
as a going concern. The lack of sales and recurring losses from operations raise
substantial doubt about the Company’s ability to continue as a going concern.
Continuation of the Company is dependent on achieving sufficiently profitable
operations and additional financing. The Company completed a private placement
of its common stock in July 2008, that began in 2007, in which it raised gross
proceeds of $977,000 and during 2009 the Company conducted a private placement,
which resulted in proceeds of $816,000 as of December 31,
2009.  Exercises of stock option awards resulted in additional
proceeds of $1,670,000 for the year ended December 31, 2009. The Company plans
to continue the launch of the commercialization of its products utilizing its
current working capital and funds from a $1,000,000 line of credit with First
Niagara Bank established on April 26, 2010.  This added working
capital may not be sufficient to fund operational growth, and the Company may
need to raise additional capital. There can be no assurance that the Company
will be able to raise sufficient additional capital.
 
 -7-
   Note
3 – Long-lived Assets
 
 The
following table summarizes the Company’s long-lived assets as of
  3/31/10
              
              
              12/31/09Property
      and equipmentEquipment
              
              $
              56,551
              
              
              $
              44,360Leasehold
      Improvements
              
              
              86,621
              
              
              
              76,213Furniture
      and fixtures
              
              
              32,763
              
              
              
              30,436Software
              
              
              51,229
              
              
              
              40,308Total
      property and equipment before accumulated depreciation
              
              
              227,164
              
              
              
              191,317Less
      accumulated depreciation
              
              
              (29,053
              )
              
              
              (16,208
              )Total
      property and equipment
              
              
              198,111
              
              
              
              175,109Intangible
      assetsPatents
              
              
              34,862
              
              
              
              34,862Trademark
              
              
              4,525
              
              
              
              4,525Total
      intangible assets before accumulated amortization
              
              
              39,387
              
              
              
              39,387Less
      accumulated amortization
              
              
              (2,286
              )
              
              
              (2,110
              )Total
      intangible assets
              
              $
              37,101
              
              
              $
              37,277
 
 Amortization
of intangible assets is expected to amount to less than $1,000 per year for each
of the next five years.
 
 Note
4 – Stockholders’ Equity
 
 On
December 7, 2007, the Company effected a 428.57-to-1 stock split.  On
that date, the Company reduced the par value of common stock from $.01 to $.001
per share.  As a result of the stock split and change in par value,
common stock increased and additional paid-in capital decreased by
$2,930.  On November 25, 2008, the Company effected a 20-for-1 split
of its outstanding shares of common stock, resulting in there then being
approximately 79,640,000 common shares outstanding, and reduced the par value of
its stock from $.001 to $.0001 per share.  In addition, the Company’s
authorized shares were increased to 500 million common shares and 5 million
preferred shares.  The shares of preferred stock are undesignated
“blank check” shares.  References to share amounts in these financial
statements and notes have been adjusted to reflect these stock
splits.
 
 During
the year ended December 31, 2007, the Company sold 1,400,000 shares of common
stock for a price of $0.05, resulting in net proceeds of $53,259 after $16,741
of related costs associated with the private placement that were treated as a
reduction to Additional Paid-In Capital.
 
 During
the year ended December 31, 2008, the Company sold 18,140,000 shares of common
stock for a price of $0.05, resulting in net proceeds of $880,742 after $26,258
of related costs associated with the private placement that were treated as a
reduction to Additional Paid-In Capital.  During 2008 the Company
issued 400,000 shares of common stock in connection with stock option awards
exercised for a price of $0.05 per share that resulted in proceeds of
$20,000.  In addition, during 2008 the Company issued 1,000,000 shares
of restricted common stock under a consulting agreement with the Company
and under the 2008 Equity Incentive Plan, of which 700,000 vested in 2008 and
300,000 vested in 2009 (see Note 6).
  -8-
  
 During
the year ended December 31, 2009, the Company sold 741,000 shares of common
stock for a price of $1.00 per share and 125,000 shares for a price of $0.60,
resulting in net proceeds of $799,658 after $16,344 of related costs associated
with the private placement that were treated as a reduction to Additional
Paid-In Capital.  In addition, 33,400,000 stock option awards were
exercised for a price of $0.05 per share that resulted in proceeds of $1,670,000
during the year ended December 31, 2009 and 91,000 shares were issued in
exchange for services provided by a vendor amounting to $91,000.
 
 During
the quarter ended March 31, 2010, 135,848 shares were issued in exchange for
services totaling approximately $98,000 provided by three vendors.
 
 Note
5 – Stock Based Compensation
 
 The
Company has established the “2008 Equity Incentive Plan” which is a shareholder
approved plan that permits the granting of share options and shares to
employees, directors and consultants.   The 2008 Equity Incentive Plan
provides for the issuance of up to 8,000,000 shares of common stock of which
1,000,000 shares are available for grant as Incentive Stock
Options.  The exercise price for options awarded is 100% of the fair
market value of the common stock on the day of grant.  The options
generally vest either immediately on the date of grant or 1 to 3 years from the
date of grant.  On December 30, 2009, the Board of Directors approved
an amendment to increase the number of shares available for award under the plan
from 8,000,000 to 16,000,000.  The Company plans to present the
amendment for shareholder approval at its Annual Meeting of Shareholders in
April 2010.
 
