10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

X  QUARTERLY REPORT PURSUANT TO SECTION 13 OR

 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2012

___                     TRANSITION REPORT PURSUANT TO SECTION 13 OR

   15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File No. 333-120507

KENERGY SCIENTIFIC, INC.

(Exact name of the Registrant)

New Jersey	20-1862816
(State of Incorporation)	(I.R.S. Employer ID Number)
6 Minneakoning Road, Flemington, New Jersey	08822
(Address of Principal Executive Offices)	(Zip Code)

908-788-0077

(Registrant’s Telephone No. including Area Code)

Indicateby checkmark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes   X    No 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   Yes   X    No 

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Act).  Yes  No   X  

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

Large accelerated filer o       Accelerated filer o     Non-accelerated filer o    Smaller reporting company [x]

 (Do not check if a smaller reporting company)

Indicate the number of shares outstanding of the issuer's common stock, as of the latest practical date:

226,278,298 shares outstanding of Class A Common Stock, no par value and 10,000 shares outstanding of Class B Common Stock, par value $.01 per share, as of May 18, 2012.

KENERGY SCIENTIFIC, INC.

TABLE OF CONTENTS

		PAGE
	Part I – Financial Information
Item 1.	Condensed Financial Statements:
	Condensed Balance Sheets – March 31, 2012 (Unaudited)  and December 31, 2011 (Unaudited)	1
	Condensed Statements of Operations - Three months  ended March 31, 2012 and 2011 (Unaudited)	2
	Condensed Statements of Cash Flows - Three months ended  March 31, 2012 and 2011 (Unaudited)	3-4
	Notes to Condensed Financial Statements (Unaudited)	5-24
Item 2.	Management’s Discussion and Analysis of Financial Position  and Results of Operations	25-27
Item 4.	Controls and Procedures	27
	Part II – Other Information
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	28
Item 3.	Defaults Upon Senior Securities.	28
Item 5.	Other information	28-29
Item 6.	Exhibits	30

Part 1.  Financial Statements

Item 1 - Financial Statements

KENERGY SCIENTIFIC, INC.
CONDENSED BALANCE SHEETS
	March 31,			December 31,
ASSETS	2012			2011
	(Unaudited)			(Unaudited)
Current assets:
Cash and cash equivalents	$	4,686		$	6,960
Accounts receivable, net of allowance for doubtful accounts of $2,862		86			477
Inventory		94,052			93,803
Prepaid and other current assets		6,921			6,965
Total current assets		105,745			108,205
Property and equipment, net		11,303			11,614
Intangible assets, net and security deposits		199,506			204,391
Total assets	$	316,554		$	324,210
LIABILITIES & STOCKHOLDERS’ DEFICIT
Current liabilities:
Accounts payable and accrued expenses	$	714,415		$	639,522
Due to related parties		206,807			174,307
Promissory note due to related parties		125,000			125,000
Promissory note due		140,000			140,000
Convertible promissory note, net of unamortized debt discount of $14,840   and $18,824, respectively		65,096			61,112
Convertible debentures, net of unamortized debt discount of $125,938   and $45,098, respectively		1,173,735			1,196,025
Derivative liabilities		3,995,457			2,270,858
Total current liabilities		6,420,510			4,606,824
Stockholders' deficit:
Preferred stock, $1.00 par value; authorized 1,000,000         shares; no shares issued and outstanding		-			-
Common stock:
Class A – no par value; authorized 625,000,000 shares;             13,020,798 and 12,418,388 shares issued and outstanding,             respectively (see note 11)		4,647,188			4,635,140
Class B - $.01 par value; authorized 50,000,000               Shares; 10,000 shares issued and outstanding		100			100
Class C - $.01 par value; authorized 20,000,000               Shares; no shares issued and outstanding		-			-
Additional paid-in capital		1,915,561			1,913,613
Accumulated deficit		(12,666,805	)		(10,831,467	)
Total stockholders' deficit		(6,103,956	)		(4,282,614	)
Total liabilities and stockholders' deficit	$	316,554		$	324,210

See accompanying notes to condensed financial statements

1

KENERGY SCIENTIFIC, INC.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
	Three months ended
	March 31, 2012			March 31, 2011
Net sales	$	16,522		$	2,547
Cost of sales		8,548			1,424
Gross margin (loss)		7,974			1,123
Operating expenses:
General and administrative expenses		156,523			106,317
Depreciation and amortization		7,666			7,110
Total operating expenses		164,189			113,427
Loss from operations		(156,215	)		(112,304	)
Other income (expense):
Interest expense		(31,380	)		(114,946	)
Amortization of debt discount		(36,694	)		(141,440	)
Gain (loss) on valuation of derivative		(1,611,049	)		622,174
Total other income (expense)		(1,679,123	)		365,788
Income (loss) from operations before     Income taxes		(1,835,338	)		253,484

Provision for income taxes		-			-
Net income (loss) attributable to common     Shares	$	(1,835,338	)	$	253,484
Basic income (loss) per common share	$	( 0.15	)	$	0.02
Diluted income (loss) per common share	$	( 0.15	)	$	0.01
Weighted average shares outstanding -
Basic (see note 5)		12,583,885			12,360,864
Diluted (see note 5)		12,583,885			25,000,000

See accompanying notes to condensed financial statements

2

KENERGY SCIENTIFIC, INC.

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

	Three months Ended
	March 31,  2012			March 31,  2011
Cash flows from operating activities:
Net income (loss)	$	(1,835,338	)	$	253,484
Adjustments to reconcile net income (loss) to net     cash provided by (used in) operating activities:
Amortization of intangibles and depreciation expense		7,666			7,110
(Gain) loss on valuation of derivative		1,611,049			(622,174	)
Amortization of debt discount		36,694			141,440
Beneficial interest on conversion of debt		7,048			97,036
Changes in assets and liabilities:
Decrease in accounts receivable		391			-
Increase in inventories		(249	)		(31,581	)
Decrease (increase) in prepaid expenses		44			(542	)
Increase in accounts payable and accrued        Liabilities		102,891			33,477
Increase in amounts due to related parties		32,500			-
Net cash (used in) operating activities		(37,304	)		(121,750	)
Cash flows from investing activities:
Purchase of office equipment		-			(3,800	)
Security deposit on GreenSmart store		-			(21,375	)
Purchase of intangible assets		(2,470	)		(5,000	)
Net cash (used in) investing activities		(2,470	)		(30,175	)
Cash flows from financing activities:
Issuance of promissory notes		37,500			-
Net cash provided by financing activities		37,500			-
Net (decrease) in cash and cash equivalents		(2,274	)		(151,925	)
Cash and cash equivalents at beginning of period		6,960			190,322
Cash and cash equivalents at end of period	$	4,686		$	38.397
SUPPLEMENTAL CASH FLOW INFORMATION:
Taxes paid	$	-		$	-
Interest paid	$	-		$	-
See accompanying notes to condensed financial statements

3

KENERGY SCIENTIFIC, INC.

CONDENSED STATEMENTS OF CASH FLOWS (Continued)

(Unaudited)

Supplemental Schedule of Non-Cash Financing Activities:

For the three months ended March 31, 2012:

a)   The Company issued 602,410 shares of Class A common stock for repayment of convertible debenture in lieu of cash, valued at $12,048. The difference in the market value and the reduction in debt of $5,000 was charged to beneficial interest in the amount of $7,048.

b)   Concurrent with the issuance of the wrap around agreement to ATG, Inc. and the cancelation of the wrap around agreement with EPIC Worldwide, Inc., the Company reclassified $26,050 of accrued interest into convertible debt.

For the three months ended March 31, 2011:

a)   The Company issued 577,597 (462,077,400 pre-reverse split) shares of Class A common stock for repayment of convertible debenture in lieu of cash, valued at $143,244. The difference in the market value and the reduction in debt of $46,208 was charged to beneficial interest in the amount of $97,036.

See accompanying notes to condensed financial statements

4

KENERGY SCIENTIFIC, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

MARCH 31, 2012 and 2011

Note 1                      Background

In September 2004, the Board of Directors of iVoice, Inc., the former parent of the Company, resolved to pursue the separation of iVoice software business into three publicly owned companies.  SpeechSwitch, Inc. (“SpeechSwitch” or “Company”) was incorporated under the laws of New Jersey on November 10, 2004 as a wholly owned subsidiary of iVoice, Inc. ("iVoice").  The Company received by assignment all of the interests in and rights and title to, and assumed all of the obligations of, all of the agreements, contracts, understandings and other instruments of iVoice Technology 3, Inc., a Nevada corporation and affiliate of the Company.

On August 4, 2005, the Company received notice from the SEC that the registration statement to effectuate the spin-off of the SpeechSwitch from iVoice was declared effective and the Company immediately embarked on the process to spin off the SpeechSwitch from iVoice.

On August 5, 2005, the spin-off transaction was accomplished, by the assignment, contribution and conveyance of certain intellectual property, representing the software codes of speech recognition, and certain accrued liabilities and related party debt into SpeechSwitch (the "Spin-off").  The Class A Common Stock shares of the Company were distributed to iVoice shareholders in the form of a taxable special dividend distribution.

In June 2009 Kenneth P. Glynn acquired debt owed by SpeechSwitch, Inc. to third party creditors and the company moved its headquarters from Matawan, NJ to Flemington, NJ.

In September 2009, Kenneth P. Glynn established the Kenergy Scientific Group to seek new products to be sold under the Kenergy Scientific brand.  The Group acquired a small inventory of solar rechargeable lanterns for testing and eventual sales.

In 2010, the Company launched several products on its website www.greensmartstore.com and is pursuing the opening of its first company–owned GreenSmart Store.  The Company may seek to expand its operations through additional sales and marketing activity and the acquisition of additional businesses.

On February 3, 2011, the Company changed its name to Kenergy Scientific, Inc.

In November 2011, the Company opened its first company-owned GreenSmart Store at the Flemington Marketplace in Flemington, NJ.

Note 2                      Business Operations

In June 2009, we entered into fields of development of various products relating to solar power generating systems; portable solar powered products, such as cell phone and PDA rechargers that are solar rechargeable; solar rechargeable lantern/flashlight devices; solar backpack rechargers; solar power audio devices, such as radios; wind power generating systems; and, creative products based on proprietary positions, especially in the area of healthcare.  We may seek to expand our operations through additional sales and marketing activity and the acquisition of additional businesses.  Any potential acquired additional businesses may be outside the current field of our operations. We may not be able to identify, successfully integrate or profitably manage any such business or operations.  Currently, we have no plans, proposal or arrangements, either orally or in writing, regarding any proposed acquisitions and is not considering any potential acquisitions.

5

KENERGY SCIENTIFIC, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

MARCH 31, 2012 and 2011

Products and Services

The following description of our business is intended to provide an understanding of our product and the direction of our initial marketing strategy.  As the new product development is in its early development stages, any focus described in the following pages may change and different initiatives may be pursued, at the discretion of Management.  Our areas of development and recent activities include:

(a)   On June 18, 2009, the Company acquired rights and ownership from GlynnTech, Inc. of technology and pending patent applications relating to cancer treatment drug delivery systems, and the technology transfer into the Company included a prototype, numerous variations on designs, CAD drawings, pending patent applications, risk analysis studies, development history and presentation documents.  The sale was “at cost” of GlynnTech, Inc. in the amount of $182,600.00.  The Agreement called for the aggregate purchase price to be in various denominations of one-year notes. The business objective was to transfer a potentially significant profit opportunity from GlynnTech, Inc. to Kenergy Scientific, Inc.  Three presentations had previously been made to pharmaceutical industry candidates and feedback indicated a high level of interest in potential purchase of this technology following FDA approval of this product.

(b)   In the solar rechargeable products sector, candidates for future sales currently include an iPhone/iPod recharger; a solar powered recharger for the cell phones and PDA’s; a backpack solar recharger with chips for attachment to a backpack, a tent, an outdoor line, etc. with a storage pocket and an array of interchangeable connectors for diverse electronic devices; a solar powered lantern/flashlight; a solar powered radio/flashlight; a solar powered laptop recharger, and other devices.  Product launches on a majority of these items were in the third quarter of 2010.  Initial product launches involved Internet sales, with a roll-out to our retail outlet in November 2011.

(c)   In solar power energy production systems, the Company is reviewing numerous models of solar photovoltaic panels and converters, as well as unique aftermarket opportunities.  The Company intends to partner with installers and market home, office and commercial solar panels through various media.

(d)   In the wind power energy production systems, third party companies will review various microturbine products to license and sell.

Distribution

Within the first two years under new management, the Company created a viable website and contracted with major retailers and multimedia advertising for the solar powered rechargers and other products.  In addition, the Company opened one retail store, as well as offering additional products made from recycled materials and/or biodegradable materials in the marketplace.

6

KENERGY SCIENTIFIC, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

MARCH 31, 2012 and 2011

Product Development

We currently have significant long term plans to engage in future research and development, to create valuable intellectual property rights and/or to launch new products.  The Company will acquire third party patent rights, develop its own patent rights and evolve both new product and intellectual property transfer (sale or license) opportunities.

Business Development

Business development objectives at the Company will be to focus on the primary functions as listed below:

1.   Continuously develop product ideas, manufacturing and supply alliances;

2.   Expand sales opportunities through diverse resources;

3.   Develop retail outlets;

4.   Evolve franchising opportunities using company retail outlets as a base;

5.   Create a continuous flow of ideas and inventions to develop patent and/or new product opportunity

Strategic Alliances

Kenergy Scientific’s business development efforts will seek to engage and secure strategic alliances with alternative energy related businesses and professional organizations in order to develop marketing programs that will expand market share for our products and develop brand recognition by entering into strategic alliances with companies that offer these products and/or services, the Company will accelerate its entry into various markets, while eliminating or reducing various training, learning curve, employee and overhead costs.

Sales and Marketing

The Company had nominal sales during the years 2011 and 2010. Sales have been slow due to research and development, product selections, product testing and other launch preparation.  Sales through the third quarters of 2011 were through our website and additional opportunities are being developed, through third party retail and internet sites and through third party distributors.  In November 2011, the Company opened its first company-owned GreenSmart retail store and we expect to expand our store plans to include other franchised stores.

Intellectual Property Rights

The Company has completed the acquisition of the patented rights for the cancer treatment patent awarded by the United States Patent and Trademark Office.  No foreign counterparts have been filed at this time.

7

KENERGY SCIENTIFIC, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

MARCH 31, 2012 and 2011

Also, the company now has numerous patent applications and some issued patents in the fields of microturbine, wind power generators, third generation solar power generators, solar desalination, solar-wind hybrid power generators, biodegradable bandages and other energy and healthcare related inventions.

Employees

Kenneth P. Glynn was elected to the positions of President, Secretary and Chairman of the Board on June 16, 2009. On July 1, 2009, the Company entered into a one (1) year employment agreement with Mr. Glynn to serve as President and Chief Executive of the Company at an annual base salary of $96,000 for the first year.  On July 1, 2010 and 2011, the Company renewed Mr. Glynn’s employment agreement for an additional one (1) year at an annual base salary of $96,000 for the year. It is the present intention of Mr. Glynn to defer a portion of his salary payment for at least the next 6 months.

As of March 31, 2012, we had one employee, Kenneth P. Glynn.  All other participants in Company activities are through purchased support services and independent contractors.

Properties

We do not own any real property.  We rent office space from GlynnTech, Inc. located at 6 Minneakoning Road, Flemington, New Jersey.  We also rent 2,375 square feet of retail sales space from Flemington Mall, LLC for our GreenSmart retail store. We intend to continue renting such spaces and anticipate no relocation of our offices or store front in the foreseeable future. We are unaware of any environmental problems in connection with these locations, and, because of the nature of our activities, do not anticipate such problems.

Kenergy Scientific’s Management

Kenneth P. Glynn was elected to the positions of President, Secretary and Chairman of the board on June 16, 2009.

Note 3                      Going Concern

The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplates continuation of the Company as a going concern.

For the three months ended March 31, 2012, the Company had a negative cash flow from operations, negative working capital and a loss from operations. These matters raise substantial doubt about the Company's ability to continue as a going concern. Therefore, recoverability of a major portion of the recorded asset amounts shown in the accompanying balance sheets is dependent upon continued operations of the Company, which in turn, is dependent upon the Company's ability to raise capital and/or generate positive cash flow from operations.

Management plans on developing new products and increasing their sales to new customers, to achieve profitability and to generate a positive cash flow. However, these plans are dependent upon obtaining additional capital. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be necessary in the event the Company cannot continue in existence.

8

KENERGY SCIENTIFIC, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

MARCH 31, 2012 and 2011

Note 4                      Summary of Significant Accounting Policies

a)    Basis of Presentation

The accompanying condensed unaudited interim financial statements included herein have been prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). The condensed financial statements and notes are presented as permitted on Form 10-Q and do not contain information included in the Company's annual statements and notes. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. It is suggested that these condensed financial statements be read in conjunction with the December 31, 2011 unaudited financial statements and the accompanying notes thereto. The financial statements that were reported in the Company’s Form 10-K for the fiscal year ended December 31, 2011 do not contain audited financial statements audited by an independent registered public accounting firm.  While management believes the procedures followed in preparing these condensed financial statements are reasonable, the accuracy of the amounts are in some respects dependent upon the facts that will exist, and procedures that will be accomplished by the Company later in the year. These results are not necessarily indicative of the results to be expected for the full year.

These condensed unaudited financial statements reflect all adjustments, including normal recurring adjustments, which, in the opinion of management, are necessary to present fairly the operations and cash flows for the periods presented.

b)    Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

c)    Revenue Recognition

The Company currently derives its revenues from the sales of portable solar powered products, solar rechargeable lantern/flashlight devices, solar backpack rechargers and clothing made from recycled products. Our products are sold directly to consumers through our own website or by direct sales. Payment is made for the products prior to delivery.

d)    Product Warranties

The Company warrants the product from defects for 30 days from delivery to the customer. The Company estimates its warranty costs based on historical warranty claims experience in estimating potential warranty claims. Due to the limited sales of the Company's products, management has determined that warranty costs are immaterial and has not included an accrual for potential warranty claims. Presently, costs related to warranty coverage are expensed as incurred. Warranty claims are reviewed quarterly to verify that warranty liabilities properly reflect any remaining obligation based on the anticipated expenditures over the balance of the obligation period.

9

KENERGY SCIENTIFIC, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

MARCH 31, 2012 and 2011

e)    Research and Development Costs

Research and development costs are charged to expense as incurred.

f)    Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents. There were no cash equivalents at March 31, 2012 and December 31, 2011.

g)    Intangible Assets

Development, registration and maintenance costs associated with the filing and registration of patents are prepaid and amortized over the remaining life of the patent, not to exceed 20 years.

As defined in ASC 360-10-35, “Impairment or Disposal of Long-Lived Assets”, long-lived assets and certain identifiable intangibles to be held and used or disposed of by an entity be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.  The Company has adopted this statement and determined that no additional impairment loss should be recognized for applicable assets at this time.

h)    Income Taxes

The Company accounts for income taxes in accordance with ASC 740-10, “Income Taxes”, which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income taxes and liabilities are computed annually for differences between the financial statement and the tax basis of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.

i)    Derivative Liabilities

The Company accounts for its embedded conversion features in its convertible debentures in accordance ASC 815-10, "Derivatives and Hedging", which requires a periodic valuation of their fair value and a corresponding recognition of liabilities associated with such derivatives, and ASC 815-40, “Contracts in Entity’s Own Equity”. The recognition of derivative liabilities related to the issuance of convertible debt is applied first to the proceeds of such issuance as a debt discount, at the date of issuance, and the excess of derivative liabilities over the proceeds is recognized as “Loss on Valuation of Derivative” in other expense in the accompanying financial statements. Any subsequent increase or decrease in the fair value of the derivative liabilities is recognized as “Other expense” or “Other income”, respectively.

10

KENERGY SCIENTIFIC, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

MARCH 31, 2012 and 2011

j)    Fair Value of Instruments

The carrying amount reported in the balance sheet for cash and cash equivalents, deposits, prepaid expenses, accounts payable, and accrued expenses approximate fair value because of the immediate or short-term maturity of these financial instruments. The carrying amount reported for notes payable approximates fair value because, in general, the interest on the underlying instruments fluctuates with market rates.

k)     Concentrations of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of trade accounts receivable and cash.  As of March 31, 2012 and December 31, 2011, the Company believes it has no significant risk related to its concentration within its accounts receivable.

The Company maintains cash and cash equivalent balances at a financial institution that is insured by the Federal Deposit Insurance Corporation up to $250,000. There were no uninsured cash balances at March 31, 2012 and December 31, 2011.

Note 5                      Income (Loss) Per Share

ASC 260, “Earnings Per Share” requires presentation of basic earnings per share (“basic EPS”) and diluted earnings per share (“diluted EPS”). The Company’s basic income (loss) per common share is based on net income or loss for the relevant period, divided by the weighted average number of common shares outstanding during the period.  Diluted income or loss per common share is based on net income or loss, divided by the weighted average number of common shares outstanding during the year, including common share equivalents, such as outstanding stock options.  The computation of diluted loss per share also does not assume conversion, exercise or contingent exercise of securities due to the beneficial conversion of related party accounts as these shares that would have an anti-dilutive effect.

The computation of income (loss) per share is as follows:

	Three months Ended			Three months Ended
	March 31, 2012			March 31, 2011
Basic net income (loss) per share computation:
Net income (loss) attributable to common stockholders	$	(1,835,338	)	$	253,484
Weighted-average common shares outstanding (see below)		12,583,885			12,360,864
Basic net income (loss) per share attributable to        common stockholders (see below)	$	(0.15	)	$	0.02
Diluted net income (loss) per share computation
Net income (loss) attributable to common stockholders	$	(1,835,338	)	$	253,484
Weighted-average common shares outstanding (see below)		12,583,885			12,360,864
Incremental shares attributable to the assumed conversion of       Convertible debenture and convertible promissory note		--			12,639,136
Total adjusted weighted-average shares		12,583,885			25,000,000
Diluted net income (loss) per share attributable to       common stockholders (see below)	$	(0.15	)	$	0.01

11

KENERGY SCIENTIFIC, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

MARCH 31, 2012 and 2011

At March 31, 2012, the Company had common stock equivalents of 241,540,640. At March 31, 2011, the Company had common stock equivalents of 14,981,883 (11,985,506,505 pre-reverse split), but when added to the common stock outstanding, they are in excess of the authorized capital, so the maximum authorized shares of 25,000,000 are shown for diluted earnings per common share calculations.

On May 31, 2011, the Company executed a reverse stock split in the ratio of one new share for every eight hundred shares held by stockholders. Concurrent with this change, the weighted average shares outstanding and basic and diluted net income (loss) per share were restated to reflect this change. For the three months ended March 31, 2011, weighted average common shares was changed from 9,888,691,090 to 12,360,864 and net income per common share was changed from $0.00 to $0.02.

Note 6                      Intangible Assets

At March 31, 2012 and December 31, 2011, intangible assets consist of the following:

	2012			2011
Speech-enabled auto dialer	$	17,025		$	17,025
Cancer drug delivery system		182,600			182,600
“Green” trademark applications		2,145			2,045
Kenergy patent portfolio		54,870			52,500
Smart Bell		5,000			5,000
Less: accumulated amortization		(83,509	)		(76,154	)
Sub-total		178,131			183,016
Security deposit		21,375			21,375
Intangible assets, net	$	199,506		$	204,391

As defined in ASC 360-10-35, “Impairment or Disposal of Long-Lived Assets”, long-lived assets and certain identifiable intangibles to be held and used or disposed of by an entity be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.  The Company has adopted this statement and determined that no additional impairment loss should be recognized for applicable assets at this time.

Note 7                      Income Taxes

Deferred income taxes will be determined using the liability method for the temporary differences between the financial reporting basis and income tax basis of the Company's assets and liabilities. Deferred income taxes will be measured based on the tax rates expected to be in effect when the temporary differences are included in the Company's tax return. Deferred tax assets and liabilities are recognized based on anticipated future tax consequences attributable to differences between financial statement carrying amounts of assets and liabilities and their respective tax bases.

12

KENERGY SCIENTIFIC, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

MARCH 31, 2012 and 2011

At March 31, 2012 and December 31, 2011 deferred tax assets consist of the following:

	March 31, 2012			December31, 2011
Deferred tax assets	$	820,000		$	766,000
Less: Valuation Allowance		(820,000	)		(766,000	)
Net deferred tax assets	$	-0-		$	-0-

At March 31, 2012 and December 31, 2011, the Company had federal net operating loss carry forwards in the approximate amounts of $2,412,000 and $2,254,000, respectively, available to offset future taxable income. The Company established valuation allowances equal to the full amount of the deferred tax assets due to the uncertainty of the utilization of the operating losses in future periods.

