UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





FORM 10-Q





(Mark One)





x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934





For the Quarterly Period Ended June 30, 2011





o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934





For the transition period from __________________ to __________________





Commission File Number 000-52595





Q LOTUS HOLDINGS, INC.


(Exact name of registrant as specified in its charter)





Nevada

14-1961383(State or Other Jurisdiction of

Incorporation or Organization)

(I.R.S. Employer

Identification No.)500 North Dearborn Street, Suite 605

Chicago, Illinois

60654(Address of Principal Executive Offices)

(Zip Code)





(312) 379-1800


Registrant’s telephone number, including area code:





(Former name and former address, if changed since last report)





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 xNo o





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 was required to submit and post such files).


o Yes   o No





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 definition of “accelerated filer”, “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (check one).




Large Accelerated Filer o

Accelerated Filer oNon-Accelerated Filer o

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 oNO x





As of August 10, 2011 there were 53,727,994 shares of the registrant's common stock outstanding.









Q LOTUS HOLDINGS, INC.


(A Development Stage Company)


FORM 10-Q


QUARTERLY PERIOD ENDED JUNE 30, 2011


INDEX




PART I – FINANCIAL INFORMATIONForward-Looking Statements


3Item 1 – Unaudited Financial Statements


4-13Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations


14-18Item 3 – Quantitative and Qualitative Disclosures about Market Risk


18Item 4 – Controls and Procedures


18-19PART II – OTHER INFORMATIONItem 1 – Legal Proceedings


19Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds


20Item 3 – Defaults Upon Senior Securities


20Item 4 – (Removed and Reserved)


20Item 5 – Other Information


20Item 6 – Exhibits


20Signatures


21





2





FORWARD-LOOKING STATEMENTS





The following information provides cautionary statements under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 (the Reform Act).  We identify important factors that could cause our actual results to differ materially from those projected in forward-looking statements we make in this report or in other documents that reference this report.  All statements that express or involve discussions as to: expectations, beliefs, plans, objectives, assumptions or future events or performance (often, but not always, identified through the use of words or phrases such as we or our management believes, expects, anticipates or hopes and words or phrases such as will result, are expected to, will continue, is anticipated, estimated, projection and outlook, and words of similar import) are not statements of historical facts and may be forward-looking.  These forward-looking statements are based largely on our expectations and are subject to a number of risks and uncertainties including, but not limited to, economic, competitive, regulatory, growth strategies, available financing and other factors discussed elsewhere in this report and in the documents filed by us with the Securities and Exchange Commission ("SEC").  Many of these factors are beyond our control.  Actual results could differ materially from the forward-looking statements we make in this report or in other documents that reference this report.  In light of these risks and uncertainties, there can be no assurance that the results anticipated in the forward-looking information contained in this report or other documents that reference this report will, in fact, occur.




These forward-looking statements involve estimates, assumptions and uncertainties, and, accordingly, actual results could differ materially from those expressed in the forward-looking statements.  Such statements involve significant risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Information on significant potential risks and uncertainties that may also cause differences include, but is not limited to, those mentioned by Q Lotus Holdings, Inc. from time to time in its filings with the SEC.  The words “may,” “will,” “believe,” “estimate,” “expect,” “plan,” “intend,” “project,” “anticipate,” “could,” “would,” “should,” “seek,” “continue,” “pursue” and similar expressions and variations thereof identify certain of such forward-looking statements, which speak only as of the dates on which they were made.  The forward-looking statements may include statements regarding product development, product potential or financial performance.  Q Lotus Holdings, Inc. undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise.  Readers are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties that may be disclosed from time to time in our SEC filings or otherwise, including the factors discussed in Item 1A, Risk Factors, of our Annual Report on Form 10-K filed on July 14, 2011 for the fiscal year ended March 31, 2011, and in our periodic reports on Form 10-Q, and, therefore, readers should not place undue reliance on these forward-looking statements.  Forward-looking statements in this Form 10-Q should be evaluated together with the many uncertainties that affect Q Lotus Holdings' business.




3




Q LOTUS HOLDINGS, INC.
 (A Development Stage Company)
 CONDENSED CONSOLIDATED BALANCE SHEETS


March 31,June 30,


20112011

(unaudited)


(see note

below)AssetsCurrent AssetsCash

$
2,487


$
30,829Prepaid expenses


26,064



25,814Total Current Assets


28,551



56,643Property and Equipment, Net


43,471



46,044Non-Current AssetsInvestment


45,250



45,000Total Non-Current Assets


45,250



45,000Total Assets

$
117,272


$
147,687Liabilities and Stockholders' (Deficit) EquityCurrent LiabilitiesAccounts payable

$
81,600


$
101,856Accrued interest


9,098



2,261Note Payable


431,000



200,000Note Payable - related party


170,000



162,500Total Current Liabilities


691,698



466,617Stockholders' (Deficit) EquityPreferred stock, $.001 par value; 100,000,000 shares authorized,no shares issued and outstandingCommon stock, $.0001 par value; 400,000,000 shares authorized,53,727,994 shares issued and outstanding atJune 30, 2011 and March 31, 2011


5,373



5,373Additional paid-in-capital


1,180,479



1,181,208Deferred Compensation


(100,000
)


(137,500
)Deficit accumulated during development stage


(1,660,278
)


(1,368,011
)Total Stockholders' (Deficit) Equity


(574,426
)


(318,930
)Total Liabilities and Stockholders' (Deficit) Equity

$
117,272


$
147,687
  Note: The balance sheet at March 31, 2011 has been derived from the audited consolidated financial statements at that date.
 See the accompanying notes to these condensed consolidated financial statements.
  4
 Q LOTUS HOLDINGS, INC.
 (A Development Stage Company)
 CONDENSED CONOLIDATED STATEMENTS OF OPERATIONS
 (Unaudited)
 For the Period fromMarch 31, 2010Three Months Ended


(Inception)June 30, 2011


June 30, 2010


to June 30, 2011Revenue

$
—


$
—


$
—Operating Expenses


(278,489
)


(545,676
)


(1,627,608
)Interest (Expense) Income


(13,778
)


28



(32,670
)Net Loss

$
(292,267
)

$
(545,648
)

$
(1,660,278
)Net Loss per Common Share:Basic and diluted

$
(0.01
)

$
(0.02
)Weighted Average Number of Shares OutstandingBasic and diluted


53,727,994



33,871,647
  See the accompanying notes to these condensed consolidated financial statements.
  5
  Q LOTUS HOLDINGS, INC.
 (A Development Stage Company)
 CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' (DEFICIT) EQUITY
 (Unaudited)
 Common Stock