 For the
quarter ended March 31, 2010, the Company recorded compensation costs for
options and shares granted under the plan amounting to $302,380, as compared to
$449,538 for the quarter ending March 31, 2009. This expense did not have an
impact on basic or diluted net loss per share for the three months ended March
31, 2010 ($0.01 increase in basic and diluted net loss per share for the quarter
ended March 31, 2009).
 
 Management
has valued the options at their date of grant utilizing the Black Scholes Option
Pricing Model.  Prior to the fourth quarter of 2009, there was not a
public market for the Company shares.  Accordingly, the fair value of
the underlying shares was determined based on recent transactions by the Company
to sell shares to third parties and other factors determined by management to be
relevant to the valuation of such shares.  Beginning in the fourth
quarter of 2009, the Company’s quoted price on the OTCBB was used to value the
underlying shares.  The excepted volatility was calculated using the
historical volatility of a similar public entity in the alternative electricity
industry in accordance with Question 6 of SAB Topic 14.D.1.  In making
this determination and finding another similar company, the Company considered
the industry, stage of life cycle, size and financial leverage of such other
entities.  Based on the development stage of the Company, similar
companies with enough historical data are not available.   The
Company was able to find one entity that met the industry criterion and as a
result has based its expected volatility off this Company’s historical stock
prices for a period similar to the expected term of the option.  The
risk-free interest rate is based on the implied yield available on U.S. Treasury
issues with an equivalent term approximating the expected life of the options
depending on the date of the grant and expected life of the
options.  The expected life of options used was based on the
contractual life of the option granted.  The Company determined the
expected dividend rate based on the assumption and expectation that earnings
generated from operations are not expected to be adequate to allow for the
payment of dividends in the near future.  The following
weighted-average assumptions were utilized in the fair value calculations for
options granted:
 
 Quarter
      ended
              
              Quarter
      endedMarch
      31, 2010
              
              March
      31, 2009Expected
      dividend yield
              
              
              0
              %
              
              
              0
              %Expected stock price
      volatility
              
              
              48.6
              %
              
              
              40
              %Risk-free
      interest rate
              
              
              1.14
      – 3.85
              %
              
              
              2.9
              %Expected
      life of options
              
              3
      - 10 Years
              
              10
      Years
 
 -9-
 
 The
following table summarizes the status of the Company’s aggregate stock options
granted:
 
 Number
      of Shares Remaining Options
              
              
              Weighted
                Average
                Exercise
                Price
              
              Weighted-Average
      Remaining Contractual Term
              
              Aggregate
      Intrinsic ValueOutstanding
      at January 1, 2010
              
              
              4,661,667
              
              
              $
              .72Options
      granted during 2010
              
              
              1,083,333
              
              
              $
              .73Outstanding
      at March 31, 2010
              
              
              5,745,000
              
              
              $
              .72
              
              7.9
      years
              
              $
              329,500Exercisable
      at March 31, 2010
              
              
              1,500,000
              
              
              $
              .49
              
              5.4
      years
              
              $
              328,000
 
 The
weighted average fair value of options granted during quarter ending March 31,
2010 was approximately $.73($.55 – for the quarter ending March 31,
2009).   During the quarter ended March 31, 2010, and March 31,
2009, no shares vested.
  The
following table summarizes the status of the Company’s aggregate non-vested
shares granted:
  Non-vested Shares
              
              Number
      of
                Non-vested Shares
              
              
              Weighted
      Average
                Fair Value at
      Grant DateNon-vested
      at December 31, 2009
              
              
              25,000
              
              
              $
              0.45Vested
              
              
              (25,000
              )
              
              $
              0.45Non-vested
      at March 31, 2010
              
              
              0
  As of
March 31, 2010, the unrecognized compensation cost related to non-vested share
based compensation arrangements granted under the plan was approximately $
$1,405,363 ($410,190 as of March 31, 2009). These costs are expected to be
recognized over a weighted average period of 1.02 years (.75 years at March 31,
2009).
 
 Note
6 – Consulting Agreement
 
 In
October 2008, the Company entered into an agreement with an individual to
provide management consulting services through September 30, 2009.  
The Company also entered into a Stock Award Agreement with this individual on
the same date.  The consultant received one million shares of common
stock, vesting according to a schedule.  The Company valued the stock
on each vesting date using the fair market value of the common
stock.  The fair value of the equity instrument is recognized as an
expense over the period the related service is performed.   The
Company issued the final 300,000 shares of common stock to the consultant upon
meeting performance criteria in the first quarter of 2009 and recognized
$300,000 of stock based compensation during the year ended December 31,
2009.  Based on information received after the purported vesting dates
of the award, the Company does not believe that the individual has satisfied the
vesting criteria for the issuance of said shares.
 