Note 8                      Related Party Transactions

On June 1, 2009 and June 2, 2009, the Company issued two (2) one-year promissory notes in the aggregate of $37,000 to GlynnTech, Inc, for GlynnTech to assume a like amount of current obligations that the Company was unable to pay from current operations. The debt was due on or before the 1st anniversary and was interest free.

On June 18, 2009, the Company acquired the patent rights and technology relating to cancer drug delivery systems developed by GlynnTech, Inc. by the issuance of three (3) $100,000 one-year promissory notes. The promissory notes were due on or before the 1st anniversary of the notes and were interest free.

On December 28, 2009, the Company completed the transfer of the patent rights and technology relating to cancer drug delivery systems developed by GlynnTech, Inc. by the issuance of three (3) one-year promissory notes for the aggregate amount of $125,000. The promissory notes are due on or before the 1st anniversary of the notes and are interest free.

On June 8, 2010 and June 22, 2010, the Company executed two wrap-around agreements, in an aggregate of $337,000, to assign amounts due under these one-year promissory notes to EPIC Worldwide, Inc. The Company was in default on the original notes and this allowed the Company to extend the payment terms for an additional year while the Company attains alternate financing.

On June 17, 2009, Kenneth P. Glynn, President and CEO of the Company, acquired debt owed by the Company to third party creditors as follows:

(1)   Promissory Note due to Jerome Mahoney dated August 5, 2005 having a balance on June 17, 2009 of $71,756 and accrued interest of $98,379;

(2)   Deferred Compensation due to Jerome Mahoney as of June 17, 2009 equal to $319,910;

(3)   Convertible promissory note to iVoice, Inc. dated March 5, 2008 having a balance on June 17, 2009, $79,936 and accrued interest of $4,344; and

(4)   Loan from iVoice Technology, Inc. to SpeechSwitch, Inc. in the amount of $3,600.

The outstanding promissory note, referred to above, will bear interest at the rate of Prime plus 1.0% per annum on the unpaid balance until paid.  Under the terms of the Promissory Note, at the option of the Promissory Note holder, principal and interest can be converted into either (i) one share of SpeechSwitch Class B Common Stock, par value $.01 per share, for each dollar owed, (ii) the number of shares of SpeechSwitch Class A Common Stock calculated by dividing (x) the sum of the principal and interest that the Note holder has requested to have prepaid by (y) eighty percent (80%) of the lowest issue price of Class A Common Stock since the first advance of funds under this Note, or (iii) payment of the principal of this Promissory Note, before any repayment of interest. The Board of Directors of the Company maintains control over the issuance of shares and may decline the request for conversion of the repayment into shares of the Company.

13

KENERGY SCIENTIFIC, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

MARCH 31, 2012 and 2011

The amount of deferred compensation, referred to above, was added to the outstanding promissory note for calculations of accrued interest and is payable in the form of cash, debt, or shares of our Class B Common Stock.

On May 27, 2010, the Company issued an aggregate of 7,057,328 (5,645,862,500 pre-reverse split) shares of Class A common stock and 10,000 shares of Class B common stock to Mr. Glynn in settlement of $509,425 (items #1 and #2 above) of promissory notes and accrued interest due to Mr. Glynn. These shares contain a restrictive legend which will limit Mr. Glynn from liquidating these into the open market.

On July 1, 2011, the Company extended the employment agreement with Mr. Glynn for an additional one (1) year period for Mr. Glynn to serve as President and CEO of the Company at an annual base salary of $96,000.  During 2011 and the three month ended March 31, 2012, Mr. Glynn drew only a portion of his annual salary and the balance is being deferred. As of March 31, 2012, the total amount due to Mr. Glynn for unpaid compensation is $178,500.

During the year ended December 31, 2010 and the three month ended March 31, 2012, GlynnTech, Inc and Mr. Glynn have paid some bills on behalf of the Company. As of March 31, 2012, the aggregate amounts due for these payments is $23,307.

On July 1, 2011, the Company extended the Administrative Services Agreement with GlynnTech, Inc to provide back office administrative support to the Company.  The administrative services agreement was for an initial term of one year and was extended for an additional one-year periods at the Company’s request. The amended fees are $7,500 per month but may be reduced in scope or eliminated at any time upon 90 days’ prior written notice by the Company to GlynnTech.

Note 9                    Convertible Promissory Note and Derivative Liability (Related Party)

The Company had entered into a temporary administrative services agreement with iVoice in 2004. The administrative services agreement continued on a month-to-month basis until December 31, 2008 at which point the agreements were suspended by mutual consent of the parties.

In March 2008, the administrative services agreement was amended to provide that accrued and unpaid administrative services shall be segregated and converted into a Convertible Promissory Note. The principal and interest shall be due and payable as follows: (a) interest shall accrue monthly on the unpaid balance and shall be paid annually, and (b) principal shall be payable on demand.

OnMarch 5, 2008, the Company converted its outstanding accounts payable to iVoice, Inc. for unpaid administrative services in the amount of $50,652 into a convertible promissory note at the rate of prime plus 1 percent per annum. Additional amounts of $42,209 were added to this note based on any unpaid administrative services, and will accrue interest at the above specified rate from date of advance until paid.

14

KENERGY SCIENTIFIC, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

MARCH 31, 2012 and 2011

On June 17, 2009, Kenneth P. Glynn (a related party) acquired this debt from iVoice, Inc. The Note holder may elect payment of the principal and/or interest, at the its sole discretion, owed pursuant to this Note by requiring the Company to issue either: (i) one Class B common stock share of the Company par value $.01 per share, for each dollar owed, (ii) the number of Class A common stock shares of the Company calculated by dividing (x) the sum of the principal and interest that the Note holder has decided to have paid by (y) eighty percent (80%) of the lowest issue price of Class A common stock since the first advance of funds under this Note, or (iii), payment of the principal of this Note, before any repayment of interest.

As of March 31, 2012, the outstanding balance on the Convertible Promissory Note was $79,936 plus accrued interest of $13,820.

Unless otherwise provided, this Convertible Promissory Note may be prepaid in full or in part at any time without penalty or premium. Partial prepayments shall be applied to installments due in reverse order of their maturity.

In the event of (a) default in payment of any installment of principal or interest hereof as the same becomes due and such default is not cured within ten (10) days from the due date, or (b) default under the terms of any instrument securing this Note, and such default is not cured within fifteen (15) days after written notice to maker, then in either such event the holder may, without further notice, declare the remainder of the principal sum, together with all interest accrued thereon, and the prepayment premium, if any, at once due and payable. Failure to exercise this option shall not constitute a waiver of the right to exercise the same at any other time. The unpaid principal of this Note and any part thereof, accrued interest and all other sums due under this Note shall bear interest at the rate of prime plus 1 percent per annum after default until paid.

The Convertible Promissory Note has a security interest in substantially all of the assets of the Company.

In accordance with ASC 815, "Derivatives and Hedging", the Company determined that the conversion feature of the Promissory Note met the criteria of an embedded derivative, and therefore the conversion feature of this Promissory Note needed to be bifurcated and accounted for as a derivative. The fair value of the embedded conversion was estimated at the date of issuance using the Black-Scholes model with the following assumptions: risk free interest rate: 5.6%; expected dividend yield: 0%: expected life: 5 years; and volatility: 263.04%. The accounting guidance instructs that the conversion options are a derivative liability. As such, at March 5, 2008 the Company recorded the conversion options as a liability, recorded a debt discount of $50,652, and charged Other Expense - Loss on Valuation of Derivative for $67,530, resulting primarily from calculation of the conversion price. For the three months ended March 31, 2012, the Company recorded a Gain on Valuation of Derivative in the amount of $20,882. For the year ended December 31, 2011, the Company recorded a Gain on Valuation of Derivative in the amount of $265,822.

Note 10      Convertible Debenture and Derivative Liability

On March 30, 2007, the Company issued a Secured Convertible Debenture (the "Debenture") to YA Global Investments (f/k/a/ Cornell Capital Partners) (“YA Global”) for the sum of $1,000,000 in exchange for a previously issued notes payable for the same amount. The Debenture has a term of three years, and pays interest at the rate of 5% per annum. YA Global has the right to convert a portion or the entire outstanding principal into the Company's Class A Common Stock at a Conversion Price equal to eighty percent (80%) of the lowest closing Bid Price of the Common Stock during the five (5) trading days immediately preceding the Conversion Date. YA Global may not convert the Debenture into shares of Class A Common Stock if such conversion would result in YA Global beneficially owning in excess of 4.99% of the then issued and outstanding shares of Class A Common Stock. The Conversion Price and number of shares of Class A Common Stock issuable upon conversion of the Debenture are subject to certain exceptions and adjustment for stock splits and combinations and other dilutive events. Subject to the terms and conditions of the Debenture, the Company has the right to redeem ("Optional Redemption") a portion or all amounts outstanding under this Debenture prior to the Maturity Date at any time provided that as of the date of the Holder's receipt of a Redemption Notice (i) the Closing Bid Price of the of the Common Stock, as reported by Bloomberg, LP, is less than the Conversion Price and (ii) no Event of Default has occurred. The Company shall pay an amount equal to the principal amount being redeemed plus a redemption premium ("Redemption Premium") equal to twenty percent (20%) of the principal amount being redeemed, and accrued interest, (collectively referred to as the "Redemption Amount"). During the time that any portion of this Debenture is outstanding, if any Event of Default has occurred, the full principal amount of this Debenture, together with interest and other amounts owing in respect thereof, to the date of acceleration shall become at the Holder's election, immediately due and payable in cash, provided however, the Holder may request (but shall have no obligation to request) payment of such amounts in Common stock of the Company. Furthermore, on addition to any other remedies, the Holder shall have the right (but not the obligation) to convert this Debenture at any time after (x) an Event of Default or (y) the Maturity Date at the Conversion Price then in-effect. The debenture is secured by substantially all of the assets of the Company.

15

KENERGY SCIENTIFIC, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

MARCH 31, 2012 and 2011

On July 26, 2010, the convertible debenture with YA Global Investments, LP was amended and restated in order to replace the existing debenture with five (5) debentures of $208,707.74 each. The term of the debentures were amended to extend the due date until July 29, 2011. The amendments had the effect of reclassifying $156,199 of non-interest bearing accrued interest into the secured convertible debentures.

During the year ended December 31, 2010, YA Global Investments, LP assigned the debentures that it held to E-Lionheart Associates, LLC (“E-Lionheart”) with an aggregate value of $1,043,539. This was done in conjunction with the execution of a Securities Purchase Agreement with E-Lionheart whereby E-Lionheart will purchase from the Company up to $500,000 of convertible debentures which will provide new financing for the Company. The new convertible debentures are due on August 9, 2011 and have conversion rights essentially the same as YA Global.

During the year ended December 31, 2011, the Company issued an additional 577,597 (462,077,400 pre-reverse split) shares of Class A common stock to E-Lionheart for repayment valued at $143,244. The difference in the market value and the reduction in debt of $46,208 was charged to beneficial interest in the amount of $97,036.

On July 29, 2011 and August 9, 2011, the Company had defaulted on the terms of the E-Lionheart Convertible Debentures and as such, the full principal amount of these Debentures, together with interest and other amounts owing in respect thereof, shall become at the Holder's election, immediately due and payable in cash, provided however, the Holder may request (but shall have no obligation to request) payment of such amounts in Common stock of the Company.

As of March 31, 2012, the outstanding balance on the E-Lionheart Convertible Debentures were $626,123. During the calendar year 2011, the Company notified E-Lionheart that the Company was disputing the balances due upon this debenture due to miscalculations of the effective conversion rates used by E-Lionheart and as of the date of this filing, the dispute has not been settled.

16

KENERGY SCIENTIFIC, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

MARCH 31, 2012 and 2011

In accordance with ASC 815, "Derivatives and Hedging", the Company determined that the conversion feature of the Debenture met the criteria of an embedded derivative, and therefore the conversion feature of this Debenture needed to be bifurcated and accounted for as a derivative. The fair value of the embedded conversion was estimated at the date of issuance using the Black-Scholes model with the following assumptions: risk free interest rate: 5.6%; expected dividend yield: 0%: expected life: 3 years; and volatility: 165.62%. The accounting guidance instructs that the conversion options are a derivative liability. As such, in March 2007 the Company recorded the conversion options as a liability, recorded a debt discount of $1,000,000, and charged Other Expense - Loss on Valuation of Derivative for $124,479, resulting primarily from calculation of the conversion price. For the three months ended March 31, 2012, the Company recorded a Gain on Valuation of Derivative in the amount of $624,720. For the year ended December 31, 2011, the Company recorded a Gain on Valuation of Derivative in the amount of $51,693.

On June 8, 2010 and June 22, 2010, the Company executed two wrap-around agreements, in an aggregate of $337,000, to assign amounts due under various Promissory Notes due to GlynnTech, Inc to EPIC Worldwide, Inc. (the “Investor”). The wrap-around agreements also modified the original terms to extend the due dates by one year, to include provisions to allow the Investor to convert the amounts due into common stock at a 50% discount of the average three deep bid on the day of conversion and to increase the interest rate to 15% after a 60 day interest free period.

On June 22, 2011, the Company had defaulted on the terms of the 2nd wrap-around agreements and as such, the default interest rate was increased retroactively to 24.99% on the remaining balance of the debt.

As of December 31, 2011, the outstanding balance on the EPIC Convertible Notes were $50,000.

On March 6, 2012, the Company consented to the cancelation of the wrap around agreement with EPIC Worldwide and the reassignment of a new wrap around agreement with ATG, Inc. for $50,000 plus accrued interest of $26,050. Concurrent with the cancelation of the wrap around agreement, the Company also recorded a Gain on Valuation of Derivative in the amount of $154,201 on the retirement of the derivative liability.

On August 9, 2010, the Company entered into a securities purchase agreement with E-Lionheart to purchase up to $500,000 of convertible debentures from the Company. Amounts due under this debenture are due on or before August 9, 2011 and pays interest at the rate of 5% per annum. E-Lionheart has the right to convert a portion or the entire outstanding principal into the Company's Class A Common Stock at a Conversion Price equal to eighty percent (90%) of the lowest closing Bid Price of the Common Stock during the five (5) trading days immediately preceding the Conversion Date. E-Lionheart may not convert the Debenture into shares of Class A Common Stock if such conversion would result in YA Global beneficially owning in excess of 4.99% of the then issued and outstanding shares of Class A Common Stock.

On August 9, 2011, the Company had defaulted on the terms of this Debenture and as such, the full principal amount of this Debentures, together with interest and other amounts owing in respect thereof, shall become at the Holder's election, immediately due and payable in cash, provided however, the Holder may request (but shall have no obligation to request) payment of such amounts in Common stock of the Company.

17

KENERGY SCIENTIFIC, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

MARCH 31, 2012 and 2011

In accordance with ASC 815, "Derivatives and Hedging", the Company determined that the conversion feature of the Debenture met the criteria of an embedded derivative, and therefore the conversion feature of this Debenture needed to be bifurcated and accounted for as a derivative. The fair value of the embedded conversion was estimated at the date of issuance using the Black-Scholes model with the following assumptions: risk free interest rate: 2.25%; expected dividend yield: 0%: expected life: 1 years; and volatility: 301.66% to 308.06%. The accounting guidance instructs that the conversion options are a derivative liability. As such, on the issue dates, the Company recorded the conversion options as a liability and recorded a debt discount of $143,408. For the three months ended March 31, 2012, the Company recorded a Gain on Valuation of Derivative in the amount of $429,255 on the fluctuation in the current market prices. For the year ended December 31, 2011, the Company recorded a Loss on Valuation of Derivative in the amount of $66,609 on the fluctuation in the current market prices.

On August 26, 2011 and November 22, 2011, the Company issued two convertible promissory notes, in an aggregate of $65,000, to Asher Enterprises, Inc. (“Asher”). Amounts due under these notes are due on or before May 30, 2012 and August 28, 2012, respectively, and pays interest at the rate of 8% per annum. Asher has the right to convert a portion or the entire outstanding principal into the Company's Class A Common Stock at a Conversion Price equal to fifty five percent (55%) of the Average of the lowest three (3) Trading Prices of the Common Stock during the ten (10) Trading Day period immediately preceding the Conversion Date. Asher may not convert the note into shares of Class A Common Stock if such conversion would result in Asher beneficially owning in excess of 4.99% of the then issued and outstanding shares of Class A Common Stock.

On March 7, 2012 the Company issued an additional 602,410 shares of Class A common stock to Asher for repayment of debt valued at $12,048. The difference in the market value and the reduction in debt of $5,000 was charged to beneficial interest in the amount of $7,048.

On March 13, 2012, the Company amended the terms of the August 26, 2011 note to change the Variable Conversion Price to equal thirty five (35%) multiplied by the average of the lowest two Trading Prices of the Common Stock during the thirty (30) Trading Day period immediately preceding the Conversion Date.

As of March 31, 2012 and December 31, 2011, the outstanding balance on these Convertible Promissory Notes was $60,000 and $65,000, respectively.

In accordance with ASC 815, "Derivatives and Hedging", the Company determined that the conversion feature of the Debenture met the criteria of an embedded derivative, and therefore the conversion feature of this Debenture needed to be bifurcated and accounted for as a derivative. The fair value of the embedded conversion was estimated at the date of issuance using the Black-Scholes model with the following assumptions: risk free interest rate: 2.25%; expected dividend yield: 0%: expected life: .75 years; and volatility: 212.29%. The accounting guidance instructs that the conversion options are a derivative liability. As such, on the issue dates, the Company recorded the conversion options as a liability, recorded a debt discount of $65,000, and charged Other Expense - Loss on Valuation of Derivative for $24,294. For the three months ended March 31, 2012, the Company recorded a Gain on Valuation of Derivative in the amount of $119,313 on the fluctuation in the current market prices. For the year ended December 31, 2011, the Company recorded a Loss on Valuation of Derivative in the amount of $139,106 on the fluctuation in the current market prices.

18

KENERGY SCIENTIFIC, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

MARCH 31, 2012 and 2011

On February 16, 2012 and March 14, 2012, the Company issued an additional two convertible promissory notes, in an aggregate of $37,500, to Asher Enterprises, Inc. (“Asher”). Amounts due under these notes are due on or before November 21, 2012 and December 19, 2012, respectively, and pays interest at the rate of 8% per annum. Asher has the right to convert a portion or the entire outstanding principal into the Company's Class A Common Stock at a Conversion Price equal to fifty five percent (55%) of the Average of the lowest two (2) Trading Prices of the Common Stock during the twenty (20) Trading Day period immediately preceding the Conversion Date. Asher may not convert the note into shares of Class A Common Stock if such conversion would result in Asher beneficially owning in excess of 4.99% of the then issued and outstanding shares of Class A Common Stock.

As of March 31, 2012, the outstanding balance on these Convertible Promissory Notes were $37,500.

In accordance with ASC 815, "Derivatives and Hedging", the Company determined that the conversion feature of the Debenture met the criteria of an embedded derivative, and therefore the conversion feature of this Debenture needed to be bifurcated and accounted for as a derivative. The fair value of the embedded conversion was estimated at the date of issuance using the Black-Scholes model with the following assumptions: risk free interest rate: 2.25%; expected dividend yield: 0%: expected life: .75 years; and volatility: 278.05% and 301.94%, respectively. The accounting guidance instructs that the conversion options are a derivative liability. As such, on the issue dates, the Company recorded the conversion options as a liability, recorded a debt discount of $37,500, and charged Other Expense - Loss on Valuation of Derivative for $73,683. For the three months ended March 31, 2012, the Company recorded a Gain on Valuation of Derivative in the amount of $38,830 on the fluctuation in the current market prices.

On March 6, 2012, the Company consented to the reassignment of the outstanding balance of the EPIC Worldwide wrap around agreements to ATG, Inc. (“ATG”). The outstanding balance of principal and accrued interest was $76,050. ATG subsequently entered into an Assignment and Assumption Agreement with UAIM Corporation (“UAIM”) to assign $10,000 of these funds from ATG to UAIM. Amounts due under these agreements are due on or before March 6, 2013 and pays interest at the rate of 15% per annum. ATG and UAIM have the right to convert a portion or the entire outstanding principal into the Company's Class A Common Stock at a Conversion Price equal to $0.0005 per share. ATG and UAIM may not convert these agreements into shares of Class A Common Stock if such conversion would result in ATG or UAIM beneficially owning in excess of 4.99% of the then issued and outstanding shares of Class A Common Stock.

As of March 31, 2012, the outstanding balance on these agreements were $76,050.

In accordance with ASC 815, "Derivatives and Hedging", the Company determined that the conversion feature of the Debenture met the criteria of an embedded derivative, and therefore the conversion feature of this Debenture needed to be bifurcated and accounted for as a derivative. The fair value of the embedded conversion was estimated at the date of issuance using the Black-Scholes model with the following assumptions: risk free interest rate: 2.25%; expected dividend yield: 0%: expected life: 1.00 years; and volatility: 295.14. The accounting guidance instructs that the conversion options are a derivative liability. As such, on the issue dates, the Company recorded the conversion options as a liability, recorded a debt discount of $76,050, and charged Other Expense - Loss on Valuation of Derivative for $2,925,649. For the three months ended March 31, 2012, the Company recorded a Gain on Valuation of Derivative in the amount of $1,082 on the fluctuation in the current market prices.

19

KENERGY SCIENTIFIC, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

MARCH 31, 2012 and 2011

Note 11  Promissory Notes

On June 15, 2011, the Company issued a promissory note, in an aggregate of $25,000, to Stuart W. DeJonge (“DeJonge”). Amounts due under this note are due on or before January 15, 2012 and pays interest at the rate of 9% per annum. On January 15, 2012, the Company defaulted on this note and as such, the lender may take whatever action he may elect to recover his loss while continuing to accrue 9% interest. As of March 31, 2012, the outstanding balance on the DeJonge note was $25,000 and accrued interest of $1,788.

On July 12, 2011, the Company issued a promissory note, in an aggregate of $15,000, to Opal Marketing Corp. Amounts due under this note are due on or before March 15, 2012 and pays interest at the rate of 7% per annum. On March 15, 2012, the Company defaulted on this note and as such, the lender may take whatever action he may elect to recover his loss while continuing to accrue 7% interest. As of March 31, 2012, the outstanding balance on the Opal Marketing Corp. note was $15,000 and accrued interest of $736.

On July 22, 2011, the Company issued a promissory note, in an aggregate of $100,000, to Charles M. Basner (“Basner”). Amounts due under this note are due on or before March 22, 2012 and pays interest at the rate of 7% per annum. On March 22, 2012, the Company defaulted on this note and as such, the lender may take whatever action he may elect to recover his loss while continuing to accrue 7% interest. As of March 31, 2012, the outstanding balance on the Basner note was $100,000 and accrued interest of $4,319.

Note 12        Capital Stock

Pursuant to Kenergy Scientific's certificate of incorporation, as amended, as of March 31, 2012, the Company is authorized to issue 1,000,000 shares of Preferred Stock, par value of $1.00 per share, 625,000,000 shares of Class A Common Stock, no par value per share, 50,000,000 shares of Class B Common Stock, par value $0.01 per share, and 20,000,000 shares of Class C Common Stock, par value $0.01 per share. Below is a description of Kenergy Scientific's outstanding securities, including Preferred Stock, Class A Common Stock, Class B Common Stock, and Class C Common Stock.

On March 5, 2012, the Company amended its Certificate of Incorporation to increase the number of authorized Class A Common Stock Shares to 625,000,000, as authorized by the Board of Directors and adopted by the shareholders on February 15, 2012. The effect of this amendment was to increase the authorized shares from 125,000,000 to 625,000,000.

a) Preferred Stock

Kenergy Scientific is authorized to issue 1,000,000 shares of Preferred Stock, par value $1.00 per share.  As of March 31, 2012, Kenergy Scientific has not issued any shares of Preferred Stock.

b) Class A Common Stock

As of March 31, 2012 and December 31, 2011, there are 625,000,000 and 125,000,000 shares of Class A Common Stock authorized, respectively, no par value, and 13,020,798 and 12,418,388 shares were issued and outstanding, respectively.