Additional

Paid-in-


Accumulated


Deferred


Total

Stockholders'

(Deficit)Shares


Amount


Capital


Deficit


Compensation


EquityBalances - March 31, 2010 (Date of Inception)


30,000,000


$
3,000


$
801,882


$
(1,192
)

$
-


$
803,690Shares of Extreme Home StagingInc, par value $.0001, adjusted for 3 for 1 split


22,019,994



2,202



(2,202
)


-



-



-Q Lotus Holdings, Inc - shares issued for services


1,250,000



125



49,875



-



-



50,000Q Lotus Holdings, Inc - shares issued for services


300,000



30



149,970



-



-



150,000Q Lotus Holdings, Inc - shares issued for services


8,000



1



15,039



-



-



15,040Q Lotus Holdings, Inc. - warrants issued


-



-



16,659



-



-



16,659Q Lotus Holdings, Inc - shares issued for services


150,000



15



149,985



-



(150,000
)


-Q Louts Holdings, Inc - amortization of compensation for services


-



-



-



-



12,500



12,500Net loss - Through March 31, 2011


-



-



-



(1,366,819
)


-



(1,366,819
)Balances - March 31, 2011


53,727,994



5,373



1,181,208



(1,368,011
)


(137,500
)


(318,930
)Q Lotus Holdings, Inc. - warrants cancelled


-



-



(16,659
)


-



-



(16,659
)Q Lotus Holdings, Inc. - warrants issued


-



-



15,930



-



-



15,930Q Louts Holdings, Inc - amortization of compensation for services


-



-



-



-



37,500



37,500Net loss


-



-



-



(292,267
)


-



(292,267
)Balances - June 30, 2011


53,727,994


$
5,373


$
1,180,479


$
(1,660,278
)

$
(100,000
)

$
(574,426
)
 See the accompanying notes to these condensed consolidated financial statements.
  6




Q LOTUS HOLDINGS, INC.
 (A Development Stage Company)
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Unaudited)


For the Period fromMarch 31, 2010Three Months Ended


(Inception)June 30, 2011


June 30, 2010


to June 30, 2011Cash Flows from Operating ActivitiesNet Loss

$
(292,267
)

$
(545,648
)

$
(1,660,278
)Adjustments to reconcile net loss to net cashused in operating activities:Depreciation expense


2,573



1,413



12,641Amortization of debt discount


(729
)


—



15,930Amortization of deferred compensation


37,500



—



50,000Shares issued for services


—



—



215,040Loss on disposal of assets


—



—



21,915Changes in operating  liabilitiesPrepaid expenses


(250
)


(264,500
)


(26,064
)Accounts payable


(20,256
)


31,358



81,600Accrued interest


6,837



—



9,098Net Cash Used in Operating Activities


(266,592
)


(777,377
)


(1,280,118
)Cash Flows from Investing ActivitiesPurchase of property and equipment


—



(56,508
)


(78,028
)Investment


(250
)


—



(45,250
)Cash Used in Investing Activities


(250
)


(56,508
)


(123,278
)Cash Flows from Financing ActivitiesProceeds from notes payable - related parties


7,500



29,003



175,000Repayment of notes payable - related parties


—



—



(5,000
)Proceeds from short term notes payable


231,000



—



431,000Proceeds from the issuance of common stock


—



804,882



804,882Cash Provided by Financing Activities


238,500



833,885



1,405,882Net (Decrease) Increase in Cash and Cash Equivalents


(28,342
)


—



2,487Cash and Cash Equivalents - Beginning


30,829



—



—Cash and Cash Equivalents - Ending

$
2,487


$
—


$
2,487Supplementary disclosures of non-cashinvesting and financing activities:Interest expense

$
13,778


$
—


$
16,039
  See the accompanying notes to these condensed consolidated financial statements.
  7


Q LOTUS HOLDINGS, INC.
 (A Development Stage Company)
 NOTES TO CONDENSED FINANCIAL STATEMENTS
 (UNAUDITED)





Note 1 - Organization and liquidity


Organization
 
 Q Lotus Holdings, Inc. (the “Company”) is a Nevada Corporation that was formed to operate as a multi-industry holding company for its operating subsidiaries. As of the close of its most recently completed fiscal year end, the Company had one wholly owned subsidiary, Q Lotus, Inc. (“QLI”), whose sole operations to date have been limited to the acquisition of certain mining claims.  The Company intends to expand its holdings by either acquiring additional subsidiaries to facilitate its business plan or acquiring either minority or controlling interests in companies which we identify as undervalued and/or where our management participation in operations can aid in the recognition of the business’s potential fair value, as well as create additional value, and to make capital investments in a variety of privately held companies.  The Company anticipates that the primary revenue sources will come from revenues from acquired operation, and interest, dividends, rents, royalties and capital gains (from both loans and equity investments) in both (i) startup companies with proprietary technology and (ii) medium sized businesses with an established operating history.  Currently, our business has consisted solely of holding mineral rights in a portfolio of minerals and our activities have been limited to our formation, business planning, pursuit of capital and exploring possible acquisitions.
 
 The Company was originally incorporated as Extreme Home Staging, Inc. Our primary revenue-generating business until June 11, 2010 was home staging, which is the art and process of preparing a house, a condominium, or any private residence to be as visually and aesthetically pleasing as possible prior to going up for sale in the real estate marketplace.  On June 11, 2010, Extreme Home Staging, Inc. entered into and closed an Agreement and Plan of Share Exchange with QLI and its sole shareholder, Marckensie Theresias, pursuant to which Extreme Home Staging, Inc. acquired 100% of the issued and outstanding capital stock of QLI in exchange for the issuance of 30,000,000 shares of Extreme Home Staging, Inc. common stock, par value $0.0001 (the “Exchange”).  The 30,000,000 shares issued to Marckensie Theresias constituted 57.6% of our issued and outstanding capital stock on a fully diluted basis.  The acquisition was accounted for as a recapitalization effected by a share exchange, wherein QLI was considered the acquirer for accounting and financial reporting purposes.   As a result of the Exchange, QLI became a wholly owned subsidiary of Extreme Home Staging, Inc.  On July 16, 2010 Extreme Home Staging, Inc. underwent a name change toQ Lotus Holdings, Inc.
 
 On July 16, 2010, the Company executed a 3 for 1 common stock split.  Accordingly, all common share and per common share information has been restated within this report to reflect this stock split.
 