 During
2009, this individual was appointed the Chief Operating Officer and awarded an
option to purchase 1,000,000 shares of common stock at $1.00 per share under the
2008 Equity Incentive Plan.  These options are included in the Stock
Based Compensation footnote above.  Later in 2009, this individual
resigned from his position and as an employee of the Company.  He was
vested in 50% of the stock option award. Under the terms of the stock option
award agreement all vested stock options were forfeited since he did not
exercise those stock options within 120 days from the effective date of his
resignation. The unvested stock options under the stock option award were
forfeited due to his resignation. As a result, $164,400 of previously recorded
stock based compensation related to the stock options was reversed.
  -10-
  
 Note
7 – Related Party Transactions
  Certain
services were provided to the Company by immediate family members of an officer
/ shareholder of the Company. These services relate to inventory production,
leasehold improvements, research and development efforts and administrative
wages and amounted to $61,170 for the quarter ended March 31, 2010, $36,803 for
the quarter ended March 31, 2009, and $383,802 since inception. As of March 31,
2010, there were no payments due to these related parties ($60,496 at December
31, 2009)
 
 Note
8 – Commitments and Contingencies
 
 Employment
Agreements
 
 As of
December 31, 2009, the Company had entered into employment agreements with
various members of management.  These employment agreements have three
year terms with the option to extend employment for a fourth year, expiring at
various dates from July 14, 2012 to December 28, 2012.  Annual
compensation required under these agreements includes base salary aggregating
approximately $800,000, as well as annual bonuses based on achieving certain
performance milestones.  All of these agreements contain severance
provisions in the event of termination of the employee without cause that
require continued payment of the annual salary through the term of the agreement
but for a minimum period of at least two years.
 
 As of
March 31, 2010, the Company had entered into employment agreements with two
additional members of management.  These agreements each have a three
year term with the option to extend employment to a fourth
year.  Annual compensation under all agreements in place as of March
31, 2010 amounts to $1,100,000.
 
 Operating
lease
 
 On August
20, 2009, the Company entered into a lease for its current office space in
Geneseo, New York requiring a monthly rental payment of $1,400, which
commenced on November 1, 2009 and expires October 31, 2011 with a two year
renewal option.  Future annual commitments by year under this lease
are as follows:
 
 Rental Commitment2010
              
              $
              16,8002011
              
              $
              14,000
 
 Warranty
 
 During
the year ended December 31, 2009 and for the quarter ended March 31, 2010, the
Company entered into a number of sales orders for wind turbine
units.  These sales orders required certain deposits of the
agreed-upon purchase price upon acceptance of the sales order.  The
advance payments received as of March 31, 2010 amounted to $224,438 (the
December 31, 2009 total was $95,000) and have been included in customer deposits. Of the
orders received before December 31, 2009, two turbines have been installed,
proceeds of which are netted against research and development
expenses.We expect to install the remaining  units
associated with these deposits during the second and third quarters of 2010, as
we obtain permits and zoning approvals from customer’s town officials, complete
site assessments, and continue product evaluation. The sales orders included
product warranties; however, based on the lack of operating history, the
Company is unable to reasonably determine an estimate of this
liability.
 
 State
refundable credit
 
 The
Company filed its 2009 and 2008 New York State corporate income tax return
during March, 2010 and July 2009, respectively, and anticipates a refund upon
approval by state tax authorities in the amount of $132,002 for 2009, and
$31,217 for 2008, related to tax credits for being a Qualified Emerging
Technology Company (QETC).  These refunds will be recognized when
received by the Company.
   -11-
 
 Other
matters
 
 The
Company entered into an agreement with Alternative Wind Resources, LLC ("AWR")
to produce a 15kWh prototype wind turbine unit by May 30, 2009, in which AWR
agreed to reimburse the Company for engineering and materials costs for
development of this larger prototype unit.  The Company has demanded
$77,413 as reimbursement for engineering and materials costs, which has not been
paid to date.  AWR also agreed to provide the Company with a purchase
order for one thousand (1,000) 15kWh units within one year after delivery of the
prototype.  The prototype was not completed or delivered to
AWR.  AWR provided a $50,000 deposit for the orders, but never
provided the purchase order.  The agreement also granted AWR the
exclusive right to purchase all 15kWh and larger wind turbine units for wind
farm and industrial uses and development.  On April 29, 2009 the
Company also granted AWR an option for 60 days to enter into an exclusive
license agreement with the Company for 50 years for the sale of the Company’s
15kWh wind turbines and larger upon the payment of a $6.0 million license fee.
The option was subject to extension if the due diligence provided to AWR by the
Company was not reasonably acceptable. AWR paid a $10,000 fee for the option.
The payments from AWR, aggregating $60,000 are included in accounts payable and
accrued expenses in the accompanying balance sheet.  On September 10,
2009, the Company received a letter from counsel to AWR terminating the March
2009 agreement and the April 2009 option described above and demanding the
return of $60,000 provided to the Company.  The Company has confirmed
the termination of the agreements and has disputed these requests although there
can be no assurance that it will be successful.
 
 Note
9 – Subsequent Events –
 
 In April,
2010, the Company established a $1,000,000 line of credit with First Niagara
Bank to help supplement cash flow. The
borrowings under the loan agreement are secured by limited guarantees provided
by two of our officers, William Schmitz and Molly Hedges, and one of our
shareholders, Michael Hughes.  Additionally, Gerald Brock, Chairman
and founder of the Company, granted the guarantors the right to sell his shares
in the Company in the event they are required to pay under the
guarantees.  Mr. Brock pledged his 20,000,000 shares of the Company’s
common stock owned by him as security for his obligations.
 