20

KENERGY SCIENTIFIC, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

MARCH 31, 2012 and 2011

Each holder of Class A Common Stock is entitled to receive ratably dividends, if any, as may be declared by the Board of Directors out of funds legally available for payment of dividends.  The Company has never paid any dividends on its common stock and does not contemplate doing so in the foreseeable future.  The Company anticipates that any earnings generated from operations will be used to finance its growth objectives.

For the three months ended March 31, 2012, the Company had the following transactions in its Class A common stock:

·   The Company issued 602,410 shares of Class A common stock for repayment of convertible debenture in lieu of cash, valued at $12,048. The difference in the market value and the reduction in debt of $5,000 was charged to beneficial interest in the amount of $7,048.

c) Class B Common Stock

As of March 31, 2012, there are 50,000,000 shares of Class B Common Stock authorized, par value $.01 per share and 10,000 shares were issued and outstanding. Each holder of Class B Common Stock has voting rights equal to 100 shares of Class A Common Stock.  A holder of Class B Common Stock has the right to convert each share of Class B Common Stock into the number of shares of Class A Common Stock determined by dividing the number of Class B Common Stock being converted by a 20% discount of the lowest price that Kenergy Scientific, Inc. had ever issued its Class A Common Stock. Upon liquidation, dissolution, or winding-up, holders of Class B Common Stock will be entitled to receive distributions.

d) Class C Common Stock

As of March 31, 2012, there are 20,000,000 shares of Class C Common Stock authorized, par value $.01 per share.  Each holder of Class C Common Stock is entitled to 1,000 votes for each share held of record.  Shares of Class C Common Stock are not convertible into Class A Common Stock.  Upon liquidation, dissolution or wind-up, the holders of Class C Common Stock are not entitled to receive the Company’s net assets pro rata.  As of March 31, 2012, no shares were issued or outstanding.

Note 13        Additional paid-in capital

As of March 31, 2012, the Company has owed as much as $437,000 to a related party director of the Company. The loans are non-interest bearing, unsecured and due at various times up to December 28, 2010 and are included in the loans payable, related party balance. However, ASC 835-30 “Imputation of Interest” has been applied to impute the interest on loan from June 1, 2009 as there was no interest rate stipulated in the agreements. An accumulation of $38,976 has been imputed as interest over the periods and as per ASC 835-30, has been credited to Additional paid-in capital.

Note 14         Stock Options

During 2005, the Company adopted the 2005 Stock Incentive Plan and the 2005 Directors’ and Officers’ Stock Incentive Plan (“Plan”) in order to attract and retain qualified personnel.  Under the Plans, the Board of Directors, in its discretion may grant stock options (either incentive or non-qualified stock options) to officers, directors and employees.  The Company has not issued any stock options as of March 31, 2012.

21

KENERGY SCIENTIFIC, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

MARCH 31, 2012 and 2011

Note 15         New Accounting Pronouncements

In December 2011, the FASB issued ASU 2011-11, “Disclosures about Offsetting Assets and Liabilities.” ASU 2011-11 amends the disclosure requirements on offsetting in Section 210-20-50 which requires an entity to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial position. The amended guidance is effective for interim and annual financial periods beginning on or after January 1, 2013. We do not expect adoption of this guidance to have an impact on our financial statements.

Management does not believe that any other recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying financial statements.

Note 16         Fair Value Measurements

In September 2006, the FASB issued ASC 820, “Fair Value Measurements and Disclosures”, which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. The provisions of ASC 820 were effective January 1, 2008. As defined in ASC 820, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The Company utilizes market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable. The Company classifies fair value balances based on the observability of those inputs. ASC 820 establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the lowest priority to unobservable inputs (level 3 measurement).

ASC 820 classifies these inputs into the following hierarchy:

Level 1 Inputs– Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Level 1 primarily consists of financial instruments such as exchange-traded derivatives, marketable securities and listed equities.

Level 2 Inputs– Pricing inputs are other than quoted prices in active markets included in level 1, which are either directly or indirectly observable as of the reported date. Level 2 includes those financial instruments that are valued using models or other valuation methodologies. These models are primarily industry-standard models that consider various assumptions, including quoted forward prices for commodities, time value, volatility factors, and current market and contractual prices for the underlying instruments, as well as other relevant economic measures. Substantially all of these assumptions are observable in the marketplace throughout the full term of the instrument, can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace. Instruments in this category generally include non-exchange-traded derivatives such as commodity swaps, interest rate swaps, options and collars.

Level 3 Inputs– Pricing inputs include significant inputs that are generally less observable from objective sources. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value.

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KENERGY SCIENTIFIC, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

MARCH 31, 2012 and 2011

The following table sets forth by level within the fair value hierarchy the Company’s financial assets and liabilities that were accounted for at fair value as of March 31, 2012 and December 31, 2010. As required by ASC 820, financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the valuation of fair value assets and liabilities and their placement within the fair value hierarchy levels.

March 31, 2012

Assets	Level I		Level II		Level III		Total
Total Assets	$	-	$	-	$	-	$	-
Convertible promissory notes	$	-	$	65,096	$	-	$	65,096
Notes payable - related parties		-		125,000		-		125,000
Notes payable - trade		-		140,000		-		140,000
Convertible debentures		-		1,173,735		-		1,173,735
Derivative liabilities		-		3,995,457		-		3,995,457
Total Liabilities	$	-	$	5,499,288	$	-	$	5,499,288

December 31, 2010

Assets	Level I		Level II		Level III		Total
Total Assets	$	-	$	-	$	-	$	-
Convertible promissory notes	$	-	$	61,112	$	-	$	61,112
Notes payable related parties		-		125,000		-		125,000
Notes payable trade		-		140,000		-		140,000
Convertible debentures		-		1,196,025		-		1,196,025
Derivative liabilities		-		2,270,858		-		2,270,858
Total Liabilities	$	-	$	3,792,995	$	-	$	3,792,995

The Company’s derivatives are classified within Level 2 of the valuation hierarchy. The Company’s derivatives are valued using internal models that use as their basis readily observable market inputs, such as time value, forward interest rates, and volatility factors. Refer to Notes 9 & 10 for more discussion on derivatives.

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KENERGY SCIENTIFIC, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

MARCH 31, 2012 and 2011

Note 19         Subsequent Events

On April 2, 2012 and May 2, 2012, the Company issued an aggregate of 11,200,000 shares of Class A common stock to ATG, Inc and UAIM Corporation in accordance with the terms of the wrap around agreements discussed in Note 10,Convertible Debenture and Derivative Liability.

On April 18, 2012, the Company issued 202,057,500 shares of Class A common stock to Kenneth Glynn upon conversion of deferred compensation according to the terms discussed in Note 8, Related Party Transactions.

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

Forward Looking Statements

A number of the statements made by the Company in this report may be regarded as “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.

Forward-looking statements include, among others, statements concerning the Company’s outlook, pricing trends and forces within the industry, the completion dates of capital projects, expected sales growth, cost reduction strategies and their results, long-term goals of the Company and other statements of expectations, beliefs, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts.

All predictions as to future results contain a measure of uncertainty and accordingly, actual results could differ materially.  Among the factors that could cause a difference are:  changes in the general economy; changes in demand for the Company’s products or in the cost and availability of its raw materials; the actions of its competitors; the success of our customers; technological change; changes in employee relations; government regulations; litigation, including its inherent uncertainty; difficulties in plant operations and materials; transportation, environmental matters; and other unforeseen circumstances.  For a discussion of material risks and uncertainties that the Company faces, see the discussion in the Form 10−K for the fiscal year ended December 31, 2011 entitled “Risk Factors”.

Overview and Plan of Operation

In June 2009, the Company entered into fields of development of various products relating to solar power generating systems; portable solar powered products, such as cell phone and PDA rechargers that are solar rechargeable; solar rechargeable lantern/flashlight devices; solar backpack rechargers; solar power audio devices, such as radios; wind power generating systems; and, creative products based on proprietary positions, especially in the area of healthcare.  Kenergy Scientific may seek to expand its operations through additional sales and marketing activity and the acquisition of additional businesses. Any potential acquired additional businesses may be outside the current field of operations of Kenergy Scientific.  Kenergy Scientific may not be able to identify, successfully integrate or profitably manage any such business or operations.  Currently, Kenergy Scientific has no plans, proposal or arrangements, either orally or in writing, regarding any proposed acquisitions and is not considering any potential acquisitions.

Results of Operations

During the three months ended March 31, 2012, the Company sold $16,522 of solar powered products and products made from recycled materials as compared to $2,547 for the three months ended March 31, 2011. This increase is primarily due to the opening of the company-owned retail GreenSmart store opened in the 4th quarter of 2011.

Gross margin for the three months ended March 31, 2012 of $7,974 represents a Gross margin % to sales of 48.3%. For the three months ended March 31, 2011, Gross margin % to sales of 44.1%. These margins are the result of keeping prices low to compete with similar products made from virgin materials.  As the volume increases, we expect to achieve greater gross margin % rates.

Total operating expenses increased $50,762 (44.8%) to $164,189 for the three months March 31, 2012, as compared to the same period in the prior year. The increase was primarily the result of the Company investing resources in establishing the company-owned retail store and professional fees incurred to engage our independent auditors.

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Total other income (expense) for the three months ended March 31, 2012 was total expense of $1,679,123 as compared to total income of $365,788 for the three months ended March 31, 2011, for an unfavorable change of $2,044,911. This change was primarily attributed to the change from a gain to a loss on revaluation of derivatives of $2,233,223 offset by a lower beneficial interest expense of $89,988 and a decrease in amortization of debt discount of $104,746 when compared to the prior year.

Net loss for the three months ended March 31, 2012 was $1,835,338 as compared to a net income of $253,484 for the three months ended March 30, 2011. The unfavorable changes for the three months ending March 31, 2012 were primarily from the unfavorable changes in revaluation of derivatives and higher operating expense offset by the increased sales and lower interest expense and amortization of debt discount.

Liquidity and Capital Resources

To date, Kenergy Scientific has incurred substantial cash losses, and will require financing for working capital to meet its operating obligations. We anticipate that we will require financing on an ongoing basis for the foreseeable future.

During the three months ended March 31, 2012, the Company was able to raise an additional $37,500 of additional short term trade debt from unrelated investors.

The Company currently has no other significant sources of working capital or cash commitments. However, no assurance can be given that Kenergy Scientific will raise sufficient funds from such financing arrangements, or that Kenergy Scientific will ever produce sufficient revenues to sustain its operations, or that a market will develop for its common stock for which a significant amount of Kenergy Scientific’s financing is dependent upon.

For the three months ended months March 31, 2012, the Company had a net decrease in cash of $2,274.  The Company’s principal sources and uses of funds were as follows:

Cash used by operating activities. The Company used $37,304 in cash for operating activities for the three months ended March 31, 2012 and used $121,750 in cash for operating activities for the three months ended March 31, 2011. The current cash operating losses of $172,881 are being partially funded by deferred payments to vendors and related parties.

Cash used by investing activities. The Company used $2,470 in cash for investing activities for the three months ended March 31, 2012. These amounts were for the prosecution and filings related to the Company’s patent portfolio.

Cash provided by financing activities.  For the three months ended March 31, 2012, the Company provided $37,500 in financing activities by the issuance of promissory notes to unrelated parties.

There was no significant impact on the Company’s operations as a result of inflation for the three months ended March 31, 2012.

Critical Accounting Policies

The discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate these estimates, including those related to bad debts, inventory obsolescence, intangible assets, payroll tax obligations, and litigation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of certain assets and liabilities. Actual results may differ from these estimates under different assumptions or conditions.

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OFF BALANCE SHEET ARRANGEMENTS

During the three months ended March 31, 2012, we did not engage in any material off-balance sheet activities nor have any relationships or arrangements with unconsolidated entities established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. Further, we have not guaranteed any obligations of unconsolidated entities nor do we have any commitment or intent to provide additional funding to any such entities.

Item 4.                      Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Management of the Company has evaluated, with the participation of the Chief Executive Officer and Chief Financial Officer of the Company, the effectiveness of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the quarter covered by this Quarterly Report on Form 10-Q. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer of the Company have concluded, as of the end of the quarter covered by this Quarterly Report on Form 10-Q, that our disclosure controls and procedures have not been effective for the following reason:

A deficiency was identified as the Company's limited segregation of duties amongst the Company's employees with respect to the Company's control activities. This deficiency is the result of the Company's limited number of employees. This deficiency may affect management's ability to determine if errors or inappropriate actions have taken place. Management is required to apply its judgment in evaluating the cost-benefit relationship of possible changes in our disclosure controls and procedures.

Changes in internal control over financial reporting.

Management of the Company has also evaluated, with the participation of the Chief Executive Officer of the Company, any change in the Company’s internal control over financial reporting that occurred during the period covered by this Quarterly Report on Form 10-Q and determined that there was no change in the Company’s internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

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Part II.  Other Information

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

On February 16, 2012 and March 14, 2012, the Company issued two convertible promissory notes, in an aggregate of $37,500, to Asher Enterprises, Inc. (“Asher”). Amounts due under these notes are due on or before November 21, 2012 and December 19, 2012, respectively, and pays interest at the rate of 8% per annum. Asher has the right to convert a portion or the entire outstanding principal into the Company's Class A Common Stock at a Conversion Price equal to fifty five percent (55%) of the Average of the lowest two (2) Trading Prices of the Common Stock during the twenty (20) Trading Day period immediately preceding the Conversion Date. Asher may not convert the note into shares of Class A Common Stock if such conversion would result in Asher beneficially owning in excess of 4.99% of the then issued and outstanding shares of Class A Common Stock.

On March 7, 2012 the Company issued an additional 602,410 shares of Class A common stock to Asher for repayment of debt valued at $12,048.

Item 3. Defaults Upon Senior Securities.

On July 29, 2011 and August 9, 2011, the Company had defaulted on the terms of the E-Lionheart Convertible Debentures and as such, the full principal amount of these Debentures, together with interest and other amounts owing in respect thereof, shall become at the Holder's election, immediately due and payable in cash, provided however, the Holder may request (but shall have no obligation to request) payment of such amounts in Common stock of the Company.

As of March 31, 2012, the outstanding balance on the E-Lionheart Convertible Debentures were $626,123. During the calendar year 2011, the Company notified E-Lionheart that the Company was disputing the balances due upon this debenture due to miscalculations of the effective conversion rates used by E-Lionheart and as of the date of this filing, the dispute has not been settled. The Company expects a favorable outcome to this dispute.

Item 5. Other Information.

Section 1 - Registrant’s Business and Operations

Item 1.01 - Entry into a Material Definitive Agreement

On February 16, 2012 and March 14, 2012, the Company issued two convertible promissory notes, in an aggregate of $37,500, to Asher Enterprises, Inc. (“Asher”). Amounts due under these notes are due on or before November 21, 2012 and December 19, 2012, respectively, and pays interest at the rate of 8% per annum. Asher has the right to convert a portion or the entire outstanding principal into the Company's Class A Common Stock at a Conversion Price equal to fifty five percent (55%) of the Average of the lowest two (2) Trading Prices of the Common Stock during the twenty (20) Trading Day period immediately preceding the Conversion Date. Asher may not convert the note into shares of Class A Common Stock if such conversion would result in Asher beneficially owning in excess of 4.99% of the then issued and outstanding shares of Class A Common Stock.

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On March 6, 2012, the Company consented to the reassignment of the outstanding balance of the EPIC Worldwide wrap around agreements to ATG, Inc. (“ATG”). The outstanding balance of principal and accrued interest was $76,050. ATG subsequently entered into an Assignment and Assumption Agreement with UAIM Corporation (“UAIM”) to assign $10,000 of these funds from ATG to UAIM. Amounts due under these agreements are due on or before March 6, 2013 and pays interest at the rate of 15% per annum. ATG and UAIM have the right to convert a portion or the entire outstanding principal into the Company's Class A Common Stock at a Conversion Price equal to $0.0005 per share. ATG and UAIM may not convert these agreements into shares of Class A Common Stock if such conversion would result in ATG or UAIM beneficially owning in excess of 4.99% of the then issued and outstanding shares of Class A Common Stock.

Item 1.02 Termination of a Material Definitive Agreement.

On March 6, 2012, the Company consented to the cancelation of the wrap around agreement with EPIC Worldwide and the reassignment of a new wrap around agreement with ATG, Inc. for $50,000 plus accrued interest of $26,050.

Section 2 - Financial Information

Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

On February 16, 2012 and March 14, 2012, the Company issued two convertible promissory notes, in an aggregate amount of $37,500, to Asher Enterprises, Inc. (“Asher”).  (See Item 1.01).

On March 6, 2012, the Company consented to the reassignment of the outstanding balance of the EPIC Worldwide wrap around agreements to ATG, Inc. (“ATG”). (See Item 1.01).

Section 5 Corporate Governance and Management

Item 5.03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year.

On March 5, 2012, the Company amended its Certificate of Incorporation to increase the number of authorized Class A Common Stock Shares to 625,000,000, as authorized by the Board of Directors and adopted by the shareholders on February 15, 2012. The effect of this amendment was to increase the authorized shares from 125,000,000 to 625,000,000.

Item 5.07 Submission of Matters to a Vote of Security Holders.

On February 15, 2012, a majority of voting shares, through written consent in lieu of a meeting, passed a resolution approving the amendment to the Certificate of Incorporation to increase the number of authorized Class A Common Stock from 125 million to 625 million shares.

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Item 6.	Exhibits
	3.1	Amended to the Certificate of Incorporation of Kenergy Scientific, Inc., dated March 5, 2012,  filed herein.
	10.1	Convertible Promissory Note, dated February 16, 2012, between Asher Enterprises, Inc. and Kenergy Scientific, Inc., for the sum of $22,500, filed herein.
	10.2	Wrap-around Agreement, dated March 6, 2012, between Kenergy Scientific, Inc., GlynnTech, Inc. and ATG, Inc., filed herein.
	10.3	Amendment No.1 to Convertible Promissory Note, dated March 13, 2012, between Asher Enterprises, Inc. and Kenergy Scientific, Inc., filed herein.
	10.4	Convertible Promissory Note, dated March 14, 2012, between Asher Enterprises, Inc. and Kenergy Scientific, Inc., for the sum of $15,000, filed herein.
	31.1	Rule 13a-14(a)/15d-14(a) Certifications.
	32.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	101.INS	XBRL Instance Document
	101.SCH	XBRL Taxonomy Extension Schema
	101.CAL	XBRL Taxonomy Extension Calculation Linkbase
	101.DEF	XBRL Taxonomy Extension Definition Linkbase
	101.LAB	XBRL Taxonomy Extension Label Linkbase
	101.PRE	XBRL Taxonomy Extension Presentation Linkbase

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SIGNATURES

In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 

       KENERGY SCIENTIFIC, INC.

Date:           May 21, 2012                                                                      By: /s/ Kenneth Glynn

Kenneth Glynn

President

Chief Executive Officer and

Chief Financial Officer

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INDEX OF EXHIBITS
3.1	Amended to the Certificate of Incorporation of Kenergy Scientific, Inc., dated March 5, 2012,  filed herein.
10.1	Convertible Promissory Note, dated February 16, 2012, between Asher Enterprises, Inc. and Kenergy Scientific, Inc., for the sum of $22,500, filed herein.
10.2	Wrap-around Agreement, dated March 6, 2012, between Kenergy Scientific, Inc., GlynnTech, Inc. and ATG, Inc., filed herein.
10.3	Amendment No.1 to Convertible Promissory Note, dated March 13, 2012, between Asher Enterprises, Inc. and Kenergy Scientific, Inc., filed herein.
10.4	Convertible Promissory Note, dated March 14, 2012, between Asher Enterprises, Inc. and Kenergy Scientific, Inc., for the sum of $15,000, filed herein.
31.1	Rule 13a-14(a)/15d-14(a) Certifications.
32.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema
101.CAL	XBRL Taxonomy Extension Calculation Linkbase
101.DEF	XBRL Taxonomy Extension Definition Linkbase
101.LAB	XBRL Taxonomy Extension Label Linkbase
101.PRE	XBRL Taxonomy Extension Presentation Linkbase

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EX-3.1

Exhibit 3.1

AMENDMENT TO THE CERTIFICATE OF

INCORPORATION

OF

KENERGY SCIENTIFIC, INC.

KENERGY SCIENTIFIC, INC., formerly SpeechSwitch Corp., a corporation organized and existing under the laws of the State of New Jersey (the “Corporation”), hereby certifies as follows:

1.The name of the corporation is now KENERGY SCIENTIFIC, INC. changed by properly filed and approved Amendment from its original name,

SpeechSwitch Corp., on May 5, 2011. The Amended and Restated Certificate of Incorporation of the original Corporation (SpeechSwitch Corp.) was filed by the New Jersey Treasurer on January 10, 2005.

2.This Amendment to the Certificate of Incorporation herein certified was authorized by the unanimous written consent of the Board of Directors on February 15, 2012 and adopted by the shareholders through written consent in lieu of meeting of a majority of the voting common stock shares of the Corporation on February 15, 2012 pursuant to the New Jersey Business Corporation Act of the State of New Jersey (the Corporation Law).

3.The Amendment to the Certificate of Incorporation herein certified effects the change to Article III Class A Common Stock Shares whereby the number of authorized Class A Common Stock Shares shall be increased from One Hundred Twenty Five Million (125,000,000) to Six Hundred Twenty Five Million (625,000,000). Prior to this Amendment, there were 125,000,000 Class A common stock shares authorized, of which 12,405,788 have been issued. To accomplish the foregoing amendment, the first paragraph of Article III Capital Stock shall be deleted in its entirety and replaced with the following:

1

“The aggregate number of shares which the Corporation shall have authority to issue is 696,000,000 shares of common stock and preferred stock. The stock of this corporation shall be divided into four classes consisting of:

Class A Common Stock	625,000,000 shares authorized, no par value per share
Class B Common Stock	50,000,000 shares authorized, $.01 par value per share
Class C Common Stock	20,000,000 shares authorized, $.01 par value per share
Preferred Stock	1,000,000 shares authorized, $1 par value per share, and

IN WITNESS WHEREOF, the Corporation has caused this Amendment of the Certificate of Incorporation to be executed by a duly authorized officer on February 15, 2012.

By:    /s/ Kenneth P. Glynn                    

Kenneth P. Glynn

President and Chief Executive Officer

2

EX-10.1

Exhibit 10.1

NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

Principal Amount: $22,500.00                                                                                     Issue Date: February 16, 2012

Purchase Price: $22,500.00

CONVERTIBLE PROMISSORY NOTE

FOR VALUE RECEIVED, KENERGY SCIENTIFIC, INC, a New Jersey corporation (hereinafter called the “Borrower”), hereby promises to pay to the order of ASHER ENTERPRISES, INC., a Delaware corporation, or registered assigns (the “Holder”) the sum of $22,500.00 together with any interest as set forth herein, on November 21, 2012 (the “Maturity Date”), and to pay interest on the unpaid principal balance hereof at the rate of eight percent (8%) (the “Interest Rate”) per annum from the date hereof (the “Issue Date”) until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. This Note may not be prepaid in whole or in part except as otherwise explicitly set forth herein. Any amount of principal or interest on this Note which is not paid when due shall bear interest at the rate of twenty two percent (22%) per annum from the due date thereof until the same is paid (“Default Interest”). Interest shall commence accruing on the date that the Note is fully paid and shall be computed on the basis of a 365-day year and the actual number of days elapsed. All payments due hereunder (to the extent not converted into common stock, no par value per share (the “Common Stock”) in accordance with the terms hereof) shall be made in lawful money of the United States of America. All payments shall be made at such address as the Holder shall hereafter give to the Borrower by written notice made in accordance with the provisions of this Note. Whenever any amount expressed to be due by the terms of this Note is due on any day which is not a business day, the same shall instead be due on the next succeeding day which is a business day and, in the case of any interest payment date which is not the date on which this Note is paid in full, the extension of the due date thereof shall not be taken into account for purposes of determining the amount of interest due on such date. As used in this Note, the term “business day” shall mean any day other than a Saturday, Sunday or a day on which commercial banks in the city of New York, New York are authorized or required by law or executive order to remain closed. Each capitalized term used herein, and not otherwise defined, shall have the meaning ascribed thereto in that certain Securities Purchase Agreement dated the date hereof, pursuant to which this Note was originally issued (the “Purchase Agreement”).

This Note is free from all taxes, liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive rights or other similar rights of shareholders of the Borrower and will not impose personal liability upon the holder thereof.