 The Company is a development stage company, and is in its initial stage of operations.  The Company has funded its operations to date from proceeds received from the sale of its common stock totaling approximately $805,000, from advances from the Company’s Chairman and from other advances from unaffiliated third parties.
 
 Liquidity and Going Concern
 
 The accompanying unaudited condensed financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities and commitments in the normal course of business.  Since March 31, 2010 (inception), the Company has had no revenue and has generated losses from operations.  At June 30, 2011, the Company had negative working capital of $663,000 and accumulated deficit of $1,660,000. Since inception (March 31, 2010) through June 30, 2011, the Company raised $804,882 of cash from the issuance of common stock and $606,000 of proceeds from short-term notes.  These funds were primarily used in operations to formulate business plans and explore opportunities. The Company needs to raise additional capital from external sources in order to sustain operations while executing its business plan.  The Company cannot provide any assurance that it will be able to raise additional capital.  If the Company is unable to secure additional capital, it may be required to curtail its current operating expenses, modify its existing business plan and take additional measures to reduce costs in order to conserve its cash in amounts sufficient to sustain operations and meet its obligation.
 
 There can be no assurance that such funding initiatives will be successful and any equity placement could result in substantial dilution to current stockholders.  The above factors raise substantial doubt about the Company’s ability to continue as a going concern.  The financial statements do not include any adjustments relating to the recoverability of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.  As of June 30, 2011, the Company’s activities have been limited to its formation, business planning, pursuing capital and exploring possible acquisitions
 
 8
  Note 2 – Basis of Presentation
 
 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 reporting and the instructions to Form 10-Q.  Accordingly, they do not include all of the information and footnotes required by United States generally accepted accounting principles.  In the opinion of management, all adjustments (consisting of normal accruals) considered for a fair presentation have been included.  The Company has evaluated subsequent events through the issuance date of this Form 10-Q.  Operating results for the three months ended June 30, 2011 are not necessarily indicative of the results that may be expected for the fiscal year ending March 31, 2012.  For further information, refer to the financial statements and footnotes thereto for the Company included in the Company’s Form 10-K filed on July 14, 2011 for the fiscal year ended March 31, 2011.
 
 Note 3 - Summary of Significant Accounting Policies
 
 Principles of Consolidation
 
 The accompanying consolidated financial statements include the accounts of the Company’s wholly owned subsidiary Q Lotus, Inc.  All significant intercompany balances and transactions have been eliminated in consolidation.
 
 Use of Estimates
 
 The preparation of the financial statements in conformity with Accounting Principles generally accepted in America 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 dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates. These estimates and assumptions include valuing equity securities, share based payment arrangements, and deferred taxes and related valuation allowances. Certain of our estimates, could be affected by external conditions, including those unique to our industry, and general economic conditions. It is possible that these external factors could have an effect on our estimates that could cause actual results to differ from our estimates. The Company re-evaluates all of its accounting estimates at least quarterly based on these conditions and record adjustments when necessary.
 
 Stock-Based Compensation
 
 The Company accounts for equity instruments issued to employees in accordance with accounting guidance, which requires that such equity instruments are recorded at their fair value on the date of grant, using the Black-Scholes method for stock options and the quoted price of its common stock for unrestricted shares and are amortized over the vesting period of the award.  For non-employee stock-based awards, the Company calculates the fair value of the award on the date of grant in the same manner as employee awards. The Company recognizes the compensation costs over the requisite period of the award, which is typically the date the services are performed.  Stock-based compensation is reflected within operating expenses. These are non-cash transactions that require management to make judgments related to the fair value of the shares issued, which affects the amounts reported in the Company’s consolidated financial statements for certain of its assets and expenses. For historic fiscal years when there was not an observable active, liquid market for the Company’s common stock, the valuation of the shares issued in a non-cash share payment transaction relies on observation of arms-length transactions where cash was received for its shares, before and after the non-cash share payment date.
 
 Income Taxes
 
 The Company determines income taxes using the asset and liability approach which results in the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax basis of those assets and liabilities, as well as operating loss and tax credit carry-forwards, using enacted tax rates in effect in the years in which the differences are expected to reverse. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
 
 The Company adopted the provisions of ASC 740, “Income Taxes” on March 31, 2010, which prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken, or expected to be taken, in a tax return.  The interpretation requires that the Company recognize the impact of a tax position in its financial statements if it is more likely than not that the position will be sustained on audit, based on the technical merits of the position. It also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods and disclosure.  In accordance with the provision of ASC 740, any cumulative effect resulting from the change in accounting principle is to be recorded as an adjustment to the opening balance of accumulated retained earnings.  The Company has not filed its first tax return, and therefore the Company has no uncertain tax positions that would require recognition in the financial statements at this time.
  9
 
 The Company’s policy is to classify assessments, if any, for tax related interest as interest expense and penalties as selling, general and administrative expenses.
 
 Fair Value Measurements
 
 The Company adopted the provisions of ASC Topic 820, “Fair Value Measurements and Disclosures”, which defines fair value as used in numerous accounting pronouncements, establishes a framework for measuring fair value and expands disclosure of fair value measurements.
 
 The estimated fair value of certain financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued expenses are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments. The carrying amounts of our long-term credit obligations approximate fair value because the effective yields on these obligations are comparable to rates of returns for instruments of similar credit risk.
 
 ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value:
 
 Level 1 — quoted prices in active markets for identical assets or liabilities
 
 Level 2 — quoted prices for similar assets and liabilities in active markets or inputs that are observable
 
 Level 3 — inputs that are unobservable (for example cash flow modeling inputs based on assumptions)
 
 The adoption of this pronouncement did not have a material impact on the Company’s consolidated financial position, results of operations and cash flows.
 
 Net Loss Per Common Share
 
 Basic net loss per share is computed by dividing net loss per share available to common stockholders by the weighted average shares of common stock outstanding for the period and excludes any potentially dilutive securities.  Diluted earnings per share reflect the potential dilution that would occur upon the exercise or conversion of all dilutive securities into common stock.  The computation of loss per share for the quarters ended June 30, 2011 and 2010 excludes potentially dilutive securities, including warrants of 360,000 and 0, respectively, because their inclusion would be anti-dilutive.
 
