10-K 1 v347429_10k.htm 10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended

March 31, 2013

Commission File No: 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.)

20 North Wacker Drive, Suite 4120, Chicago, IL 60606

(Address, including zip code, of principal executive offices)

Registrant's telephone number, including area code: (312) 379-1800

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.0001 par value

(Title of class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES o NO x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. YES o NO x

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 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). YES x NO o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (check one):

Large Accelerated Filer o Accelerated Filer o Non-Accelerated Filer o Smaller Reporting Company x

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III or any amendment to this Form 10-K. YES x NO o

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

As of September 30, 2012, the aggregate market value of voting and non-voting common equity held by non-affiliates of the registrant, based on the closing sales price of $.08 per share for the registrant's common stock, as quoted on the Over-the-Counter Bulletin Board was approximately $3,323,581 (calculated by excluding shares owned beneficially by directors, officers and 10% shareholders). As of June 30, 2013, there were 116,321,967 shares of the registrant's common stock outstanding.

Q LOTUS HOLDINGS, INC.

(A Development Stage Company)

FORM 10-K

ANNUAL REPORT FOR YEAR ENDED MARCH 31, 2013

INDEX

PART I

Forward-Looking Statements	2

Item 1 – Business	3

Item 1A – Risk Factors	4

Item 1B – Unresolved Staff Comments	9

Item 2 – Properties	9

Item 3 – Legal Proceedings	9

Item 4 – Mine Safety Disclosures	10

PART II

Item 5 – Market for the Registrant’s Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	10

Item 6 – Selected Financial Data	10

Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations	11

Item 7A – Quantitative and Qualitative Disclosures about Market Risk	13

Item 8 – Financial Statements and Supplementary Data	13

Item 9 – Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	13

Item 9A – Controls and Procedures	14

Item 9B – Other Information	15

PART III

Item 10 – Directors and Executive Officers of the Registrant	15

Item 11 – Executive Compensation	19

Item 12 – Security Ownership of Certain Beneficial Owners and Management	20

Item 13 – Certain Relationships and Related Transactions and Director Independence	21

Item 14 – Principal Accounting Fees and Services	22

Item 15 – Exhibits, Financial Statement Schedules	22

Signatures	23

Report of Independent Registered Public Accounting Firm	29

PART I

FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains forward-looking statements that are subject to risks and uncertainties. All statements in this Annual Report on Form 10-K other than statements of historical fact are forward-looking statements. Forward-looking statements convey our current expectations and projections relating to our financial condition, results of operations, plans, objectives, business strategy, budgets, projected costs, future performance and business. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current fact. These statements may include words such as “anticipate,” “believe,” “can have,” “continue,” “estimate,” “expect,” “intend,” “likely,” “may,” “might,” “plan,” “potential,” “predict,” “project,” “seek,” “should,” “will,” and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events. The absence of these words does not necessarily mean that a statement is not forward-looking.

For example, all statements we make relating to our estimated and projected costs, cash flow, growth rate, and financial results, our plans, objectives and strategies, for future operations, growth or initiatives are forward-looking statements.

All forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those that we expect, including:

⋅

the effects of competition in the industries we conduct business in today and in the future

⋅

the failure by us to anticipate changes in consumer and business preferences

⋅

the loss of key employees

⋅

changes in general business conditions and other factors which are beyond our control

⋅

our rights and ability to mine, our receipt of the required permits and approvals from governmental authorities

⋅

our substantial indebtedness

⋅

other factors outside our control

In particular, you should consider the numerous risks described in the “Risk Factors” section of this Annual Report on Form 10-K.

Although we believe the expectations reflected in the forward-looking statements are reasonable, in light of these risks and uncertainties, the forward-looking events and circumstances discussed in this Annual Report on Form 10-K may not occur as contemplated and actual results could differ materially from those anticipated or implied by the forward-looking statements.

We derive many of our forward-looking statements from our budgets and forecasts, which are based on many assumptions. While we believe that our assumptions are reasonable, we caution that it is very difficult to predict the impact of know factors, and it is impossible for us to anticipate all factors that would affect our actual results. Important factors that could cause actual results to differ materially from our expectations or cautionary statements are disclosed under Item 1A. “Risk Factors” and Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Annual Report on Form 10-K. All written or oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by these cautionary statements as well as other cautionary statements that are made from time to time in our other filings with the Securities and Exchange Commission (the “SEC”) and public communications. You should evaluate all forward-looking statements made in this Annual Report on Form 10-K in the context of these risks and uncertainties.

We caution you that the important factors referenced above may not contain all of the factors that are important to you. In addition, we cannot assure you that we will realize the results we expect or anticipate or, even if substantially realized, they will result in the consequences or affect us or our operations in the way we expect.

The forward-looking statements included in this Annual Report on Form 10-K are made only as of the date hereof. Unless required by law, we undertake no obligation to publicly update or revise any forward-looking statements to reflect new information or future events or otherwise. You should, however, review the factors and risks we describe in the reports we will file from time to time with the SEC after the date of this Annual Report.

Item 1. BUSINESS

Unless we stated otherwise or the context otherwise requires, the terms “we,” “us,” “our,” “The Company,” “Q Lotus,” “our business,” “our company,” refer to Q Lotus Holdings, Inc. and its consolidated subsidiaries as a combined group.

Our Company

Business Overview

Q Lotus is a Nevada Corporation formed to operate as a resource company with an important focus on natural resources and mining, and interests in finance and real estate. As of March 31, 2013, the Company had two wholly owned subsidiaries, Q Lotus, Inc. (“QLI”), a Nevada corporation whose operations through such date have consisted of the acquisition of certain mining claims, and Midwest Business Credit, Inc. (“MBC”), a Nevada corporation that was formed in order to acquire the assets of Midwest Business Credit LLC (“MBC LLC”), an asset based lending company that provides secured financing.

Currently, our business consists solely of holding mineral rights in a portfolio of minerals and our activities through March 31, 2013 have been limited to formation of the legal and business structure, business planning, the pursuit of capital and the exploration of possible acquisitions and investments.

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, advances made by the Company’s Chairman, related parties, other advances from unaffiliated third parties and issuance of notes payable all totaling approximately $3,800,000.

Corporate History

The Company was originally incorporated as Extreme Home Staging, Inc. on May 2, 2006. The primary revenue-generating activity of this 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, MarckensieTheresias, 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 MarckensieTheresias 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 also executed a 3 for 1 common stock split. Accordingly, all common share and per common share information has been restated within this Form 10-K to reflect this stock split.

Plan of Operations and Planned Operating Segments

In June 2013, after completing an internal study of the Mining Claims and following significant discussions among members of our Board of Directors and our industry consultants, we have decided to focus on our natural resource and mining business pursuing the realization of our current mining interests and develop new investment opportunities. We remain committed to our interests in finance and real estate.

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 Q Lotus was originally formed on March 31, 2010, the Company has had no revenue and has generated losses from operations. At March 31, 2013, the Company had negative working capital of approximately $4,216,000 and an accumulated deficit of approximately $5,561,000. The Company needs to raise additional capital from external sources through different funding initiatives or equity placements 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 reduce 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 obligations.

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 March 31, 2013, the Company’s activities have been limited to formation of the legal and business structure, business planning, the pursuit of capital and the exploration of possible acquisitions and investments.

As of July10, 2013, the Company had minimal available cash balances. 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 to meet ongoing operating requirements through fiscal year 2014.

Seasonality and Backlog

Our business is not subject to significant seasonal fluctuations, and there are no material backlogs in our business.

Regulation and Legislation

We are subject to laws and regulations at the local, state and federal levels. These laws and regulations may change from time to time. Any change in these laws and regulations, or their interpretation, couldhave a material adverse effect on our business. See Item 1A. “Risk Factors.”

Research and Development and Environmental Matters

We have not incurred any significant research and development expenses since our formation; nor have we incurred any significant costs or any significant negative effects as a result of compliance with federal, state and local environmental laws.

Item 1A. RISK FACTORS

Our operations and financial results are subject to various risks and uncertainties, including those described below and elsewhere in this Annual Report on Form 10-K. You should carefully consider the risk factors set forth below as well as the other information contained in this Annual Report on Form 10-K in connection with evaluating us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially and adversely affect our business, results of operations or financial condition. Certain statements in “Risk Factors” are forward-looking statements.

Risks Related to our Business

We have a limited operating history upon which to base an investment decision.

We are a development-stage company and as a result we have limited financial information on which you can evaluate an investment in our company. We are subject to all of the business risks and uncertainties associated with any new business including the risk that we will not achieve our investment objectives and that the value of your investment could decline substantially or become worthless.

Since the Exchange on July 16, 2010 (as defined in “Company Overview”), our operations have been limited to organizing and exploring business opportunities, performing due diligence reviews of potential target companies and the holding of the Mining Claims. These operations provide a limited basis for you to assess our ability to achieve our business strategy and the advisability of investing in our securities.

The Company may be exposed to various risks under revenue sharing agreements it has entered into in connection with mining claims.

The Company holds mining rights to certain properties located in Utah, Arizona and Oregon. As consideration for the mining rights, the Company entered into several revenue sharing agreements that would provide the transferors with a percentage of the net revenue realized from the sale of minerals that could be mined and extracted from each respective claim. In valuing the consideration/rights provided to the transferors (rights to receive fees in the future), the Company considered many factors in determining an appropriate fair value for such consideration/rights. Since the Company (i) did not exchange any monetary consideration at the time it acquired the mining rights, (ii) has not conducted any studies as to the magnitude of the cost necessary to extract any value from such mineral rights, and (iii) does not currently have the means to pay for mining and extraction of such rights, the value of such consideration for such rights has been determined to be de minimisand valued at zero for accounting purposes. See Note 13 to the Financial Statements, entitled Commitments and Contingencies, under “Mineral Rights”.

If, and when, the Company seeks to develop the mining claims, it may encounter certain risks associated with the revenue sharing agreements. Each revenue sharing agreements identifies the parties, provides a listing of the claims in question and indicates that the transferor will be paid thirty percent (30%) of the Net Revenue (gross revenue less all related expenses), and essentially provides no additional detail. The agreements do not contain most of the standard provisions found in contacts, such as defined terms, representations and warranties (including those related to potential environmental claims), conditions of default and termination, dispute resolution, indemnification and conditions precedent to and subsequent to performance, among others. For example, the agreements do not indicate how net revenue and expenses will be calculated, including what expenses will be paid before net revenue can be allocated between the parties. If these agreements are not revised to address such shortcomings prior to the mining and extraction of the claims, if, and when that should occur, there is a significant risk of conflict between the Company and the transferor, in each case. The cost of resolving these disputes in the absence of a detailed agreement or related contracts to guide the parties and others who may be affected, could have a material adverse effect on the Company. For example, Company may not be able to realize net revenue in a timely to cover the expenses of development and earn a profit on its efforts; the Company could also be exposed to material losses for the same reasons. Moreover, there is a risk that the Company could be exposed to significant environment costs if such risks are not addressed in the agreements or related contracts. The Company could also face greater regulatory scrutiny from federal, state and local governmental entities, over environmental and other matters, including scrutiny by the SEC as to disclosure matters, unless such issues are addressed in the agreements or related contracts.

We are dependent upon senior management and the loss of their services could harm our ability to implement our business strategy.

We depend on the experience, diligence, skill and network of the leadership team consisting of our President and Chief Executive Officer, Gary A. Rosenberg, the officers and directors of Q Lotus, and Timothy Bellcourt, founder and President of Midwest Business Credit, all of whom will identify, evaluate, negotiate, structure, close, monitor and/or service our investments. Our future success will depend to a significant extent on the continued service and coordination from our leadership team, as well as our ability to attract highly qualified talent to the Company as needed. The departure of any members of senior management or key employees could have a material adverse effect on our ability to achieve our objectives. While our senior management expects to devote a majority of their business time to our operations they are not currently subject to any employment contracts. We do not maintain any "key-man" insurance policies on any of our senior management and we do not intend to obtain such insurance.

Our ability to grow will depend on our ability to raise capital.

In order for us to have the opportunity for future success and profitability, we will need to access the capital markets to raise funds. Unfavorable economic conditions could increase our funding costs, limit our access to the capital markets or result in a decision by lenders not to extend credit to us. We have actively pursued a variety of funding sources and have consummated certain transactions in order to address our capital requirements. We may need to consider raising additional capital through other available sources, including borrowing additional funds from third parties, equity offerings or debt offerings.

The use of leverage magnifies the potential for loss on amounts invested and therefore increases the risks associated with investing in our securities. Lenders and purchasers of these senior securities would have fixed dollar claims on our assets that are superior to the claims of our common shareholders and we would expect such lenders to seek recovery against our assets in the event of a default. If the value of our assets decreases, leveraging would cause our value to decline more sharply than it otherwise would have had we not leveraged. Similarly, any decrease in our income would cause net income to decline more sharply than it would have had we not borrowed. Our ability to service any debt that we incur will depend largely on our financial performance and will be subject to prevailing economic conditions and competitive pressures.

There can be no assurance that we will be successful in such pursuits. Additionally, the issuance of new securities to raise capital will cause the dilution of shares held by current stockholders. An inability to successfully access the capital markets could limit our ability to grow our business and fully execute our business strategy and could decrease our earnings, if any, in the early years of operation. As a result, our ability to generate revenues in our initial years of operation will be based on our ability to raise funds.

Our financial condition and results of operations will depend on our ability to manage our future growth effectively.

Our ability to achieve our business objectives will depend on our ability to grow, which will depend, in turn, on our ability to identify, analyze, and invest in and finance companies that meet our investment criteria. Accomplishing this result on a cost-effective basis is largely a function of our management’s proper structuring and implementation of the investment process, its ability to identify and evaluate companies that meet our investment criteria, its ability to provide competent, attentive and efficient services to us, and our ability to access financing on acceptable terms. In order to grow, we may need to hire, train, supervise and manage new employees. Failure to manage our future growth effectively could have a material adverse effect on our business, financial condition and results of operations.

A negative outlook of lending activities could materially adversely affect our proposed acquisition of Midwest Business Credit, LLC.

MBC does not currently own a portfolio of loans. However, MBC’s ability to originate loans and extend credit may be materially adversely affected by the current state of the credit and lending industry. The likelihood of experiencing delinquencies, impairments and non-accruals on loans that we originate or credit we extend is high.