The following terms shall apply to this Note:

ARTICLE I. CONVERSION RIGHTS

1.1Conversion Right. The Holder shall have the right from time to time, and at any time during the period beginning on the date which is one hundred eighty (180) days following the date of this Note and ending on the later of: (i) the Maturity Date and (ii) the date of payment of the Default Amount (as defined in Article III) pursuant to Section 1.6(a) or Article III, each in respect of the remaining outstanding principal amount of this Note to convert all or any part of the outstanding and unpaid principal amount of this Note into fully paid and non­assessable shares of Common Stock, as such Common Stock exists on the Issue Date, or any shares of capital stock or other securities of the Borrower into which such Common Stock shall hereafter be changed or reclassified at the conversion price (the “Conversion Price”) determined as provided herein (a “Conversion”); provided, however, that in no event shall the Holder be entitled to convert any portion of this Note in excess of that portion of this Note upon conversion of which the sum of (1) the number of shares of Common Stock beneficially owned by the Holder and its affiliates (other than shares of Common Stock which may be deemed beneficially owned through the ownership of the unconverted portion of the Notes or the unexercised or unconverted portion of any other security of the Borrower subject to a limitation on conversion or exercise analogous to the limitations contained herein) and (2) the number of shares of Common Stock issuable upon the conversion of the portion of this Note with respect to which the determination of this proviso is being made, would result in beneficial ownership by the Holder and its affiliates of more than 4.99% of the outstanding shares of Common Stock. For purposes of the proviso to the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Regulations 13D-G thereunder, except as otherwise provided in clause (1) of such proviso, provided, further, however, that the limitations on conversion may be waived by the Holder upon, at the election of the Holder, not less than 61 days’ prior notice to the Borrower, and the provisions of the conversion limitation shall continue to apply until such 61st day (or such later date, as determined by the Holder, as may be specified in such notice of waiver). The number of shares of Common Stock to be issued upon each conversion of this Note shall be determined by dividing the Conversion Amount (as defined below) by the applicable Conversion Price then in effect on the date specified in the notice of conversion, in the form attached hereto as Exhibit A (the “Notice of Conversion”), delivered to the Borrower by the Holder in accordance with Section 1.4 below; provided that the Notice of Conversion is submitted by facsimile or e-mail (or by other means resulting in, or reasonably expected to result in, notice) to the Borrower before 6:00 p.m., New York, New York time on such conversion date (the “Conversion Date”). The term “Conversion Amount” means, with respect to any conversion of this Note, the sum of (1) the principal amount of this Note to be converted in such conversion plus (2) at the Borrower’s option, accrued and unpaid interest, if any, on such principal amount at the interest rates provided in this Note to the Conversion Date, plus (3) at the Borrower’s option, Default Interest, if any, on the amounts referred to in the immediately preceding clauses (1) and/or (2) plus (4) at the Holder’s option, any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof.

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1.2Conversion Price.

(a)Calculation of Conversion Price. The conversion price (the “Conversion Price”) shall equal the Variable Conversion Price (as defined herein) (subject to equitable adjustments for stock splits, stock dividends or rights offerings by the Borrower relating to the Borrower’s securities or the securities of any subsidiary of the Borrower, combinations, recapitalization, reclassifications, extraordinary distributions and similar events). The "Variable Conversion Price" shall mean 55% multiplied by the Market Price (as defined herein) (representing a discount rate of 45%). “Market Price” means the average of the lowest Trading Price (as defined below) for the Common Stock during the twenty (20) Trading Day period ending on the latest complete Trading Day prior to the Conversion Date. “Trading Price” means, for any security as of any date, the closing bid price on the Over-the-Counter Bulletin Board, or applicable trading market (the “OTCBB”) as reported by a reliable reporting service (“Reporting Service”) designated by the Holder (i.e. Bloomberg) or, if the OTCBB is not the principal trading market for such security, the closing bid price of such security on the principal securities exchange or trading market where such security is listed or traded or, if no closing bid price of such security is available in any of the foregoing manners, the average of the closing bid prices of any market makers for such security that are listed in the “pink sheets” by the National Quotation Bureau, Inc. If the Trading Price cannot be calculated for such security on such date in the manner provided above, the Trading Price shall be the fair market value as mutually determined by the Borrower and the holders of a majority in interest of the Notes being converted for which the calculation of the Trading Price is required in order to determine the Conversion Price of such Notes. “Trading Day” shall mean any day on which the Common Stock is tradable for any period on the OTCBB, or on the principal securities exchange or other securities market on which the Common Stock is then being traded.

(b)Conversion Price During Major Announcements. Notwithstanding anything contained in Section 1.2(a) to the contrary, in the event the Borrower (i) makes a public announcement that it intends to consolidate or merge with any other corporation (other than a merger in which the Borrower is the surviving or continuing corporation and its capital stock is unchanged) or sell or transfer all or substantially all of the assets of the Borrower or (ii) any person, group or entity (including the Borrower) publicly announces a tender offer to purchase 50% or more of the Borrower’s Common Stock (or any other takeover scheme) (the date of the announcement referred to in clause (i) or (ii) is hereinafter referred to as the “Announcement Date”), then the Conversion Price shall, effective upon the Announcement Date and continuing through the Adjusted Conversion Price Termination Date (as defined below), be equal to the lower of (x) the Conversion Price which would have been applicable for a Conversion occurring on the Announcement Date and (y) the Conversion Price that would otherwise be in effect. From and after the Adjusted Conversion Price Termination Date, the Conversion Price shall be determined as set forth in this Section 1.2(a). For purposes hereof, “Adjusted Conversion Price Termination Date” shall mean, with respect to any proposed transaction or tender offer (or takeover scheme) for which a public announcement as contemplated by this Section 1.2(b) has been made, the date upon which the Borrower (in the case of clause (i) above) or the person, group or entity (in the case of clause (ii) above) consummates or publicly announces the termination or abandonment of the proposed transaction or tender offer (or takeover scheme) which caused this Section 1.2(b) to become operative.

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1.3Authorized Shares. The Borrower covenants that during the period the conversion right exists, the Borrower will reserve from its authorized and unissued Common Stock a sufficient number of shares, free from preemptive rights, to provide for the issuance of Common Stock upon the full conversion of this Note issued pursuant to the Purchase Agreement. The Borrower is required at all times to have authorized and reserved five times the number of shares that is actually issuable upon full conversion of the Note (based on the Conversion Price of the Notes in effect from time to time)(the “Reserved Amount”). The Reserved Amount shall be increased from time to time in accordance with the Borrower’s obligations pursuant to Section 4(g) of the Purchase Agreement. The Borrower represents that upon issuance, such shares will be duly and validly issued, fully paid and non-assessable. In addition, if the Borrower shall issue any securities or make any change to its capital structure which would change the number of shares of Common Stock into which the Notes shall be convertible at the then current Conversion Price, the Borrower shall at the same time make proper provision so that thereafter there shall be a sufficient number of shares of Common Stock authorized and reserved, free from preemptive rights, for conversion of the outstanding Notes. The Borrower (i) acknowledges that it has irrevocably instructed its transfer agent to issue certificates for the Common Stock issuable upon conversion of this Note, and (ii) agrees that its issuance of this Note shall constitute full authority to its officers and agents who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for shares of Common Stock in accordance with the terms and conditions of this Note.

If, at any time the Borrower does not maintain the Reserved Amount it will be considered an Event of Default under Section 3.2 of the Note.

1.4Method of Conversion.

(a)Mechanics of Conversion. Subject to Section 1.1, this Note may be converted by the Holder in whole or in part at any time from time to time after the Issue Date, by (A) submitting to the Borrower a Notice of Conversion (by facsimile, e-mail or other reasonable means of communication dispatched on the Conversion Date prior to 6:00 p.m., New York, New York time) and (B) subject to Section 1.4(b), surrendering this Note at the principal office of the Borrower.

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(b)Surrender of Note Upon Conversion. Notwithstanding anything to the contrary set forth herein, upon conversion of this Note in accordance with the terms hereof, the Holder shall not be required to physically surrender this Note to the Borrower unless the entire unpaid principal amount of this Note is so converted. The Holder and the Borrower shall maintain records showing the principal amount so converted and the dates of such conversions or shall use such other method, reasonably satisfactory to the Holder and the Borrower, so as not to require physical surrender of this Note upon each such conversion. In the event of any dispute or discrepancy, such records of the Borrower shall, primafacie, be controlling and determinative in the absence of manifest error. Notwithstanding the foregoing, if any portion of this Note is converted as aforesaid, the Holder may not transfer this Note unless the Holder first physically surrenders this Note to the Borrower, whereupon the Borrower will forthwith issue and deliver upon the order of the Holder a new Note of like tenor, registered as the Holder (upon payment by the Holder of any applicable transfer taxes) may request, representing in the aggregate the remaining unpaid principal amount of this Note. The Holder and any assignee, by acceptance of this Note, acknowledge and agree that, by reason of the provisions of this paragraph, following conversion of a portion of this Note, the unpaid and unconverted principal amount of this Note represented by this Note may be less than the amount stated on the face hereof.

(c)Payment of Taxes. The Borrower shall not be required to pay any tax which may be payable in respect of any transfer involved in the issue and delivery of shares of Common Stock or other securities or property on conversion of this Note in a name other than that of the Holder (or in street name), and the Borrower shall not be required to issue or deliver any such shares or other securities or property unless and until the person or persons (other than the Holder or the custodian in whose street name such shares are to be held for the Holder’s account) requesting the issuance thereof shall have paid to the Borrower the amount of any such tax or shall have established to the satisfaction of the Borrower that such tax has been paid.

(d)Delivery of Common Stock Upon Conversion. Upon receipt by the Borrower from the Holder of a facsimile transmission or e-mail (or other reasonable means of communication) of a Notice of Conversion meeting the requirements for conversion as provided in this Section 1.4, the Borrower shall issue and deliver or cause to be issued and delivered to or upon the order of the Holder certificates for the Common Stock issuable upon such conversion within three (3) business days after such receipt (the “Deadline”) (and, solely in the case of conversion of the entire unpaid principal amount hereof, surrender of this Note) in accordance with the terms hereof and the Purchase Agreement..

(e)Obligation of Borrower to Deliver Common Stock. Upon receipt by the Borrower of a Notice of Conversion, the Holder shall be deemed to be the holder of record of the Common Stock issuable upon such conversion, the outstanding principal amount and the amount of accrued and unpaid interest on this Note shall be reduced to reflect such conversion, and, unless the Borrower defaults on its obligations under this Article I, all rights with respect to the portion of this Note being so converted shall forthwith terminate except the right to receive the Common Stock or other securities, cash or other assets, as herein provided, on such conversion. If the Holder shall have given a Notice of Conversion as provided herein, the Borrower’s obligation to issue and deliver the certificates for Common Stock shall be absolute and unconditional, irrespective of the absence of any action by the Holder to enforce the same, any waiver or consent with respect to any provision thereof, the recovery of any judgment against any person or any action to enforce the same, any failure or delay in the enforcement of any other obligation of the Borrower to the holder of record, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder of any obligation to the Borrower, and irrespective of any other circumstance which might otherwise limit such obligation of the Borrower to the Holder in connection with such conversion. The Conversion Date specified in the Notice of Conversion shall be the Conversion Date so long as the Notice of Conversion is received by the Borrower before 6:00 p.m., New York, New York time, on such date.

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(f)Delivery of Common Stock by Electronic Transfer. In lieu of delivering physical certificates representing the Common Stock issuable upon conversion, provided the Borrower is participating in the Depository Trust Company (“DTC”) Fast Automated Securities Transfer (“FAST”) program, upon request of the Holder and its compliance with the provisions contained in Section 1.1 and in this Section 1.4, the Borrower shall use its best efforts to cause its transfer agent to electronically transmit the Common Stock issuable upon conversion to the Holder by crediting the account of Holder’s Prime Broker with DTC through its Deposit Withdrawal Agent Commission (“DWAC”) system.

(g)Failure to Deliver Common Stock Prior to Deadline. Without in any way limiting the Holder’s right to pursue other remedies, including actual damages and/or equitable relief, the parties agree that if delivery of the Common Stock issuable upon conversion of this Note is not delivered by the Deadline (other than a failure due to the circumstances described in Section 1.3 above, which failure shall be governed by such Section) the Borrower shall pay to the Holder $2,000 per day in cash, for each day beyond the Deadline that the Borrower fails to deliver such Common Stock. Such cash amount shall be paid to Holder by the fifth day of the month following the month in which it has accrued or, at the option of the Holder (by written notice to the Borrower by the first day of the month following the month in which it has accrued), shall be added to the principal amount of this Note, in which event interest shall accrue thereon in accordance with the terms of this Note and such additional principal amount shall be convertible into Common Stock in accordance with the terms of this Note. The Borrower agrees that the right to convert is a valuable right to the Holder. The damages resulting from a failure, attempt to frustrate, interference with such conversion right are difficult if not impossible to qualify. Accordingly the parties acknowledge that the liquidated damages provision contained in this Section 1.4(g) are justified

1.5Concerning the Shares. The shares of Common Stock issuable upon conversion of this Note may not be sold or transferred unless (i) such shares are sold pursuant to an effective registration statement under the Act or (ii) the Borrower or its transfer agent shall have been furnished with an opinion of counsel (which opinion shall be in form, substance and scope customary for opinions of counsel in comparable transactions) to the effect that the shares to be sold or transferred may be sold or transferred pursuant to an exemption from such registration or (iii) such shares are sold or transferred pursuant to Rule 144 under the Act (or a successor rule) (“Rule 144”) or (iv) such shares are transferred to an “affiliate” (as defined in Rule 144) of the Borrower who agrees to sell or otherwise transfer the shares only in accordance with this Section 1.5 and who is an Accredited Investor (as defined in the Purchase Agreement). Except as otherwise provided in the Purchase Agreement (and subject to the removal provisions set forth below), until such time as the shares of Common Stock issuable upon conversion of this Note have been registered under the Act or otherwise may be sold pursuant to Rule 144 without any restriction as to the number of securities as of a particular date that can then be immediately sold, each certificate for shares of Common Stock issuable upon conversion of this Note that has not been so included in an effective registration statement or that has not been sold pursuant to an effective registration statement or an exemption that permits removal of the legend, shall bear a legend substantially in the following form, as appropriate:

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“NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B)

AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.”

The legend set forth above shall be removed and the Borrower shall issue to the Holder a new certificate therefore free of any transfer legend if (i) the Borrower or its transfer agent shall have received an opinion of counsel, in form, substance and scope customary for opinions of counsel in comparable transactions, to the effect that a public sale or transfer of such Common Stock may be made without registration under the Act, which opinion shall be accepted by the Company so that the sale or transfer is effected or (ii) in the case of the Common Stock issuable upon conversion of this Note, such security is registered for sale by the Holder under an effective registration statement filed under the Act or otherwise may be sold pursuant to Rule 144 without any restriction as to the number of securities as of a particular date that can then be immediately sold. In the event that the Company does not accept the opinion of counsel provided by the Buyer with respect to the transfer of Securities pursuant to an exemption from registration, such as Rule 144 or Regulation S, at the Deadline, it will be considered an Event of Default pursuant to Section 3.2 of the Note.

1.6Effect of Certain Events.

(a)Effect of Merger, Consolidation, Etc. At the option of the Holder, the sale, conveyance or disposition of all or substantially all of the assets of the Borrower, the effectuation by the Borrower of a transaction or series of related transactions in which more than 50% of the voting power of the Borrower is disposed of, or the consolidation, merger or other business combination of the Borrower with or into any other Person (as defined below) or Persons when the Borrower is not the survivor shall either: (i) be deemed to be an Event of Default (as defined in Article III) pursuant to which the Borrower shall be required to pay to the Holder upon the consummation of and as a condition to such transaction an amount equal to the Default Amount (as defined in Article III) or (ii) be treated pursuant to Section 1.6(b) hereof.

“Person” shall mean any individual, corporation, limited liability company, partnership, association, trust or other entity or organization.

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(b)Adjustment Due to Merger, Consolidation, Etc. If, at any time when this Note is issued and outstanding and prior to conversion of all of the Notes, there shall be any merger, consolidation, exchange of shares, recapitalization, reorganization, or other similar event, as a result of which shares of Common Stock of the Borrower shall be changed into the same or a different number of shares of another class or classes of stock or securities of the Borrower or another entity, or in case of any sale or conveyance of all or substantially all of the assets of the Borrower other than in connection with a plan of complete liquidation of the Borrower, then the Holder of this Note shall thereafter have the right to receive upon conversion of this Note, upon the basis and upon the terms and conditions specified herein and in lieu of the shares of Common Stock immediately theretofore issuable upon conversion, such stock, securities or assets which the Holder would have been entitled to receive in such transaction had this Note been converted in full immediately prior to such transaction (without regard to any limitations on conversion set forth herein), and in any such case appropriate provisions shall be made with respect to the rights and interests of the Holder of this Note to the end that the provisions hereof (including, without limitation, provisions for adjustment of the Conversion Price and of the number of shares issuable upon conversion of the Note) shall thereafter be applicable, as nearly as may be practicable in relation to any securities or assets thereafter deliverable upon the conversion hereof. The Borrower shall not affect any transaction described in this Section 1.6(b) unless (a) it first gives, to the extent practicable, thirty (30) days prior written notice (but in any event at least fifteen (15) days prior written notice) of the record date of the special meeting of shareholders to approve, or if there is no such record date, the consummation of, such merger, consolidation, exchange of shares, recapitalization, reorganization or other similar event or sale of assets (during which time the Holder shall be entitled to convert this Note) and (b) the resulting successor or acquiring entity (if not the Borrower) assumes by written instrument the obligations of this Section 1.6(b). The above provisions shall similarly apply to successive consolidations, mergers, sales, transfers or share exchanges.

(c)Adjustment Due to Distribution. If the Borrower shall declare or make any distribution of its assets (or rights to acquire its assets) to holders of Common Stock as a dividend, stock repurchase, by way of return of capital or otherwise (including any dividend or distribution to the Borrower’s shareholders in cash or shares (or rights to acquire shares) of capital stock of a subsidiary (i.e., a spin-off)) (a “Distribution”), then the Holder of this Note shall be entitled, upon any conversion of this Note after the date of record for determining shareholders entitled to such Distribution, to receive the amount of such assets which would have been payable to the Holder with respect to the shares of Common Stock issuable upon such conversion had such Holder been the holder of such shares of Common Stock on the record date for the determination of shareholders entitled to such Distribution.

(d)Adjustment Due to Dilutive Issuance. If, at any time when any Notes are issued and outstanding, the Borrower issues or sells, or in accordance with this Section 1.6(d) hereof is deemed to have issued or sold, any shares of Common Stock for no consideration or for a consideration per share (before deduction of reasonable expenses or commissions or underwriting discounts or allowances in connection therewith) less than the Conversion Price in effect on the date of such issuance (or deemed issuance) of such shares of Common Stock (a “Dilutive Issuance”), then immediately upon the Dilutive Issuance, the Conversion Price will be reduced to the amount of the consideration per share received by the Borrower in such Dilutive Issuance.

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The Borrower shall be deemed to have issued or sold shares of Common Stock if the Borrower in any manner issues or grants any warrants, rights or options (not including employee stock option plans), whether or not immediately exercisable, to subscribe for or to purchase Common Stock or other securities convertible into or exchangeable for Common Stock (“Convertible Securities”) (such warrants, rights and options to purchase Common Stock or Convertible Securities are hereinafter referred to as “Options”) and the price per share for which Common Stock is issuable upon the exercise of such Options is less than the Conversion Price then in effect, then the Conversion Price shall be equal to such price per share. For purposes of the preceding sentence, the “price per share for which Common Stock is issuable upon the exercise of such Options” is determined by dividing (i) the total amount, if any, received or receivable by the Borrower as consideration for the issuance or granting of all such Options, plus the minimum aggregate amount of additional consideration, if any, payable to the Borrower upon the exercise of all such Options, plus, in the case of Convertible Securities issuable upon the exercise of such Options, the minimum aggregate amount of additional consideration payable upon the conversion or exchange thereof at the time such Convertible Securities first become convertible or exchangeable, by (ii) the maximum total number of shares of Common Stock issuable upon the exercise of all such Options (assuming full conversion of Convertible Securities, if applicable). No further adjustment to the Conversion Price will be made upon the actual issuance of such Common Stock upon the exercise of such Options or upon the conversion or exchange of Convertible Securities issuable upon exercise of such Options.

Additionally, the Borrower shall be deemed to have issued or sold shares of Common Stock if the Borrower in any manner issues or sells any Convertible Securities, whether or not immediately convertible (other than where the same are issuable upon the exercise of Options), and the price per share for which Common Stock is issuable upon such conversion or exchange is less than the Conversion Price then in effect, then the Conversion Price shall be equal to such price per share. For the purposes of the preceding sentence, the “price per share for which Common Stock is issuable upon such conversion or exchange” is determined by dividing (i) the total amount, if any, received or receivable by the Borrower as consideration for the issuance or sale of all such Convertible Securities, plus the minimum aggregate amount of additional consideration, if any, payable to the Borrower upon the conversion or exchange thereof at the time such Convertible Securities first become convertible or exchangeable, by (ii) the maximum total number of shares of Common Stock issuable upon the conversion or exchange of all such Convertible Securities. No further adjustment to the Conversion Price will be made upon the actual issuance of such Common Stock upon conversion or exchange of such Convertible Securities.

(e)Purchase Rights. If, at any time when any Notes are issued and outstanding, the Borrower issues any convertible securities or rights to purchase stock, warrants, securities or other property (the “Purchase Rights”) pro rata to the record holders of any class of Common Stock, then the Holder of this Note will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which such Holder could have acquired if such Holder had held the number of shares of Common Stock acquirable upon complete conversion of this Note (without regard to any limitations on conversion contained herein) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights or, if no such record is taken, the date as of which the record holders of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights.

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(f)Notice of Adjustments. Upon the occurrence of each adjustment or readjustment of the Conversion Price as a result of the events described in this Section 1.6, the Borrower, at its expense, shall promptly compute such adjustment or readjustment and prepare and furnish to the Holder a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Borrower shall, upon the written request at any time of the Holder, furnish to such Holder a like certificate setting forth (i) such adjustment or readjustment, (ii) the Conversion Price at the time in effect and (iii) the number of shares of Common Stock and the amount, if any, of other securities or property which at the time would be received upon conversion of the Note.

1.7Trading Market Limitations. Unless permitted by the applicable rules and regulations of the principal securities market on which the Common Stock is then listed or traded, in no event shall the Borrower issue upon conversion of or otherwise pursuant to this Note and the other Notes issued pursuant to the Purchase Agreement more than the maximum number of shares of Common Stock that the Borrower can issue pursuant to any rule of the principal United States securities market on which the Common Stock is then traded (the “Maximum Share Amount”), which shall be 4.99% of the total shares outstanding on the Closing Date (as defined in the Purchase Agreement), subject to equitable adjustment from time to time for stock splits, stock dividends, combinations, capital reorganizations and similar events relating to the Common Stock occurring after the date hereof. Once the Maximum Share Amount has been issued, if the Borrower fails to eliminate any prohibitions under applicable law or the rules or regulations of any stock exchange, interdealer quotation system or other self-regulatory organization with jurisdiction over the Borrower or any of its securities on the Borrower’s ability to issue shares of Common Stock in excess of the Maximum Share Amount, in lieu of any further right to convert this Note, this will be considered an Event of Default under Section 3.3 of the Note.

1.8Status as Shareholder. Upon submission of a Notice of Conversion by a Holder, (i) the shares covered thereby (other than the shares, if any, which cannot be issued because their issuance would exceed such Holder’s allocated portion of the Reserved Amount or Maximum Share Amount) shall be deemed converted into shares of Common Stock and (ii) the Holder’s rights as a Holder of such converted portion of this Note shall cease and terminate, excepting only the right to receive certificates for such shares of Common Stock and to any remedies provided herein or otherwise available at law or in equity to such Holder because of a failure by the Borrower to comply with the terms of this Note. Notwithstanding the foregoing, if a Holder has not received certificates for all shares of Common Stock prior to the tenth (10th) business day after the expiration of the Deadline with respect to a conversion of any portion of this Note for any reason, then (unless the Holder otherwise elects to retain its status as a holder of Common Stock by so notifying the Borrower) the Holder shall regain the rights of a Holder of this Note with respect to such unconverted portions of this Note and the Borrower shall, as soon as practicable, return such unconverted Note to the Holder or, if the Note has not been surrendered, adjust its records to reflect that such portion of this Note has not been converted. In all cases, the Holder shall retain all of its rights and remedies (including, without limitation, (i) the right to receive Conversion Default Payments pursuant to Section 1.3 to the extent required thereby for such Conversion Default and any subsequent Conversion Default and (ii) the right to have the Conversion Price with respect to subsequent conversions determined in accordance with Section 1.3) for the Borrower’s failure to convert this Note.