 Recent Accounting Pronouncements
  We reviewed new accounting standards as issued.  Although some of these accounting standards issued or effective after the end of our previous fiscal year may be applicable to us, we have not identified any standards that we believe merit further discussion. We expect that none of the new standards will have a significant impact on our consolidated financial statements.
  Note 4 – Commitments and Contingencies
 
 Facility Lease
 
 The Company is not currently leasing any office space.
  10
 
 Mineral Rights
 
 During May 2010, the Company acquired the mining rights of properties located in Utah, Arizona and Oregon from unrelated third parties.  As consideration for the mining rights, the Company has agreed to pay the transferors a fee in the future operations of the Company, based on the ability of the Company to monetize the value of the rights in some manner. In valuing such consideration (rights to receive fees in the future) the Company considered many factors in determining an appropriate fair value of the consideration/rights. Since the Company did not exchange any monetary consideration for the acquired mining rights, the Company will account for the mining rights in accordance with the guidance described with respect to “Nonmonetary Transactions”.   The assets acquired provide no further support of fair values since there appears to be no objective support to measure the value of the rights within reasonable limits that any value can be realized.  It should be noted that the Company has no plans on mining such property, but intends to utilize the mining assets as collateral for its Asset Backed Notes that it plans to underwrite.  No studies have been performed as to the magnitude of the cost necessary to extract any value and at present, based on the information available, no reliable estimates as to the realizable nature of the assets can be determined.  Given that no monetary consideration was paid, and that no minimum payments have been guaranteed, and given that the Company currently does not have any active business/cash flow or means to pay for such rights, the fair value of the consideration was determined to be de minimus and therefore valued at zero.  Payments to the transferors for future fees will be charged to expense when incurred.  There were no transactions relating to these mineral rights through March 31, 2011.  In June 2011 the Company entered into an agreement to swap four of its mining claims, representing approximately one-third of such claims, with an unrelated third party in exchange for four equivalent claims.
  Litigation, Claims and Assessments
  From time to time, in the normal course of business, the Company may be involved in litigation.  The Company’s management has determined any asserted or unasserted claims to be immaterial to the consolidated financial statements.
 
 Note 5 – Investments
 
 The Company made advances totaling $45,250 to Lexington Hills, Inc. as an investment.  The Company’s Chairman and Chief Financial Officer is a minority shareholder of Lexington Hills.  In exchange for the investment, Lexington Hills agreed to pay the Company 60% of its net cash flow over the next five years.  The Company has the option to convert its investment in Lexington Hills into a sixty percent equity ownership interest through March 17, 2012. To date, no payments have been received by the Company.
 
 Note 6 – Notes Payable
 
 In July 2010 the Company received two advances totaling $22,500 from a minority shareholder of the Company that were used to pay operating expenses.  In September 2010 the Company received an advance of $5,000 from another minority shareholder of the Company that was used to pay operating expenses.  These notes are non-interest bearing and payable on demand.  The $5,000 advance was repaid in the quarter ended December 31, 2010.
 
 In October 2010, the Company entered into a Loan Agreement for advances totaling $150,000, $140,000 of which was funded     to the Company, by a minority shareholder of the Company that were used to pay operating expenses.  This note is non-interest bearing and payable on demand.
 
 In February 2011, the Company entered into a $200,000 Promissory Note with an unaffiliated third party.  These funds were used to pay operating expenses.  An affiliate of the lender received a two-year warrant to purchase an aggregate of 150,000 shares of the Company’s common stock at an exercise price of $1.50 per share.  In May 2011, the Company and the unaffiliated third party entered into a note amendment whereby the $200,000 Promissory Note was increased to a principal amount of $300,000 with a maturity date of June 30, 2011.  The warrant that was previously issued was cancelled and reissued at an exercise price of $.50 per share.  In June 2011 the Promissory Note was further amended twice to increase the principal amount to $425,000 and extend the maturity date to August 24, 2011.  These funds were used to pay operating expenses.  This note bears interest at the rate of 11% per annum.  In connection with these note amendments, the Company issued additional two-year warrants to purchase an aggregate of 210,000 shares of the Company’s common stock at an exercise price of $.50 per share.  The fair value of the warrants was calculated using the Black-Scholes Option Valuation Model.  The Company recorded a debt discount of approximately $15,930 that was charged to interest expense in the quarter ended June 30, 2011, and is included in “Operating Expenses” in the accompanying condensed financial statements.
 
 In April 2011 the Company received an advance of $6,000 from an unaffiliated third party that was used to pay operating expenses. This note is non-interest bearing and payable on demand.
 
 In May 2011 the Company received an advance of $7,500 from a minority shareholder of the Company that was used to pay operating expenses. This note is non-interest bearing and payable on demand.
  11
 
 Note 7 – Stockholders’ Deficit
 
 Common Stock
 
 The Company has authorized 400,000,000 shares of common stock, $0.0001 par value per share, and as of June 30, 2011, adjusted for the stock split, 53,727,994 shares were issued and outstanding.  The holders of the Company’s common stock are entitled to one vote per share. The holders of common stock are entitled to receive ratably such dividends, if any, as may be declared by the Board of Directors out of legally available funds.  However, the current policy of the Board of Directors is to retain earnings, if any, for the operation and expansion of the business.  Upon liquidation, dissolution or winding-up of the Company, the holders of common stock are entitled to share ratably in all assets of the Company, which are legally available for distribution and after payment of or provision for all liabilities.  The holders of common stock have no preemptive, subscription, redemption or conversion rights.
 
 Preferred Stock
 
 The Company has authorized 100,000,000 shares of preferred stock, $0.001 par value per share, and as of June 30, 2011, no shares were issued and outstanding.
 
 Reverse Merger
 
 On April 16, 2010 in contemplation of the reverse merger described below, the sole shareholder of QLI (now our wholly-owned subsidiary), Marckensie Theresias, acquired 26,550,000 shares of our common stock for $266,620, primarily from its former CEO, Milka Fixler.
 
 On June 11, 2010, QLI entered into and completed an Agreement and Plan of Share Exchange with the Company.
 
 The Company had 22,019,994 common shares par value $0.0001 outstanding at the time of the merger.
 
 The Company agreed to acquire all of the QLI common stock from the QLI stockholder in exchange for 30,000,000 newly issued shares of common stock.  As a condition of the exchange agreement, the 26,550,000 shares as described above, were cancelled.  The name of the Company was subsequently changed to Q Lotus Holdings, Inc.  After the exchange was completed, there was a total of 52,019,994 common shares outstanding.
 
 The completion of the transactions as described above was accounted for as a “reverse merger” and recapitalization since the stockholder of QLI gained control over the Company following the completion of the transactions.
 