In light of the lending risks noted above, management periodically reviews the appropriateness of our allowance for credit losses. However, it may be difficult to judge the expected credit performance of loans. Our estimates and judgments with respect to the appropriateness of our allowance for credit losses may not be accurate, and the assumptions we use to make such estimates and judgments may not be accurate. Our allowance may not be adequate to cover credit or other losses related to our loans as a result of unanticipated adverse changes in the economy or events adversely affecting specific customers, industries or markets. If we were to experience material credit losses related to our loans, such losses could adversely impact our ability to fund future loans and our business and, to the extent losses exceed our allowance for credit losses, our results of operations and financial condition would be adversely affected.

We operate in a highly competitive market for acquisition and investment opportunities.

We compete for investments with a number investment funds (including private equity funds and venture capital funds), reverse merger and special purpose acquisition company (“SPAC”) sponsors, investment bankers which underwrite initial public offerings, hedge funds that invest in private investments in public equity (“PIPE”), traditional financial services companies such as commercial banks and other sources of financing. Many of our competitors are substantially larger than us and have considerably greater financial, technical and marketing resources than we do. For example, some competitors may have a lower cost of funds and access to funding sources that are not available to us. In addition, some of our competitors may have higher risk tolerances or different risk assessments, which could allow them to consider a wider variety of investments and establish more relationships than we can. There can be no assurance that the competitive pressures we face will not have a material adverse effect on our business, financial condition, and results of operations. Also, as a result of this competition, we may not be able to take advantage of attractive investment opportunities from time to time, and we can offer no assurance that we will be able to identify and make investments that are consistent with our investment objectives.

Changes in laws or regulations governing our operations may adversely affect our business.

We are subject to laws and regulations at the local, state and federal levels. These laws and regulations, as well as their interpretation, may be changed from time to time. Any change in these laws or regulations, or their interpretation, could have a material adverse effect on our business.

Changes to the laws and regulations governing our business operations or their interpretations may cause us to alter our investment strategy in order to avail ourselves of new or different opportunities. If legislation is enacted, new rules are adopted, or existing rules are materially amended, we may need to change our investment strategy. Such changes could result in material differences to the strategies and plans set forth in this Form 10-K and may result in our investment focus shifting.

We may not qualify for an available exemption from registration as an investment company under the Investment Company Act.

The Company intends to structure its business operations so that it is exempt from registration under the Investment Company Act of 1940, as amended, and the rules and regulations promulgated there under (the “40 Act”). The Company has not and does not intend to register as an investment company under the 40 Act. The Company will not submit a no-action letter to the SEC, to verify that its intended organizational structure and business objectives fall outside of the definition of an investment company under the 40 Act or meet any exemption under the 40 Act. The Company intends to follow other no-action letters in structuring its investments and acquisitions. If the Company was deemed to be an investment company and unable to avail itself of any safe-harbors or other exemptions under the 40 Act, it would be required to register as an investment company. The cost would be prohibitive and could have very serious consequences for the Company. In the event that the Company is required to register under the 40 Act, the added regulatory burden could make it more difficult for the Company to continue as a viable business.

There are significant potential conflicts of interest that could impact our investment returns.

Our senior management may serve as officers, directors or principals of entities that operate in the same or a related line of business as we do or of target companies that we acquire or in which we invest. In such situations, senior management could be faced with conflicts between the interests of the Company and the interests of other businesses in which they may be involved.

We incur significant costs as a result of being a public company.

As a public company, we incur legal, accounting and other expenses, including costs associated with the periodic reporting requirements applicable to a company whose securities are registered under the Exchange Act, corporate governance requirements, including requirements under the Sarbanes-Oxley Act of 2002, as amended and other rules implemented by the SEC. We believe that complying with these rules and regulations may make some business activities time-consuming and costly and may divert the attention of our management away from implementing our business objectives.

The U.S. economy continues to experience recessionary and slow growth conditions and events have significantly constrained the availability of debt and equity capital for the market as a whole, although there are some positive economic indicators that suggest a slow, but steady recovery, is underway.

The current economic situation, together with the limited availability of debt and equity capital, including through bank financing, will likely continue to have a disproportionate impact on the micro-cap and small-cap companies we intend to target, notwithstanding recent positive economic indicators. As a result, we will likely experience an ongoing challenge in obtaining attractive acquisition and investment opportunities that fit our criteria. In addition, our interests in target companies could be impaired to the extent such target companies experience financial difficulties arising out of the current economic environment. Our inability to locate attractive target opportunities, or the impairment of our target companies as a result of economic conditions, could have a material adverse effect on our financial condition and results of operations.

Risks Related to our Common Stock

The fact that our common stock is quoted on the OTC Bulletin Board that may have an unfavorable impact on our stock price and liquidity.

Our common stock is quoted on the OTC Bulletin Board. The OTC Bulletin Board is a significantly more limited market than established trading markets such as the New York Stock Exchange or NASDAQ. The quotation of our shares on the OTC Bulletin Board may result in a less liquid market available for existing and potential stockholders to trade shares of our common stock, could depress the trading price of our common stock and could have a long-term adverse impact on our ability to raise capital. There may be other significant consequences associated with our common stock trading on the OTC Bulletin Board rather than a national exchange. The effects of not being able to list our common stock on a national exchange may include:

	¨	limited release of the market price of our securities;
	¨	limited news coverage;
	¨	limited interest by investors in our securities;
	¨	volatility of our common stock price due to low trading volume;
	¨	increased difficulty in selling our securities in certain states due to "blue sky" restrictions; and
	¨	limited ability to issue additional securities or to secure additional financing.

Our common stock has low trading volume and any sale of a significant number of shares is likely to depress the trading price.

Traditionally, the trading volume of our common stock has been limited. For example, for the 30 trading days ended on July9, 2013, the average daily trading volume was approximately 1,931,625 shares per day and on certain days there was no trading activity. During this 30-day period the closing price of our common stock ranged from a high of $0.01to a low of $0.0033.Because of this limited trading volume, holders of our securities may not be able to sell quickly any significant number of such shares, and any attempted sale of a large number of our shares will likely have a material adverse impact on the price of our common stock. As a result of the limited number of shares being traded, the price per share is subject to more volatility and may continue to be subject to rapid price swings in the future.

The price of our common stock is volatile.

The price of our common stock has fluctuated substantially. The market price of the common stock may be highly volatile as a result of factors specific to us, and the securities markets in general. Factors affecting volatility may include: variations in our annual or quarterly financial results or those of competitors; economic conditions in general; and changes in applicable laws or regulations, or their judicial or administrative interpretations that affect us, our subsidiaries or the securities industry generally. In addition, volatility of the price of our common stock is further affected by its thinly traded market.

Our principal stockholders including our directors and officers control a large percentage of shares of our common stock and can significantly influence our corporate actions.

As of June 30, 2013, our executive officers, directors and/or entities that these individuals are affiliated with, beneficially owned approximately 13.13% of our outstanding common stock. Accordingly, these individuals and entities will be able to significantly influence most, if not all, of our corporate actions, including the election of directors, the appointment of officers, and potential merger or acquisition transactions.

We may be subject to penny stock regulations and restrictions and you may have difficulty selling shares of our common stock.

The SEC has adopted regulations which generally define so-called “penny stocks” to be an equity security that has a market price less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exemptions. Our common stock is a “penny stock” and is subject to Rule 15g-9 under the Exchange Act, or the Penny Stock Rule. This rule imposes additional sales practice requirements on broker-dealers that sell such securities to persons other than established customers and “accredited investors” (generally, individuals with a net worth in excess of $1,000,000, excluding their primary residence, or annual incomes exceeding $200,000, or $300,000 together with their spouses). For transactions covered by Rule 15g-9, a broker-dealer must make a special suitability determination for the purchaser and obtain the purchaser's written consent to the transaction prior to sale. As a result, this rule may affect the ability of broker-dealers to sell our securities in the primary market and may affect the ability of purchasers to further sell any of our securities in the secondary market, thus possibly making it more difficult for us to raise additional capital.

For any transaction involving a penny stock, unless exempt, the rules require delivery, prior to any transaction in penny stock, of a disclosure schedule prepared by the SEC relating to the penny stock market. Disclosure is also required to be made about sales commissions payable to both the broker-dealer and the registered representative and current quotations for the securities. Finally, monthly statements are required to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in the penny stock.

There can be no assurance that our common stock will qualify for exemption from the Penny Stock Rule. In any event, even if our common stock were exempt from the Penny Stock Rule, we would remain subject to Section 15(b)(6) of the Exchange Act, which gives the SEC the authority to restrict any person from participating in a distribution of penny stock, if the SEC finds that such a restriction would be in the public interest.

Provisions in our articles of incorporation and bylaws or Nevada law might discourage, delay or prevent a change of control of us or changes in our management and, therefore depress the trading price of the common stock.

Nevada corporate law and our articles of incorporation and bylaws contain provisions that could discourage, delay or prevent a change in control of our Company or changes in our management that our stockholders may deem advantageous. These provisions (i) deny holders of our common stock cumulative voting rights in the election of directors, meaning that stockholders owning a majority of our outstanding shares of common stock will be able to elect all of our directors; (ii) require any stockholder wishing to properly bring a matter before a meeting of stockholders to comply with specified procedural and advance notice requirements; and (iii) allow any vacancy on the board of directors, however the vacancy may occur, to be filled by the directors.

Our board of directors can issue shares of "blank check" preferred stock without further action by our stockholders.

Our board of directors has the authority, without further action by our stockholders, to issue up to 100,000,000 shares of preferred stock in one or more series and to fix the rights, preferences, privileges and restrictions in each series of the preferred stock, including:

	¨	dividend rights;
	¨	conversion rights;
	¨	voting rights, which may be greater or lesser than the voting rights of our common stock;
	¨	rights and terms of redemption;
	¨	liquidation preferences; and
	¨	sinking fund terms.

We currently do not have any shares of preferred stock issued or outstanding. The issuance of shares of preferred stock could adversely affect the voting power of holders of our common stock and the likelihood that these holders will receive dividends and payments upon our liquidation and could have the effect of delaying, deferring or preventing a change in control of the Company. We have no current plans to issue any preferred stock, although the issuance of preferred stock may be necessary at any time in order to raise additional capital and is possible in the next 12 months.

We do not intend to pay dividends for the foreseeable future.

For the foreseeable future, we intend to retain any earnings to finance the development and expansion of our business, and we do not anticipate paying any cash dividends on our common stock. Accordingly, investors must be prepared to rely on sales of their common stock after price appreciation to earn an investment return, which may never occur. Investors seeking cash dividends should not purchase our common stock. Any determination to pay dividends in the future will be made at the discretion of our board of directors and will depend on our results of operations, financial condition, contractual restrictions, restrictions imposed by applicable law or regulation and other factors our board deems relevant.

Item 1B. UNRESOLVED STAFF COMMENTS

None.

Item 2. PROPERTIES

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 Mr. Rosenberg, the Company's Chief Executive Officer, and during the fiscal year ended March 31, 2013, the Company agreed to reimburse Urban R2 for one hundred percent of its monthly occupancy expenses. Over the period April 1, 2012 through March 31, 2013 the Company advanced funds to Urban R2 totaling $113,310 for use in investing and operations. Urban R2 has repaid $32,500 against the advances resulting in a balance due to the Company as of March 31, 2013 of $80,810.In the year ended March 31, 2013 the Company also paid to SL Civic Wacker, LLC a $100,000 deposit as security for office space at 20 N WackerDr, STE 4120, Chicago, IL 60606. For the fiscal years ended March 31, 2013 and 2012, the Company's share of these expenses charged to Q Lotus by Urban R2 totaled approximately $272,000 and $302,000, respectively. As of March 31, 2013 and 2012 amounts owed to Urban R2 included in accounts payable was $14,088 and $11,563 respectively.

Item 3. LEGAL PROCEEDINGS

Our management knows of no material existing or pending legal proceeding, litigation or claim against us. We are notinvolved as a plaintiff in any material existing legal proceeding or pending legal proceeding, litigation or claim. 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 a material existing or pending legal proceeding, litigation or claim.

Item 4. MINE SAFETY DISCLOSURES

Not applicable.

PART II

Item 5. MARKET FOR THE REGISTRANT'S EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

On July 19, 2010, our common stock commenced trading under the symbol “QLTS” on the Over-the-Counter Bulletin Board (“OTCBB”) reflecting the Company’s name change at the time. Quotations on the OTCBB reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.

The following table sets forth the high and low closing sales prices for our common stock as reported on the OTCBB for the period from April 1, 2011 to March 31, 2013.

Period	High		Low

April 1, 2011/June 30, 2011	$	0.99	$	0.20
July 1, 2011/September 30, 2011	$	0.50	$	0.10
October 1, 2011/December 31, 2011	$	0.29	$	0.03
January 1, 2012/March 31, 2012	$	0.33	$	0.04

April 1, 2012/June 30, 2012	$	0.12	$	0.03
July 1, 2012/September 30, 2012	$	0.15	$	0.05
October 1, 2012/December 31, 2012	$	0.06	$	0.01
January 1, 2013/March 31, 2013	$	0.11	$	0.01

The closing price of our common stock on June 20, 2013, as quoted on the OTCBB, was $0.0053per share.

Shareholders

As of June30, 2013, there were116,321,967shares of our common stock outstanding and the Company had 98shareholders of record. The Company’s transfer agent is Pacific Stock Transfer Company, 4045 South Spencer Street, Suite 403, Las Vegas, NV 89119.

Dividends

We do not anticipate paying any dividends to holders of our common stock in the foreseeable future.

Securities Authorized for Issuance under Equity Compensation Plans

Effective February 19, 2013 the Board adopted and Stockholders approved an Equity Incentive plan setting aside 7,500,000 shares to select Employees, Directors and Consultants to further the growth, development and financial success of the Company by providing a means by which such persons can personally benefit through the ownership of capital stock of the Company; and enable the Company to secure and retain key employees, directors and consultants considered important to the long-term success of the Company by offering such persons an opportunity to own capital stock of the Company.The Equity Incentive Plan agreement was cancelled effective May 31, 2013. As a result 4,000,000 of the 5,000,000 shares of common stock issued as compensation for creation of the plan are to be returned and cancelled.