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1.9Prepayment. Notwithstanding anything to the contrary contained in this Note, at any time during the period beginning on the Issue Date and ending on the date which is one hundred twenty (120) days following the issue date, the Borrower shall have the right, exercisable on not less than three (3) Trading Days prior written notice to the Holder of the Note to prepay the outstanding Note (principal and accrued interest), in full, in accordance with this Section 1.9. Any notice of prepayment hereunder (an “Optional Prepayment Notice”) shall be delivered to the Holder of the Note at its registered addresses and shall state: (1) that the Borrower is exercising its right to prepay the Note, and (2) the date of prepayment which shall be not more than three (3) Trading Days from the date of the Optional Prepayment Notice. On the date fixed for prepayment (the “Optional Prepayment Date”), the Borrower shall make payment of the Optional Prepayment Amount (as defined below) to or upon the order of the Holder as specified by the Holder in writing to the Borrower at least one (1) business day prior to the Optional Prepayment Date. If the Borrower exercises its right to prepay the Note, the Borrower shall make payment to the Holder of an amount in cash (the “Optional Prepayment Amount”) equal to 145%, multiplied by the sum of: (w) the then outstanding principal amount of this Note plus (x) accrued and unpaid interest on the unpaid principal amount of this Note to the Optional Prepayment Date plus (y) Default Interest, if any, on the amounts referred to in clauses (w) and (x) plus (z) any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof. If the Borrower delivers an Optional Prepayment Notice and fails to pay the Optional Prepayment Amount due to the Holder of the Note within two (2) business days following the Optional Prepayment Date, the Borrower shall forever forfeit its right to prepay the Note pursuant to this Section 1.9.

Notwithstanding any to the contrary stated elsewhere herein, at any time during the period beginning one hundred twenty-one (121) days from the issue date and ending one hundred eighty (180) days following the issue date, the Borrower shall have the right, exercisable on not less than three (3) Trading Days prior written notice to the Holder of the Note to prepay the outstanding Note (principal and accrued interest), in full, in accordance with this Section 1.9. Any notice of prepayment hereunder (an “Optional Prepayment Notice”) shall be delivered to the Holder of the Note at its registered addresses and shall state: (1) that the Borrower is exercising its right to prepay the Note, and (2) the date of prepayment which shall be not more than three (3) Trading Days from the date of the Optional Prepayment Notice. On the date fixed for prepayment (the “Optional Prepayment Date”), the Borrower shall make payment of the Second Optional Prepayment Amount (as defined below) to or upon the order of the Holder as specified by the Holder in writing to the Borrower at least one (1) business day prior to the Optional Prepayment Date. If the Borrower exercises its right to prepay the Note, the Borrower shall make payment to the Holder of an amount in cash (the “Second Optional Prepayment Amount”) equal to 150%, multiplied by the sum of: (w) the then outstanding principal amount of this Note plus (x) accrued and unpaid interest on the unpaid principal amount of this Note to the Optional Prepayment Date plus (y) Default Interest, if any, on the amounts referred to in clauses (w) and (x) plus (z) any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof. If the Borrower delivers an Optional Prepayment Notice and fails to pay the Second Optional Prepayment Amount due to the Holder of the Note within two (2) business days following the Optional Prepayment Date, the Borrower shall forever forfeit its right to prepay the Note pursuant to this Section 1.9.

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After the expiration of one hundred eighty (180) following the date of the Note, the Borrower shall have no right of prepayment.

ARTICLE II. CERTAIN COVENANTS

2.1Distributions on Capital Stock. So long as the Borrower shall have any obligation under this Note, the Borrower shall not without the Holder’s written consent (a) pay, declare or set apart for such payment, any dividend or other distribution (whether in cash, property or other securities) on shares of capital stock other than dividends on shares of Common Stock solely in the form of additional shares of Common Stock or (b) directly or indirectly or through any subsidiary make any other payment or distribution in respect of its capital stock except for distributions pursuant to any shareholders’ rights plan which is approved by a majority of the Borrower’s disinterested directors.

2.2Restriction on Stock Repurchases. So long as the Borrower shall have any obligation under this Note, the Borrower shall not without the Holder’s written consent redeem, repurchase or otherwise acquire (whether for cash or in exchange for property or other securities or otherwise) in any one transaction or series of related transactions any shares of capital stock of the Borrower or any warrants, rights or options to purchase or acquire any such shares.

2.3Borrowings. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s written consent, create, incur, assume guarantee, endorse, contingently agree to purchase or otherwise become liable upon the obligation of any person, firm, partnership, joint venture or corporation, except by the endorsement of negotiable instruments for deposit or collection, or suffer to exist any liability for borrowed money, except (a) borrowings in existence or committed on the date hereof and of which the Borrower has informed Holder in writing prior to the date hereof, (b) indebtedness to trade creditors or financial institutions incurred in the ordinary course of business or (c) borrowings, the proceeds of which shall be used to repay this Note.

2.4Sale of Assets. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s written consent, sell, lease or otherwise dispose of any significant portion of its assets outside the ordinary course of business. Any consent to the disposition of any assets may be conditioned on a specified use of the proceeds of disposition.

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2.5Advances and Loans. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s written consent, lend money, give credit or make advances to any person, firm, joint venture or corporation, including, without limitation, officers, directors, employees, subsidiaries and affiliates of the Borrower, except loans, credits or advances (a) in existence or committed on the date hereof and which the Borrower has informed Holder in writing prior to the date hereof, (b) made in the ordinary course of business or (c) not in excess of $100,000.

ARTICLE III. EVENTS OF DEFAULT

If any of the following events of default (each, an “Event of Default”) shall occur:

3.1Failure to Pay Principal or Interest. The Borrower fails to pay the principal hereof or interest thereon when due on this Note, whether at maturity, upon acceleration or otherwise.

3.2Conversion and the Shares. The Borrower fails to issue shares of Common Stock to the Holder (or announces or threatens in writing that it will not honor its obligation to do so) upon exercise by the Holder of the conversion rights of the Holder in accordance with the terms of this Note, fails to transfer or cause its transfer agent to transfer (issue) (electronically or in certificated form) any certificate for shares of Common Stock issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note, the Borrower directs its transfer agent not to transfer or delays, impairs, and/or hinders its transfer agent in transferring (or issuing) (electronically or in certificated form) any certificate for shares of Common Stock to be issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note, or fails to remove (or directs its transfer agent not to remove or impairs, delays, and/or hinders its transfer agent from removing) any restrictive legend (or to withdraw any stop transfer instructions in respect thereof) on any certificate for any shares of Common Stock issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note (or makes any written announcement, statement or threat that it does not intend to honor the obligations described in this paragraph) and any such failure shall continue uncured (or any written announcement, statement or threat not to honor its obligations shall not be rescinded in writing) for three (3) business days after the Holder shall have delivered a Notice of Conversion. It is an obligation of the Borrower to remain current in its obligations to its transfer agent. It shall be an event of default of this Note, if a conversion of this Note is delayed, hindered or frustrated due to a balance owed by the Borrower to its transfer agent. If at the option of the Holder, the Holder advances any funds to the Borrower’s transfer agent in order to process a conversion, such advanced funds shall be paid by the Borrower to the Holder within forty eight (48) hours of a demand from the Holder.

3.3Breach of Covenants. The Borrower breaches any material covenant or other material term or condition contained in this Note and any collateral documents including but not limited to the Purchase Agreement and such breach continues for a period of ten (10) days after written notice thereof to the Borrower from the Holder.

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3.4Breach of Representations and Warranties. Any representation or warranty of the Borrower made herein or in any agreement, statement or certificate given in writing pursuant hereto or in connection herewith (including, without limitation, the Purchase Agreement), shall be false or misleading in any material respect when made and the breach of which has (or with the passage of time will have) a material adverse effect on the rights of the Holder with respect to this Note or the Purchase Agreement.

3.5Receiver or Trustee. The Borrower or any subsidiary of the Borrower shall make an assignment for the benefit of creditors, or apply for or consent to the appointment of a receiver or trustee for it or for a substantial part of its property or business, or such a receiver or trustee shall otherwise be appointed.

3.6Judgments. Any money judgment, writ or similar process shall be entered or filed against the Borrower or any subsidiary of the Borrower or any of its property or other assets for more than $50,000, and shall remain unvacated, unbonded or unstayed for a period of twenty (20) days unless otherwise consented to by the Holder, which consent will not be unreasonably withheld.

3.7Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings, voluntary or involuntary, for relief under any bankruptcy law or any law for the relief of debtors shall be instituted by or against the Borrower or any subsidiary of the Borrower.

3.8Delisting of Common Stock. The Borrower shall fail to maintain the listing of the Common Stock on at least one of the OTCBB or an equivalent replacement exchange, the Nasdaq National Market, the Nasdaq SmallCap Market, the New York Stock Exchange, or the American Stock Exchange.

3.9Failure to Comply with the Exchange Act. The Borrower shall fail to comply with the reporting requirements of the Exchange Act; and/or the Borrower shall cease to be subject to the reporting requirements of the Exchange Act.

3.10Liquidation. Any dissolution, liquidation, or winding up of Borrower or any substantial portion of its business.

3.11Cessation of Operations. Any cessation of operations by Borrower or Borrower admits it is otherwise generally unable to pay its debts as such debts become due, provided, however, that any disclosure of the Borrower’s ability to continue as a “going concern” shall not be an admission that the Borrower cannot pay its debts as they become due.

3.12Maintenance of Assets. The failure by Borrower to maintain any material intellectual property rights, personal, real property or other assets which are necessary to conduct its business (whether now or in the future).

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3.13Financial Statement Restatement. The restatement of any financial statements filed by the Borrower with the SEC for any date or period from two years prior to the Issue Date of this Note and until this Note is no longer outstanding, if the result of such restatement would, by comparison to the unrestated financial statement, have constituted a material adverse effect on the rights of the Holder with respect to this Note or the Purchase Agreement.

3.14Reverse Splits. The Borrower effectuates a reverse split of its Common Stock without twenty (20) days prior written notice to the Holder.

3.15Replacement of Transfer Agent. In the event that the Borrower proposes to replace its transfer agent, the Borrower fails to provide, prior to the effective date of such replacement, a fully executed Irrevocable Transfer Agent Instructions in a form as initially delivered pursuant to the Purchase Agreement (including but not limited to the provision to irrevocably reserve shares of Common Stock in the Reserved Amount) signed by the successor transfer agent to Borrower and the Borrower.

3.16Cross-Default. Notwithstanding anything to the contrary contained in this Note or the other related or companion documents, a breach or default by the Borrower of any covenant or other term or condition contained in any of the Other Agreements, after the passage of all applicable notice and cure or grace periods, shall, at the option of the Holder, be considered a default under this Note and the Other Agreements, in which event the Holder shall be entitled (but in no event required) to apply all rights and remedies of the Holder under the terms of this Note and the Other Agreements by reason of a default under said Other Agreement or hereunder. “Other Agreements” means, collectively, all agreements and instruments between, among or by: (1) the Borrower, and, or for the benefit of, (2) the Holder and any affiliate of the Holder, including, without limitation, promissory notes; provided, however, the term “Other Agreements” shall not include the related or companion documents to this Note. Each of the loan transactions will be cross-defaulted with each other loan transaction and with all other existing and future debt of Borrower to the Holder.

Upon the occurrence and during the continuation of any Event of Default specified in Section 3.1 (solely with respect to failure to pay the principal hereof or interest thereon when due at the Maturity Date), the Note shall become immediately due and payable and the Borrower shall pay to the Holder, in full satisfaction of its obligations hereunder, an amount equal to the Default Sum (as defined herein). UPON THE OCCURRENCE AND DURING THE CONTINUATION OF ANY EVENT OF DEFAULT SPECIFIED IN SECTION 3.2, THE NOTE SHALL BECOME IMMEDIATELY DUE AND PAYABLE AND THE BORROWER SHALL PAY TO THE HOLDER, IN FULL SATISFACTION OF ITS OBLIGATIONS HEREUNDER, AN AMOUNT EQUAL TO: (Y) THE DEFAULT SUM (AS DEFINED HEREIN); MULTIPLIED BY (Z) TWO (2). Upon the occurrence and during the continuation of any Event of Default specified in Sections 3.1 (solely with respect to failure to pay the principal hereof or interest thereon when due on this Note upon a Trading Market Prepayment Event pursuant to Section 1.7 or upon acceleration), 3.3, 3.4, 3.6, 3.8, 3.9, 3.11, 3.12, 3.13, 3.14, and/or 3. 15 exercisable through the delivery of written notice to the Borrower by such Holders (the “Default Notice”), and upon the occurrence of an Event of Default specified the remaining sections of Articles III (other than failure to pay the principal hereof or interest thereon at the Maturity Date specified in Section 3,1 hereof), the Note shall become immediately due and payable and the Borrower shall pay to the Holder, in full satisfaction of its obligations hereunder, an amount equal to the greater of (i) 150% times the sum of (w) the then outstanding principal amount of this Note plus (x) accrued and unpaid interest on the unpaid principal amount of this Note to the date of payment (the “Mandatory Prepayment Date”) plus (y) Default Interest, if any, on the amounts referred to in clauses (w) and/or (x) plus (z) any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof (the then outstanding principal amount of this Note to the date of payment plus the amounts referred to in clauses (x), (y) and (z) shall collectively be known as the “Default Sum”) or (ii) the “parity value” of the Default Sum to be prepaid, where parity value means (a) the highest number of shares of Common Stock issuable upon conversion of or otherwise pursuant to such Default Sum in accordance with Article I, treating the Trading Day immediately preceding the Mandatory Prepayment Date as the “Conversion Date” for purposes of determining the lowest applicable Conversion Price, unless the Default Event arises as a result of a breach in respect of a specific Conversion Date in which case such Conversion Date shall be the Conversion Date), multiplied by (b) the highest Closing Price for the Common Stock during the period beginning on the date of first occurrence of the Event of Default and ending one day prior to the Mandatory Prepayment Date (the “Default Amount”) and all other amounts payable hereunder shall immediately become due and payable, all without demand, presentment or notice, all of which hereby are expressly waived, together with all costs, including, without limitation, legal fees and expenses, of collection, and the Holder shall be entitled to exercise all other rights and remedies available at law or in equity.

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If the Borrower fails to pay the Default Amount within five (5) business days of written notice that such amount is due and payable, then the Holder shall have the right at any time, so long as the Borrower remains in default (and so long and to the extent that there are sufficient authorized shares), to require the Borrower, upon written notice, to immediately issue, in lieu of the Default Amount, the number of shares of Common Stock of the Borrower equal to the Default Amount divided by the Conversion Price then in effect.

ARTICLE IV. MISCELLANEOUS

4.1Failure or Indulgence Not Waiver. No failure or delay on the part of the Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privileges. All rights and remedies existing hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available.

4.2Notices. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be:

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If to the Borrower, to:

KENERGY SCIENTIFIC, INC

6 Minneakoning Road

Flemington, NJ 08822

Attn: KENNETH GLYNN, President/Chief Executive Officer

facsimile:

With a copy by fax only to (which copy shall not constitute notice):

[enter name of law firm]

Attn: [attorney name]

[enter address line 1]

[enter city, state, zip] facsimile: [enter fax number]

If to the Holder:

ASHER ENTERPRISES, INC.

1 Linden Pl., Suite 207

Great Neck, NY. 11021

Attn: Curt Kramer, President

facsimile: 516-498-9894

With a copy by fax only to (which copy shall not constitute notice):

Naidich Wurman Birnbaum & Maday, LLP

80 Cuttermill Road, Suite 410

Great Neck, NY 11021

Attn: Bernard S. Feldman, Esq.

facsimile: 516-466-3555

4.3Amendments. This Note and any provision hereof may only be amended by an instrument in writing signed by the Borrower and the Holder. The term “Note” and all reference thereto, as used throughout this instrument, shall mean this instrument (and the other Notes issued pursuant to the Purchase Agreement) as originally executed, or if later amended or supplemented, then as so amended or supplemented.

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4.4Assignability. This Note shall be binding upon the Borrower and its successors and assigns, and shall inure to be the benefit of the Holder and its successors and assigns. Each transferee of this Note must be an “accredited investor” (as defined in Rule 501(a) of the 1933 Act). Notwithstanding anything in this Note to the contrary, this Note may be pledged as collateral in connection with a bona fide margin account or other lending arrangement.

4.5Cost of Collection. If default is made in the payment of this Note, the Borrower shall pay the Holder hereof costs of collection, including reasonable attorneys’ fees.

4.6Governing Law. This Note shall be governed by and construed in accordance with the laws of the State of New York without regard to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this Note shall be brought only in the state courts of New York or in the federal courts located in the state and county of Nassau. The parties to this Note hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. The Borrower and Holder waive trial by jury. The prevailing party shall be entitled to recover from the other party its reasonable attorney's fees and costs. In the event that any provision of this Note or any other agreement delivered in connection herewith is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement. Each party hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding in connection with this Agreement or any other Transaction Document by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law.

4.7Certain Amounts. Whenever pursuant to this Note the Borrower is required to pay an amount in excess of the outstanding principal amount (or the portion thereof required to be paid at that time) plus accrued and unpaid interest plus Default Interest on such interest, the Borrower and the Holder agree that the actual damages to the Holder from the receipt of cash payment on this Note may be difficult to determine and the amount to be so paid by the Borrower represents stipulated damages and not a penalty and is intended to compensate the Holder in part for loss of the opportunity to convert this Note and to earn a return from the sale of shares of Common Stock acquired upon conversion of this Note at a price in excess of the price paid for such shares pursuant to this Note. The Borrower and the Holder hereby agree that such amount of stipulated damages is not plainly disproportionate to the possible loss to the Holder from the receipt of a cash payment without the opportunity to convert this Note into shares of Common Stock.

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4.8Purchase Agreement. By its acceptance of this Note, each party agrees to be bound by the applicable terms of the Purchase Agreement.

4.9Notice of Corporate Events. Except as otherwise provided below, the Holder of this Note shall have no rights as a Holder of Common Stock unless and only to the extent that it converts this Note into Common Stock. The Borrower shall provide the Holder with prior notification of any meeting of the Borrower’s shareholders (and copies of proxy materials and other information sent to shareholders). In the event of any taking by the Borrower of a record of its shareholders for the purpose of determining shareholders who are entitled to receive payment of any dividend or other distribution, any right to subscribe for, purchase or otherwise acquire (including by way of merger, consolidation, reclassification or recapitalization) any share of any class or any other securities or property, or to receive any other right, or for the purpose of determining shareholders who are entitled to vote in connection with any proposed sale, lease or conveyance of all or substantially all of the assets of the Borrower or any proposed liquidation, dissolution or winding up of the Borrower, the Borrower shall mail a notice to the Holder, at least twenty (20) days prior to the record date specified therein (or thirty (30) days prior to the consummation of the transaction or event, whichever is earlier), of the date on which any such record is to be taken for the purpose of such dividend, distribution, right or other event, and a brief statement regarding the amount and character of such dividend, distribution, right or other event to the extent known at such time. The Borrower shall make a public announcement of any event requiring notification to the Holder hereunder substantially simultaneously with the notification to the Holder in accordance with the terms of this Section 4.9.

4.10Remedies. The Borrower acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder, by vitiating the intent and purpose of the transaction contemplated hereby. Accordingly, the Borrower acknowledges that the remedy at law for a breach of its obligations under this Note will be inadequate and agrees, in the event of a breach or threatened breach by the Borrower of the provisions of this Note, that the Holder shall be entitled, in addition to all other available remedies at law or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining, preventing or curing any breach of this Note and to enforce specifically the terms and provisions thereof, without the necessity of showing economic loss and without any bond or other security being required.

IN WITNESS WHEREOF, Borrower has caused this Note to be signed in its name by its duly authorized officer this February 16, 2012.

KENERGY SCIENTIFIC, INC

By:  

KENNETH GLYNN

President/Chief Executive Officer

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EXHIBIT A: NOTICE OF CONVERSION

The undersigned hereby elects to convert $                    principal amount of the Note (defined below) into that number of shares of Common Stock to be issued pursuant to the conversion of the Note (“Common Stock”) as set forth below, of KENERGY SCIENTIFIC, INC, a New Jersey corporation (the “Borrower”) according to the conditions of the convertible note of the Borrower dated as of February 16, 2012 (the “Note”), as of the date written below. No fee will be charged to the Holder for any conversion, except for transfer taxes, if any.

Box Checked as to applicable instructions:

[ ]	The Borrower shall electronically transmit the Common Stock issuable pursuant to this Notice of Conversion to the account of the undersigned or its nominee with DTC through its Deposit Withdrawal Agent Commission system (“DWAC Transfer”). Name of DTC Prime Broker: Account Number:
[ ]	The undersigned hereby requests that the Borrower issue a certificate or certificates for the number of shares of Common Stock set forth below (which numbers are based on the Holder’s calculation attached hereto) in the name(s) specified immediately below or, if additional space is necessary, on an attachment hereto: ASHER ENTERPRISES, INC. 1 Linden Pl., Suite 207 Great Neck, NY. 11021 Attention: Certificate Delivery (516)498-9890
	Date of Conversion: Applicable Conversion Price:  Number of Shares of Common Stock to be Issued Pursuant to Conversion of the Notes: Amount of Principal Balance Due remaining Under the Note after this conversion:	$
	ASHER ENTERPRISES, INC. By: Name: Curt Kramer Title: President Date: 1 Linden Pl., Suite 207 Great Neck, NY. 11021

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EX-10.2

Exhibit 10.2

WRAP-AROUND AGREEMENT

WRAP-AROUND AGREEMENT (the “Agreement"), dated this 6th day of March, 2012, by and among KENERGY SCIENTIFIC, INC. f/k/a SPEECHSWITCH, INC., a New Jersey corporation (the “Issuer”), GLYNNTECH, INC., a New Jersey corporation (the “Affiliate”), and ATG, INC., a California corporation (the “Purchaser”).

WHEREAS, the Issuer desires to fulfill debt obligations owed to Affiliate in the principal amount of Fifty Thousand and 00/100 ($50,000.00) Dollars owed from on or before June 18, 2009;

WHEREAS, the Issuer owes the Affiliate Fifty Thousand and 00/100 ($50,000.00) Dollars for the purchase of intellectual property by the Issuer from the Affiliate and for a loan given by the Affiliate to the Issuer, evidenced by a Promissory Note dated as of June 18, 2009 (the “Promissory Note”);

WHEREAS, the Issuer, the Affiliate and Epic Worldwide, inc. (the “Investor”) entered into a Wrap-Around Agreement dated June 22, 2010 (the “2010 Agreement”) pursuant to which the Investor acquired the Promissory Note from the Affiliate, and pursuant to which the Issuer allowed to convert the balance of principal and accrued but unpaid interest thereon into shares of the Issuer’s common stock, under the terms and conditions set forth therein;

WHEREAS, as consideration for the 2010 Agreement and the acquisition of the Promissory Note, the Investor issued Affiliate a Note in the original principal amount of Three Hundred Twelve Thousand and 00/11 ($312,000.00) Dollars (the “Epic Note”), of which the unpaid balance of principal due thereon is Fifty Thousand and 00/100 ($50,000.00) Dollars;

WHEREAS, the Investor has agreed to allow the Affiliate to assign to the Purchaser, and the Purchaser has agreed to accept, all of Investor’s right, title and interest in the Promissory Note in Exchange for Purchaser’s payment of the remaining principal due Affiliate on the Epic Note; and

WHEREAS, the Issuer does not have the disposable cash to satisfy the obligations set forth in the Promissory Note and has agreed to permit the Purchaser to convert any or all of the Promissory' Note into shares of the Issuer’s common stock, as set forth herein.

NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

1.Assignment of Debt. The Affiliate hereby assigns the debt evidenced by the Promissory Note to the Purchaser form the inception of the debt, together with the unpaid principal and accrued but unpaid interest thereon;

1.1The Issuer and the Affiliate hereby accept the assignment of the Promissory Note to the Purchaser.

1.2As consideration for the assignment, the Purchaser hereby agrees to pay to the Affiliate the sum of Twenty Five Thousand and 00/100 ($25,000.00) Dollars in satisfaction of the Epic Note upon execution of this Agreement.