 Common Stock Issued
 
 In August 2010, the Company issued 1,250,000 shares of common stock with an ascribed value of $50,000 (based on the value of the services) in exchange for $125 and services that related to the formation and establishment of the Company and its business operations to Real Holdings Capital, LLC (“RHC”).  The Company’s Chief Executive Officer, Mr. Rosenberg, is a beneficiary under a trust that owns RHC. These shares are subject to a voting agreement with Mr. Theresias.
 
 In September 2010, the Company issued 300,000 shares of common stock with an ascribed value of $150,000 (based on the value of the services) in exchange for web marketing services.  This amount was fully amortized as operating expenses during the fiscal ended March 31, 2011.
 
 In December 2010, the Company issued 8,000 shares of common stock with a value of $15,040, based on the closing price of the Company’s common stock on the date of issuance, for services.
 
 In March 2011, the Company issued 150,000 shares of its common stock valued at $150,000 based on the closing price of the Company’s common stock on the date of issuance for investment banking services.  This amount is being amortized over the twelve-month period of the service agreement, $37,500 of which was amortized as operating expenses during the quarter ended June 30, 2011.
  12
 
 Warrants Issued
 
 In February 2011, the Company issued a two-year warrant to purchase an aggregate of 150,000 shares of the Company’s common stock at an exercise price of $1.50 per share.The fair value of the warrant was calculated using the Black-Scholes Option Valuation Model.  The Company recorded a debt discount of approximately $16,659 that was charged to interest expense in the fiscal year ended March 31, 2011, and is included in “Operating Expenses” in the accompanying consolidated financial statements.  This warrant was subsequently cancelled and reissued on May 20, 2011 at an exercise price of $.50 per share.
 
 In connection with certain note amendments (See Note 5.), the Company issued additional two-year warrants to purchase an aggregate of 210,000 shares of the Company’s common stock at an exercise price of $.50 per share.  The fair value of the warrants was calculated using the Black-Scholes Option Valuation Model. The Company recorded a debt discount of approximately $15,930 that was charged to interest expense in the quarter ended June 30, 2011, and is included in “Operating Expenses” in the accompanying condensed financial statements.
 
 Note 8 – Related Party Transactions
 
 In August 2010, the Company issued 1,250,000 shares of common stock with an ascribed value of $50,000 (based on the value of the services) in exchange for $125 and services that related to the formation and establishment of the Company and its business operations to RHC.  The Company’s Chief Executive Officer, Mr. Rosenberg, is a beneficiary under a trust that owns RHC. These shares are subject to a voting agreement with Mr. Theresias.
 
 The Company conducts its operations from office space in Chicago, Illinois, that is leased by Urban R2 Development ("Urban R2").  Urban R2 is controlled by the Company's Chief Executive Officer, and during a portion of the fiscal year ended March 31, 2011, the Company agreed to reimburse Urban R2 for fifty percent of its monthly occupancy expenses.  Effective as of April 1, 2011, all of the offices and resources of this office space were maintained for the benefit of the Company.  For the quarter ended June 30, 2011, the Company's expenses for this office space totaled approximately $113,000.
 
 In March 2011 and April 2011, the Company made three separate advances totaling $45,250 to Lexington Hills, Inc. as an investment.  The Company’s Chairman and Chief Financial Officer is a minority shareholder of Lexington Hills.  In exchange for the investment, Lexington Hills agreed to pay the Company 60% of its net cash flow over the next five years.  The Company has the option to convert its investment in Lexington Hills into a sixty percent equity ownership interest through March 17, 2012. To date, no payments have been received by the Company.
 
 Note 9 - Capital Structure
 
 On June 17, 2010, the Company filed a Schedule 14C Information Statement disclosing the following actions, to be effective on July 16, 2010, that had been approved by the shareholders of the Company:
 
 1.
the Company’s Articles of Incorporation was amended to change the name to Q Lotus Holdings, Inc.;
 
 2.
the authorized capital stock of the Company was increased to 500,000,000 shares, of which 400,000,000 shares will be Common Stock par value $0.0001 per share, and 100,000,000 shares will be Preferred Stock par value $.001 per share; and
 
 3.
the outstanding common shares of the Company were split so that each outstanding share on the books of the Company was split into three outstanding common shares.
 
 Note 10 – Subsequent Events
 
 In July and August 2011, the Company and an unaffiliated third party entered into note amendments whereby an existing $425,000 Promissory Note was increased to a principal amount $538,000.  (See Note 6.)  These funds have been used to pay operating expenses.  This note bears interest at the rate of 11% per annum.  In connection with these note amendments and note amendments entered into in June 2011, the Company issued additional two-year warrants to purchase an aggregate of 147,000 shares of the Company’s common stock at an exercise price of $.50 per share.
 
 In August 2011 the Company received advances of $5,000 and $15,000 from a minority shareholder of the Company that were used to pay operating expenses.  These advances are non-interest bearing and payable on demand.  The $5,000 advance was repaid in August 2011.
 
 In August 2011, the Company entered into a financing transaction with an unaffiliated third party, pursuant to which the Company issued a $42,500 principal amount, 8% Convertible Note. The note matures on May 7, 2012 and is unsecured,
 
 13
 
 ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDTION AND RESULTS OF OPERATIONS
 
 The following discussion and analysis of the results of operations and financial condition of Q Lotus Holdings, Inc. (the “Company”) for the three months ended June 30, 2011 and 2010 should be read in conjunction with our financial statements and the notes to those financial statements that are included elsewhere in this Quarterly Report on Form 10-Q.  References in this Management’s Discussion and Analysis of Financial Condition and Results of Operations or Plan of Operations to “ us,” “ we,” “ our,” and similar terms refer to the Company.  This discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors.  See “Risk Factors” under Item 1A of the Company’s Form 10-K filed July 14, 2011 for the fiscal year ended March 31, 2011.  Words such as “anticipate,” “estimate,” “plan,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions are used to identify forward-looking statements.
 