 In
connection with the guarantees, we issued to Mr. Brock and the guarantors
warrants to purchase an aggregate of 29,000,000 shares of our common stock at
$0.25 per share.  The warrants have a term of 10 years, with a
six-month incremental vesting schedule in tranches of 25% of the shares under
each warrant from the date of issue.
 
 Also on
April 26, 2010, Mr. Brock agreed to the voluntary cancellation of 29,050,000
shares of the Company’s common stock owned by him for no additional
consideration.  As a result, the Company’s outstanding shares of
common stock were reduced from 115,457,848 to 86,407,848 and were returned to
authorized but unissued shares.
 
 
 Item
2. Management’s Discussion and Analysis of Financial Condition and Results of
Operations
 
 The following discussion should be
read in conjunction with the historical financial statements and the related
notes and the other financial information included elsewhereinthis report. This discussion
contains forward-looking statements that involve risks and uncertainties. Our
actual results could differ materially from those anticipated in these
forward-looking statements as a result of any number of factors, including those
set forth under “Information Concerning Forward-Looking Statements” and under
other captions contained elsewhere in this report.
 
 Overview
 
 We are a
development-stage company that has developed a new type of wind turbine, based
on our patented technology.  We believe that our patented technology
enables our turbines to harness wind energy more efficiently than other turbines
currently available in the market, thereby enabling our turbines to provide more
energy than other comparably sized and priced turbines.
 
 We were
formed in 2001 and received our first patent in 2003. From 2003 through the
third quarter of 2009, we focused virtually all of our resources on research and
development, including the testing of multiple prototypes.  We
continue to collect a variety of test data related to the performance of
the machine.  During the fourth quarter of 2009, we began hiring our
experienced management team as we expanded our efforts from research and
development to also include sales, marketing, operations and related
efforts.  In the fourth quarter of 2009, we began selling our turbines, and
had our first installations of turbines in the first quarter of 2010. Proceeds
from the installations were netted against research and development costs, where
the cost of the installs, which exceeded customer proceeds, were expensed .
We continue to collect data, monitor our install sites, and enhance the original
design concept in order to maximize output potential, and as a result, we
believe that we continue to operate as a development stage company. We are
filling our supply chain based upon minimal, prototype vendor orders, and have
not yet begun ramping our suppliers to full-scale production
levels.
   -12-
  
 We are
seeking to market our products in the residential, commercial, governmental,
industrial, recreational, and portable markets. In the future, we intend to
develop WindTamer turbines of several sizes and capabilities for the low-head
hydro renewable energy and transportation markets.  Our initial
customers, who have placed orders and have paid down payment deposits, are
slated for installation in the second and third quarters of
2010.  These customers have purchased our smaller turbines in the
residential, agricultural, educational and small scale commercial
markets.  We are targeting vertical markets, including governmental,
educational, industrial and recreational markets for recurring
business.
 
 Financial
Operations
  The
Company expects to incur substantial additional costs, including costs related
to expanding our operations to meet our anticipated growth and ongoing research
and development activities. We have utilized the proceeds raised from our
private placements conducted in 2008 and 2009 to sustain our operations and
produce our WindTamer prototype turbines. In April, 2010, we established a $1.0
million revolving credit facility with First Niagara Bank to help supplement our
cash flow.  The facility is secured by personal guarantees of two our
officers and one other shareholder.
 
 Our
future cash requirements will depend on many factors, including our level and
types of sales and the timing and progress of those efforts, continued progress
in our research and development programs, the costs involved in filing,
prosecuting and enforcing patents, competing technological and market
development and the cost of product commercialization. We do not expect to
generate a positive cash flow from operations at least until the end of 2010,
and possibly later if we are unable to establish satisfactory manufacturing and
distribution arrangements, or our products are not initially accepted by
the market. This will be affected to a large extent to our ability to secure
multi-unit orders from larger commercial customers who we have begun
targeting.
 
 We may
require additional external financing to sustain our operations if we cannot
achieve positive cash flow from our anticipated operations and new credit
facility.  Additionally, even if we are able to achieve positive cash
flow from operations following the initial launch of our products we may
continue to seek to raise additional capital to accelerate the growth of our
operations or build on our manufacturing and distribution infrastructure.
Success in our future operations is subject to a number of technical and
business risks, including our continued ability to obtain future funding,
satisfactory product development, and market acceptance for our products as
further described in our Annual Report on Form 10-K under the heading “Risk
Factors” and under other captions contained elsewhere in this
report.
 