1.3The Debt consists of Fifty Thousand and 00/100 ($50,000.00) Dollars for the purchase of intellectual property by the Issuer from the Affiliate and for a loan given by the Affiliate to the Issuer, secured by the Promissory Note. The Issuer hereby agrees, acknowledges, consents and stipulates, that full consideration has been rendered for said Debt and hereby waives any and all objections thereto.

1.4THE ISSUER AND THE AFFILIATE HEREBY BOTH AGREE TO BE JOINTLY AND SEVERALLY LIABLE WITH FULL RECOURSE IN THE EVENT OF DEFAULT TO PURCHASER.

2.Modification of Terms and Conditions. The terms of this Agreement shall govern and supersede the original Promissory Note to the extent that any terms contained in the Promissory Note conflict with, the terns and conditions of this Agreement.

2.1Convertibility. The terms and conditions of the Promissory Note shall be so modified or amended as to include a convertibility provision allowing the Purchaser to convert into common voting stock of the Issuer (“Conversion Shares”) at a price per share equal to $0.0005 per share for so long as any portion of unpaid principal or interest thereon remains on the Promissory. This Agreement shall be convertible in whole or in part into Conversion Shares. The remaining balance of the Debt shall continue to accrue interest and inure normally. The Purchaser shall only be able to convert the Debt up to the amount of the Epic Note repaid to the Affiliate; provided that payment will be deemed made to Affiliate and will not be required to be paid until 30 days after each set of Conversion Shares has cleared through the Issuer’s transfer agent and the Purchaser’s broker. In addition, the Purchaser shall not hold more than 4.99% of the issued and outstanding common shares of the Issuer at any one time. Further, until a conversion has been paid in full, no additional conversion notices or conversion are permitted hereunder and shall be void ab initio.

2.2Interest Rate. The interest rate shall be the same as the original Note and continue during the term of this Agreement.

2.3Call Provision. The Issuer shall have the right to repurchase all remaining Debt, plus any additional Debt, at an amount equal to 150% of the remaining unpaid principal and accrued but unpaid interest thereon of the Debt, within the first year of the execution hereof, and 130% thereafter.

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2.4Anti-Dilution. The Issuer hereby represents and warrants that any issuance, modification or creation of any class of security, or the granting of any beneficial interest in a security of the Issuer that will have a net dilutive effect on the Purchaser, including without limitation, any stock split, stock dividend, reverse stock split, or recapitalization, in regards to this instant Agreement will grant the Purchaser additional principal on the Debt in pecuniary compensation of the net dilutive effect on the Purchaser’s position and interest; provided that Issuer agrees not to undertake any such action without the prior written consent of the Purchaser.

2.5Default Provisions. If the Issuer or the Affiliate suffers a “material adverse event,” the Purchaser shall have the right to call for adequate assurances from both the Issuer and the Affiliate reasonable and prudent as circumstances warrant. Failure to produce such adequate assurances within a reasonable period of time shall result in default.

2.5.1Examples of Material Adverse Events, (a) deregistration of the Issuer’s common stock, either voluntary or involuntary; (b) bankruptcy, insolvency, a meeting of creditors, or the consultation of an attorney regarding bankruptcy; and (c) any failure of the Issuer to meets its obligations listed as current liabilities on its balance sheet in a timely manner,

2.5.2Entrance in Default. Upon a default event, the Issuer and the Affiliate shall be jointly and severally liable for the remaining Debt.

2.5.3Default Interest Upon a default event, the interest rate shall be 24.99% per annum, compounded, effective retroactively from the inception of this Agreement, less any converted amount, calculated as any Conversion Shares will be offset against the Debt nearest in time.

2.5.4Nonpayment Any missed conversion shall constitute a default event.

2.6Denovo of Debt and Extension of Payment Period. The Issuer hereby renews and affirms the debt as a legally binding obligation, regardless of any termination date or statute of limitation, and hereby extends the Debt for 5 years from the execution hereof, or the depletion and satisfaction of the Debt with all accrued interest thereon.

2.7Transfer Agent Irrevocable Instructions. The Issuer hereby irrevocably instructs its Transfer Agent, current or successor, to issue said Conversion Shares upon request by Purchaser and waives all objections thereto.

2.8Demand Registration Rights. The Issuer hereby grants the right to the Purchaser to register any and all issuances past, present and future, if the Purchaser shall request the registration thereof and the Issuer does not comply within 30 days, nor takes reasonable steps to comply therewith within 10 days. Implied rights to this Demand Registration shall include, but not be limited to:

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2.8.1Limited Power of Attorney to act as signatory for any and all registration statements.

2.8.2 Repayment of Registration Fees. If the Purchaser shall invoke its right under the Demand Registration, all fees, costs and disbursements, inclusive of attorneys’ fees, shall be added onto the Debt as additional principal.

2.9Jurisdiction and Venue. All parties hereto consent to the jurisdiction of the Courts of the State of New Jersey.

2.10Legal Opinions. The legal opinion(s) rendered pursuant to the terms and conditions, and resultant from this Agreement, shall be construed for the entire conversion process of the Debt, should full conversion occur. Issuer and Affiliate hereby agree, acknowledge, accept, consent and stipulate to provide any legal opinion acceptable to the Purchaser in a timely fashion; provided that if the Purchaser shall use its right to cause to be furnished its own legal opinion, Issuer and Affiliate hereby waive any and all rights to object thereto, except for blatant and generally accepted misstatements or omissions of fact, law or application thereof.

2.11Capital Raise. The Purchaser endeavors to use its “best efforts” to raise between Five Hundred Thousand and 00/100 ($500,000.00) Dollars and Four Million and 00/100 ($4,000,000.00) Dollars for the benefit of the Issuer. “Best efforts” shall mean a good faith effort to raise the funds by contacting Purchaser's counterparties, but shall not be deemed to mean a guaranty on the part of Purchaser to make any payments or raise any funds for Issuer.

2.12Assignment The Issuer and the Affiliate hereby consent to the assignment of Purchaser’s rights under the Agreement and the Debt to any lawful third party assignee.

3.Representations and Warranties

3.1Issuer. The Issuer hereby represents and warrants the following material inducements:

3.1.1Issuer shall hold a reserve of authorized but unissued shares of its common stock for the issuance of Conversion Shares.

3.1.2The Issuer has no objection to, and hereby waives all objections, to a reasonable legal opinion(s) regarding the free trading nature of the Conversion Shares or the mechanics of the transaction.

3.1.3All services constituting the Debt have been fully rendered for legitimate business purposes.

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3.2Affiliate. The Affiliate hereby represents and warrants the following material inducements:

3.2.1The Affiliate will if necessary furnish a legal opinion regarding the free trading nature of the Conversion Shares and the mechanics thereof.

3.2.2The services constituting the Debt have been fully rendered for legitimate purposes.

4. Miscellaneous

4.1Execution. This Agreement may be executed in counterparts, each taken in conjunction equating a fully executed agreement; facsimile and scanned signatures may be accepted in lieu of original manual signatures.

4.2 Severability. This Agreement is not severable. If any term contained herein is found by a court of competent jurisdiction to be unenforceable, then the entire Agreement shall be rescinded, the consideration proffered by the Purchaser shall be refunded in its entirety, and any Conversion Shares will be cancelled.

4.3Legal Fees. Legal fees for the production of this Agreement, and all other opinions and related agreements, shall be the responsibility of the Issuer and the Affiliate.

4.4Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New Jersey.

4.5Modification. This Agreement and the Debt may only be modified in a writing signed by all the parties hereto.

4.6Term. This Agreement shall have a term of one year from the date hereof. All remaining conversion transactions that have been initiated prior to termination shall be completed in accordance herewith. Otherwise, upon termination, any unpaid balance on the Note shall revert back to the Affiliate.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written.

ISSUER:

KENERGY SCIENTIFIC, INC.

By:  /s/ Kenneth P. Glynn           

Name: Kenneth P. Glynn

Title: President

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AFFILIATE	PURCHASER:
GLYNNTECH, INC.	ATG, INC.
By:  /s/ Kenneth P. Glynn	By:  /s/ Ongkaruck Sripetch
Name: Kenneth P. Glynn	Name: Ongkaruck Sripetch
Title: President	Title: President

6

EX-10.3

Exhibit 10.3

AMENDMENT NO. 1

TO

CONVERTIBLE PROMISSORY NOTE

This Amendment No. 1 to the Convertible Promissory Note (this "Amendment") is executed as of March 13, 2012, by KENERGY SCIENTIFIC, INC, a New Jersey corporation (the “Maker”); and ASHER ENTERPRISES, INC., a Delaware corporation, or its assigns ("Holder") to amend the Convertible Promissory Note dated August 26, 2011 among those parties (the "Note").

   The Maker and the Holder desire to amend the Note and further agree as follows:

1.Capitalized Terms. Except as expressly provided in this Amendment, all capitalized terms used in this Amendment have meanings ascribed to them in the Note and those definitions are incorporated by reference into this Note.

2.Section 1.2 of the Note shall be deleted and the following shall be substituted therefor:

“Conversion Price.

Calculation of Conversion Price. The conversion price (the “Conversion Price”) shall equal the Variable Conversion Price (as defined herein) (subject to equitable adjustments for stock splits, stock dividends or rights offerings by the Borrower relating to the Borrower’s securities or the securities of any subsidiary of the Borrower, combinations, recapitalization, reclassifications, extraordinary distributions and similar events). The "Variable Conversion Price" shall mean 35% multiplied by the Market Price (as defined herein) (representing a discount rate of 65%). “Market Price” means the average of the lowest two (2) Trading Prices (as defined below) for the Common Stock during the thirty (30) Trading Day period ending on the latest complete Trading Day prior to the Conversion Date. “Trading Price” means, for any security as of any date, the closing bid price on the Over-the-Counter Bulletin Board, or applicable trading market (the “OTCBB”) as reported by a reliable reporting service (“Reporting Service”) designated by the Holder (i.e. Bloomberg) or, if the OTCBB is not the principal trading market for such security, the closing bid price of such security on the principal securities exchange or trading market where such security is listed or traded or, if no closing bid price of such security is available in any of the foregoing manners, the average of the closing bid prices of any market makers for such security that are listed in the “pink sheets” by the National Quotation Bureau, Inc. If the Trading Price cannot be calculated for such security on such date in the manner provided above, the Trading Price shall be the fair market value as mutually determined by the Borrower and the holders of a majority in interest of the Notes being converted for which the calculation of the Trading Price is required in order to determine the Conversion Price of such Notes. “Trading Day” shall mean any day on which the Common Stock is tradable for any period on the OTCBB, or on the principal securities exchange or other securities market on which the Common Stock is then being traded.

3.Counterparts. This Amendment may be executed in any number of counterparts, each of which shall be deemed an original as against the party whose signature appears thereon, and all of which shall together constitute one and the same instrument. This Amendment shall become binding when one or more counterparts hereof, individually or taken together, shall bear the signatures of all the parties reflected hereon as the signatories.

4.Third Parties. Except as specifically set forth or referred to herein, nothing herein express of implied is intended or shall be construed to confer upon or give to any person other than the parties hereto and their permitted successors or assigns, any claims, rights, remedies under or by reason of this Amendment.

5.Governing Law. This Amendment shall be governed and construed in accordance with the laws of the State of New York applicable to agreements made and to be performed entirely within such State and the federal laws of the United States of America, without regard to the conflict of laws rules thereof.

 IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the date set

KENERGY SCIENTIFC, INC.

By: /s/ Kenneth P. Glynn                              

 KENNETH GLYNN

 President/Chief Executive Officer

ASHER ENTERPRISES, INC.

By:   

Name: Curtis Kramer

Title    President

1 Linden Pl., Suite 207

Great Neck, NY. 11021

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EX-10.4

Exhibit 10.4

NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

Principal Amount: $15,000.00                                                                                     Issue Date: March 14, 2012

Purchase Price: $15,000.00

CONVERTIBLE PROMISSORY NOTE

FOR VALUE RECEIVED, KENERGY SCIENTIFIC, INC, a New Jersey corporation (hereinafter called the “Borrower”), hereby promises to pay to the order of ASHER ENTERPRISES, INC., a Delaware corporation, or registered assigns (the “Holder”) the sum of $15,000.00 together with any interest as set forth herein, on December 19, 2012 (the “Maturity Date”), and to pay interest on the unpaid principal balance hereof at the rate of eight percent (8%) (the “Interest Rate”) per annum from the date hereof (the “Issue Date”) until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. This Note may not be prepaid in whole or in part except as otherwise explicitly set forth herein. Any amount of principal or interest on this Note which is not paid when due shall bear interest at the rate of twenty two percent (22%) per annum from the due date thereof until the same is paid (“Default Interest”). Interest shall commence accruing on the date that the Note is fully paid and shall be computed on the basis of a 365-day year and the actual number of days elapsed. All payments due hereunder (to the extent not converted into common stock, no par value per share (the “Common Stock”) in accordance with the terms hereof) shall be made in lawful money of the United States of America. All payments shall be made at such address as the Holder shall hereafter give to the Borrower by written notice made in accordance with the provisions of this Note. Whenever any amount expressed to be due by the terms of this Note is due on any day which is not a business day, the same shall instead be due on the next succeeding day which is a business day and, in the case of any interest payment date which is not the date on which this Note is paid in full, the extension of the due date thereof shall not be taken into account for purposes of determining the amount of interest due on such date. As used in this Note, the term “business day” shall mean any day other than a Saturday, Sunday or a day on which commercial banks in the city of New York, New York are authorized or required by law or executive order to remain closed. Each capitalized term used herein, and not otherwise defined, shall have the meaning ascribed thereto in that certain Securities Purchase Agreement dated the date hereof, pursuant to which this Note was originally issued (the “Purchase Agreement”).

This Note is free from all taxes, liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive rights or other similar rights of shareholders of the Borrower and will not impose personal liability upon the holder thereof.

The following terms shall apply to this Note:

ARTICLE I. CONVERSION RIGHTS

1.1Conversion Right. The Holder shall have the right from time to time, and at any time during the period beginning on the date which is one hundred eighty (180) days following the date of this Note and ending on the later of: (i) the Maturity Date and (ii) the date of payment of the Default Amount (as defined in Article III) pursuant to Section 1.6(a) or Article III, each in respect of the remaining outstanding principal amount of this Note to convert all or any part of the outstanding and unpaid principal amount of this Note into fully paid and non­assessable shares of Common Stock, as such Common Stock exists on the Issue Date, or any shares of capital stock or other securities of the Borrower into which such Common Stock shall hereafter be changed or reclassified at the conversion price (the “Conversion Price”) determined as provided herein (a “Conversion”); provided, however, that in no event shall the Holder be entitled to convert any portion of this Note in excess of that portion of this Note upon conversion of which the sum of (1) the number of shares of Common Stock beneficially owned by the Holder and its affiliates (other than shares of Common Stock which may be deemed beneficially owned through the ownership of the unconverted portion of the Notes or the unexercised or unconverted portion of any other security of the Borrower subject to a limitation on conversion or exercise analogous to the limitations contained herein) and (2) the number of shares of Common Stock issuable upon the conversion of the portion of this Note with respect to which the determination of this proviso is being made, would result in beneficial ownership by the Holder and its affiliates of more than 4.99% of the outstanding shares of Common Stock. For purposes of the proviso to the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Regulations 13D-G thereunder, except as otherwise provided in clause (1) of such proviso, provided, further, however, that the limitations on conversion may be waived by the Holder upon, at the election of the Holder, not less than 61 days’ prior notice to the Borrower, and the provisions of the conversion limitation shall continue to apply until such 61st day (or such later date, as determined by the Holder, as may be specified in such notice of waiver). The number of shares of Common Stock to be issued upon each conversion of this Note shall be determined by dividing the Conversion Amount (as defined below) by the applicable Conversion Price then in effect on the date specified in the notice of conversion, in the form attached hereto as Exhibit A (the “Notice of Conversion”), delivered to the Borrower by the Holder in accordance with Section 1.4 below; provided that the Notice of Conversion is submitted by facsimile or e-mail (or by other means resulting in, or reasonably expected to result in, notice) to the Borrower before 6:00 p.m., New York, New York time on such conversion date (the “Conversion Date”). The term “Conversion Amount” means, with respect to any conversion of this Note, the sum of (1) the principal amount of this Note to be converted in such conversion plus (2) at the Borrower’s option, accrued and unpaid interest, if any, on such principal amount at the interest rates provided in this Note to the Conversion Date, plus (3) at the Borrower’s option, Default Interest, if any, on the amounts referred to in the immediately preceding clauses (1) and/or (2) plus (4) at the Holder’s option, any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof.

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1.2Conversion Price.

(a)Calculation of Conversion Price. The conversion price (the “Conversion Price”) shall equal the Variable Conversion Price (as defined herein) (subject to equitable adjustments for stock splits, stock dividends or rights offerings by the Borrower relating to the Borrower’s securities or the securities of any subsidiary of the Borrower, combinations, recapitalization, reclassifications, extraordinary distributions and similar events). The "Variable Conversion Price" shall mean 35% multiplied by the Market Price (as defined herein) (representing a discount rate of 65%). “Market Price” means the average of the two (2) lowest Trading Price (as defined below) for the Common Stock during the thirty (30) Trading Day period ending on the latest complete Trading Day prior to the Conversion Date. “Trading Price” means, for any security as of any date, the closing bid price on the Over-the-Counter Bulletin Board, or applicable trading market (the “OTCBB”) as reported by a reliable reporting service (“Reporting Service”) designated by the Holder (i.e. Bloomberg) or, if the OTCBB is not the principal trading market for such security, the closing bid price of such security on the principal securities exchange or trading market where such security is listed or traded or, if no closing bid price of such security is available in any of the foregoing manners, the average of the closing bid prices of any market makers for such security that are listed in the “pink sheets” by the National Quotation Bureau, Inc. If the Trading Price cannot be calculated for such security on such date in the manner provided above, the Trading Price shall be the fair market value as mutually determined by the Borrower and the holders of a majority in interest of the Notes being converted for which the calculation of the Trading Price is required in order to determine the Conversion Price of such Notes. “Trading Day” shall mean any day on which the Common Stock is tradable for any period on the OTCBB, or on the principal securities exchange or other securities market on which the Common Stock is then being traded.

(b)Conversion Price During Major Announcements. Notwithstanding anything contained in Section 1.2(a) to the contrary, in the event the Borrower (i) makes a public announcement that it intends to consolidate or merge with any other corporation (other than a merger in which the Borrower is the surviving or continuing corporation and its capital stock is unchanged) or sell or transfer all or substantially all of the assets of the Borrower or (ii) any person, group or entity (including the Borrower) publicly announces a tender offer to purchase 50% or more of the Borrower’s Common Stock (or any other takeover scheme) (the date of the announcement referred to in clause (i) or (ii) is hereinafter referred to as the “Announcement Date”), then the Conversion Price shall, effective upon the Announcement Date and continuing through the Adjusted Conversion Price Termination Date (as defined below), be equal to the lower of (x) the Conversion Price which would have been applicable for a Conversion occurring on the Announcement Date and (y) the Conversion Price that would otherwise be in effect. From and after the Adjusted Conversion Price Termination Date, the Conversion Price shall be determined as set forth in this Section 1.2(a). For purposes hereof, “Adjusted Conversion Price Termination Date” shall mean, with respect to any proposed transaction or tender offer (or takeover scheme) for which a public announcement as contemplated by this Section 1.2(b) has been made, the date upon which the Borrower (in the case of clause (i) above) or the person, group or entity (in the case of clause (ii) above) consummates or publicly announces the termination or abandonment of the proposed transaction or tender offer (or takeover scheme) which caused this Section 1.2(b) to become operative.

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1.3Authorized Shares. The Borrower covenants that during the period the conversion right exists, the Borrower will reserve from its authorized and unissued Common Stock a sufficient number of shares, free from preemptive rights, to provide for the issuance of Common Stock upon the full conversion of this Note issued pursuant to the Purchase Agreement. The Borrower is required at all times to have authorized and reserved five times the number of shares that is actually issuable upon full conversion of the Note (based on the Conversion Price of the Notes in effect from time to time)(the “Reserved Amount”). The Reserved Amount shall be increased from time to time in accordance with the Borrower’s obligations pursuant to Section 4(g) of the Purchase Agreement. The Borrower represents that upon issuance, such shares will be duly and validly issued, fully paid and non-assessable. In addition, if the Borrower shall issue any securities or make any change to its capital structure which would change the number of shares of Common Stock into which the Notes shall be convertible at the then current Conversion Price, the Borrower shall at the same time make proper provision so that thereafter there shall be a sufficient number of shares of Common Stock authorized and reserved, free from preemptive rights, for conversion of the outstanding Notes. The Borrower (i) acknowledges that it has irrevocably instructed its transfer agent to issue certificates for the Common Stock issuable upon conversion of this Note, and (ii) agrees that its issuance of this Note shall constitute full authority to its officers and agents who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for shares of Common Stock in accordance with the terms and conditions of this Note.

If, at any time the Borrower does not maintain the Reserved Amount it will be considered an Event of Default under Section 3.2 of the Note.

1.4Method of Conversion.

(a)Mechanics of Conversion. Subject to Section 1.1, this Note may be converted by the Holder in whole or in part at any time from time to time after the Issue Date, by (A) submitting to the Borrower a Notice of Conversion (by facsimile, e-mail or other reasonable means of communication dispatched on the Conversion Date prior to 6:00 p.m., New York, New York time) and (B) subject to Section 1.4(b), surrendering this Note at the principal office of the Borrower.

(b)Surrender of Note Upon Conversion. Notwithstanding anything to the contrary set forth herein, upon conversion of this Note in accordance with the terms hereof, the Holder shall not be required to physically surrender this Note to the Borrower unless the entire unpaid principal amount of this Note is so converted. The Holder and the Borrower shall maintain records showing the principal amount so converted and the dates of such conversions or shall use such other method, reasonably satisfactory to the Holder and the Borrower, so as not to require physical surrender of this Note upon each such conversion. In the event of any dispute or discrepancy, such records of the Borrower shall, prima facie, be controlling and determinative in the absence of manifest error. Notwithstanding the foregoing, if any portion of this Note is converted as aforesaid, the Holder may not transfer this Note unless the Holder first physically surrenders this Note to the Borrower, whereupon the Borrower will forthwith issue and deliver upon the order of the Holder a new Note of like tenor, registered as the Holder (upon payment by the Holder of any applicable transfer taxes) may request, representing in the aggregate the remaining unpaid principal amount of this Note. The Holder and any assignee, by acceptance of this Note, acknowledge and agree that, by reason of the provisions of this paragraph, following conversion of a portion of this Note, the unpaid and unconverted principal amount of this Note represented by this Note may be less than the amount stated on the face hereof.

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(c)Payment of Taxes. The Borrower shall not be required to pay any tax which may be payable in respect of any transfer involved in the issue and delivery of shares of Common Stock or other securities or property on conversion of this Note in a name other than that of the Holder (or in street name), and the Borrower shall not be required to issue or deliver any such shares or other securities or property unless and until the person or persons (other than the Holder or the custodian in whose street name such shares are to be held for the Holder’s account) requesting the issuance thereof shall have paid to the Borrower the amount of any such tax or shall have established to the satisfaction of the Borrower that such tax has been paid.

(d)Delivery of Common Stock Upon Conversion. Upon receipt by the Borrower from the Holder of a facsimile transmission or e-mail (or other reasonable means of communication) of a Notice of Conversion meeting the requirements for conversion as provided in this Section 1.4, the Borrower shall issue and deliver or cause to be issued and delivered to or upon the order of the Holder certificates for the Common Stock issuable upon such conversion within three (3) business days after such receipt (the “Deadline”) (and, solely in the case of conversion of the entire unpaid principal amount hereof, surrender of this Note) in accordance with the terms hereof and the Purchase Agreement..

(e)Obligation of Borrower to Deliver Common Stock. Upon receipt by the Borrower of a Notice of Conversion, the Holder shall be deemed to be the holder of record of the Common Stock issuable upon such conversion, the outstanding principal amount and the amount of accrued and unpaid interest on this Note shall be reduced to reflect such conversion, and, unless the Borrower defaults on its obligations under this Article I, all rights with respect to the portion of this Note being so converted shall forthwith terminate except the right to receive the Common Stock or other securities, cash or other assets, as herein provided, on such conversion. If the Holder shall have given a Notice of Conversion as provided herein, the Borrower’s obligation to issue and deliver the certificates for Common Stock shall be absolute and unconditional, irrespective of the absence of any action by the Holder to enforce the same, any waiver or consent with respect to any provision thereof, the recovery of any judgment against any person or any action to enforce the same, any failure or delay in the enforcement of any other obligation of the Borrower to the holder of record, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder of any obligation to the Borrower, and irrespective of any other circumstance which might otherwise limit such obligation of the Borrower to the Holder in connection with such conversion. The Conversion Date specified in the Notice of Conversion shall be the Conversion Date so long as the Notice of Conversion is received by the Borrower before 6:00 p.m., New York, New York time, on such date.