Issuer Purchases of Equity Securities

We have not announced any currently effective authorization to repurchase shares of our common stock.

Item 6. SELECTED FINANCIAL DATA

Not applicable.

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of the results of operations and financial condition of Q Lotus for the fiscal year ended March 31, 2013 should be read in conjunction with our audited financial statements and the notes to those financial statements that are included elsewhere in this Annual Report on Form 10-K. 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. 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

We are a Nevada corporation formed to operate as a natural resource company with an important focus on natural resources and mining, and interests in finance and real estate. As of March 31, 2013, the close of its most recently completed fiscal year end, the Company had two wholly owned subsidiaries, QLI whose operations through such date have consisted of the acquisition of certain mining claims, and MBC which was formed in order to acquire the assets of MBC LLC an asset based lending company which provides secured financing.

We are a development stage company and are in our initial stage of operations. The Company has funded its operations to date from proceeds received from the sale of its common stock totaling approximately $1,005,000 from advances made by the Company’s Chairman, related parties and other advances from unaffiliated third parties.

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 (a) startup companies with proprietary technology and (b) 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 the formation of the legal and business structure, business planning, the pursuit of capital and the exploration of possible acquisitions and investments.

Critical Accounting Policies

The discussion and analysis of our financial condition and results of operations is based on the consolidated financial statements of the Company, 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.

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 be recorded at their fair value on the date of a grant, using the Black-Scholes Option Valuation Model method for stock options and the quoted price of its common stock for unrestricted shares that 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 a 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 the Company’sshares, 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 follows the provisions of ASC 740, “Income Taxes”, 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 de-recognition, classification, interest and penalties, accounting in interim periods and disclosure. The Company has filed its initial Federal and state income tax returns for the year ended March 31, 2012. The Company has no material uncertain tax positions that would require recognition in the financial statements as of March 31, 2013 and 2012.

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. As of March 31, 2013 and 2012, no penalties or interest were required to be recorded.

Common Stock Purchase Warrants and Derivative Financial Instruments

The Company classifies all of its common stock purchase warrants and other derivative financial instruments as equity if the contracts (1) require physical settlement or net-share settlement or (2) give the Company a choice of net-cash settlement or settlement in its own shares (physical settlement or net-share settlement). The Company classifies as assets or liabilities any contracts that (1) require net-cash settlement (including a requirement to net cash settle the contract if an event occurs and if that event is outside the control of the Company), (2) give the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement), or (3) that contain reset provisions. The Company assesses classification of its common stock purchase warrants and other derivatives at each reporting date to determine whether a change in classification between assets and liabilities is required.

Results of Operations

Operating Income/Loss

We have no operating income. As of March 31, 2013, our operating losses amounted to approximately $2,225,000 compared with $1,968,000 at March 31, 2012.

General and Administrative Expenses

Through March 31, 2013, the Company’s activities have been limited to formation of the legal and business structure, business planning, the pursuit of capital and the exploration of possible acquisitions and investments.

Operating expenses for the fiscal year ended March 31, 2013 of approximately $1,391,000 were incurred relating to travel of approximately $19,000, consulting fees of approximately $581,000, promotional expenses of approximately $138,000, professional fees of approximately $314,000, payroll expense of approximately $119,000, and supplies and services of approximately $220,000.

Operating expenses for the fiscal year ended March 31, 2012 of approximately $1,595,000 were incurred relating to travel of approximately $1,500, consulting fees of approximately $286,000, promotional expenses of approximately $30,000, professional fees of approximately $636,500, payroll expense of approximately $125,000other income/expense of approximately $280,000 and supplies and services of approximately $236,000.

Interest Expenses

As of March 31, 2013, the Company’s interest expense amounted to approximately $837,000 compared with $328,000 at March 31, 2012. The increase is the result of added Debt and Interest incurred in connection with Note extensions.

Net Loss

As of March 31, 2013 we have cumulative net losses of approximately $5,561,000 due to the factors noted above.

Liquidity and Capital Resources

As of March 31, 2013, the Company had minimal available cash balances. 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 in order to continue funding our ongoing operations through fiscal year 2014, as we do not believe that cash generated through operations and our current financing arrangements will be sufficient to meet our current expenses, capital requirements, anticipated capital expenses and scheduled debt payments.

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 March 31, 2013, the Company had negative working capital of approximately $4,216,000, and an accumulated deficit of approximately $5,561,000. During the period from March 31, 2010 (inception) through March31, 2013, the Company raised approximately $1,005,000 in cash from the issuance of common stock and approximately $2,860,000 in proceeds from the issuance of short-term notes. These funds were primarily used in ongoing 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 reduce 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.

Contractual Obligations

As of March 31, 2013 the total of our contractual commitments, including the repayment of our debt obligations, is summarized as follows:

	Total	Less than 1 year	1-3 years
Note payables	3,089,936	3,089,936	0
Interest payments on notes	71,657	71,657	0
Note payables – related parties	195,949	195,949	0
Note payable – on demand	6,000	6,000	0

Recently Issued Accounting Standards

We review new accounting standards as they are 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 at this time. We expect that none of the new standards will have a material impact on our consolidated financial statements.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See Part IV, Item 15(a)(1) for a list of financial statements filed as part of this Form 10-K.

Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

There were no disagreements with accountants on accounting and financial disclosure for the fiscal year ended March 31, 2013.

Item 9A. 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, (the “Exchange Act”)) Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this Annual Report on Form 10-K (the “Evaluation Date”). Based upon that evaluation, our Principal Executive Officer and Principal Financial Officer 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 Annual Report, the Principal Executive Officer and Principal Financial Officer believe that the financial statements and other information contained in this Annual Report present fairly, in all material respects, our business, financial condition and results of operations.

Management’s Annual report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. 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 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.

Our management, including our Principal Executive Officer and Principal Financial Officer, do 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.

Our management, with the participation of our Principal Executive Officer and Principal Financial Officer, evaluated the effectiveness of the Company’s internal control over financial reporting as of March 31, 2013. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control — Integrated Framework. Based on this evaluation and those criteria, our management, with the participation of our Principal Executive Officer and Principal Financial Officer, concluded that, as of March 31, 2013, our internal control over financial reporting was not effective.

At this time, management has concluded that considering the personnel involved and the control procedures in place, the risks associated with such lack of segregation of duties are insignificant and the potential benefits of adding employees to clearly segregate duties do not justify the additional expenses associated with such increases. Management will periodically reevaluate this situation. If the volume of business increases and sufficient capital is secured, it is the Company’s intention to further increase staffing to mitigate the current lack of segregation of duties within the general, administrative and financial functions.

In connection with the audit of our annual 2013 consolidated financial statements, our independent auditors also 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. 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. We have performed additional analyses and other post-closing procedures to ensure that our financial statements contained in this Annual 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 and to upgrade our financial reporting systems.

This annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our independent registered public accounting firm pursuant to final rulings of the SEC that permit us to provide only management’s report in this annual report.

Changes in Internal Control over Financial Reporting.

There was no change in the Company’s internal control over financial reporting during the Company’s fiscal quarter ended March 31, 2013 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Item 9B. OTHER INFORMATION

There is no other information to be disclosed by the Company during the fourth quarter of fiscal year 2013 that has not been reported on a current report on Form 8-K.

PART III

Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The following table sets forth certain information for each director and executive officer of the Company.

Name	Age	Position

Gary A. Rosenberg	72	Chairman of the Board,Director, President and Chief Executive Officer (CEO)

Jorge Gonzalez	49	Chief Financial Officer (CFO)

Tim Bellcourt	54	Director

Robert H. Brennan	52	Director

Robert H. Daskal	71	Director

Steven Greenberg	46	Director

Daniel Kurzweil	45	Director

Brian Ulione	58	Director

Gary A. Rosenberg has served as Chief Executive Officer and a Director of the Company since January 28, 2011. He was also named President of Q Lotus on May 10, 2012, and was elected as Chairman of the Board on December 21, 2012.Mr. Rosenberg is currently President and Chief Executive Officer of Urban R2 Development Company LLC, a position he has held since January 2005. Mr. Rosenberg also served as a Director and Chairman of the Audit Committee of National Holdings Corporation (NHLD.OB) from 2000 to July 2008. In February 2004, Mr. Rosenberg filed for bankruptcy protection under Chapter 7 in the U.S. Bankruptcy Court for the Northern District of Illinois. Mr. Rosenberg also created the real estate program at The Kellogg Graduate School of Management at Northwestern University, founded and chaired its Real Estate Research Center, and currently sits on its Board. Mr. Rosenberg received his BS and MBA from Northwestern University and his JD from the University of Wisconsin.

Jorge Gonzalez (CFO) is a well respected financial planner in South Florida who has recently joined our management team. He is the founder, President & CEO of Synergy Financial Group, Inc., an independent financial planning and advisory firm that specializes in providing creative financial programs to expand and preserve wealth. Since forming his company in 1989, Jorge has led Synergy to become a well established, stable, and responsive organization. In the last two decades his company has helped thousands of educators, individuals, and small businesses achieve and preserve their assets, promote steady growth, and achieve financial success. Jorge is a certified financial planner and holds licenses in insurance and securities. He is a member in good standing with the Financial Planning Association (FPA). Although his primary duties revolve around finance. His thorough preparation and his 22 years of first hand business management experience serves as a tremendous asset to our firm. Jorge has extensive expertise in budget management, organizational planning, and marketing skills. His contribution brings greater value and certainty of success to all of our current and future acquisitions.

Tim Bellcourt has served as a Director of the Company since December 21, 2012.Timothy D. Bellcourt (Director) is currently President and CEO of Midwest Business Credit, LLC. His asset-based lending experience covers more than 25 years in the industry. He has work for organizations such as GE Capital Corporation, NBD Business Credit, LaSalle Business Credit, and US Bank. His background includes audit, loan administration, portfolio management, credit underwriting and marketing. During the past fifteen years, Het has successfully started two separate independent asset base lending companies. Mr. Bellcourt started Midwest Business Credit, Inc. in 1997. He then sold the company in 2000 to Business Alliance Capital Corporation (BACC). Mr. Bellcourt and former partner ran the Midwest region for BACC for the next three years. Then in 2004, He started Midwest Business Credit, LLC.

Robert H. Brennan has served as a Director of the Company since January 3, 2011. Mr. Brennan has been a senior investment advisor with CB Richard Ellis Group, Inc. since 1987. Mr. Brennan has over 25 years of experience in commercial real estate specializing in the placement of sale-leaseback equity investment offerings as well as single-tenant net leased properties throughout North America. In 2001, he co-founded the National Sale Leaseback Group of CBRE. Mr. Brennan has completed investment transactions totaling over $4 billion in gross consideration during his career. Mr. Brennan also serves as an independent director and Chairman of the audit committee for Oromin Explorations – a publicly traded mineral exploration company based in Vancouver, British Columbia that trades on the Toronto Stock Exchange under the symbol "OLE" and on the OTCBB under the symbol “OLEPF”. Mr. Brennan earned his BBA from Loyola University in 1983.

Robert H. Daskal has served as a Director of the Company since January 3, 2011. Mr. Daskal has served in a number of positions with National Holdings Corporation, a publicly held financial holdings company, in Chicago, IL, since 1987, including CFO (through July 2008) and Vice President-Finance (through April 2011). Prior to that Mr. Daskal served as the Executive VP, CFO, and a Member of the Board of Directors for two publicly held companies with a focus on home building: Inco Homes Corporation, with activities primarily in Southern California, and UDC Homes, Inc., with activities in several of the Sunbelt states in North America. Mr. Daskal was formerly a Partner at Arthur Andersen & Co. in Chicago, IL, where he worked for 15 years. Mr. Daskal earned a BBA from the University of Michigan in 1962 and a JD from the University of Michigan Law School in 1965.

Steven Greenberg has served as a Director of the Company since January 3, 2011. Mr. Greenberg is a member of the Chicago Mercantile Exchange and the Minneapolis Grain Exchange. Mr. Greenberg was a founder, Chairman, President and CEO of Alaron Trading Corporation, a Chicago based global futures and options brokerage, where he has gained significant experience in a highly regulated industry, including financial reporting, employee relations and corporate governance. Mr. Greenberg has been associated with Alaron Trading since 1989. He is the author of Single Stock Futures and supports a number of civic initiatives including The Gastro-Intestinal Research Foundation of the University of Chicago and Boston University. Mr. Greenberg earned his BA from Boston University in 1989 and MBA from the University of Chicago in 2006.

Daniel Kurzweil has served as a Director of the Company since January 3, 2011. Mr. Kurzweil has been an independent Employee Benefits Advisor since October 2009. Prior to that Mr. Kurzweil was the Administrator for Eagles of Hope from January 2005 to December 2009. Mr. Kurzweil was also the General Manager and Partner for M&S Inc (Field of Dreams) from October 2004 to June 2007. Mr. Kurzweil was also a Financial Advisor with Morgan Stanley from August 2003 to April 2006.

Brian Ulione has served as a Director of the Company since January 3, 2011. Mr. Ulione is currently a Principal with Business Transition Specialists (BTS) in St. Louis, MO, a position he has held since 2009. Additionally, Mr. Ulione serves as President for Consultants Unlimited (which he founded in 1999) where he provides consultation services primarily to the real estate, hospitality, sports industries. Prior to that, Mr. Ulione worked with the Rouse Company on several mixed-use developments throughout the country. He has more than 25 years of experience in the sales, management, and business development side of professional sports, entertainment, racing, and gaming businesses. He has served on many charitable and community boards of directors and is currently a Director of The Boys Club of St. Louis. Mr. Ulione earned his BA from Rutgers College in 1976.

Involvement in Certain Legal Proceedings

Other than Mr. Rosenberg(as described above), none of the proposed directors has, during the past ten years:

(a)

Had any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;

(b)

Been convicted in a criminal proceeding or subject to a pending criminal proceeding;

(c)

Been subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities, futures, commodities or banking activities; or

(d)

Been found by a court of competent jurisdiction (in a civil action), the SEC or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated.

Compliance with Section 16(a) of the Exchange Act

Section 16(a) of the Exchange Act requires our directors, executive officers, and stockholders holding more than 10% of our outstanding Common Stock to file with the SEC initial reports of ownership and reports of changes in beneficial ownership of our Common Stock. Executive officers, directors, and persons who own more than 10% of our Common Stock are required by SEC regulations to furnish us with copies of all Section 16(a) reports that they file.