 Results
of Operations
 
 Results
of Operations for Quarter Ended March 31, 2010 Compared to Quarter Ended March
31, 2009
 
 Revenues
 
 We are a development stage company and
have generated no significant revenues since our inception in
2001.   For the quarter ending March 31, 2010, we installed two
turbine units, and netted the proceeds from the sale against research and
development expense, where the costs, which significantly exceeded proceeds,
were charged.   We continue to focus significant resources on
research and development, including the testing of multiple prototypes and
gathering and assessing data from installed and demo units.  We continue to
expand our selling efforts in residential, agricultural, small scale commercial,
educational and governmental channels via our website, our direct sales force
and our distribution network. We have deposits from customers totaling
approximately $224,000 as of March 31, 2010.  We expect to install the
units associated with these deposits during the second and third quarters of
2010, as we obtain permits and zoning approvals from customer’s town officials,
complete site assessments, and continue product evaluation although there can be
no assurance that we will be able to meet this schedule.
 
  -13-
  
 Research
and Development
 
 Research
and development costs increased in the quarter ended March 31, 2010 by $455,156,
or 405%, to $567,418 when compared to the quarter ended March 31, 2009, and are
$1,691,595 since inception. This increase in research and development expenses
was comprised primarily of labor and materials for the construction,
installations, testing and refinement of our production models. During the first
quarter of 2010, we incurred significant costs associated with preparing for
full-scale production, which we expect to commence during the second quarter of
2010.  These costs included the establishment of an operations
department, and reserves to correctly value on-hand inventory at lower of cost
or market.
 
 Selling,
General and Administrative
 
 Selling,
general and administrative expenses, or SG&A expenses, for the quarter ended
March 31, 2010 were $680,189, a decrease of $21,950 or 3%, when compared to the
quarter ended March 31, 2009, and are $3,612,193 since inception.  The
decrease over the prior year was related to the costs associated with
stock-based compensation awarded to our former COO during the first quarter of
2009, partially offset by headcount increases required as we ramped our business
operations to facilitate our planned entrance to commercialization.
 
 
 Depreciation
and Amortization
 
 Depreciation
and amortization charges were $13,021 for the quarter ended March 31, 2010
compared to $2,485 during the quarter ended March 31, 2009, and $31,339 since
inception.  This was a result of depreciation charges related to
leasehold improvements, computer related equipment and software.
 
 
 Other
Income (Expense)
 
 Interest
income for the quarter ended March 31, 2010 was nominal due to the low interest
rates received on our deposits. We continue to assess the level of risk and
related rates within our current banking arrangement as well as opportunities
with other institutions in order to leverage our cash balances while minimizing
our risk.
 
 
 Net
Loss
 
 We
incurred net losses of $1,245,954 and $814,401 for the first quarters of fiscal
2010 and 2009, respectively, and $5,300,555 cumulative since
inception.  The loss for the quarter ended March 31, 2010 is
reflective of ramping internal resources, loading our supply chain, and
continuing our initial product launch.
 
 During
the next twelve months, we expect to take the following steps in connection with
the further development of our business and the implementation of our plan of
operations.
 
 We have
initially introduced WindTamer turbines from 1.0 to 3.5 kilowatts for
commercial, industrial, governmental, educational and residential
use. Larger turbines, including a 15kWh turbine, are currently under
development. We have not yet begun large scale manufacturing of our turbines or
large scale marketing of them to customers, although we expect to commence both
during 2010. We have begun working with distributors for WindTamer turbines for
domestic sale.  We plan to evaluate licensing opportunities later in
2010.  At this time, however, we have no definitive licensing agreements or
arrangements to do so and there can be no assurance that we will be able to
enter into successful arrangements by that time or at all.
   -14-
 
 We have
utilized the proceeds we raised from our private placements conducted in 2008
and 2009 to implement our business plan and build prototypes of our WindTamer
turbines.  We plan to utilize these remaining proceeds in the manufacture
and commercialization of our products and technology. Late in 2009, and
during the first quarter of 2010, we expanded our management and sales and
marketing teams to facilitate our growth and expansion. We began taking orders
for our initial sales in late 2009 and made our first installations during the
first quarter of 2010.  Currently, we outsource our component
manufacture; however, we plan to evaluate the cost benefit of bringing some
component manufacturing in house during the course of 2010.
 
 There can
be no assurance that our management will be successful in completing our product
development programs, implementing the corporate infrastructure to support
operations at the levels called for by our business plan, conclude a successful
sales and marketing plan with third parties to attain significant market
penetration or that we will generate sufficient revenues to meet our expenses or
to achieve or maintain profitability.
 
 
 Liquidity
and Capital Resources
 
 As of
March 31, 2010, we had a working capital deficit of $125,353 as compared to
$742,964 of working capital as of December 31, 2009.  The decrease in
working capital is attributed to the net loss generated from operations for the
quarter ended March 31, 2010 which included the use of capital in the
development of our internal resources, and our initial product launch and
related expenses.  Our principal source of liquidity has been from our
founder, and proceeds of $977,000 from a private placement of our common stock
completed in 2008 and the proceeds from two private placements conducted in
2009.
 
 We
launched the commercialization of our products in the third quarter of
2009 with installations of turbines beginning in the first quarter of
2010.  We believe that we will need additional capital to meet anticipated
demand for our products over the next twelve months.  We raised
approximately $2.6 million in private equity financing in 2009.  We believe
that we will need approximately $1.5 to $2.5 million of additional capital over
the next twelve months to bring our business to a level to be able to sustain
positive cash flow from operations.  If we are unable to generate this
amount from our new $1.0 million credit facility and operations, we will need to
seek additional financing.  We have outsourced our component builds to
local manufacturers to begin sales and during 2010 we plan to perform a cost
benefit analysis to determine the benefits associated with in-house component
manufacturing. There can be no assurance that we will be successful in raising
any needed amounts on these terms for these uses or that these amounts will be
sufficient for our plans.
 