 OVERVIEW
 
 Q Lotus Holdings, Inc. (the “Company”) is a Nevada Corporation formed to operate as a multi-industry holding company for its operating subsidiaries. As of the close of its most recently completed fiscal year end, the Company had one wholly owned subsidiary, Q Lotus, Inc. (“QLI”), whose sole operations to date have been limited to the acquisition of certain mining claims.  The Company intends to expand its holdings by either acquiring additional subsidiaries to facilitate its business plan or acquiring either minority or controlling interests in companies which we identify as undervalued and/or where our management participation in operations can aid in the recognition of the business’s potential fair value, as well as create additional value, and to make capital investments in a variety of privately held companies.  The Company anticipates that the primary revenue sources will come from revenues from acquired operations, and interest, dividends, rents, royalties and capital gains (from both loans and equity investments) in both (i) startup companies with proprietary technology and (ii) medium sized businesses with an established operating history.  Currently, our business has consisted solely of holding mineral rights in a portfolio of minerals and our activities have been limited to our formation, business planning, pursuit of capital and exploring possible acquisitions.
 
  The Company was originally incorporated as Extreme Home Staging, Inc. Our primary revenue-generating business until June 11, 2010 was home staging, which is the art and process of preparing a house, a condominium, or any private residence to be as visually and aesthetically pleasing as possible prior to going up for sale in the real estate marketplace.  On June 11, 2010, Extreme Home Staging, Inc. entered into and closed an Agreement and Plan of Share Exchange with QLI and its sole shareholder, Marckensie Theresias, pursuant to which Extreme Home Staging, Inc. acquired 100% of the issued and outstanding capital stock of QLI in exchange for the issuance of 30,000,000 shares of Extreme Home Staging, Inc. common stock, par value $0.0001 (the “Exchange”).  The 30,000,000 shares issued to Marckensie Theresias constituted 57.6% of our issued and outstanding capital stock on a fully diluted basis.  The acquisition was accounted for as a recapitalization effected by a share exchange, wherein QLI was considered the acquirer for accounting and financial reporting purposes.   As a result of the Exchange, QLI became a wholly owned subsidiary of Extreme Home Staging, Inc.  On July 16, 2010 Extreme Home Staging, Inc. underwent a name change toQ Lotus Holdings, Inc.
 
 On July 16, 2010, the Company executed a 3 for 1 common stock split.  Accordingly, all common share and per common share information has been restated within this report to reflect this stock split.
 
 PLAN OF OPERATIONS
 
 We plan to operate as a multi-industry holding company whereby we will acquire and/or develop profitable companies either by obtaining a majority of stock in each company we gain control of or by providing capital investments to companies which internally develop into profitable enterprises. The Company has adopted a business strategy that focuses on expansion through acquisition. The key elements of acquisition targets must include solid management, profitability, geographical locations compatibility and/or undervalued companies that can be enhanced by shared services and opportunities.  Through the acquisition and development of profitable companies and the expansion of internal divisions, we believe that the Company will have the ability to experience growth through diverse holdings. We anticipate that our primary revenue-generating center will initially come from our capital investments (both loans and equity) into startups with proprietary technology and medium sized businesses with an established operating history, as well as from operating revenues from acquired companies.
  14
 
 Our Planned Operating Segments
 
 Our principal operating segments focus will be to acquire or provide equity or debt financing to U.S. emerging growth and middle-market companies in a variety of industries. We will generally seek to invest in companies from the broad variety of industries in which our Chairman and CEO have direct expertise. We plan to diversify our business primarily into four operating segments:
 
 ·
Finance;
 ·
Real estate;
 ·
Communications; and
 ·
Natural resources.
 
 We may invest in other industries if we are presented with attractive opportunities.
 
 Investments in Marketable Securities
 
 Management may also make investments directly into hedge funds that specialize in specific areas of trading, which will reduce the specialized personnel costs associated with maintaining trading operations.
 
 Real Estate Investments
 
 In addition to private investments and marketable securities, the Company will also directly and indirectly purchase real estate, as management feels that the low prices within the market represent substantial buying opportunities. Many economists are currently predicting that the real estate market correction is nearing its end, and the Company could be in an excellent position to purchase large apartment complexes, industrial facilities, and commercial (Class A and Class B) properties that produce substantial rent rolls. The business could easily use its existing cash reserves to directly purchase real estate with the intent to refinance the properties at a later time.
 
 Investment Selection
 
 We are committed to a value oriented philosophy that will be used by management to seek to minimize the risk of capital loss without foregoing potential for capital appreciation.   We have identified several criteria that we believe are important in identifying and investing in prospective acquisition or financing targets.  These criteria provide general guidelines for our investment decisions; however, we caution that not all of these criteria will be met by each prospective target company in which we choose to invest or acquire.   Generally, we seek to use the experience and expertise of our President, Marckensie Theresias, and our Chief Executive Officer, Gary A. Rosenberg, and access to market information to identify investment candidates and to structure investments quickly and effectively.
 
 Value orientation and positive cash flow
 
 Our business philosophy places a premium on fundamental analysis from an investor’s perspective and has a distinct value orientation. We will focus on companies in which we can invest or acquire at relatively low multiples of operating cash flow and that are profitable at the time of the transaction on an operating cash flow basis. We plan to also acquire or invest in select start-up companies that have proprietary technologies, or a specialized niche that will enable the company to capitalize on its specialty to emerge as a market leader in its field.
 
 Experienced management and established financial sponsor relationship
 
 We will generally require that our target companies have an experienced management team. We also will require the target companies to have proper incentives in place to induce management to succeed and to act in concert with our interests as investors, including having significant equity interests.
 
 Strong and defensible competitive market position in industry
 
 We seek to acquire or invest in target companies that have developed or are in the process of developing leading market positions within their respective markets and are or will be well positioned to capitalize on growth opportunities. We also seek companies that demonstrate significant competitive advantages versus their competitors, which should help to protect their market position and profitability.
  15
 
 Viable exit strategy
 
 Our principal objective is long-term capital appreciation.  We may invest in debt securities of these companies, or may acquire an equity interest in the form of common or preferred stock, warrants or options to acquire stock or the right to convert the debt securities into stock.  We may invest alone, or as part of a larger investment group.   In addition, we may acquire either a minority or controlling interest in mature companies in a roll-up strategy.  The principal objective of acquisitions pursuant to a roll-up strategy would be to consolidate an industry and either sell the acquired entities as a larger unit, or take the unit public through an initial public offering, spin-off to our shareholders, or reverse merger into a publicly traded shell corporation.
 
 We also seek to invest in companies that we believe will provide a steady stream of cash flow to repay our loans and reinvest in their respective businesses. We expect that such internally generated cash flow, leading to the payment of interest on, and the repayment of the principal of, our investments in target companies to be a key means by which we exit from our investments over time. In addition, we also seek to invest in companies whose business models and expected future cash flows offer attractive exit possibilities. These companies include candidates for strategic acquisition by other industry participants and companies that may repay our investments through an initial public offering of common stock or another capital market transaction.
 