Based solely upon a review of Forms 3, 4, and 5 delivered to us as filed with the SEC during our most recent fiscal year, none of our executive officers and directors, and persons who own more than 10% of our common stock, failed to timely file the reports required pursuant to Section 16(a) of the Exchange Act, other than, MilkaFixler, our former sole director and executive officer, who failed to file any Form 3 or 4 with the SEC for our predecessor company, Mr. Theresias, a former director, who filed a Form 3 and Form 4 late and Mr. Rosenberg, who failed to timely file his Form 3.

Terms of Office

The Company’s directors serve for a one-year term to hold office until the next annual general meeting of the Company’s stockholders or until removed from office in accordance with the Company’s Bylaws and the provisions of the Nevada Revised Statutes. Each of the Company’s directors will hold office after the expiration of his term until his successor is elected and qualified, or until he resigns or is removed in accordance with the Company’s Bylaws and the provisions of the Nevada Revised Statutes.

The Company’s executive officers have been appointed by the Company’s Board of Directors and hold office until removed by the Board of Directors in accordance with the Company’s Bylaws and the provisions of the Nevada Revised Statutes.

Board Meetings and Annual Meeting

In the fiscal year ended March 31, 2013, our Board of Directors met threetimes and we did not hold an annual meeting of stockholders in 2012. All directors have made at least 100% of the meetings of directors held during the period for which such directors served as directors. Directors will be encouraged to attend annual meetings of shareholders if scheduled, but we do not anticipate having a formal policy requiring them to do so.

Committees of the Board of Directors

We presently do not have a compensation committee or nominating committee, or committees performing similar functions, since our management had believed that, until this point, that considering the early stage of our management and business development, it has been premature to form a compensation or nominating committee. In May 2011, we formed an audit committee consisting of three independent directors, Steven Greenberg, as Chairman and a member, and Robert H. Brennan and Brian Ulione, as members. We anticipate that our Board of Directors will form a compensation and nominating committee in the near future. The audit committee is primarily responsible for reviewing the services performed by our independent auditors and evaluating our accounting policies and system of internal controls. We envision that the compensation committee will be primarily responsible for reviewing and approving our salary and benefits policies (including stock options) and other compensation of our executive officers. The nominating committee would be primarily responsible for nominating directors and setting policies and procedures for the nomination of directors. The nominating committee would also be responsible for overseeing the creation and implementation of our corporate governance policies and procedures. Until these committees are established, decisions in the above areas will continue to be made by our Board of Directors. Although our Board of Directors has not established any minimum qualifications for director candidates, when reviewing potential director candidates, our Board of Directors considers the candidate’s character, judgment, skills and experience in the context of the needs of our Company and our Board of Directors.

We do not have a charter governing the nominating process. The members of our Board of Directors, who perform the functions of a nominating committee, are not independent because they are also our officers. There has not been any defined policy or procedural requirements for shareholders to submit recommendations or nominations for directors. Our Board of Directors does not believe that a defined policy with regard to the consideration of candidates recommended by shareholders is necessary at this time because, given the early stage of our development, a specific nominating policy would be premature and of little assistance until our business operations are at a more advanced level.

Nominations to the Board of Directors

Our directors take a critical role in guiding our strategic direction and oversee the management of the Company. Board of Director candidates are considered based upon various criteria, such as their broad-based business and professional skills and experiences, evidence of a global business and social perspective, a concern for the long-term interests of the stockholders, a commitment to diversity, personal integrity and good judgment. Accordingly, we seek to attract and retain highly qualified directors.

In carrying out its responsibilities, the Board of Directors will consider candidates suggested by stockholders. If a stockholder wishes to formally place a candidate's name in nomination, however, such stockholder must do so in accordance with the provisions of the Company's Bylaws. As noted above, the Board of Directors does not currently have a defined policy for consideration of candidates for the Board of Directors.

Board Leadership Structure and Role on Risk Oversight

Gary A. Rosenberg currently serves as the Company’s Chairman, President, Chief Executive Officer and a director. At present, we have determined this leadership structure is appropriate for the Company due to our small size and limited operations and resources. As a result, no policy has been adopted that requires the combination or separation of leadership roles and our governing documents do not mandate a particular leadership structure. This has allowed our Board of Directors the flexibility to establish the most appropriate structure for the Company at any given time.

Board Compensation

On September 28, 2011 the Board of Directors agreed to accrue compensation for independent Board Members in the amount of $13,500 each and to accrue at the end of each subsequent quarter $4,500 each, to be paid when cash is available. It was also resolved on February 27, 2012 to issue 25,000 shares of stock to independent directors and 250,000 shares of stock to Dan Kurzweil. In December 2012, the Company authorized the return and cancellation of the 250,000 shares of common stock issued to Mr. Kurzweil and 25,000 shares issued to one director. In February 2013 the Company issued 500,000 shares of common stock issued to Mr. Kurzweil and 25,000 shares issued to one director. All travel and lodging expenses of the Board of Directors and Members associated with corporate matters are reimbursed by us, if and when incurred.

Legal Proceedings

Our management knows of no material existing or pending legal proceeding, litigation or claim against us, nor are we involved as a plaintiff in any material existing legal proceeding or pending legal proceeding, litigation or claim. 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 a material existing or pending legal proceeding, litigation or claim.

Stockholder Communication with the Board of Directors

Stockholders may send communications to our Board of Directors by writing to: 20 North Wacker Drive, Suite 4120, Chicago, IL 60606, Attention: Board of Directors.

Item 11. EXECUTIVE COMPENSATION

Compensation Summary

The following table summarizes all compensation earned by or paid to our current Chief Executive Officer and Chief Financial Officer (Principal Executive Officer and Principal Financial Officer) during the fiscal years ended March 31, 2013 and 2012.

SUMMARY COMPENSATION TABLE

Name and Principal Position	Year	Salary ($)		Bonus ($)	Stock Awards ($)		Option Awards ($)	Non- Equity Incentive Plan Compensation ($)	Change in Pension Value and Non- qualified Deferred Compensation Earnings ($)	All Other Compensation ($)	Total ($)

Gary A.	2012	$	0	0		0	0	0	0	0	$	0
Rosenberg, Chief Executive Officer	2013	*$	25,946	0		0	0	0	0	0	$	25,946

Jorge	2012	$	0	0		0	0	0	0	0	$	0
Gonzalez, Chief Financial Officer	2013	$	0	0	$	40,000	0	0	0	0	$	40,000

* Indirect Compensation expense included in shared expenses with Urban R2

We have not issued any stock options since our formation onMarch 31, 2010. We have no plans in place and have never maintained any plans that provide for the payment of retirement benefits or benefits that will be paid primarily following retirement including, but not limited to, tax qualified deferred benefit plans, supplemental executive retirement plans, tax-qualified deferred contribution plans and nonqualified deferred contribution plans. Similarly, we have no contracts, agreements, plans or arrangements, whether written or unwritten, that provide for payments to the named executive officers or any other persons following, or in connection with the resignation, retirement or other termination of a named executive officer, or a change in control of the Company or a change in a named executive officer’s responsibilities following a change in control.

Option Grants

We did not grant options to purchase any equity interests to any employees or officers, and no stock options are issued or outstanding to any officers.

Employment Agreements

As of this time, we do not have any employment agreements with any of our executive officers.

Outstanding Equity Awards

None.

Bonuses and Deferred Compensation

The Company does not have any bonus, deferred compensation or retirement plan. Decisions regarding compensation will be determined by our compensation committee once it is established. Our compensation committee will consist of our three independent directors effective until the expiration of the ten-day period following the mailing of the Schedule 14f-1 to the Company’s shareholders.

Compensation of Directors

On September 28, 2011, the board agreed to accrue compensation for independent Board Members in the amount of $13,500 each and to accrue at the end of each subsequent quarter $4,500 each, to be paid when cash is available. It was resolved on February 27, 2012 to issue 25,000 shares of stock to the independent directors and 250,000 shares to Dan Kurzweil.In December 2012, the Company authorized the return and cancellation of the 250,000 shares of common stock issued to Mr. Kurzweil and 25,000 shares issued to one director. In February 2013 the Company issued 500,000 shares of common stock to Mr. Kurzweil and issued 25,000 shares to one director.

Compensation Committee Interlocks and Insider Participation

We do not have a Compensation Committee. All compensation matters are approved by the full Board.

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The holders of the Company’s Common Stock are entitled to one vote per share of Common Stock held on all matters submitted to a vote of stockholders and have equal rights to receive dividends, when and if declared by our Board of Directors, out of funds legally available for such purpose. In the event of liquidation, holders of the Company’s Common Stock are entitled to share ratably in the net assets of the Company available for distribution to stockholders. The table below sets forth the number and percentage of shares of our Common Stock owned as of June30, 2013, by the following persons: (i) stockholders known to us who own 5% or more of our outstanding shares, (ii) each of our officers and directors, and (iii) our officers and directors as a group. As of June30, 2013, there were116,321,967shares of our Common Stock outstanding.

To our knowledge, except as indicated in the footnotes to this table or pursuant to applicable community property laws, the persons named in the table have sole voting and investment power with respect to the shares of common stock indicated.

Title of Class	Name and Address of Beneficial Owner⁽¹⁾	Amount of Beneficial Ownership⁽²⁾	Percent of Class⁽²⁾

Common Stock	Joshua T Goldstein 4 Executive Blvd STE 20 Suffern, NY 10901	17,500,000	16.23	%

Common Stock	MarckensieTheresias 475 Brickell Avenue Miami, FL 33131	5,670,000	5.26	%

Common Stock	Gary A. Rosenberg 20 North Wacker Drive Suite 4120 Chicago, IL 60606	11,600,000	11.59	%

Common Stock	All officers and directors as a group (8 persons)	12,225,000	12.22	%

____________________________

⁽¹⁾	Unless otherwise noted, the security ownership disclosed in this table is of record and beneficial.

⁽²⁾

Under Rule 13d-3 of the Exchange Act, shares not outstanding but subject to options, warrants, rights, or conversion privileges pursuant to which such shares may be acquired in the next 60 days are deemed to be outstanding for the purpose of computing the percentage of outstanding shares owned by the person having such rights, but are not deemed outstanding for the purpose of computing the percentage for such other persons. None of our officers or directors has options, warrants, rights, or conversion privileges outstanding at this time.

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

Policies and Procedures for Review, Approval or Ratification of Transactions with Related Persons

We expect to prepare and adopt a written related-person transactions policy that sets forth our policies and procedures regarding the identification, review, consideration and approval or ratification of “related-persons transactions.” For purposes of our policy only, a “related-person transaction” will be a transaction, arrangement or relationship or proposed transaction, arrangement or relationship (or any series of similar or proposed transactions, arrangements or relationships) in which we and any “related person” are participants involving an amount that exceeds the lesser of $120,000 or one percent of the average of our total assets at year end for the last two completed fiscal years. Transactions involving compensation for services provided to us as an employee, director, consultant or similar capacity by a related person will not be covered by this policy. A related person will be any executive officer, director or a holder of more than five percent of our ordinary shares, including any of their immediate family members and any entity owned or controlled by such persons

We anticipate that, where a transaction has been identified as a related-person transaction, the policy will require management to present information regarding the proposed related-person transaction to our Audit Committee (or, where approval by our Audit Committee would be inappropriate, to another independent body of our Board of Directors) for consideration and approval or ratification. Management’s presentation will be expected to include a description of, among other things, the material facts, the direct and indirect interests of the related persons, the benefits of the transaction to us and whether any alternative transactions are available.

To identify related-person transactions in advance, we are expected to rely on information supplied by our executive officers, directors and certain significant shareholders. In considering related-person transactions, our Board of Directors will take into account the relevant available facts and circumstances including, but not limited to:

	•	the risks, costs and benefits to us;
	•	the effect on a director’s independence in the event the related person is a director, immediate family member of a director or an entity with which a director is affiliated;
	•	the terms of the transaction;
	•	the availability of other sources for comparable services or products; and
	•	the terms available to or from, as the case may be, unrelated third parties or to or from our employees generally.

We also expect that the policy will require any interested director to excuse him or herself from deliberations and approval of the transaction in which the interested director is involved.

Director Independence

Our securities are not listed on a national securities exchange or on any inter-dealer quotation system that has a requirement that directors be independent. However, we believe that a strong presence of independent, non-employee directors is beneficial to our Company. Currently, Tim Bellcourt, Robert H. Daskal, Daniel Kurzweil, Steven Greenberg, Brian Ulione and Robert H. Brennan are independent directors. We evaluate independence by the standards for director independence established by the Marketplace Rules of The Nasdaq Stock Market.

Subject to some exceptions, these standards generally provide that a director will not be independent if (a) the director is, or in the past three years has been, an employee of ours; (b) a member of the director’s immediate family is, or in the past three years has been, an executive officer of ours; (c) the director or a member of the director’s immediate family has received more than $120,000 per year in direct compensation from us other than for service as a director (or for a family member, as a non-executive employee); (d) the director or a member of the director’s immediate family is, or in the past three years has been, employed in a professional capacity by our independent public accountants, or has worked for such firm in any capacity on our audit; (e) the director or a member of the director’s immediate family is, or in the past three years has been, employed as an executive officer of a company where one of our executive officers serves on the compensation committee; or (f) the director or a member of the director’s immediate family is an executive officer of a company that makes payments to, or receives payments from, us in an amount which, in any twelve-month period during the past three years, exceeds the greater of $200,000 or five percent of the provider’sorrecipient’s consolidated gross revenues for that year, as applicable.

Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

Audit Fees. The aggregate fees for professional services rendered was $126,500 and $129,000 for the Company’s annual financial statements for the fiscal years ended March 31, 2013 and 2012, respectively, which services include the cost of the quarterly review of the condensed financial statements for the fiscal years ended March 31, 2013 and 2012.

Audit-Related Fees. “Audit-related fees” include fees billed for assurance and related services that are reasonably related to the performance of the audit and not included in the “audit fees” mentioned above. There were no such services provided in fiscal years 2013 and 2012.

Tax Fees. Tax fees billed include fees for tax compliance, tax advice or tax planning. The aggregate fees for these services rendered was $4,500 and $4,500 for the fiscal years ended March 31, 2013 and 2012, respectively.