 On April
26, 2010, we entered into a Loan Agreement for a working capital line of credit
with our lender, First Niagara Bank.  The loan agreement consisted of
a revolving credit facility with an aggregate maximum commitment of $1.0
million.  Our revolving credit facility bears a prime variable
interest rate (3.25% as of April 26, 2010) subject to a minimum rate of no less
than 3.25%.  Interest is payable monthly.  The credit
facility matures on May 1, 2011, and all borrowings are due and payable on that
date. The loan agreement includes customary covenants related to, among other
things, restrictions on our ability to incur additional debt or encumbrances on
our assets, or pay or declare dividends, make sales of assets, make certain
investments and lending, but does not contain any specific financial
covenants.
 
 The
borrowings under the Loan Agreement are secured by a limited guarantees provided
by two of our officers, William Schmitz and Molly Hedges, and one of our
shareholders, Michael Hughes. Additionally, Gerald Brock, Chairman and founder
of the Company, granted the guarantors the right to sell his shares in the
Company in the event they are required to pay under the
guarantees.  Mr. Brock pledged his 20,000,000 shares of the Company’s
common stock owned by him as security for his obligations.
 
 In
connection with the guarantees and pledge, we issued to Mr. Brock and the
guarantors warrants to purchase an aggregate of 29,000,000 shares of our common
stock at $0.25 per share.  The warrants have a term of 10 years, with
a six-month incremental vesting schedule in tranches of 25% of the shares under
each warrant from the date of issue.
  -15-
  
 Also on
April 26, 2010, Mr. Brock agreed to the voluntary cancellation of 29,050,000
shares of the Company’s common stock owned by him for no additional
consideration.  As a result, the Company’s outstanding shares of
common stock were reduced from 115,457,848 to 86,407,848 and were returned to
authorized but unissued shares.
 
 There can
be no assurance that any revenues from our operations and our new credit
facility will be sufficient to satisfy all of our cash requirements and
implement our plan of operations for the next twelve month period.  In such
event, we may need to raise additional capital through debt or equity financing.
Additionally, even if we are able to achieve cash flow from operations we may
seek to raise additional capital to accelerate the growth of our operations or
build on our manufacturing and distribution infrastructure.
 
 Due to
the uncertainty of our ability to meet our current operating and capital
expenses, in their report on our audited annual financial statements as of and
for the years ended December 31, 2009 and 2008, our independent auditors
included an explanatory paragraph regarding concerns about our ability to
continue as a going concern. Our financial statements contain additional note
disclosures describing the circumstances that led to this disclosure by our
independent auditors. There is substantial doubt about our ability to continue
as a going concern as the continuation and expansion of our business is
dependent upon obtaining further financing, successful and sufficient market
acceptance of our products, and, finally, achieving a profitable level of
operations.
 
 The
issuance of additional equity securities by us may result in a significant
dilution in the equity interests of our current shareholders. Obtaining
commercial loans, assuming those loans would be available, will increase our
liabilities and future cash commitments. There is no assurance that we will be
able to obtain further funds required for our continued operations or that
additional financing will be available to us when needed or, if available, that
it can be obtained on commercially reasonable terms. If we are not able to
obtain the additional financing on a timely basis, we will not be able to meet
our other obligations as they become due and we will be forced to scale down or
perhaps even cease our operations. Furthermore, our ability to raise additional
capital may be made more difficult by the global financial crisis.
   Off-Balance
Sheet Arrangements
 
 We have
no significant off-balance sheet arrangements that have, or are reasonably
likely to have, a current or future effect on our financial condition, changes
in financial condition, revenues or expenses, results of operations, liquidity,
capital expenditures, or capital resources that is material to
shareholders.
   Critical
Accounting Policies
 
 As of
March 31, 2010, the Company’s critical accounting policies and estimates have
not changed materially from those set forth in the Company’s Annual Report on
Form 10-K for the year ended December 31, 2009.
   Information
Concerning Forward-Looking Statements
 
 All
statements in this Form 10-Q, future filings by the Company with the Securities
and Exchange Commission (“Commission”), the Company’s press releases and oral
statements by authorized officers of the Company, other than statements of
historical facts, that address future activities, events or developments are
“forward-looking statements.”
   -16-
 
 These
forward-looking statements include, but are not limited to, statements relating
to our anticipated financial performance, business prospects, new developments,
new merchandising strategies and similar matters, and/or statements preceded by,
followed by or that include the words “believes,” “could,” “expects,”
“anticipates,” “estimates,” “intends,” “plans,” “projects,” “seeks,” or similar
expressions. We have based these forward-looking statements on certain
assumptions and analyses made by us in light of our experience and on our
assessment of historical trends, current conditions, expectations, and
projections about expected future developments and events, as well as on other
factors we believe are appropriate under the circumstances and other information
currently available to us. These forward-looking statements are subject to
risks, uncertainties and assumptions, including those described under the
heading “Risk Factors” appearing in Item 1A of Part I of the Company’s 10-K
filed with the Commission, for the fiscal year ended December 31, 2009, that may
affect the operations, performance, development and results of our business. You
are cautioned not to place undue reliance on these forward-looking statements,
which speak only as of the date stated, or if no date is stated, as of the date
hereof.
 