 We believe it is critical to conduct extensive due diligence on investment targets. In evaluating new investments we plan to conduct a rigorous due diligence process that draws from the experience, industry expertise and network of contacts of our Chairman, Mr. Marckensie Theresias’ and our Chief Executive Officer, Mr. Gary A. Rosenberg. At the onset of operations, we will hire several skilled research analysts and structured finance experts (in both an employment and consulting capacity) to ensure that each transaction is structured so that the business is conducive to a favorable return on investment while minimizing undue risk exposure. Among other things, our due diligence will be designed to satisfy that each prospective target company will be able to meet its debt service obligations.
 
 Competition
 
 Our primary competitors provide financing to middle-market companies and include business development companies, commercial and investment banks, commercial financing companies, and to the extent they provide an alternative form of financing, private equity funds. Additionally, because competition for investment opportunities generally has increased among alternative investment vehicles, such as hedge funds, those entities have begun to invest in areas they have not traditionally invested in, including investments in middle-market companies. As a result of these new entrants, competition for investment opportunities at middle-market companies has intensified. However, we believe that there has been a reduction in the amount of debt capital available for lending in new emerging growth companies and leveraged buyout transactions since the downturn in the credit markets.   This has resulted in a less competitive environment.
 
 Many of our competitors are substantially larger and have considerably greater financial, technical and marketing resources than we do. For example, we believe some competitors have a lower cost of funds and access to funding sources that are not available to us. In addition, some of our competitors have higher risk tolerances or different risk assessments, which could allow them to consider a wider variety of investments and establish more relationships than us.
 
 Critical Accounting Policies
 
 Our discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States.  The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses and related disclosures.  We review our estimates on an ongoing basis.
 
 We consider an accounting estimate to be critical if it requires assumptions to be made that were uncertain at the time the estimate was made; and changes in the estimate or different estimates that could have been made could have a material impact on our results of operations or financial condition.  Our critical accounting policies include the following:
 
 Stock-Based Compensation
 
 The Company accounts for equity instruments issued to employees in accordance with accounting guidance, which requires that such equity instruments are recorded at their fair value on the date of grant, using the Black-Scholes method for stock options and the quoted price of its common stock for unrestricted shares and are amortized over the vesting period of the award.  For non-employee stock-based awards, the Company calculates the fair value of the award on the date of grant in the same manner as employee awards. The Company recognizes the compensation costs over the requisite period of the award, which is typically the date the services are performed.  Stock-based compensation is reflected within operating expenses. These are non-cash transactions that require management to make judgments related to the fair value of the shares issued, which affects the amounts reported in the Company’s consolidated financial statements for certain of its assets and expenses. For historic fiscal years when there was not an observable active, liquid market for the Company’s common stock, the valuation of the shares issued in a non-cash share payment transaction relies on observation of arms-length transactions where cash was received for its shares, before and after the non-cash share payment date.
  16
 
 Results of Operations
 
 General and Administrative Expenses
 
 To date, the Company’s activities have been limited to its formation, business planning, pursuing capital and exploring possible acquisitions.
  Expenses for the three months ended June 30, 2011 of approximately $278,000 were incurred relating to travel of approximately $1,000, consulting fees of approximately $24,000, promotional expenses of approximately $1,000, professional fees of approximately $124,000, payroll expense of approximately $36,000,and supplies and services of approximately $92,000.
  Expenses for the three months ended June 30, 2010 of approximately 546,000 were incurred relating to travel of approximately $104,000, consulting fees of approximately $101,000, promotional expenses of approximately $104,000, professional fees of approximately $30,000, payroll expense of approximately $24,000, and supplies and services of approximately $183,000
  The Company issued 150,000 shares of its common stock valued at $150,000 for investment banking services, $12,500 of which was amortized as operating expenses during the fiscal year ended March 31, 2011 and $37,500 of which was amortized as operating expenses during the three months ended June 30, 2011.
  Liquidity and Capital Resources
 
 As of August 10, 2011 the Company had a minimal available cash balance.  Our primary sources of liquidity to date have been limited to the sale of our securities and other financing activities. We will need to raise additional funds to continue our operations to fund our ongoing operating requirements through fiscal year 2012.
 
 In July 2010 the Company received two advances totaling $22,500 from a minority shareholder of the Company that were used to pay operating expenses.  In September 2010 the Company received an advance of $5,000 from another minority shareholder of the Company that was used to pay operating expenses.  These notes are non-interest bearing and payable on demand.  The $5,000 advance was repaid in the quarter ended December 31, 2010.
 
 In October 2010, the Company entered into a Loan Agreement for advances totaling $150,000, $140,000 of which was funded to the Company, by a minority shareholder of the Company that were used to pay operating expenses.  This note is non-interest bearing and payable on demand.
 
 In February 2011, the Company entered into a $200,000 Promissory Note with an unaffiliated third party.  These funds were used to pay operating expenses.  An affiliate of the lender received a two-year warrant to purchase an aggregate of 150,000 shares of the Company’s common stock at an exercise price of $1.50 per share.  In May 2011, the Company and the unaffiliated third party entered into a note amendment whereby the $200,000 Promissory Note was increased to a principal amount of $300,000 with a maturity date of June 30, 2011.  The warrant that was previously issued was cancelled and reissued at an exercise price of $.50 per share.  In June 2011 the Promissory Note was further amended twice to increase the principal amount to $425,000 and extend the maturity date to August 24, 2011.  These funds were used to pay operating expenses.  This note bears interest at the rate of 11% per annum.  In connection with these note amendments, the Company issued additional two-year warrants to purchase an aggregate of 210,000 shares of the Company’s common stock at an exercise price of $.50 per share.  The fair value of the warrants was calculated using the Black-Scholes Option Valuation Model.  The Company recorded a debt discount of approximately $15,930 that was charged to interest expense in the quarter ended June 30, 2011, and is included in “Operating Expenses” in the accompanying condensed financial statements.
  17
 
 Our common stock currently trades on the over the counter bulletin board under the symbol “QLTS.”
 
 We plan to initiate corporate bond offerings to raise capital for our planned investments utilizing as collateral our portfolio of gold and other mineral assets.  There can be no assurance the Company will be successful in raising these funds or executing its business plans.
 