All Other Fees. “All other fees” consists of fees for products and services other than those products and services reported above. There were no other products and services provided in fiscal years 2013 and 2012.

Pre-Approval Policies

Pursuant to the rules and regulations of the SEC, before the Company’s independent public accountant is engaged to render audit or non-audit services, the engagement must be approved by the Company’s Board of Directors.

Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a) The following financial statements are included in Part II, Item 8:

1. Financial Statements

Report of Independent Registered Public Accounting Firm

Consolidated Financial Statements

Balance Sheets, March 31, 2013 and March 31, 2012

Statements of Operations for the Years ended March 31, 2013 and March 31, 2012

Statement of Changes in Stockholders' Equity for the Years ended March 31, 2013 and March 31, 2012

Statements of Cash Flows for the Years ended March 31, 2013 and March 31, 2012

Notes to Consolidated Financial Statements

2. Financial Statement Schedules

Schedules not listed above have been omitted because they are not applicable or have been included in footnotes to the consolidated financial statements.

(b) See Exhibit Index.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities and 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.
	(Registrant)

Date: July 15, 2013	By:	/s/ Gary A. Rosenberg
		Gary A. Rosenberg
		Chairman of the Board, Director, President, Chief Executive Officer and Principal Executive Officer

Date: July 15, 2013	By:	/s/ Jorge Gonzalez
		Jorge Gonzalez
		Chief Financial Officer and Principal Financial Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Date: July 15, 2013	By:	/s/Gary A. Rosenberg
		Gary A. Rosenberg
		Chairman of the Board and Director

Date: July 15, 2013	By:	/s/Tim Bellcourt
		Tim Bellcourt
		Director

Date: July 15, 2013	By:	/s/ Robert H. Brennan
		Robert H. Brennan
		Director

Date: July 15, 2013	By:	/s/ Robert H. Daskal
		Robert H. Daskal
		Director

Date: July 15, 2013	By:	/s/ Steven Greenberg
		Steven Greenberg
		Director

Date: July 15, 2013	By:	/s/ Daniel Kurzweil
		Daniel Kurzweil
		Director

Date: July 15, 2013	By:	/s/ Brian Ulione
		Brian Ulione
		Director

EXHIBIT INDEX

3.1 Amended and Restated Articles of Incorporation, previously filed as an exhibit to the Company’s Definitive Information Statement on Schedule 14C filed June 28, 2010 and hereby incorporated by reference.

3.2 By-laws, previously filed as Exhibit 3.3 to the Company’s Registration Statement on Form SB-2 filed October 25, 2007 and hereby incorporated by reference.

3.3 Articles of Exchange, previously filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K filed June 15, 2010 and hereby incorporated by reference.

3.4 Form of 11% Promissory Note with Southshore Real Estate Development, LLC, dated February 23, 2011 (the “Southshore Note”) previously filed as Exhibit 3.4 to the Company’s Form 10-K filed July 14, 2011 and hereby incorporated by reference.

3.5 Warrant, dated February 23, 2011, previously filed as Exhibit 3.5 to the Company’s Form 10-K filed July 14, 2011 and hereby incorporated by reference.

3.6 Warrant, dated May 20, 2011, previously filed as Exhibit 3.6 to the Company’s Form 10-K filed July 14, 2011 and hereby incorporated by reference.

3.7 Warrant, dated May 20, 2011, previously filed as Exhibit 3.7 to the Company’s Form 10-K filed July 14, 2011 and hereby incorporated by reference.

3.8 Warrant, dated June 17, 2011, previously filed as Exhibit 3.8 to the Company’s Form 10-K filed July 14, 2011 and hereby incorporated by reference.

3.9 Warrant, dated July 21, 2011, previously filed as Exhibit 3.9 to the Company’s Form 10-Q filed August 18, 2011 and hereby incorporated by reference.

3.10 Warrant, dated March 16, 2012, previously filed as Exhibit 3.10 to the Company’s Form 8-K filed June 11, 2012 and hereby incorporated by reference.

3.11 Warrant, dated March 16, 2012,previously filed as Exhibit 3.11 to the Company’s Form 8-K filed June 11, 2012 and hereby incorporated by reference.

9.1 Voting Trust Agreement, dated August 24, 2010, by and between Real Holdings Capital, LLC and MarkensieTheresias, previously filed as Exhibit 9.1 to the Company’s Form 10-K filed July 14, 2011 and hereby incorporated by reference.

10.1 Stock Purchase Agreement, dated April 15, 2010, by and among Extreme Home Staging Inc., MilkaFixlar, Esther Ackerman and MarkensieTheresias, previously filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed April 21, 2010 and hereby incorporated by reference.

10.2 Agreement and Plan of Share Exchange, dated as of June 11, 2010, by and between Extreme Home Staging Inc. and Q Lotus, Inc. previously filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed June 15, 2010 and hereby incorporated by reference.

10.3 Cancellation Agreement, dated as of June 11, 2010, by and between Extreme Home Staging Inc. and MarkensieTheresias previously filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed June 15, 2010 and hereby incorporated by reference.

10.4 Mineral Rights Agreement, dated May 7, 2010, by and between ATP Holdings, Inc, and Q Lotus, Inc. - Legend Property #1- Harley Dome #10 previously filed as Exhibit 10.3 to the Company’s Current Report on Form 8-K filed June 15, 2010 and hereby incorporated by reference.

10.5 Mineral Rights Agreement, dated May 7, 2010, by and between ATP Holdings, Inc, and Q Lotus, Inc. - Legend Property #2- Harley Dome #11 previously filed as Exhibit 10.3 to the Company’s Current Report on Form 8-K filed June 15, 2010 and hereby incorporated by reference.

10.6 Mineral Right Agreement, dated May 7, 2010, by and between Prospect Silica Enterprises Inc. and Q Lotus, Inc. - Legend Property #4- Ramix Portfolio previously filed as Exhibit 10.5 to the Company’s Current Report on Form 8-K filed June 15, 2010 and hereby incorporated by reference.

10.7 Loan Agreement, dated October 11, 2010, by and between the Company and Zenith Estates, Inc. previously filed as Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q filed November 15, 2010 and hereby incorporated by reference.

10.8 Amendment No. 1 to Southshore Note, dated April 25, 2011, previously filed as Exhibit 10.8 to the Company’s Form 10-K filed July 14, 2011 and hereby incorporated by reference.

10.9 Amendment No. 2 to Southshore Note, dated May 20, 2011, previously filed as Exhibit 10.9 to the Company’s Form 10-K filed July 14, 2011 and hereby incorporated by reference.

10.10 Amendment No. 3 to Southshore Note, dated June 17, 2011, previously filed as Exhibit 10.10 to the Company’s Form 10-K filed July 14, 2011 and hereby incorporated by reference.

10.11 Amendment No. 4 to Southshore Note, dated June 27, 2011, previously filed as Exhibit 10.11 to the Company’s Form 10-K filed July 14, 2011 and hereby incorporated by reference.

10.12 Amendment No. 5 to Southshore Note, dated July 18, 2011, previously filed as Exhibit 10.12 to the Company’s Form 10-Q filed August 18, 2011 and hereby incorporated by reference.

10.13 Securities Purchase Agreement, dated August 3, 2011, between the Registrant and Asher Enterprises, Inc. previously filed as Exhibit 10.13 to the Company’s 8-K filed August 17, 2011 and hereby incorporated by reference.

10.14 Convertible Promissory Note dated August 3, 2011, previously filed as Exhibit 10.14 to the Company’s 8-K filed August 17, 2011 and hereby incorporated by reference.

10.15 Amendment No. 6 to Promissory Note, dated August 24, 2011, between the Registrant and Southshore Real Estate Development, LLC, previously filed as Exhibit 10.15 to the Company’s 8-K filed August 26, 2011 and hereby incorporated by reference.

10.16 Amendment No. 7 to Promissory Note, dated September 6, 2011, between the Registrant and Southshore Real Estate Development, LLC, previously filed as Exhibit 10.16 to the Company’s 8-K filed September 7, 2011 and hereby incorporated by reference.

10.17 Promissory Note, dated September 12, 2011, between the Registrant and Timothy Bellcourt, previously filed as Exhibit to the Company’s 8-K filed September 14, 2011 and hereby incorporated by reference.

10.18 Promissory Note, dated September 12, 2011, between the Registrant and Matloob Husain, previously filed as Exhibit to the Company’s 8-K filed September 14, 2011 and hereby incorporated by reference.

10.19 Promissory Note, dated September 8, 2011, between the Registrant and EstefaniaUrso, previously filed as Exhibit to the Company’s 8-K filed September 14, 2011 and hereby incorporated by reference.

10.20 Amendment No. 8 to Promissory Note, dated September 22, 2011, between the Registrant and Southshore Real Estate Development, LLC, previously filed as Exhibit 10.17 to the Company’s 8-K filed September 27, 2011 and hereby incorporated by reference.

10.21 Employment Agreement, dated September 28, 2011, by and between the Company and Daniel Kurzwiel, previously filed as Exhibit 10.18 to the Company’s 8-K filed October 5, 2011 and hereby incorporated by reference.

10.22 Amendment No. 9 to Promissory Note, dated November 2, 2011, between the Registrant and Southshore Real Estate Development, LLC, previously filed as Exhibit 10.18 to the Company’s 8-K filed November 4, 2011 and hereby incorporated by reference.

10.23 Promissory Note, dated December 1, 2011, between the Registrant and Frank Powers, previously filed as Exhibit 10.20 to the Company’s 8-K filed January 11, 2012 and hereby incorporated by reference.

10.24 Amendment to Promissory Note, dated December 1, 2011, between the Registrant and Frank Powers, previously filed as Exhibit 10.20 to the Company’s 8-K filed January 11, 2012 and hereby incorporated by reference.

10.25 Amendment to Convertible Promissory Note, dated August 3, 2011, between the Registrant and Asher Enterprises Inc., a Delaware corporation, previously filed as Exhibit 10.21 to the Company’s 8-K filed January 24, 2012 and hereby incorporated by reference.

10.26 Promissory Note, dated January 18, 2012, between the Registrant and Southshore Real Estate Development, LLC,previously filed as Exhibit 10.22 to the Company’s 8-K filed January 24, 2012 and hereby incorporated by reference.

10.27 Securities Purchase Agreement dated January 5, 2012 between the Registrant and Asher Enterprises, Inc., previously filed as Exhibit 10.23 to the Company’s 8-K filed January 26, 2012 and hereby incorporated by reference.

10.28 Convertible Promissory Note dated January 5, 2012 between the Registrant and Asher Enterprises, Inc., previously filed as Exhibit 10.24 to the Company’s 8-K filed January 26, 2012 and hereby incorporated by reference.

10.29 Amendment to Promissory Note, dated January 18, 2012, between the Q Lotus and EstefaniaUrso, previously filed as Exhibit 10.25 to the Company’s 8-K filed January 30, 2012 and hereby incorporated by reference.

10.30 Second Amendment to Promissory Note, dated January 25, 2012, between the Q Lotus Holdings, Inc. and Frank Powers, previously filed as Exhibit 10.26 to the Company’s 8-K filed January 30, 2012 and hereby incorporated by reference.

10.31 Asset Purchase Agreement, dated January 26, 2012, between MW Business Credit, LLC f/k/a Midwest Business Credit, LLC, a Nevada limited liability company, and Midwest Business Credit, Inc., a Delaware corporation, a wholly owned subsidiary of Q Lotus Holdings, Inc., previously filed as Exhibit 10.27 to the Company’s 8-K filed February 7, 2012 and hereby incorporated by reference.

10.32 Third Amendment to Promissory Note, dated March 9, 2012, between the Q Lotus Holdings, Inc. and Frank Powers, previously filed as Exhibit 10.28 to the Company’s 8-K filed March 20, 2012 and hereby incorporated by reference.

10.33 Amendment to Promissory Note, dated September 12, 2011, between the Q Lotus Holdings, Inc. and Matloob Husain, previously filed as Exhibit 10.29 to the Company’s 8-K filed April 12, 2012 and hereby incorporated by reference.

10.34 Amendment to Promissory Note, dated September 12, 2011, between the Q Lotus Holdings, Inc. and Timothy Bellcourt, previously filed as Exhibit 10.30 to the Company’s 8-K filed April 12, 2012 and hereby incorporated by reference.

10.35 Fourth Amendment to Promissory Note, dated April 11, 2012, between the Q Lotus Holdings, Inc. and Frank Powers, previously filed as Exhibit 10.31 to the Company’s 8-K filed April 13, 2012 and hereby incorporated by reference.

10.36 Amendment to Promissory Note, dated April 10, 2012, between the Q Lotus Holdings, Inc. and Southshore Real Estate Development, LLC, previously filed as Exhibit 10.32 to the Company’s 8-K filed April 13, 2012 and hereby incorporated by reference.

10.37 Agreement, dated April 5, 2012, between the Q Lotus Holdings, Inc. and Centarus Business Consultants Ltd. regarding the evaluation of the mineral potential of the mining claims held by Q Lotus, previously filed as Exhibit 10.33 to the Company’s 8-K filed April 17, 2012 and hereby incorporated by reference.

10.38 Amendment to Promissory Note, dated April 17, 2012, between the Q Lotus and EstefaniaUrso, previously filed as Exhibit 10.34 to the Company’s 8-K filed April 20, 2012 and hereby incorporated by reference.

10.39 Agreement dated March 23, 2012 between the Q Lotus Holdings Inc. and Capital Business West LLC whereby Capital Business West will act as financial advisor to Q Lotus regarding Q Lotus’ capital raising activities, previously filed as Exhibit 10.35 to the Company’s 8-K filed April 26, 2012 and hereby incorporated by reference.

10.40 Amendment to Convertible Promissory Note, dated May 1, 2012, between the Registrant and Asher Enterprises Inc., a Delaware corporation, previously filed as Exhibit 10.36 to the Company’s 8-K filed May 7, 2012 and hereby incorporated by reference.

10.41 Promissory Note, dated May 2, 2012, between the Registrant and Corie Marie Leasing, LLC, previously filed as Exhibit 10.37 to the Company’s 8-K filed May 7, 2012 and hereby incorporated by reference.

10.42 Amendment to Convertible Promissory Note, dated May 1, 2012, between the Registrant and Asher Enterprises Inc., a Delaware corporation, previously filed as Exhibit 10.38 to the Company’s 8-K filed May 9, 2012 and hereby incorporated by reference.