 Although
we believe that the expectations reflected in the forward-looking statements are
reasonable, there can be no assurance that such expectations or any of the
forward-looking statements will prove to be correct, and actual results could
differ materially from those projected or assumed in the forward-looking
statements. Our future financial condition and results of operations, as well as
any forward-looking statements, are subject to inherent risks and uncertainties.
All forward-looking statements and reasons why results may differ contained
herein are made as of the date hereof, and we assume no obligation to update any
such forward-looking statement or reason why actual results might differ. All of
the forward-looking statements contained herein are qualified by these
cautionary statements.
  
 Item 3. Quantitative
and Qualitative Disclosures About Market Risk
 
 A smaller
reporting company is not required to provide the information required by this
Item.
  
 Item
4. Controls and Procedures
 
 The
Company’s management has established disclosure controls and procedures designed
to ensure that information required to be disclosed by the Company in the
reports that it files or submits under the Securities Exchange Act of 1934, as
amended (the “Exchange Act”) is recorded, processed, summarized and reported
within time periods specified in the SEC rules and forms. Such disclosure
controls and procedures include, without limitation, controls and procedures
designed to ensure that information required to be disclosed by the Company in
the reports that it files or submits under the Exchange Act is accumulated and
communicated to the Company’s management to allow timely decisions regarding
required disclosure.
 
 Based on
the evaluation of the effectiveness of our disclosure controls and procedures,
our Chief Executive Officer and Chief Financial Officer concluded that our
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)) were not effective as of March 31, 2010.  This
conclusion is based on the material weaknesses in our internal control over
financial reporting discussed further identified by our management as of
December 31, 2009.
 
 In
connection with management’s assessment of our internal control over financial
reporting described above, management identified the following material
weaknesses in the Company’s internal control over financial reporting as of
December 31, 2009:
 
 ·
              We
      were ineffective in maintaining a sufficient complement of qualified
      accounting personnel and controls in order to assure adequate segregation
      of duties where all aspects of our financial reporting process were
      performed by a single individual with limited segregation of duties and
      limited secondary review.  As a result of the above, there was a
      lack of segregated duties in the following business processes: payroll,
      treasury and accounts payable.  Specifically, we determined that
      because of the latter situations, our controls over the preparation,
      review and monitoring of the financial statements were ineffective to
      provide reasonable assurance that financial disclosures agreed to
      appropriate supporting detail, calculations or other
      documents.   -17-
  ·
              We
      had a general lack of formally documented comprehensive entity level
      controls, including a process for anonymously reporting potential code of
      conduct violations without fear of retribution and a lack of a formal
      audit committee and audit committee
charter.
 
 ·
              Our
      documentation and application of general computer control policies and
      procedures associated with information technology systems used for
      financial reporting were incomplete to the level necessary to reasonably
      assure the financial statements and related disclosures were complete and
      accurate.
 
 We are
committed to improving our disclosure controls and procedures and internal
controls over financial reporting.  As part of this commitment, we took
steps during 2009 to improve our disclosure controls and procedures, including
establishing more robust procedures for the review and reporting of material
agreements.   We took additional steps during the first quarter of
2010 to remediate the material weaknesses in our internal controls over
financial reporting including, the appointment of Molly Hedges as Controller and
Vice-President of Finance and the establishment of an independent Audit
Committee and charter for the committee.
 
 We will
continue to monitor and evaluate the effectiveness of our disclosure
controls and procedures and our internal controls over financial reporting on an
ongoing basis and are committed to taking further action and implementing
additional enhancements or improvements, as necessary and as funds
allow.  These ongoing efforts are focused on (i) developing a
sufficient code of conduct including a process for anonymously reporting
potential code of conduct violations without fear of retribution, and
(ii) the issuance of general computer control policies and procedures
associated with information technology systems used for financial reporting to
the level necessary to reasonably assure the financial statements and related
disclosures are complete and accurate.
 
 There can
be no assurance, however, that our disclosure controls and procedures will
detect or uncover all failures of persons within the Company to disclose
material information otherwise required to be set forth in our periodic reports.
There are inherent limitations to the effectiveness of any system of disclosure
controls and procedures, including the possibility of human error and the
circumvention or overriding of the controls and procedures. Accordingly, even
effective disclosure controls and procedures can only provide reasonable, not
absolute, assurance of achieving their control objectives.
 
 Notwithstanding
the material weaknesses discussed above, management believes that the financial
statements included in this report present fairly, in all material respects, our
financial position, results of operations, and cash flows for the periods
presented in accordance with U.S. generally accepted accounting
principles.
   Changes
in Internal Control Over Financial Reporting
 
 Except as
described above under the heading, “Evaluation of Disclosure Controls and
Procedures,” there was no change in the Company’s internal control over
financial reporting that occurred during the quarter ended March 31, 2010 that
has materially affected, or is likely to materially affect, the Company’s
internal control over financial reporting.
 