(f)Delivery of Common Stock by Electronic Transfer. In lieu of delivering physical certificates representing the Common Stock issuable upon conversion, provided the Borrower is participating in the Depository Trust Company (“DTC”) Fast Automated Securities Transfer (“FAST”) program, upon request of the Holder and its compliance with the provisions contained in Section 1.1 and in this Section 1.4, the Borrower shall use its best efforts to cause its transfer agent to electronically transmit the Common Stock issuable upon conversion to the Holder by crediting the account of Holder’s Prime Broker with DTC through its Deposit Withdrawal Agent Commission (“DWAC”) system.

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(g)Failure to Deliver Common Stock Prior to Deadline. Without in any way limiting the Holder’s right to pursue other remedies, including actual damages and/or equitable relief, the parties agree that if delivery of the Common Stock issuable upon conversion of this Note is not delivered by the Deadline (other than a failure due to the circumstances described in Section 1.3 above, which failure shall be governed by such Section) the Borrower shall pay to the Holder $2,000 per day in cash, for each day beyond the Deadline that the Borrower fails to deliver such Common Stock. Such cash amount shall be paid to Holder by the fifth day of the month following the month in which it has accrued or, at the option of the Holder (by written notice to the Borrower by the first day of the month following the month in which it has accrued), shall be added to the principal amount of this Note, in which event interest shall accrue thereon in accordance with the terms of this Note and such additional principal amount shall be convertible into Common Stock in accordance with the terms of this Note. The Borrower agrees that the right to convert is a valuable right to the Holder. The damages resulting from a failure, attempt to frustrate, interference with such conversion right are difficult if not impossible to qualify. Accordingly the parties acknowledge that the liquidated damages provision contained in this Section 1.4(g) are justified

1.5Concerning the Shares. The shares of Common Stock issuable upon conversion of this Note may not be sold or transferred unless (i) such shares are sold pursuant to an effective registration statement under the Act or (ii) the Borrower or its transfer agent shall have been furnished with an opinion of counsel (which opinion shall be in form, substance and scope customary for opinions of counsel in comparable transactions) to the effect that the shares to be sold or transferred may be sold or transferred pursuant to an exemption from such registration or (iii) such shares are sold or transferred pursuant to Rule 144 under the Act (or a successor rule) (“Rule 144”) or (iv) such shares are transferred to an “affiliate” (as defined in Rule 144) of the Borrower who agrees to sell or otherwise transfer the shares only in accordance with this Section 1.5 and who is an Accredited Investor (as defined in the Purchase Agreement). Except as otherwise provided in the Purchase Agreement (and subject to the removal provisions set forth below), until such time as the shares of Common Stock issuable upon conversion of this Note have been registered under the Act or otherwise may be sold pursuant to Rule 144 without any restriction as to the number of securities as of a particular date that can then be immediately sold, each certificate for shares of Common Stock issuable upon conversion of this Note that has not been so included in an effective registration statement or that has not been sold pursuant to an effective registration statement or an exemption that permits removal of the legend, shall bear a legend substantially in the following form, as appropriate:

“NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B)

AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.”

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The legend set forth above shall be removed and the Borrower shall issue to the Holder a new certificate therefore free of any transfer legend if (i) the Borrower or its transfer agent shall have received an opinion of counsel, in form, substance and scope customary for opinions of counsel in comparable transactions, to the effect that a public sale or transfer of such Common Stock may be made without registration under the Act, which opinion shall be accepted by the Company so that the sale or transfer is effected or (ii) in the case of the Common Stock issuable upon conversion of this Note, such security is registered for sale by the Holder under an effective registration statement filed under the Act or otherwise may be sold pursuant to Rule 144 without any restriction as to the number of securities as of a particular date that can then be immediately sold. In the event that the Company does not accept the opinion of counsel provided by the Buyer with respect to the transfer of Securities pursuant to an exemption from registration, such as Rule 144 or Regulation S, at the Deadline, it will be considered an Event of Default pursuant to Section 3.2 of the Note.

1.6Effect of Certain Events.

(a)Effect of Merger, Consolidation, Etc. At the option of the Holder, the sale, conveyance or disposition of all or substantially all of the assets of the Borrower, the effectuation by the Borrower of a transaction or series of related transactions in which more than 50% of the voting power of the Borrower is disposed of, or the consolidation, merger or other business combination of the Borrower with or into any other Person (as defined below) or Persons when the Borrower is not the survivor shall either: (i) be deemed to be an Event of Default (as defined in Article III) pursuant to which the Borrower shall be required to pay to the Holder upon the consummation of and as a condition to such transaction an amount equal to the Default Amount (as defined in Article III) or (ii) be treated pursuant to Section 1.6(b) hereof.

“Person” shall mean any individual, corporation, limited liability company, partnership, association, trust or other entity or organization.

(b)Adjustment Due to Merger, Consolidation, Etc. If, at any time when this Note is issued and outstanding and prior to conversion of all of the Notes, there shall be any merger, consolidation, exchange of shares, recapitalization, reorganization, or other similar event, as a result of which shares of Common Stock of the Borrower shall be changed into the same or a different number of shares of another class or classes of stock or securities of the Borrower or another entity, or in case of any sale or conveyance of all or substantially all of the assets of the Borrower other than in connection with a plan of complete liquidation of the Borrower, then the Holder of this Note shall thereafter have the right to receive upon conversion of this Note, upon the basis and upon the terms and conditions specified herein and in lieu of the shares of Common Stock immediately theretofore issuable upon conversion, such stock, securities or assets which the Holder would have been entitled to receive in such transaction had this Note been converted in full immediately prior to such transaction (without regard to any limitations on conversion set forth herein), and in any such case appropriate provisions shall be made with respect to the rights and interests of the Holder of this Note to the end that the provisions hereof (including, without limitation, provisions for adjustment of the Conversion Price and of the number of shares issuable upon conversion of the Note) shall thereafter be applicable, as nearly as may be practicable in relation to any securities or assets thereafter deliverable upon the conversion hereof. The Borrower shall not affect any transaction described in this Section 1.6(b) unless (a) it first gives, to the extent practicable, thirty (30) days prior written notice (but in any event at least fifteen (15) days prior written notice) of the record date of the special meeting of shareholders to approve, or if there is no such record date, the consummation of, such merger, consolidation, exchange of shares, recapitalization, reorganization or other similar event or sale of assets (during which time the Holder shall be entitled to convert this Note) and (b) the resulting successor or acquiring entity (if not the Borrower) assumes by written instrument the obligations of this Section 1.6(b). The above provisions shall similarly apply to successive consolidations, mergers, sales, transfers or share exchanges.

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(c)Adjustment Due to Distribution. If the Borrower shall declare or make any distribution of its assets (or rights to acquire its assets) to holders of Common Stock as a dividend, stock repurchase, by way of return of capital or otherwise (including any dividend or distribution to the Borrower’s shareholders in cash or shares (or rights to acquire shares) of capital stock of a subsidiary (i.e., a spin-off)) (a “Distribution”), then the Holder of this Note shall be entitled, upon any conversion of this Note after the date of record for determining shareholders entitled to such Distribution, to receive the amount of such assets which would have been payable to the Holder with respect to the shares of Common Stock issuable upon such conversion had such Holder been the holder of such shares of Common Stock on the record date for the determination of shareholders entitled to such Distribution.

(d)Adjustment Due to Dilutive Issuance. If, at any time when any Notes are issued and outstanding, the Borrower issues or sells, or in accordance with this Section 1.6(d) hereof is deemed to have issued or sold, any shares of Common Stock for no consideration or for a consideration per share (before deduction of reasonable expenses or commissions or underwriting discounts or allowances in connection therewith) less than the Conversion Price in effect on the date of such issuance (or deemed issuance) of such shares of Common Stock (a “Dilutive Issuance”), then immediately upon the Dilutive Issuance, the Conversion Price will be reduced to the amount of the consideration per share received by the Borrower in such Dilutive Issuance.

The Borrower shall be deemed to have issued or sold shares of Common Stock if the Borrower in any manner issues or grants any warrants, rights or options (not including employee stock option plans), whether or not immediately exercisable, to subscribe for or to purchase Common Stock or other securities convertible into or exchangeable for Common Stock (“Convertible Securities”) (such warrants, rights and options to purchase Common Stock or Convertible Securities are hereinafter referred to as “Options”) and the price per share for which Common Stock is issuable upon the exercise of such Options is less than the Conversion Price then in effect, then the Conversion Price shall be equal to such price per share. For purposes of the preceding sentence, the “price per share for which Common Stock is issuable upon the exercise of such Options” is determined by dividing (i) the total amount, if any, received or receivable by the Borrower as consideration for the issuance or granting of all such Options, plus the minimum aggregate amount of additional consideration, if any, payable to the Borrower upon the exercise of all such Options, plus, in the case of Convertible Securities issuable upon the exercise of such Options, the minimum aggregate amount of additional consideration payable upon the conversion or exchange thereof at the time such Convertible Securities first become convertible or exchangeable, by (ii) the maximum total number of shares of Common Stock issuable upon the exercise of all such Options (assuming full conversion of Convertible Securities, if applicable). No further adjustment to the Conversion Price will be made upon the actual issuance of such Common Stock upon the exercise of such Options or upon the conversion or exchange of Convertible Securities issuable upon exercise of such Options.

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Additionally, the Borrower shall be deemed to have issued or sold shares of Common Stock if the Borrower in any manner issues or sells any Convertible Securities, whether or not immediately convertible (other than where the same are issuable upon the exercise of Options), and the price per share for which Common Stock is issuable upon such conversion or exchange is less than the Conversion Price then in effect, then the Conversion Price shall be equal to such price per share. For the purposes of the preceding sentence, the “price per share for which Common Stock is issuable upon such conversion or exchange” is determined by dividing (i) the total amount, if any, received or receivable by the Borrower as consideration for the issuance or sale of all such Convertible Securities, plus the minimum aggregate amount of additional consideration, if any, payable to the Borrower upon the conversion or exchange thereof at the time such Convertible Securities first become convertible or exchangeable, by (ii) the maximum total number of shares of Common Stock issuable upon the conversion or exchange of all such Convertible Securities. No further adjustment to the Conversion Price will be made upon the actual issuance of such Common Stock upon conversion or exchange of such Convertible Securities.

(e)Purchase Rights. If, at any time when any Notes are issued and outstanding, the Borrower issues any convertible securities or rights to purchase stock, warrants, securities or other property (the “Purchase Rights”) pro rata to the record holders of any class of

Common Stock, then the Holder of this Note will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which such Holder could have acquired if such Holder had held the number of shares of Common Stock acquirable upon complete conversion of this Note (without regard to any limitations on conversion contained herein) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights or, if no such record is taken, the date as of which the record holders of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights.

(f)Notice of Adjustments. Upon the occurrence of each adjustment or readjustment of the Conversion Price as a result of the events described in this Section 1.6, the Borrower, at its expense, shall promptly compute such adjustment or readjustment and prepare and furnish to the Holder a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Borrower shall, upon the written request at any time of the Holder, furnish to such Holder a like certificate setting forth (i) such adjustment or readjustment, (ii) the Conversion Price at the time in effect and (iii) the number of shares of Common Stock and the amount, if any, of other securities or property which at the time would be received upon conversion of the Note.

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1.7Trading Market Limitations. Unless permitted by the applicable rules and regulations of the principal securities market on which the Common Stock is then listed or traded, in no event shall the Borrower issue upon conversion of or otherwise pursuant to this Note and the other Notes issued pursuant to the Purchase Agreement more than the maximum number of shares of Common Stock that the Borrower can issue pursuant to any rule of the principal United States securities market on which the Common Stock is then traded (the “Maximum Share Amount”), which shall be 4.99% of the total shares outstanding on the Closing Date (as defined in the Purchase Agreement), subject to equitable adjustment from time to time for stock splits, stock dividends, combinations, capital reorganizations and similar events relating to the Common Stock occurring after the date hereof. Once the Maximum Share Amount has been issued, if the Borrower fails to eliminate any prohibitions under applicable law or the rules or regulations of any stock exchange, interdealer quotation system or other self-regulatory organization with jurisdiction over the Borrower or any of its securities on the Borrower’s ability to issue shares of Common Stock in excess of the Maximum Share Amount, in lieu of any further right to convert this Note, this will be considered an Event of Default under Section 3.3 of the Note.

1.8Status as Shareholder. Upon submission of a Notice of Conversion by a Holder, (i) the shares covered thereby (other than the shares, if any, which cannot be issued because their issuance would exceed such Holder’s allocated portion of the Reserved Amount or Maximum Share Amount) shall be deemed converted into shares of Common Stock and (ii) the Holder’s rights as a Holder of such converted portion of this Note shall cease and terminate, excepting only the right to receive certificates for such shares of Common Stock and to any remedies provided herein or otherwise available at law or in equity to such Holder because of a failure by the Borrower to comply with the terms of this Note. Notwithstanding the foregoing, if a Holder has not received certificates for all shares of Common Stock prior to the tenth (10th) business day after the expiration of the Deadline with respect to a conversion of any portion of this Note for any reason, then (unless the Holder otherwise elects to retain its status as a holder of Common Stock by so notifying the Borrower) the Holder shall regain the rights of a Holder of this Note with respect to such unconverted portions of this Note and the Borrower shall, as soon as practicable, return such unconverted Note to the Holder or, if the Note has not been surrendered, adjust its records to reflect that such portion of this Note has not been converted. In all cases, the Holder shall retain all of its rights and remedies (including, without limitation, (i) the right to receive Conversion Default Payments pursuant to Section 1.3 to the extent required thereby for such Conversion Default and any subsequent Conversion Default and (ii) the right to have the Conversion Price with respect to subsequent conversions determined in accordance with Section 1.3) for the Borrower’s failure to convert this Note.

1.9Prepayment. Notwithstanding anything to the contrary contained in this Note, at any time during the period beginning on the Issue Date and ending on the date which is one hundred twenty (180) days following the issue date, the Borrower shall have the right, exercisable on not less than three (3) Trading Days prior written notice to the Holder of the Note to prepay the outstanding Note (principal and accrued interest), in full, in accordance with this Section 1.9. Any notice of prepayment hereunder (an “Optional Prepayment Notice”) shall be delivered to the Holder of the Note at its registered addresses and shall state: (1) that the Borrower is exercising its right to prepay the Note, and (2) the date of prepayment which shall be not more than three (3) Trading Days from the date of the Optional Prepayment Notice. On the date fixed for prepayment (the “Optional Prepayment Date”), the Borrower shall make payment of the Optional Prepayment Amount (as defined below) to or upon the order of the Holder as specified by the Holder in writing to the Borrower at least one (1) business day prior to the Optional Prepayment Date. If the Borrower exercises its right to prepay the Note, the Borrower shall make payment to the Holder of an amount in cash (the “Optional Prepayment Amount”) equal to 175%, multiplied by the sum of: (w) the then outstanding principal amount of this Note plus (x) accrued and unpaid interest on the unpaid principal amount of this Note to the Optional Prepayment Date plus (y) Default Interest, if any, on the amounts referred to in clauses (w) and (x) plus (z) any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof. If the Borrower delivers an Optional Prepayment Notice and fails to pay the Optional Prepayment Amount due to the Holder of the Note within two (2) business days following the Optional Prepayment Date, the Borrower shall forever forfeit its right to prepay the Note pursuant to this Section 1.9.

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After the expiration of one hundred eighty (180) following the date of the Note, the Borrower shall have no right of prepayment.

ARTICLE II. CERTAIN COVENANTS

2.1Distributions on Capital Stock. So long as the Borrower shall have any obligation under this Note, the Borrower shall not without the Holder’s written consent (a) pay, declare or set apart for such payment, any dividend or other distribution (whether in cash, property or other securities) on shares of capital stock other than dividends on shares of Common Stock solely in the form of additional shares of Common Stock or (b) directly or indirectly or through any subsidiary make any other payment or distribution in respect of its capital stock except for distributions pursuant to any shareholders’ rights plan which is approved by a majority of the Borrower’s disinterested directors.

2.2Restriction on Stock Repurchases. So long as the Borrower shall have any obligation under this Note, the Borrower shall not without the Holder’s written consent redeem, repurchase or otherwise acquire (whether for cash or in exchange for property or other securities or otherwise) in any one transaction or series of related transactions any shares of capital stock of the Borrower or any warrants, rights or options to purchase or acquire any such shares.

2.3Borrowings. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s written consent, create, incur, assume guarantee, endorse, contingently agree to purchase or otherwise become liable upon the obligation of any person, firm, partnership, joint venture or corporation, except by the endorsement of negotiable instruments for deposit or collection, or suffer to exist any liability for borrowed money, except (a) borrowings in existence or committed on the date hereof and of which the Borrower has informed Holder in writing prior to the date hereof, (b) indebtedness to trade creditors or financial institutions incurred in the ordinary course of business or (c) borrowings, the proceeds of which shall be used to repay this Note.

2.4Sale of Assets. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s written consent, sell, lease or otherwise dispose of any significant portion of its assets outside the ordinary course of business. Any consent to the disposition of any assets may be conditioned on a specified use of the proceeds of disposition.

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2.5Advances and Loans. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s written consent, lend money, give credit or make advances to any person, firm, joint venture or corporation, including, without limitation, officers, directors, employees, subsidiaries and affiliates of the Borrower, except loans, credits or advances (a) in existence or committed on the date hereof and which the Borrower has informed Holder in writing prior to the date hereof, (b) made in the ordinary course of business or (c) not in excess of $100,000.

ARTICLE III. EVENTS OF DEFAULT

If any of the following events of default (each, an “Event of Default”) shall occur:

3.1Failure to Pay Principal or Interest. The Borrower fails to pay the principal hereof or interest thereon when due on this Note, whether at maturity, upon acceleration or otherwise.

3.2Conversion and the Shares. The Borrower fails to issue shares of Common Stock to the Holder (or announces or threatens in writing that it will not honor its obligation to do so) upon exercise by the Holder of the conversion rights of the Holder in accordance with the terms of this Note, fails to transfer or cause its transfer agent to transfer (issue) (electronically or in certificated form) any certificate for shares of Common Stock issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note, the Borrower directs its transfer agent not to transfer or delays, impairs, and/or hinders its transfer agent in transferring (or issuing) (electronically or in certificated form) any certificate for shares of Common Stock to be issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note, or fails to remove (or directs its transfer agent not to remove or impairs, delays, and/or hinders its transfer agent from removing) any restrictive legend (or to withdraw any stop transfer instructions in respect thereof) on any certificate for any shares of Common Stock issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note (or makes any written announcement, statement or threat that it does not intend to honor the obligations described in this paragraph) and any such failure shall continue uncured (or any written announcement, statement or threat not to honor its obligations shall not be rescinded in writing) for three (3) business days after the Holder shall have delivered a Notice of Conversion. It is an obligation of the Borrower to remain current in its obligations to its transfer agent. It shall be an event of default of this Note, if a conversion of this Note is delayed, hindered or frustrated due to a balance owed by the Borrower to its transfer agent. If at the option of the Holder, the Holder advances any funds to the Borrower’s transfer agent in order to process a conversion, such advanced funds shall be paid by the Borrower to the Holder within forty eight (48) hours of a demand from the Holder.

3.3Breach of Covenants. The Borrower breaches any material covenant or other material term or condition contained in this Note and any collateral documents including but not limited to the Purchase Agreement and such breach continues for a period of ten (10) days after written notice thereof to the Borrower from the Holder.

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3.4Breach of Representations and Warranties. Any representation or warranty of the Borrower made herein or in any agreement, statement or certificate given in writing pursuant hereto or in connection herewith (including, without limitation, the Purchase Agreement), shall be false or misleading in any material respect when made and the breach of which has (or with the passage of time will have) a material adverse effect on the rights of the Holder with respect to this Note or the Purchase Agreement.

3.5Receiver or Trustee. The Borrower or any subsidiary of the Borrower shall make an assignment for the benefit of creditors, or apply for or consent to the appointment of a receiver or trustee for it or for a substantial part of its property or business, or such a receiver or trustee shall otherwise be appointed.

3.6Judgments. Any money judgment, writ or similar process shall be entered or filed against the Borrower or any subsidiary of the Borrower or any of its property or other assets for more than $50,000, and shall remain unvacated, unbonded or unstayed for a period of twenty (20) days unless otherwise consented to by the Holder, which consent will not be unreasonably withheld.

3.7Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings, voluntary or involuntary, for relief under any bankruptcy law or any law for the relief of debtors shall be instituted by or against the Borrower or any subsidiary of the Borrower.

3.8Delisting of Common Stock. The Borrower shall fail to maintain the listing of the Common Stock on at least one of the OTCBB or an equivalent replacement exchange, the Nasdaq National Market, the Nasdaq SmallCap Market, the New York Stock Exchange, or the American Stock Exchange.

3.9Failure to Comply with the Exchange Act. The Borrower shall fail to comply with the reporting requirements of the Exchange Act; and/or the Borrower shall cease to be subject to the reporting requirements of the Exchange Act.

3.10Liquidation. Any dissolution, liquidation, or winding up of Borrower or any substantial portion of its business.

3.11Cessation of Operations. Any cessation of operations by Borrower or Borrower admits it is otherwise generally unable to pay its debts as such debts become due, provided, however, that any disclosure of the Borrower’s ability to continue as a “going concern” shall not be an admission that the Borrower cannot pay its debts as they become due.

3.12Maintenance of Assets. The failure by Borrower to maintain any material intellectual property rights, personal, real property or other assets which are necessary to conduct its business (whether now or in the future).

3.13Financial Statement Restatement. The restatement of any financial statements filed by the Borrower with the SEC for any date or period from two years prior to the Issue Date of this Note and until this Note is no longer outstanding, if the result of such restatement would, by comparison to the unrestated financial statement, have constituted a material adverse effect on the rights of the Holder with respect to this Note or the Purchase Agreement.

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3.14Reverse Splits. The Borrower effectuates a reverse split of its Common Stock without twenty (20) days prior written notice to the Holder.

3.15Replacement of Transfer Agent. In the event that the Borrower proposes to replace its transfer agent, the Borrower fails to provide, prior to the effective date of such replacement, a fully executed Irrevocable Transfer Agent Instructions in a form as initially delivered pursuant to the Purchase Agreement (including but not limited to the provision to irrevocably reserve shares of Common Stock in the Reserved Amount) signed by the successor transfer agent to Borrower and the Borrower.

3.16Cross-Default. Notwithstanding anything to the contrary contained in this Note or the other related or companion documents, a breach or default by the Borrower of any covenant or other term or condition contained in any of the Other Agreements, after the passage of all applicable notice and cure or grace periods, shall, at the option of the Holder, be considered a default under this Note and the Other Agreements, in which event the Holder shall be entitled (but in no event required) to apply all rights and remedies of the Holder under the terms of this Note and the Other Agreements by reason of a default under said Other Agreement or hereunder. “Other Agreements” means, collectively, all agreements and instruments between, among or by: (1) the Borrower, and, or for the benefit of, (2) the Holder and any affiliate of the Holder, including, without limitation, promissory notes; provided, however, the term “Other Agreements” shall not include the related or companion documents to this Note. Each of the loan transactions will be cross-defaulted with each other loan transaction and with all other existing and future debt of Borrower to the Holder.