10.43 Securities Purchase Agreement, dated May 2, 2012, between the Company and Asher Enterprises, Inc., previously filed as Exhibit 10.39 to the Company’s 8-K filed May 21, 2012 and hereby incorporated by reference.

10.44 Convertible Promissory Note dated May 2, 2012, previously filed as Exhibit 10.40 to the Company’s 8-K filed May 21, 2012 and hereby incorporated by reference.

10.45 Promissory note, dated April 27, 2012, between Registrant and MB Business Credit, LLC, previously filed as Exhibit 10.41 to the Company’s 8-K filed June 15, 2012 and hereby incorporated by reference.

10.46 Security Agreement, dated April 27, 2012 between Registrant and MB Business Credit, LLC, previously filed as Exhibit 10.42 to the Company’s 8-K filed June 15, 2012 and hereby incorporated by reference.

10.47 Partnership Agreement dated July 10, 2012 between Q Lotus Holdings, Inc. and Q Lotus Holdings, Ltd., a company registered in Hong Kong, previously filed as Exhibit 10.43 to the Company’s 8-K filed July 20, 2012 and hereby incorporated by reference.

10.48 Collateral Agreement, dated July 1, 2012, between Registrant and US Bank, previously filed as Exhibit 10.44 to the Company’s 8-K filed August 9, 2012 and hereby incorporated by reference.

10.49 Trust Indenture, dated July 30, 2012 between Registrant and US Bank, previously filed as Exhibit 10.45 to the Company’s 8-K filed August 9, 2012 and hereby incorporated by reference.

10.50 Secured Note R1 in the amount of $500,000 due July 30, 2025 with an interest rate of 6.25% previously filed as Exhibit 10.46 to the Company’s 8-K filed August 9, 2012 and hereby incorporated by reference.

10.51 Secured Note R2 in the amount of $500,000 due July 30, 2025 with an interest rate of 6.25% previously filed as Exhibit 10.47 to the Company’s 8-K filed August 9, 2012 and hereby incorporated by reference.

10.52 Modified Purchase Rights and Completion Agreement dated October 15, 2012 between the Registrant and Prospect Silica Enterprises, Inc. previously filed as Exhibit 10.48 to the Company’s 8-K filed November 5, 2012 and hereby incorporated by reference.

10.53 Resignation Letter from MarckensieTheresias dated December 17, 2012, previously filed as Exhibit 10.49 to the Company’s 8-K filed December 21, 2012 and hereby incorporated by reference.

14 Code of Ethics previously filed as Exhibit 99.1 to the Company’s Registration Statement on Form SB-2 filed October 25, 2007 and hereby incorporated by reference.

16.1 Letter from Seale & Beers, CPAs, re: change in certifying accountants previously filed as Exhibit 16.1 to the Company’s Current Report on 8-K/A filed June 11, 2010 and hereby incorporated by reference.

21 Subsidiaries.

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.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders

of Q Lotus Holdings, Inc.

(A Development Stage Company)

We have audited the accompanying consolidated balance sheets of Q Lotus Holdings, Inc. (the “Company”) (a development stage company) as ofMarch 31, 2013 and March 31, 2012, and the related consolidated statements of operations, stockholders’ equity and cash flows for the years then ended and for the period from inception of the Company on March 31, 2010 to March 31, 2013. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Q Lotus Holdings, Inc., as of March 31, 2013 and March 31, 2012, and the consolidated results of its operations and its cash flows for the years then ended and for the period from inception of the Company on March 31, 2010 to March 31, 2013, in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company’s working capital deficiency and substantial loss from operations raise substantial doubt about its ability to continue as a going concern. Management’s plans concerning these matters are also discussed in Note 1 to the financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ Marcum LLP

New York, NY

July 15, 2013

Q LOTUS HOLDINGS, INC.

(A Development Stage Company)

CONSOLIDATED BALANCE SHEETS

	March 31		March 31
	2013		2012

Assets
Current Assets
Cash	$	156	$	14
Prepaid expenses		25,000		2,500

Total Current Assets		25,156		2,514

Property and Equipment, Net		22,892		35,751

Non-Current Assets
Due from Urban R2 - related party		180,810		-
Advances to Southshore Development		115,000		-
Advance to MBC LLC		400,000		-
Other assets		4,038		-

Total Non-Current Assets		699,848		-

Total Assets	$	747,896	$	38,265

Liabilities and Stockholders' (Deficit) Equity
Current Liabilities
Accounts payable and accrued expenses	$	712,561	$	269,454
Accrued interest		71,657		20,673
Demand note payable		6,000		6,000
Notes Payable - related parties		195,949		194,375
Convertible note payable, net of debt discount $17,407 and $0 as of March 31, 2013 and March 31, 2012 respectively		64,593		75,500
Derivative liability		100,762		-
Notes Payable		3,089,936		1,399,607

Total Current Liabilities		4,241,458		1,965,609
Commitments and Contingencies

Stockholders' (Deficit) Equity
Preferred stock, $.001 par value; 100,000,000 shares authorized,
no shares issued and outstanding		-		-
Common stock, $.0001 par value; 400,000,000 shares authorized,
100,062,234 and 56,349,057 shares issued and outstanding at
March 31, 2013 and March 31, 2012, respectively		10,006		5,635
Additional paid-in-capital		2,105,838		1,540,325
Deferred Compensation		(48,370)		(137,500)
Deficit accumulated during development stage		(5,561,036)		(3,335,804)

Total Stockholders' (Deficit) Equity		(3,493,562)		(1,927,344)

Total Liabilities and Stockholders' (Deficit) Equity	$	747,896	$	38,265

See the accompanying notes to these consolidated financial statements.

Q LOTUS HOLDINGS, INC.

(A Development Stage Company)

CONSOLIDATED STATEMENTS OF OPERATIONS

					For the Period from
	For the Fiscal		For the Fiscal		March 31, 2010
	Year Ended		Year Ended		(Inception) to
	March 31, 2013		March 31, 2012		March 31, 2013

Revenue	$	—	$	—	$	—

Operating Expenses		(1,391,437)		(1,594,467)		(4,335,023)

Other Income/(Expense)
Impairment of Investment		—		(45,250)		(45,250)
Interest Expense		(837,389)		(328,077)		(1,184,358)
Change in fair value of derivative liability		111,730		—		111,730
Amortization of debt discount		(108,136)		—		(108,136)

Total Other Income/(Expense)		(833,795)		(373,327)		(1,226,014)

Net Loss	$	(2,225,232)	$	(1,967,794)	$	(5,561,036)

Net Loss per Common Share:
Basic and diluted	$	(0.03)	$	(0.04)

Weighted Average Number of Shares Outstanding
Basic and diluted		64,278,873		53,927,134

See the accompanying notes to these consolidated financial statements.

Q LOTUS HOLDINGS, INC.

(A Development Stage Company)

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' (DEFICIT) EQUITY

										Total
										Stockholders'
	Common Stock			Additional		Accumulated		Deferred		(Deficit)
	Shares	Amount		Paid-in-Capital		Deficit		Compensation		Equity

Balances - March 31, 2011	53,727,994	$	5,373	$	1,181,208	$	(1,368,011)	$	(137,500)	$	(318,930)

Warrants cancelled	-		-		(16,659)		-		-		(16,659)

Warrants issued	-		-		10,038		-		-		10,038

Amortization of compensation for services	-		-		-		-		137,500		137,500

Shares issued as fee payment	84,246		8		9,992		-		-		10,000

Shares issued for interest	350,000		35		34,965		-		-		35,000

Shares issued for services	500,000		50		164,950		-		(165,000)		-

Shares issued to directors and consultants	850,000		85		118,915		-		-		119,000

Amortization of compensation for services	-		-		-		-		27,500		27,500

Shares issued as conversion of loan principal	836,817		84		36,916		-		-		37,000

Net loss	-		-		-		(1,967,793)		-		(1,967,793)

Balances - March 31, 2012	56,349,057		5,635		1,540,325		(3,335,804)		(137,500)		(1,927,344)

Shares issued for services	5,000,000		500		49,500		-		(50,000)		-

Amortization of compensation for services	-		-		-		-		139,130		139,130

Shares issued as conversion of loan principal	13,163,177		1,316		91,984		-		-		93,300

Warrants Issued for services	-		-		54,333		-		-		54,333

Shares issued for cash — $0.01 per share	20,000,000		2,000		198,000		-		-		200,000

Cancellation of shares	(775,000)		(78)		78		-		-		-

Shares issued to directors and consultants for services	6,325,000		633		171,618		-		-		172,251

Net loss	-		-		-		(2,225,232)		-		(2,225,232)

Balances - March 31, 2013	100,062,234	$	10,006	$	2,105,839	$	(5,561,036)	$	(48,370)	$	(3,493,562)

See the accompanying notes to these consolidated financial statements.

Q LOTUS HOLDINGS, INC.

(A Development Stage Company)

CONSOLIDATED STATEMENTS OF CASH FLOWS

					For the Period from
	For the Fiscal		For the Fiscal		March 31, 2010
	Year Ended		Year Ended		(Inception) to
	March 31, 2013		March 31, 2012		March 31, 2013

Cash Flows from Operating Activities
Net Loss	$	(2,225,232)	$	(1,967,793)	$	(5,561,036)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation expense		10,693		10,293		31,054
Amortization of deferred compensation		139,130		165,000		316,630
Loss on disposal of assets		12,726		—		34,641
Fair value of warrants issued for services		54,333		(6,621)		64,372
Default and other financing interest		605,078		222,500		827,578
Stock based compensation		172,251		129,000		516,291
Investment impairment		—		45,250		45,250
Amortization of debt discount		108,136		—		108,136
Change in fair value of derivative liabilities		(111,730)		—		(111,730)
Changes in operating assets and liabilities
Prepaid expenses		(22,500)		23,314		(25,000)
Other assets		(4,038)		—		(4,038)
Accounts payable and accrued expenses		443,107		167,598		712,560
Accrued interest		50,984		18,412		71,657

Net Cash Used in Operating Activities		(767,062)		(1,193,047)		(2,973,635)

Cash Flows from Investing Activities
Purchase of property and equipment		(10,560)		—		(88,588)
Investment and advances		(695,810)		(250)		(741,060)

Cash Used in Investing Activities		(706,370)		(250)		(829,648)

Cash Flows from Financing Activities
Proceeds from demand note payable		—		6,000		6,000
Proceeds from convertible notes payable		97,000		112,500		209,500
Proceeds from notes payable - related parties		37,449		52,500		252,449
Repayment of notes payable - related parties		(35,875)		(20,625)		(56,500)
Proceeds from short term notes payable		1,175,000		1,012,107		2,387,108
Proceeds from the issuance of common stock		200,000		—		1,004,882

Cash Provided by Financing Activities		1,473,574		1,162,482		3,803,439

Net (Decrease) Increase in Cash and Cash Equivalents		142		(30,815)		156

Cash and Cash Equivalents - Beginning		14		30,829		—

Cash and Cash Equivalents - Ending	$	156	$	14	$	156

Supplemental Disclosure of Cash Flow Information
Cash paid for interest		47,063		55,680	$	102,743
Cash paid for taxes		—		—		—
Supplemental Disclosure of Non-Cash Information
Conversion of promissory note to stock	$	90,500		37,000	$	127,500

See the accompanying notes to these consolidated financial statements.

Q LOTUS HOLDINGS, INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2013

Note 1 - Organization and liquidity

Organization

Q Lotus is a Nevada Corporation formed to operate as a natural resources company with an important focus on natural resources, and mining, and interests in finance and real estate. As of March 31, 2013, the close of its most recently completed fiscal year end, the Company had two wholly owned subsidiaries, Q Lotus, Inc. (“QLI”), a Nevada corporation whose operations through such date have consisted of the acquisition of certain mining claims, and Midwest Business Credit, Inc. (“MBC”), a Nevada corporation that was formed in order to acquire the assets of Midwest Business Credit LLC (“MBC LLC”), an asset based lending company that provides secured financing.

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, m advances made by the Company’s Chairman, related parties, other advances from unaffiliated third parties and the issuance of notes payable all totaling approximately $3,800,000.

The Company was originally incorporated as Extreme Home Staging, Inc. in 2006. The primary revenue-generating activity of this 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, MarckensieTheresias, 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 MarckensieTheresias 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 to Q Lotus Holdings, Inc. On July 16, 2010, the Company also executed a 3 for 1 common stock split. Accordingly, all common share and per common share information has been restated within this Form 10-K to reflect this stock split.

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 Q Lotus was originally formed on March 31, 2010, the Company has had no revenue and has generated losses from operations. At March 31, 2013, the Company had negative working capital of approximately $4,216,000 and an accumulated deficit of approximately $5,561,000. 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 reduce 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 obligations.

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 March 31, 2013, the Company’s activities have been limited to formation of the legal and business structure, business planning, the pursuit of capital and exploration of possible acquisitions and investments.

Note 2 - Summary of Significant Accounting Policies

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the Company’s wholly owned subsidiaries QLI and MBC. All significant intercompany balances and transactions have been eliminated in consolidation.

Cash and Cash Equivalents

The Company considers all highly liquid securities purchased with original maturities of three months or less to be cash equivalents. From time to time the Company’s cash account balances exceed the Federal Deposit Insurance Corporation guarantee limit of $250,000. The Company reduces its exposure to credit risk by maintaining its cash deposits with major financial institutions and monitoring their credit ratings.

Property, Plant and Equipment

Property, plant and equipment are carried at cost less accumulated depreciation and amortization. Depreciation and amortization are calculated using the straight-line method over the estimated useful life of the assets. Gains and losses from the retirement or disposition of property and equipment are included in operations in the period incurred. Maintenance and repairs are expensed as incurred.

Use of Estimates

The preparation of the financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect (i) the reported amounts of assets and liabilities and disclosure of contingent assets, (ii) liabilities at the dates of the financial statements and (iii) 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, 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.

Advertising Expenses

Advertising and marketing costs are expenses as incurred. Advertising expenses for the fiscal years ended March 31, 2013 and 2012 were approximately $138,000 and $30,000, respectively.