 Part
II – OTHER INFORMATION
 
 Item
1. Legal Proceedings
 
 From time
to time we are involved with legal proceedings, claims and litigation arising in
the ordinary course of business. As of the date of this report we are not a
party to any material pending legal proceedings.
 
 Item
1A. Risk Factors
 
 A smaller
reporting company is not required to provide the information required by this
Item.
   -18-
  
 Item
2.  Unregistered Sales of Equity Securities and Use of
Proceeds
 
 None.
  Item
3.  Defaults Upon Senior Securities
 
 None.
 
 Item
5.  Other Information
 
 None
      -19-
    Item
6.  Exhibits
 
 (a)
              
              Exhibits:3.1
              
              Restated
      Certificate of Incorporation of WindTamer Corporation, dated November 25,
      2008 (incorporated herein by reference to Exhibit 3.1 to the Registration
      Statement on Form 10 of WindTamer Corporation dated November 26, 2008
      (File No. 000-53510)).3.2
              
              Amended
      and Restated By-Laws of WindTamer Corporation, dated March 10,
      2010.
                (incorporated
      herein by reference to Exhibit 3.2 to the Annual Report on Form 10-K of
      WindTamer Corporation dated March 11, 2010 (File No.
      000-53510))4.1
              
              Registration
      Rights Agreement dated as of April 26, 2010, by and among WindTamer
      Corporation and the Holders named therein (incorporated by reference
      herein to Exhibit 4.1 to the Current Report on Form 8-K filed by WindTamer
      Corporation dated April 27, 2010 (File No. 000-53510)).4.2
              
              Registration
      Rights Agreement dated as of April 26, 3020, by and among WindTamer
      Corporation and the Holders named therein (incorporated by reference
      herein to Exhibit 4.1 to the Current Report on Form 8-K filed by WindTamer
      Corporation dated April 21, 2010(File No. 000-53510)).10.1
              
              WindTamer
      Corporation Non-Employee Director Compensation Plan. (incorporated by
      reference herein to Exhibit 10.2 to the Current Report on Form 8-K filed
      by WindTamer Corporation dated January 4, 2010 (File No.
      000-53510)).*10.2
              
              Employment
      Agreement between WindTamer Corporation and Molly Hedges, dated as
      of  March 1, 2010 ((incorporated by reference herein to Exhibit
      10.1 to the Current Report on Form 8-K filed by WindTamer Corporation
      dated March 1, 2010 (File No. 000-53510)).*10.3
              
              Employment
      Agreement between WindTamer Corporation and Cherie Mahon, dated as of
      February 11,2010 (incorporated by reference herein to Exhibit 10.4to the
      Current Report on Form 8-K filed by WindTamer Corporation dated April 20,
      2010 (File No. 000-53510))*10.4
              
              Loan
      Agreement dated as of April 26, 2010 by and between WindTamer Corporation
      and First Niagara Bank , N.A. (incorporated by reference herein to Exhibit
      10.1 to the Current Report on Form 8-K filed by WindTamer Corporation
      dated April 27, 2010(File No. 000-53510)).10.5
              
              $1,000,000
      Revolving Credit Note dated as of April 26, 2010, by and among WindTamer
      Corporation and First Niagara Bank, N.A.(incorporated by reference herein
      to Exhibit 10.2 to the Current Report Form 8-K filed by WindTamer
      Corporation dated April 27, 2010 (File No. 000-53510)).10.6
              
              Warrant
      Purchase  Agreement, dated as of April 26, 2010 between
      WindTamer Corporation and certain investors identified on Schedule 1
      thereto (incorporated by reference herein to Exhibit 10.3 to the Current
      Report on Form 8-K filed by WindTamer Corporation dated April 27, 2010
      (File No. 000-53510)).10.7
              
              Assignment
      of Shares by Gerald E. Brock to WindTamer Corporation, dated as of April
      26, 2010 (incorporated by reference herein to Exhibit 10.4 to the Current
      Report on Form 8-K filed by WindTamer Corporation dated April 27, 2010
      (File 000-53510)).31.1
              
              Certification
      of the Chief Executive Officer Pursuant to Rule 13a-14 or 15d-14of the
      Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002.31.2
              
              Certification
      of the Chief Financial Officer Pursuant to Rule 13a-14 or 15d-14 of the
      Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002.32.1
              
              Certification
      Pursuant to 18 U.S.C. Section 1350 by the Chief Executive Officer, as
      Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002.32.2
              
              Certification
      Pursuant to 18 U.S.C. Section 1350 by the Chief Financial Officer, as
      Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002.
 
 * Management contract or compensatory
plan or arrangement.
 
 
 -20-
 
 SIGNATURES
 
 Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
 
 
 WINDTAMER
      CORPORATION(Registrant)April
      28, 2010By:
              
              /s/
      WILLIAM A. SCHMITZName:
              
              William
      A. SchmitzTitle:
              
              President
      and Chief Executive Officer
 
    -21-