 Liquidity and Going Concern
 
 The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities and commitments in the normal course of business.  Since March 31, 2010 (inception), the Company has had no revenue and has generated losses from operations.  At June 30, 2011, the Company had negative working capital of $663,000 and accumulated deficit of $1,660,000. Since inception (March 31, 2010) through June 30, 2011, the Company raised $804,882 of cash from the issuance of common stock and $606,000 of proceeds from short-term notes.  These funds were primarily used in operations to formulate business plans and explore opportunities. The Company needs to raise additional capital from external sources in order to sustain operations while executing its business plan.  The Company cannot provide any assurance that it will be able to raise additional capital.  If the Company is unable to secure additional capital, it may be required to curtail its current operating expenses, modify its existing business plan and take additional measures to reduce costs in order to conserve its cash in amounts sufficient to sustain operations and meet its obligation.
 
 There can be no assurance that such funding initiatives will be successful and any equity placement could result in substantial dilution to current stockholders.  The above factors raise substantial doubt about the Company’s ability to continue as a going concern.  The financial statements do not include any adjustments relating to the recoverability of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.  As of June 30, 2011, the Company’s activities have been limited to its formation, business planning, pursuing capital and exploring possible acquisitions.
 
 ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
  Not applicable
 
 ITEM 4. Controls and Procedures
  Disclosure Controls and Procedures
 
 Management, with the participation of our Principal Executive Officer and Principal Financial Officer, carried out an evaluation of the effectiveness of our “disclosure controls and procedures” (as defined in the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this quarterly report on Form 10-Q (the “Evaluation Date”).  Based upon that evaluation, our Principal Executive and Financial Officers concluded that, as of the Evaluation Date, our disclosure controls and procedures are not effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act (i) is recorded, processed, summarized and reported, within the time periods specified in the SEC rules and forms and (ii) is accumulated and communicated to our management, including our Principal Executive Officer and Principal Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
 
 Notwithstanding the conclusion that our disclosure controls and procedures were not effective as of the end of the period covered by this Quarterly Report, the Principal Executive and Financial Officers believe that the condensed consolidated financial statements and other information contained in this Quarterly Report present fairly, in all material respects, our business, financial condition and results of operations.
 
 Our management, including our Principal Executive and Financial Officers, does not expect that our disclosure controls and procedures or our internal controls will prevent all errors and all fraud.  A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.  Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.
  18
 
 In connection with the review of our annual 2011 consolidated financial statements, our independent auditors identified certain significant deficiencies that together constitute a material weakness in our disclosure controls and procedures. These significant deficiencies primarily relate to our lack of formalized written policies and procedures in the financial accounting area, our lack of appropriate resources to handle the accounting for complex equity and other transactions, our lack of sophisticated financial reporting systems, due in part to the small size of our Company prior to the merger, and our lack of a formalized disaster recovery plan in the information technology area. These significant deficiencies together constitute a material weakness in our disclosure controls and procedures.
 
 We have work to do to bring our disclosure controls and procedures up to public-company standards. Due to the development stage of the Company, we have been unable to upgrade our disclosure controls and procedures to the level required of a public company prior to the end of the period covered by this quarterly report. Nevertheless, we have performed additional analyses and other post-closing procedures to ensure that our financial statements contained in this Quarterly Report were prepared in accordance with U.S. GAAP and applicable SEC regulations. Our planned remediation includes formalizing written policies and procedures, determining the appropriate resources to handle complex transactions as they arise in the future, upgrading our financial reporting systems, and developing and documenting a formalized IT disaster recovery plan.
 
 Internal Control over Financial Reporting
 
 The term “internal control over financial reporting” is defined as a process designed by, or under the supervision of, the registrant’s principal executive and principal financial officers, or persons performing similar functions, and effected by the registrant’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:
  ·
pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions s of the registrant;
  ·
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the registrant are being made only in accordance with authorizations of management and directors of the registrant; and
  ·
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the registrant’s assets that could have a material effect on the financial statements.
 
 Changes in Internal Control over Financial Reporting.
 
 The Company maintains a system of internal controls designed to provide reasonable assurance that transactions are executed in accordance with management's general or specific authorization; transactions are recorded as necessary to (1) permit preparation of financial statements in conformity with accounting principles generally accepted in the United States of America, and (2) maintain accountability for assets. Access to assets is permitted only in accordance with management's general or specific authorization.
 
 There was no change in the Company’s internal control over financial reporting during the Company’s last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
 
 It is the responsibility of the Company’s management to establish and maintain adequate internal control over financial reporting. However, due in part to the small size of our Company, we lack formalized written policies and procedures in the financial accounting area, we lack the appropriate resources to handle the accounting for complex equity and other transactions and lack a sophisticated financial reporting systems.
 
 Our independent auditors have reported to our Board of Directors certain matters involving internal controls that our independent auditors considered to be a material weakness as of the Evaluation Date, under standards established by the Public Company Accounting Oversight Board. As previously stated, the material weakness relates our lack of formalized written policies and procedures in the financial accounting area, our lack of appropriate resources to handle the accounting for complex equity and other transactions and our lack of sophisticated financial reporting systems.
 
 PART II – OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
 
 Our management knows of no material existing or pending legal proceedings or claims against us, nor are we involved as a plaintiff in any material proceeding or pending litigation. To our knowledge, none of our directors, officers or affiliates, and no owner of record or beneficial owner of more than five percent (5%) of our securities, or any associate of any such director, officer or security holder is a party adverse to us or has a material interest adverse to us in reference to pending litigation.
  19
 
 ITEM 2. UNREGISTERED SALES OF EQUITYSECURITIES AND USE OF PROCEEDS
 
 None.
 
 ITEM 3. DEFAULTS UPON SENIOR SECURITIES
 
 None.
 
 ITEM 4. (REMOVED AND RESERVED)
 
 Not applicable.
  ITEM 5. OTHER INFORMATION
 
 None.
 
 ITEM 6. EXHIBITS
 
 The following is a list of exhibits filed as part of this Quarterly Report on Form 10-Q.
  Exhibit No.

Description3.9

Warrant, dated July 21, 201110.12

Amendment No. 5 to Southshore Note, dated July 18, 2011.31.1

Chief Executive Officer’s Certificate pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2

Chief Financial Officer’s Certificate pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1

Chief Executive Officer’s Certificate pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2

Chief Financial Officer’s Certificate pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
  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.
 
 Q LOTUS HOLDINGS, INC.

(A Development Stage Company)August 18, 2011
By:
/s/ Gary A. RosenbergGary A. Rosenberg

Chief Executive OfficerAugust 18, 2011

/s/ Marckensie TheresiasMarckensie Theresias

Chief Financial Officer




21