Stock-Based Compensation

The Company accounts for equity instruments issued to employees in accordance with accounting guidance, which requires that such equity instruments be recorded at their fair value on the date of grant, using the Black-Scholes Option Valuation Model 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 a 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 historical 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.

Income Taxes

The Company follows the provisions of ASC 740, “Income Taxes”, 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 de-recognition, classification, interest and penalties, accounting in interim periods and disclosure. The Company has filed its initial federal and state income tax returns for the year ended March 31, 2012. The Company has no material uncertain tax positions that would require recognition in the financial statements as of March 31, 2013 and 2012.

Common Stock Purchase Warrants and Derivative Financial Instruments

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.

Financial liabilities measured at fair value on a recurring basis are summarized below:

	Fair value measurements at March 31, 2013
			Quoted prices in
			active markets for	Significant	Significant
			unobservable	other	observable
	March 31,		identical assets	inputs	inputs
	2013		(Level 1)	(Level 2)	(Level 3)
Derivative liability	$	100,762			$	100,762

The derivative liabilities are measured at fair value using quoted market prices and estimated volatility factors based on historical quoted market prices for the Company’s common stock, and are classified within Level 3 of the valuation hierarchy.

The following table sets forth a summary of the changes in the fair value of the Company’s Level 3 financial liabilities that are measured at fair value on a recurring basis:

	March 31,		March 31,
	2013		2012

Beginning Balance	$	—	$	—
Aggregate fair value of derivative issued	$	126,754	$	—
Derivative issued in connection with debt	$	85,738	$	—
Change in fair value of derivative included in results of operations	$	(111,730)	$	—

Ending Balance	$	100,762	$	—

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 year ended March 31, 2013 excludes potentially dilutive securities, including warrants of 6,356,000 and convertible securities of 16,164,700, because their inclusion would be anti-dilutive. The computation of loss per share for the year ended March 31, 2012 excludes potentially dilutive securities, including warrants of 4,507,000 and convertible securities of 200,000, 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 at this time. We expect that none of the new standards will have a significant impact on our consolidated financial statements.

Note 3 – Property and Equipment

Property and equipment consisted of the following:

	March 31, 2013		March 31, 2012
Computers and office equipment	$	29,170	$	29,944
Computer equipment		-		21,520
Furniture and Fixtures		2,910		-
		32,080		51,464

Less: Accumulated depreciation		(9,188)		(15,713)

Property and equipment, net	$	22,892	$	35,751

Depreciation expense was $10,693, $10,293, and $33,713 for the years ended March 31, 2013 and 2012 and for the period from March 30, 2010 (inception) to March 31, 2013, respectively.

Note 4 – Advances

During the year ended March 31 2013, the Company made advances to Southshore Real Estate Development, LLC, in the amount of $115,000 to secure development rights for a real estate project to revitalize the downtown commercial district of Lake Zurich Illinois and is refundable by September 30, 2013. Q Lotusalso advanced funds to MBC LLC in the amount of $400,000. Monies advanced to MBC LLC are to be converted to capital as part of the Company’s desire to acquire MBC LLC. If the acquisition is ultimately not consummated within one year by June 1, 2014, MBC LLC is required to repay such advances to Q Lotus upon its request.

Note 5 – Debt

Demand Note Payable

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.

Notes Payable – Related Parties

In July 2010 the Company received an advance totaling $22,500 from a minority shareholder of the Company that was used to pay operating expenses. In October 2010, the Company entered into a loan agreement with this shareholder as was advanced $140,000 to pay operating expenses. Both the advance and the note are non-interest bearing and payable on demand. Total amount due to this lender was $162,500 at March 31, 2013.

In May 2011 the Company received an advance of $7,500 from a minority shareholder of the Company to pay operating expenses. The note is non-interest bearing and payable on demand. In August 2011 the Company received advances of $5,000 and $15,000 from this shareholder to pay operating expenses. These advances are non-interest bearing and payable on demand. Payments were made of $5,000 on August 12, 2011, $5,625 on September 12, 2011 and $10,000 on December 5, 2011, resulting in a balance due of $6,875 as of March 31, 2012. The full balance due of $6,875 was paid in April, 2012.

In March 2012, the Company received an advance of $25,000 from an officer of the Company to pay operating expenses. This note is non-interest bearing and payable on demand. In 2013 the Company received and additional $31,429 of which $29,000 was repaid resulting in a balance due at March 31, 2013 of $27,429.

In August and September of 2012 the Company received and advance of $6,020 from an officer of the Company to pay operating expenses. This note is non-interest bearing and payable on demand.

Notes Payable

Notes payable consist of the following:

	March 31, 2013		March 31, 2012
Southshore	$	—	$	582,107
Bellcourt		425,000		250,000
Husain		280,000		187,500
Urso		150,000		150,000
MBC, LLC		298,000		—
Goldstein Family Partnership, LP		1,706,936		—
Powers		230,000		230,000

Total notes payable	$	3,089,936	$	1,399,607

Southshore Note

At March 31, 2012, the Company had a $582,107 promissory note to Southshore Real Estate Development, LLC (“Southshore”), an unaffiliated third party to pay operating expenses. This note bears interest at the rate of 11% per annum and was due on July 31, 2012. The note was consolidated into the Goldstein Family Partnership, LP note as of January 16, 2013.

Bellcourt Note

On September 12, 2011, the Company issued a note to Timothy Bellcourt, in the principal amount of $125,000 that matured on March 7, 2012. Upon maturity, the Company agreed to pay Mr. Bellcourt $250,000. In the event that certain conditions of the note are not satisfied, Mr. Bellcourt may demand repayment of the original principal amount, which may be paid in shares of the Company's common stock, valued at the date of repayment. The maturity date of the note was extended to May 31, 2012, and further extended to June 30, 2013. At March 31, 2013, the principal balance as recorded was $425,000 including default interest of $300,000. The note is in default and accordingly is classified as a current liability. The Company is in discussion with the note holder to amend the maturity date of the note. There can be no assurance that the Company will be successful in its effort to obtain an amendment.

Husain Note

On September 12, 2011, the Company issued a note to Matloob Husain, in the principal amount of $125,000 that matured on March 7, 2012. Upon maturity, the Company agreed to pay Mr. Husain $187,500. In the event certain conditions of the note are not satisfied Mr. Husain may demand repayment of the original principal amount, which may be paid in shares of the Company's common stock, valued at the date of repayment. The maturity date of the note was extended to May 31, 2012, and further extended to June 30, 2013. As of March 31, 2013, the principal balance as recorded was $280,000 including default interest of $155,000. The note is in default and accordingly is classified as a current liability. The Company is in discussion with the note holder to amend the maturity date of the note. There can be no assurance that the Company will be successful in its effort to obtain an amendment.

Urso Note

On September 12, 2011, the Company issued a note to Estefania Urso, in the principal amount of $150,000 that matured on January 10, 2012 and was extended to June 30, 2012. Upon maturity, the Company will pay Ms. Urso $150,000. In the event that certain conditions of the note are not satisfied and escrowed funds are not returned to the Company, then the Company will be obligated to repay the principal amount of the loan, plus interest ($180,000 in the aggregate) to Ms. Urso in shares of the Company's common stock, valued at the date of repayment. On March 14, 2012 , the Company provided 350,000 shares of Company common stock to Ms. Urso valued at $.10 per share to compensate her for $35,000 accrued interest. At March 31, 2013, the principal balance as recorded was $150,000. The note is in default and accordingly is classified as a current liability. The Company is in discussion with the note holder to amend the maturity date of the note. There can be no assurance that the Company will be successful in its effort to obtain an amendment.

Powers Note

In December 2011, the Company entered into a $100,000 note agreement with an unaffiliated third party. These funds were used to pay operating expenses. The note bears interest at the rate of 10% per annum, matured on May 31, 2012 and was extended to August 31, 2012. In January 2012, the principal amount of this note was increased to $130,000, and in March 2012, the principal amount of the note was further increased to $230,000. The note is in default and accordingly is classified as a current liability. The Company is in discussion with the note holder to amend the maturity date of the note. There can be no assurance that the Company will be successful in its effort to obtain an amendment.

MBC LLC Note

In April 2012, the Company received $180,000 from MBC LLC. The funds were used to pay operating expenses. A $16,000 loan fee was recorded to interest expense at the original maturity date of June 21, 2012. On June 21, 2012 the loan was extended to July 6, 2012 for an additional loan fee of $16,000 that was recorded to interest expense. On July 6, 2012 the maturity date of the note was extended to August 31, 2012 for an additional $16,000 loan fee. On August 31, 2012 the maturity of the note was further extended to January 31, 2013 for an additional loan fee of $50,000. On January 31, 2013 the maturity of the note was further extended to June 30,2013 for an additional loan fee of $50,000. At March 31, 2013, the principal balance was $298,000, of which $ 118,000 was charged to interest expense during the year ended March 31, 2013. The note is in default and accordingly is classified as a current liability. The Company is in discussion with the note holder to amend the maturity date of the note. There can be no assurance that the Company will be successful in its effort to obtain an amendment.

Goldstein Family Note

In January 2013, The Company entered into a promissory note agreement with Goldstein Family Partnership, LP (“Goldstein”) whereby certain promissory notes in the aggregate of $796,884 including principle and accrued interest issued to individuals and entities related to Goldstein during the year were consolidated in a single 15% promissory note. In addition, the Southshore note in the amount of $650,052 was consolidated into the note as well. Pursuant to the terms of the Note agreement and as amended, the Company received proceeds in the amount of $260,000. The principal balance as of March 31, 2013 is $1,706,936 and bears interest at a rate of 15% per annum. The note matures July 16, 2013.

As part of the note agreement with Goldstein, the Company agreed to purchase a 51% interest in Southshore Real Estate Development, LLC (“Southshore”) whereby the Company will be responsible to pay a total of $5.2 million including an additional $3.2 million as defined in the original note agreement. The Company has yet to consummate and execute the asset purchase agreement and transfer title of the interest in Southshore.

The note also contains a cross default provision, and since the Company is currently in default on other indebtedness, the Company is technically in default on this note as well.

The Company is currently in discussion with Goldstein to extend the maturity date of the Note. There can be no assurance that Company will be successful in its effort to obtain an extension.

Convertible Note Payable

The Company has entered into several financing transaction with Asher Enterprises, Inc., ("Asher") pursuant to which the Company issued convertible notes to Asher in the aggregate amount of $209,500. The notes have been unsecured, and provide for the conversion of all principal and interest outstanding under the notes into shares of the Company's common stock beginning six months after the issuance date of the respective notes (“conversion date”), at a rate of 55% of the market price (no lower than $0.01) of the Company's common stock for the six lowest trading days during the ten day period prior to such conversion; provided, however, that the notes require 61 days prior written notice of conversion to the Company if such conversion would put Asher and/or its affiliates over 4.99% beneficial ownership in the Company.

The conversion price of the Notes is subject to adjustment in the event of stock splits, dividends, distributions and similar adjustments to our capital stock. The number of shares of common stock subject to the Note may be adjusted in the event of mergers, distributions, a sale of substantially all of the Company's assets, tender offers and dilutive issuances.

In connection with the financings, the Company entered into a Securities Purchase Agreement that grants Asher a limited right of first refusal in the event the Company wishes to obtain additional working capital loans that are under $150,000. During the fiscal year ended March 2012, Asher converted $37,000 of convertible notes into 836,817 shares of common stock of the Company at variable conversion prices as defined in the note agreement. During the fiscal year ended March 2013, Asher converted $95,000 of convertible notes into 13,163,177 shares of common stock of the Company at variable conversion prices as defined in the note agreement.

As of March 31, 2013, convertible notes was $64,593 net of $17,407 debt discount. Any amount of principal or interest on these note which is not paid when due shall bear interest at a rate of 22% per annum from the due date until paid. The notes mature on May 20, 2013, August 14, 2013 and December 26, 2013.

Total Interest expense including default interest on all notes for the years ended March 31, 2013 and 2012 was $837,389 and $328,077 respectively.

Derivative Financial Instrument

The Company evaluates and accounts for conversion options embedded in its convertible instruments in accordance with ASC 815, Derivatives and Hedging which requires issuers of financial statements to make a determination as to whether (1) an embedded conversion meets the definition of a derivative in its entirety and (2) the derivative would qualify for a scope exception to derivative accounting, which includes evaluating whether the embedded derivative would be considered indexed to the issuer’s own stock.

ASC 815 generally provides three criteria that, if met, require companies to bifurcate conversion options from their host instruments and account for them as separate derivatives in the event such derivatives would not be classified in stockholders’ equity if they were free standing. These three criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under other applicable US GAAP with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument subject to the requirements of ASC 815. ASC 815 also provides for an exception to this rule if a debt host instrument is deemed to be a conventional debt instrument.

The Company evaluated the conversion option embedded in its Convertible Notes in accordance with the provisions of ASC 815 and determined that the conversion option have all of the characteristics of a derivative in its entirety and does not qualify for an exception to the derivative accounting rules. Specifically, because the exercise price of the conversion option is not fixed at any time during the term of the note based on the occurrence or non-occurrence of certain events also entitles the counterparty to an adjustment of the exercise price in the event that the Company subsequently issues equity securities or equity linked securities at prices more favorable than the exercise price of the conversion option embedded in the note. Accordingly, the embedded conversion option in the convertible notes are classified as derivative liabilities at the issuance dates and are marked to market through earnings at the end of each reporting period. The fair value of the conversion option was determined using the intrinsic value method, which the Company believes approximate the results obtained using the Binomial Lattice model. At March 31, 2013 the fair value of the derivative liability was $100,762. The change in the fair value of the derivative liability was $111,730 and $0 for the years ended March 31, 2013 and 2012 respectively and is recorded in the Statement of Operations.

Note 6 – Stockholders’ Deficit

Common Stock

The Company has authorized 400,000,000 shares of common stock, $0.0001 par value per share, and as of March 31, 2013, 100,062,234 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 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 March 31, 2013, no such 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 referred to above were cancelled. The name of the Company was subsequently changed to Q Lotus Holdings, Inc. After the exchange was completed, a total of 52,019,994 common shares were 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) to Real Holdings Capital, LLC (“RHC”) in exchange for $125 and services that related to the formation and establishment of the Company and its business operations. The Company’s Chairman, President and Chief Executive Officer, Mr. Rosenberg, is a beneficiary under a trust that owns RHC.

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, in exchange for services, based on the closing price of the Company’s common stock on the date of issuance.

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 in exchange for investment banking services. This amount is being amortized over the twelve-month period of the service agreement and was fully amortized in the year ended March 31, 2012.

In December 2011, the Company issued 84,246 shares of common stock with a value of $10,000, based on the average of the ten (10) day historical closing price of the Company’s common stock, in exchange for professional fees. This amount was expensed in the quarter ended December 31, 2011.

In February and March 2012, the Company issued 836,817 shares of common stock with an aggregate value of $37,000 as partial conversion of the Asher notes payable. These amounts were recorded as stockholders equity in the quarter ended March 31, 2012.

In February 2012, the Company issued 500,000 shares of common stock with a value of $165,000, in exchange for professional fees to be amortized over six months. The stock price was based on the closing price of the Company’s common stock on the date of issuance.

In March 2012, the Company issued a total of 850,000 shares of common stock. The Company issued 25,000 shares of common stock to each of four independent Directors. The shares were valued at $3,500 to each Director based on the closing price ($0.14) on the date the shares were granted. The Company issued 250,000 shares each to three consultants as compensation for services. The shares were valued at $35,000 to each consultant based on the closing price on the date the shares were granted. These amounts were expensed in the quarter ended March 31, 2012. In December 2012, the issuance of 775,000 of these shares was rescinded, returned to the Company and cancelled. In February 2013 the Company issued 500,000 shares of common stock valued at $25,000 based on the closing price ($0.05) on the date the shares were granted to each of three consultants, and issued 25,000 shares to one independent Director valued at $1,250.

In March 2012, the Company issued 350,000 shares valued at $35,000 ($0.14 per share) on the date of issuance as payment of interest on the Urso note. This amount was recorded as stockholders equity in the quarter ended March 31, 2012.

In April 2012, the Company issued 234,528 shares of common stock with an aggregate value of $5,500 ($0.02 per share) as partial conversion of the Asher notes payable. These amounts were recorded as stockholders equity in the quarter ended June 30, 2012.

In July and August 2012, the Company issued 606,177 shares of common stock with an aggregate value of $22,000 ($0.04 per share) as partial conversion of the Asher notes payable, based on three lowest trading days during the ten (10) day historical period prior to conversion.

In October 2012, the Company issued 1,061,947 shares of common stock with an aggregate value of $12,000 ($0.01 per share) as partial conversion of the Asher notes payable.

During December 2012, the Company sold 14,000,000 shares of the Company’s common stock for $140,000 to investors pursuant to a stock purchase agreement at $0.01 per share.

In December 2012, the Company authorized the return and cancellation of 750,000 shares of common stock issued to three consultants and 25,000 shares issued to one director in March of 2012. The fair value of these shares was $15,000.

In January 2013, the Company issued 2,000,000 shares of the Company’s common stock with an aggregate value of $40,000 ($.02 per share) as compensation for services rendered in 2012.

In January 2013, the Company sold 6,000,000 shares of the Company’s common stock for $60,000 to investors pursuant to a stock purchase agreement at $0.01 per share.

In January 2013, the Company issued 1,562,500 shares of common stock with an aggregate value of $5,000 ($.0032 per share) as partial conversion of the Asher notes payable.

In January 2013, the Company issued 1,300,000 shares of common stock with an aggregate value of $26,000 ($0.02 per share) to Marckensie Theresias as part of a severance package.

In January 2013, the Company issued 1,500,000 shares of common stock with an aggregate value of $30,000 ($0.02 per share) to a consultant for services rendered.

In February 2013, the Company issued 1,094,891 shares of common stock with an aggregate value of $15,000 ($0.0137 per share) as partial conversion of the Asher notes payable.

In February 2013, the Company issued a total of 1,525,000 shares of common stock. The Company issued 25,000 shares of common stock to one independent Director. The shares were valued at $1,250 based on the closing price ($0.05) on the date the shares were granted. The Company issued 500,000 shares each to three consultants as compensation for services. The shares were valued at $25,000 to each consultant based on the closing price on the date the shares were granted. These amounts were expensed in the quarter ended March 31, 2013.

In February 2013, the Company issued 4,200,000 shares of common stock with an aggregate value of $14,700 ($0.0035 per share) as partial conversion of the Asher notes payable.

In March 2013, the Company issued 1,518,519 shares of common stock with an aggregate value of $4,100 ($0.0027 per share) as partial conversion of the Asher notes payable.

In March 2013, the Company issued 2,884,615 shares of common stock with an aggregate value of $15,000 ($0.0052 per share) as partial conversion of the Asher notes payable.

In March 2013, the Company issued 5,000,000 shares of common stock with an aggregate value of $50,000 ($.01 per share) for services rendered in preparing an Equity Incentive Plan. The value of the services is to be amortized over a six month period.

Warrants Issued

In February 2011, the Company issued a two-year warrant to an individual affiliated with Southshore to purchase an aggregate of 150,000 shares of the Company’s common stock at an exercise price of $1.50 per share. The Company recorded a charge for the fair value totaling $16,659 that was included in interest expense in the fiscal year ended March 31, 2011. This warrant was subsequently cancelled and reissued on May 20, 2011 at $.50 per share having a fair value of $4,368 and was charged to interest expense during the year ended March 31, 2012. In January 2013 these warrants were cancelled per the Goldstein Family note payable.

In connection with a series of amendments to the Southshore Note during the year ended March 31, 2012, the Company issued two year warrants to purchase an aggregate 357,000 shares of the Company’s common stock at an exercise price of $.05 per shares. The Company recorded a charge for the fair value totaling $5,654 that was included in interest expense in the fiscal year ended March 31, 2012. In January 2013 these warrants were cancelled per the Goldstein Family note payable.

On March 16, 2012, the Company issued a five-year warrant to a note-holder to purchase 2,000,000 shares of the Company’s common stock at an exercise price of $1.75 per share as an added inducement for additional advances from the note-holder. On the same date, the Company also issued a five-year warrant to a related party note holder to purchase 2,000,000 shares of the Company’s common stock at an exercise price of $1.75 per share. The Company recorded a charge for the fair value totaling $16 that was included in interest expense in the fiscal year ended March 31, 2012.

On August 1, 2012 the Company issued a warrant to Jorge Gonzalez, the Company’s Chief Financial Officer, to purchase up to 156,000 shares of common stock at an exercise price equal to $1.00. The warrant expires August 1, 2014. The Company recorded a charge for the fair value totaling $11,617 that was included in compensation expense in the fiscal year ended March 31, 2013.

On October 4, 2012 the Company issued a two-year warrant to Joshua Goldstein to purchase 212,500 shares of the Company’s common stock at an exercise price of $.10 per share as an added inducement for additional advances from the note-holder. On the same date, the Company also issued a two-year warrant to the Goldstein Limited Partnership to purchase 697,000 shares of the Company’s common stock at an exercise price of $.10 per share. The Company recorded a charge for the fair value totaling $42,715 that was included in interest expensed in the quarter ended December 31, 2012. In January 2013 these warrants were cancelled per the Goldstein Family note payable.

On November 12, 2012, in conjunction with a convertible note agreement. The Company issued to Asher warrants to purchase 2,200,000 shares of common stock at an exercise price of $.01 per share for a period of five years that expire on November 12, 2017. The warrants were determined to be a derivative instrument. The Company computed the fair value of the warrants to be $43,954 and is included in derivative liabilities.

Note 7 – Related Party Transactions

The Company conductsits operations from office space in Chicago, Illinois, that is leased by Urban R2 Development ("Urban R2"). Urban R2 is controlled by Mr. Rosenberg, the Company's Chief Executive Officer, and during the fiscal year ended March 31, 2013, the Company agreed to reimburse Urban R2 for one hundred percent of its monthly occupancy expenses. Over the period April 1, 2012 through March 31, 2013 the Company advanced funds to Urban R2 totaling $113,310 for use in investing and operations. Urban R2 has repaid $32,500 against the advances resulting in a balance due to the Company as of March 31, 2013 of $80,810. In the year ended March 31, 2013 the Company also paid to SL Civic Wacker, LLC a $100,000 deposit as security for office space at 20 N Wacker Dr, STE 4120, Chicago, IL 60606. For the fiscal years ended March 31, 2013 and 2012, the Company's share of these expenses charged to Q Lotus by Urban R2 totaled approximately $272,000 and $302,000, respectively. As of March 31, 2013 and 2012 amounts owed to Urban R2 included in accounts payable was $14,088 and $11,563 respectively.

The Company made advances totaling $45,250 to Lexington Hills, Inc. as an investment. The Company’s Chairman 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 had the option to convert its investment in Lexington Hills into a sixty percent equity ownership interest through March 17, 2012. In the quarter ended December 31, 2011, Lexington Hills effectively ceased operations, and the full amount of the Company’s investment was impaired and charged to expense.

Note 8 - 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 were 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 converted into three outstanding common shares.

Note 9 - Income Taxes

The Company’s deferred tax assets and liabilities consist of the effects of temporary differences attributable to the following:

	For the Years Ended March 31,
	2013		2012
Deferred Tax Assets:
Net operating loss carryovers	$	2,310,031	$	1,296,055
Organization costs		17,628		19,086
Charitable contribution carryover		3,423		3,423
Derivative liability		7,010		0
Total Deferred Tax Assets		2,338,092		1,318,564
Valuation Allowance		(2,307,779)		(1,259,878)
Deferred tax asset, Net of Valuation Allowance	$	30,313	$	58,686

Stock based compensation		(19,479)		(55,371)
Fixed asset depreciation		(3,824)		(3,315)
Convertible debt		(7,010)		0

Total deferred tax liabilities		(30,313)		(58,686)
Net deferred tax asset (liabilities)	$	0	$	0

The income tax provision (benefit) consists of the following:

	For the Years Ended March 31,
	2013		2012
Current:
Federal	$	—	$	—
State and local		—		—
		—		—
Deferred:
Federal		(806,093)		(515,350)
State and local		(241,808)		(216,527)

Change in valuation allowance		1,047,901		731,877

Provision for Income Taxes	$	—	$	—

A reconciliation of the statutory federal income tax rate to the Company’s effective tax rate is as follows:

	For the Years Ended March 31,
	2013			2012
US Federal statutory rate		(34.0)	%		(34.0)	%
State income taxes, net of federal benefit		(6.3)	%		(6.3)	%
Other permanent differences		(0.9)	%		(3.1)	%
Net operating loss deferred true-up		(7.7)	%		0	%
Change in valuation allowance		47.1	%		43.4	%
Income Tax Provision (benefit)
Total		—	%		—	%

As of March 31, 2013 and 2012, the Company had federal net operating loss carryovers (“NOLS”) of approximately $ 5,226,943 and $3,370,672, respectively, and state NOLS of approximately $ 5,466,000 and $3,370,672, respectively, available to offset future taxable income. These NOLS begin expiring in 2031. The Company’s net operating loss carry-forwards reflect only those losses that have occurred since the merger.

The utilization of the net operating losses may be subject to substantial limitations due to the “change of ownership” provisions under Section 382 of the Internal Revenue Code and similar state laws, should there be a greater than 50% change of ownership as determined under the regulations. It has been determined that there was a change of ownership with the reverse acquisition in June 2010. Since QLI was in a different line of business before the merger, none of its pre-merger NOLS will be available to offset future taxable income. The change in valuation allowance for the years ended March 31, 2013 and March 31, 2012, is $1,047,901 and $731,877, respectively.

In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax strategies in making this assessment. Based on this assessment, management has established a full valuation allowance against all of the deferred tax assets for every annual period, since it is more likely than not that all of the deferred tax assets will not be realized.

Note 10 – Commitments and Contingencies

Facility Lease

The Company is not currently leasing any office space.

Mineral Rights

The Company holds mining rights of properties located in Utah, Arizona and Oregon. As consideration for the mining rights, the Company entered into a Revenue Sharing Agreement that would provide the transferors with a percentage of the net revenue realized from the sale of minerals that have been extracted and mined from each respective claim. 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 an absence of 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 not begun any mining operations as of March 31, 2013. 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 does not currently have the 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 revenue from said minerals will be charged to expense when incurred. There were no transactions relating to these mineral rights through March 31, 2013. 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.

In the fiscal year ended March 31, 2013 Q Lotus has paid $4,038 to secure rights to silica mining claims that will be used as collateral for asset backed notes to bring financing into the Company to fund operations.

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 at this time.

Note 11 – SUBSEQUENT EVENTS

Asher loaned $33,000 in April 2013 and in June 2013 Asher loaned 42,500 to the Company.

In April 2013 Asher converted $15,000 principal of its note dated May 2, 2012 to 3,571,429 shares of common stock at a conversion price of $0.0042 per share.

In May 2013 Asher converted $7,500 in principal along with $500 in interest of its note dated May 2, 2012 to 4,210,526 shares of common stock at a conversion price of $0.0019 per share. Asher converted the remaining $1,000 principal of its note dated May 2, 2012 to 555,556 shares of common stock at a conversion price of $0.0018 per share. Asher converted $6,300 principal if its note dated August 17, 2012 to 3,500,000 shares of common stock at a conversion price of $0.0018 per share.

In June 2013 Asher converted $7,600 principal of its note dated August 17, 2012 to 4,222,222 shares of common stock at a conversion price of $0.0018 per share. Asher converted $8,400 principal of its noted dated August 17, 2012 to 4,200,000 shares of common stock at a conversion price of $0.002 per share.

Urban R2 Development Company, LLC has additionally repaid all of its outstanding loan.

The Equity Incentive Plan agreement was cancelled effective May 31, 2013. As a result 4,000,000 of the 5,000,000 shares of common stock issued as compensation for creation of the plan are to be returned and cancelled.

In May 2013, the Company received an advance of $2,848 from an officer.

In May 2013 the Goldstein Family Limited Partnership, LP agreed to loan an additional $200,000 to the Company. $100,000 was transferred to the Company in May 2013. $50,000 will be transferred in July 2013 and a final advance will follow in August 2013.

In June 2013 the Board authorized the issuance of 10,000,000 shares of $.01/share common stock to raise short term capital for operations. 8,000,000 shares were purchased by the CEO and Chairman of the Company and an affiliate by converting $42,000 in receivables to common stock and purchasing the balance with $38,000 in cash. These shares have not yet been issued by the transfer company.