Upon the occurrence and during the continuation of any Event of Default specified in Section 3.1 (solely with respect to failure to pay the principal hereof or interest thereon when due at the Maturity Date), the Note shall become immediately due and payable and the Borrower shall pay to the Holder, in full satisfaction of its obligations hereunder, an amount equal to the Default Sum (as defined herein). UPON THE OCCURRENCE AND DURING THE CONTINUATION OF ANY EVENT OF DEFAULT SPECIFIED IN SECTION 3.2, THE NOTE SHALL BECOME IMMEDIATELY DUE AND PAYABLE AND THE BORROWER SHALL PAY TO THE HOLDER, IN FULL SATISFACTION OF ITS OBLIGATIONS HEREUNDER, AN AMOUNT EQUAL TO: (Y) THE DEFAULT SUM (AS DEFINED HEREIN); MULTIPLIED BY (Z) TWO (2). Upon the occurrence and during the continuation of any Event of Default specified in Sections 3.1 (solely with respect to failure to pay the principal hereof or interest thereon when due on this Note upon a Trading Market Prepayment Event pursuant to Section 1.7 or upon acceleration), 3.3, 3.4, 3.6, 3.8, 3.9, 3.11, 3.12, 3.13, 3.14, and/or 3. 15 exercisable through the delivery of written notice to the Borrower by such Holders (the “Default Notice”), and upon the occurrence of an Event of Default specified the remaining sections of Articles III (other than failure to pay the principal hereof or interest thereon at the Maturity Date specified in Section 3,1 hereof), the Note shall become immediately due and payable and the Borrower shall pay to the Holder, in full satisfaction of its obligations hereunder, an amount equal to the greater of (i) 150% times the sum of (w) the then outstanding principal amount of this Note plus (x) accrued and unpaid interest on the unpaid principal amount of this Note to the date of payment (the “Mandatory Prepayment Date”) plus (y) Default Interest, if any, on the amounts referred to in clauses (w) and/or (x) plus (z) any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof (the then outstanding principal amount of this Note to the date of payment plus the amounts referred to in clauses (x), (y) and (z) shall collectively be known as the “Default Sum”) or (ii) the “parity value” of the Default Sum to be prepaid, where parity value means (a) the highest number of shares of Common Stock issuable upon conversion of or otherwise pursuant to such Default Sum in accordance with Article I, treating the Trading Day immediately preceding the Mandatory Prepayment Date as the “Conversion Date” for purposes of determining the lowest applicable Conversion Price, unless the Default Event arises as a result of a breach in respect of a specific Conversion Date in which case such Conversion Date shall be the Conversion Date), multiplied by (b) the highest Closing Price for the Common Stock during the period beginning on the date of first occurrence of the Event of Default and ending one day prior to the Mandatory Prepayment Date (the “Default Amount”) and all other amounts payable hereunder shall immediately become due and payable, all without demand, presentment or notice, all of which hereby are expressly waived, together with all costs, including, without limitation, legal fees and expenses, of collection, and the Holder shall be entitled to exercise all other rights and remedies available at law or in equity.

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If the Borrower fails to pay the Default Amount within five (5) business days of written notice that such amount is due and payable, then the Holder shall have the right at any time, so long as the Borrower remains in default (and so long and to the extent that there are sufficient authorized shares), to require the Borrower, upon written notice, to immediately issue, in lieu of the Default Amount, the number of shares of Common Stock of the Borrower equal to the Default Amount divided by the Conversion Price then in effect.

ARTICLE IV. MISCELLANEOUS

4.1Failure or Indulgence Not Waiver. No failure or delay on the part of the Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privileges. All rights and remedies existing hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available.

4.2Notices. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be:

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If to the Borrower, to:

KENERGY SCIENTIFIC, INC

6 Minneakoning Road

Flemington, NJ 08822

Attn: KENNETH GLYNN, President/Chief Executive Officer

facsimile:

With a copy by fax only to (which copy shall not constitute notice):

[enter name of law firm]

Attn: [attorney name]

[enter address line 1]

[enter city, state, zip] facsimile: [enter fax number]

If to the Holder:

ASHER ENTERPRISES, INC.

1 Linden Pl., Suite 207

Great Neck, NY. 11021

Attn: Curt Kramer, President

facsimile: 516-498-9894

With a copy by fax only to (which copy shall not constitute notice):

Naidich Wurman Birnbaum & Maday, LLP

80 Cuttermill Road, Suite 410

Great Neck, NY 11021

Attn: Bernard S. Feldman, Esq.

facsimile: 516-466-3555

4.3Amendments. This Note and any provision hereof may only be amended by an instrument in writing signed by the Borrower and the Holder. The term “Note” and all reference thereto, as used throughout this instrument, shall mean this instrument (and the other Notes issued pursuant to the Purchase Agreement) as originally executed, or if later amended or supplemented, then as so amended or supplemented.

4.4Assignability. This Note shall be binding upon the Borrower and its successors and assigns, and shall inure to be the benefit of the Holder and its successors and assigns. Each transferee of this Note must be an “accredited investor” (as defined in Rule 501(a) of the 1933 Act). Notwithstanding anything in this Note to the contrary, this Note may be pledged as collateral in connection with a bona fide margin account or other lending arrangement.

4.5Cost of Collection. If default is made in the payment of this Note, the Borrower shall pay the Holder hereof costs of collection, including reasonable attorneys’ fees.

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4.6Governing Law. This Note shall be governed by and construed in accordance with the laws of the State of New York without regard to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this Note shall be brought only in the state courts of New York or in the federal courts located in the state and county of Nassau. The parties to this Note hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. The Borrower and Holder waive trial by jury. The prevailing party shall be entitled to recover from the other party its reasonable attorney's fees and costs. In the event that any provision of this Note or any other agreement delivered in connection herewith is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement. Each party hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding in connection with this Agreement or any other Transaction Document by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law.

4.7Certain Amounts. Whenever pursuant to this Note the Borrower is required to pay an amount in excess of the outstanding principal amount (or the portion thereof required to be paid at that time) plus accrued and unpaid interest plus Default Interest on such interest, the Borrower and the Holder agree that the actual damages to the Holder from the receipt of cash payment on this Note may be difficult to determine and the amount to be so paid by the Borrower represents stipulated damages and not a penalty and is intended to compensate the Holder in part for loss of the opportunity to convert this Note and to earn a return from the sale of shares of Common Stock acquired upon conversion of this Note at a price in excess of the price paid for such shares pursuant to this Note. The Borrower and the Holder hereby agree that such amount of stipulated damages is not plainly disproportionate to the possible loss to the Holder from the receipt of a cash payment without the opportunity to convert this Note into shares of Common Stock.

4.8Purchase Agreement. By its acceptance of this Note, each party agrees to be bound by the applicable terms of the Purchase Agreement.

4.9Notice of Corporate Events. Except as otherwise provided below, the Holder of this Note shall have no rights as a Holder of Common Stock unless and only to the extent that it converts this Note into Common Stock. The Borrower shall provide the Holder with prior notification of any meeting of the Borrower’s shareholders (and copies of proxy materials and other information sent to shareholders). In the event of any taking by the Borrower of a record of its shareholders for the purpose of determining shareholders who are entitled to receive payment of any dividend or other distribution, any right to subscribe for, purchase or otherwise acquire (including by way of merger, consolidation, reclassification or recapitalization) any share of any class or any other securities or property, or to receive any other right, or for the purpose of determining shareholders who are entitled to vote in connection with any proposed sale, lease or conveyance of all or substantially all of the assets of the Borrower or any proposed liquidation, dissolution or winding up of the Borrower, the Borrower shall mail a notice to the Holder, at least twenty (20) days prior to the record date specified therein (or thirty (30) days prior to the consummation of the transaction or event, whichever is earlier), of the date on which any such record is to be taken for the purpose of such dividend, distribution, right or other event, and a brief statement regarding the amount and character of such dividend, distribution, right or other event to the extent known at such time. The Borrower shall make a public announcement of any event requiring notification to the Holder hereunder substantially simultaneously with the notification to the Holder in accordance with the terms of this Section 4.9.

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4.10Remedies. The Borrower acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder, by vitiating the intent and purpose of the transaction contemplated hereby. Accordingly, the Borrower acknowledges that the remedy at law for a breach of its obligations under this Note will be inadequate and agrees, in the event of a breach or threatened breach by the Borrower of the provisions of this Note, that the Holder shall be entitled, in addition to all other available remedies at law or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining, preventing or curing any breach of this Note and to enforce specifically the terms and provisions thereof, without the necessity of showing economic loss and without any bond or other security being required.

IN WITNESS WHEREOF, Borrower has caused this Note to be signed in its name by its duly authorized officer this March 14, 2012.

KENERGY SCIENTIFIC, INC

By: 

KENNETH GLYNN

President/Chief Executive Officer

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EXHIBIT A: NOTICE OF CONVERSION

 The undersigned hereby elects to convert $ principal amount of the Note (defined below) into that number of shares of Common Stock to be issued pursuant to the conversion of the Note (“Common Stock”) as set forth below, of KENERGY SCIENTIFIC, INC, a New Jersey corporation (the “Borrower”) according to the conditions of the convertible note of the Borrower dated as of March 14, 2012 (the “Note”), as of the date written below. No fee will be charged to the Holder for any conversion, except for transfer taxes, if any.

Box Checked as to applicable instructions:

[ ] The Borrower shall electronically transmit the Common Stock issuable pursuant to this Notice of Conversion to the account of the undersigned or its nominee

 with DTC through its Deposit Withdrawal Agent Commission system (“DWAC Transfer”).

 Name of DTC Prime Broker:

 Account Number:

[ ] The undersigned hereby requests that the Borrower issue a certificate or certificates for the number of shares of Common Stock set forth below (which numbers

 are based on the Holder’s calculation attached hereto) in the name(s) specified immediately below or, if additional space is necessary, on an attachment hereto:

 ASHER ENTERPRISES, INC.

 1 Linden Pl., Suite 207

 Great Neck, NY. 11021

 Attention: Certificate Delivery

 (516)498-9890

Date of Conversion:                                                                 

Applicable Conversion Price:                                               $ 

 Number of Shares of Common Stock to be Issued

 Pursuant to Conversion of the Notes:                                                

 Amount of Principal Balance Due remaining

 Under the Note after this conversion:

 ASHER ENTERPRISES, INC.

 By:                                             

 Name: Curt Kramer

 Title: President

 Date:                                   

 1 Linden Pl., Suite 207

 Great Neck, NY. 11021

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EX-31.1

Exhibit 31.1

Rule 13a-14(a)/15d-14(a) Certifications

I, Kenneth Glynn, certify that:

1.   I have reviewed this quarterly report on Form 10-Q of Kenergy Scientific, Inc.

2.   Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterlyreport;

3.   Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.   I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:

a)   Designed such disclosure controls and procedures, or caused such control and procedures to be designed under our supervision, to ensure that material information relating to the registrant is made known to us by others within this entity, particularly during the period in which this quarterly report is being prepared;

b)   Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

c)   Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation, and

d)   Disclosed in this quarterly report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.   The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a)    All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b)     Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: May 21, 2012

By   /s/ Kenneth Glynn
	Kenneth Glynn
	President
	Chief Executive Officer and
	Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Kenneth Glynn, hereby certify, pursuant to and solely for the purpose of 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

1.   The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and

2.   The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

By   /s/ Kenneth Glynn
	Kenneth Glynn
	President
	Chief Executive Officer and
	Chief Financial Officer
May 21, 2012

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Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2012

Notes to Financial Statements

Summary of Significant Accounting Policies

a) Basis of Presentation

The accompanying condensed unaudited interim financial statements included herein have been prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). The condensed financial statements and notes are presented as permitted on Form 10-Q and do not contain information included in the Company's annual statements and notes. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. It is suggested that these condensed financial statements be read in conjunction with the December 31, 2011 unaudited financial statements and the accompanying notes thereto. The financial statements that were reported in the Company’s Form 10-K for the fiscal year ended December 31, 2011 do not contain audited financial statements audited by an independent registered public accounting firm. While management believes the procedures followed in preparing these condensed financial statements are reasonable, the accuracy of the amounts are in some respects dependent upon the facts that will exist, and procedures that will be accomplished by the Company later in the year. These results are not necessarily indicative of the results to be expected for the full year.

These condensed unaudited financial statements reflect all adjustments, including normal recurring adjustments, which, in the opinion of management, are necessary to present fairly the operations and cash flows for the periods presented.

b) Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

c) Revenue Recognition

The Company currently derives its revenues from the sales of portable solar powered products, solar rechargeable lantern/flashlight devices, solar backpack rechargers and clothing made from recycled products. Our products are sold directly to consumers through our own website or by direct sales. Payment is made for the products prior to delivery.

d) Product Warranties

The Company warrants the product from defects for 30 days from delivery to the customer. The Company estimates its warranty costs based on historical warranty claims experience in estimating potential warranty claims. Due to the limited sales of the Company's products, management has determined that warranty costs are immaterial and has not included an accrual for potential warranty claims. Presently, costs related to warranty coverage are expensed as incurred. Warranty claims are reviewed quarterly to verify that warranty liabilities properly reflect any remaining obligation based on the anticipated expenditures over the balance of the obligation period. 

e) Research and Development Costs

Research and development costs are charged to expense as incurred.

f) Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents. There were no cash equivalents at March 31, 2012 and December 31, 2011.

g) Intangible Assets

Development, registration and maintenance costs associated with the filing and registration of patents are prepaid and amortized over the remaining life of the patent, not to exceed 20 years.

As defined in ASC 360-10-35, “Impairment or Disposal of Long-Lived Assets”, long-lived assets and certain identifiable intangibles to be held and used or disposed of by an entity be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.  The Company has adopted this statement and determined that no additional impairment loss should be recognized for applicable assets at this time.

h) Income Taxes

The Company accounts for income taxes in accordance with ASC 740-10, “Income Taxes”, which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income taxes and liabilities are computed annually for differences between the financial statement and the tax basis of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.

i) Derivative Liabilities

The Company accounts for its embedded conversion features in its convertible debentures in accordance ASC 815-10, "Derivatives and Hedging", which requires a periodic valuation of their fair value and a corresponding recognition of liabilities associated with such derivatives, and ASC 815-40, “Contracts in Entity’s Own Equity”. The recognition of derivative liabilities related to the issuance of convertible debt is applied first to the proceeds of such issuance as a debt discount, at the date of issuance, and the excess of derivative liabilities over the proceeds is recognized as “Loss on Valuation of Derivative” in other expense in the accompanying financial statements. Any subsequent increase or decrease in the fair value of the derivative liabilities is recognized as “Other expense” or “Other income”, respectively.

j) Fair Value of Instruments

The carrying amount reported in the balance sheet for cash and cash equivalents, deposits, prepaid expenses, accounts payable, and accrued expenses approximate fair value because of the immediate or short-term maturity of these financial instruments. The carrying amount reported for notes payable approximates fair value because, in general, the interest on the underlying instruments fluctuates with market rates.

k) Concentrations of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of trade accounts receivable and cash. As of March 31, 2012 and December 31, 2011, the Company believes it has no significant risk related to its concentration within its accounts receivable.

The Company maintains cash and cash equivalent balances at a financial institution that is insured by the Federal Deposit Insurance Corporation up to $250,000. There were no uninsured cash balances at March 31, 2012 and December 31, 2011.

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Going Concern

3 Months Ended

Mar. 31, 2012

Notes to Financial Statements

Going Concern

The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplates continuation of the Company as a going concern.

For the three months ended March 31, 2012, the Company had a negative cash flow from operations, negative working capital and a loss from operations. These matters raise substantial doubt about the Company's ability to continue as a going concern. Therefore, recoverability of a major portion of the recorded asset amounts shown in the accompanying balance sheets is dependent upon continued operations of the Company, which in turn, is dependent upon the Company's ability to raise capital and/or generate positive cash flow from operations.

Management plans on developing new products and increasing their sales to new customers, to achieve profitability and to generate a positive cash flow. However, these plans are dependent upon obtaining additional capital. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be necessary in the event the Company cannot continue in existence.

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Condensed Balance Sheets (USD $)	Mar. 31, 2012	Dec. 31, 2011
Current assets:
Cash and cash equivalents	$ 4,686	$ 6,960
Accounts receivable, net of allowance for doubtful accounts of $2,862	86	477
Inventory	94,052	93,803
Prepaid and other current assets	6,921	6,965
Total current assets	105,745	108,205
Property and equipment, net	11,303	11,614
Intangible assets, net and security deposits	199,506	204,391
Total assets	316,554	324,210
Current liabilities:
Accounts payable and accrued expenses	714,415	639,522
Due to related parties	206,807	174,307
Promissory note due to related parties	125,000	125,000
Notes payable	140,000	140,000
Convertible promissory note, net of unamortized debt discount of $14,840 and $18,824, respectively	65,096	61,112
Convertible debentures, net of unamortized debt discount of $125,938 and $45,098, respectively	1,173,735	1,196,025
Derivative liabilities	3,995,457	2,270,858
Total current liabilities	6,420,510	4,606,824
Stockholders' deficit:
Preferred stock, $1.00 par value; authorized 1,000,000 shares; no shares issued and outstanding	0	0
Common stock: Class A - no par value; authorized 625,000,000 shares;13,020,798 and 12,418,388 shares issued and outstanding, respectively	4,647,188	4,635,140
Class B - $.01 par value; authorized 50,000,000 Shares; 10,000 shares issued and outstanding, respectively	100	100
Class C - $.01 par value; authorized 20,000,000 Shares; no shares issued and outstanding	0	0
Additional paid-in capital	1,915,561	1,913,613
Accumulated deficit	(12,666,805)	(10,831,467)
Total stockholders' deficit	(6,103,956)	(4,282,614)
Total liabilities and stockholders' deficit	$ 316,554	$ 324,210

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Background

3 Months Ended

Mar. 31, 2012

Notes to Financial Statements

Background

In September 2004, the Board of Directors of iVoice, Inc., the former parent of the Company, resolved to pursue the separation of iVoice software business into three publicly owned companies. SpeechSwitch, Inc. (“SpeechSwitch” or “Company”) was incorporated under the laws of New Jersey on November 10, 2004 as a wholly owned subsidiary of iVoice, Inc. ("iVoice"). The Company received by assignment all of the interests in and rights and title to, and assumed all of the obligations of, all of the agreements, contracts, understandings and other instruments of iVoice Technology 3, Inc., a Nevada corporation and affiliate of the Company.

On August 4, 2005, the Company received notice from the SEC that the registration statement to effectuate the spin-off of the SpeechSwitch from iVoice was declared effective and the Company immediately embarked on the process to spin off the SpeechSwitch from iVoice.

On August 5, 2005, the spin-off transaction was accomplished, by the assignment, contribution and conveyance of certain intellectual property, representing the software codes of speech recognition, and certain accrued liabilities and related party debt into SpeechSwitch (the "Spin-off"). The Class A Common Stock shares of the Company were distributed to iVoice shareholders in the form of a taxable special dividend distribution.

In June 2009 Kenneth P. Glynn acquired debt owed by SpeechSwitch, Inc. to third party creditors and the company moved its headquarters from Matawan, NJ to Flemington, NJ.

In September 2009, Kenneth P. Glynn established the Kenergy Scientific Group to seek new products to be sold under the Kenergy Scientific brand.  The Group acquired a small inventory of solar rechargeable lanterns for testing and eventual sales.

In 2010, the Company launched several products on its website www.greensmartstore.com and is pursuing the opening of its first company–owned GreenSmart Store. The Company may seek to expand its operations through additional sales and marketing activity and the acquisition of additional businesses.

On February 3, 2011, the Company changed its name to Kenergy Scientific, Inc.

In November 2011, the Company opened its first company-owned GreenSmart Store at the Flemington Marketplace in Flemington, NJ.

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Subsequent Events

3 Months Ended

Mar. 31, 2012

Notes to Financial Statements

Subsequent Events

On April 2, 2012 and May 2, 2012, the Company issued an aggregate of 11,200,000 shares of Class A common stock to ATG, Inc and UAIM Corporation in accordance with the terms of the wrap around agreements discussed in Note 10, Convertible Debenture and Derivative Liability.

On April 18, 2012, the Company issued 202,057,500 shares of Class A common stock to Kenneth Glynn upon conversion of deferred compensation according to the terms discussed in Note 8, Related Party Transactions.

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Business Operations

3 Months Ended

Mar. 31, 2012

Notes to Financial Statements

Business Operations

In June 2009, we entered into fields of development of various products relating to solar power generating systems; portable solar powered products, such as cell phone and PDA rechargers that are solar rechargeable; solar rechargeable lantern/flashlight devices; solar backpack rechargers; solar power audio devices, such as radios; wind power generating systems; and, creative products based on proprietary positions, especially in the area of healthcare. We may seek to expand our operations through additional sales and marketing activity and the acquisition of additional businesses. Any potential acquired additional businesses may be outside the current field of our operations. We may not be able to identify, successfully integrate or profitably manage any such business or operations. Currently, we have no plans, proposal or arrangements, either orally or in writing, regarding any proposed acquisitions and is not considering any potential acquisitions.

Products and Services

The following description of our business is intended to provide an understanding of our product and the direction of our initial marketing strategy. As the new product development is in its early development stages, any focus described in the following pages may change and different initiatives may be pursued, at the discretion of Management. Our areas of development and recent activities include:

(a) On June 18, 2009, the Company acquired rights and ownership from GlynnTech, Inc. of technology and pending patent applications relating to cancer treatment drug delivery systems, and the technology transfer into the Company included a prototype, numerous variations on designs, CAD drawings, pending patent applications, risk analysis studies, development history and presentation documents. The sale was “at cost” of GlynnTech, Inc. in the amount of $182,600.00. The Agreement called for the aggregate purchase price to be in various denominations of one-year notes. The business objective was to transfer a potentially significant profit opportunity from GlynnTech, Inc. to Kenergy Scientific, Inc. Three presentations had previously been made to pharmaceutical industry candidates and feedback indicated a high level of interest in potential purchase of this technology following FDA approval of this product.

(b) In the solar rechargeable products sector, candidates for future sales currently include an iPhone/iPod recharger; a solar powered recharger for the cell phones and PDA’s; a backpack solar recharger with chips for attachment to a backpack, a tent, an outdoor line, etc. with a storage pocket and an array of interchangeable connectors for diverse electronic devices; a solar powered lantern/flashlight; a solar powered radio/flashlight; a solar powered laptop recharger, and other devices. Product launches on a majority of these items were in the third quarter of 2010. Initial product launches involved Internet sales, with a roll-out to our retail outlet in November 2011.

(c) In solar power energy production systems, the Company is reviewing numerous models of solar photovoltaic panels and converters, as well as unique aftermarket opportunities. The Company intends to partner with installers and market home, office and commercial solar panels through various media.

(d) In the wind power energy production systems, third party companies will review various microturbine products to license and sell.

Distribution

Within the first two years under new management, the Company created a viable website and contracted with major retailers and multimedia advertising for the solar powered rechargers and other products. In addition, the Company opened one retail store, as well as offering additional products made from recycled materials and/or biodegradable materials in the marketplace.

Product Development

We currently have significant long term plans to engage in future research and development, to create valuable intellectual property rights and/or to launch new products. The Company will acquire third party patent rights, develop its own patent rights and evolve both new product and intellectual property transfer (sale or license) opportunities.

Business Development

Business development objectives at the Company will be to focus on the primary functions as listed below:

1. Continuously develop product ideas, manufacturing and supply alliances;

2. Expand sales opportunities through diverse resources;

3. Develop retail outlets;

4. Evolve franchising opportunities using company retail outlets as a base;

5. Create a continuous flow of ideas and inventions to develop patent and/or new product opportunity

Strategic Alliances

Kenergy Scientific’s business development efforts will seek to engage and secure strategic alliances with alternative energy related businesses and professional organizations in order to develop marketing programs that will expand market share for our products and develop brand recognition by entering into strategic alliances with companies that offer these products and/or services, the Company will accelerate its entry into various markets, while eliminating or reducing various training, learning curve, employee and overhead costs.

Sales and Marketing

The Company had nominal sales during the years 2011 and 2010. Sales have been slow due to research and development, product selections, product testing and other launch preparation. Sales through the third quarters of 2011 were through our website and additional opportunities are being developed, through third party retail and internet sites and through third party distributors. In November 2011, the Company opened its first company-owned GreenSmart retail store and we expect to expand our store plans to include other franchised stores.

Intellectual Property Rights

The Company has completed the acquisition of the patented rights for the cancer treatment patent awarded by the United States Patent and Trademark Office. No foreign counterparts have been filed at this time.

Also, the company now has numerous patent applications and some issued patents in the fields of microturbine, wind power generators, third generation solar power generators, solar desalination, solar-wind hybrid power generators, biodegradable bandages and other energy and healthcare related inventions.

Employees

Kenneth P. Glynn was elected to the positions of President, Secretary and Chairman of the Board on June 16, 2009. On July 1, 2009, the Company entered into a one (1) year employment agreement with Mr. Glynn to serve as President and Chief Executive of the Company at an annual base salary of $96,000 for the first year. On July 1, 2010 and 2011, the Company renewed Mr. Glynn’s employment agreement for an additional one (1) year at an annual base salary of $96,000 for the year. It is the present intention of Mr. Glynn to defer a portion of his salary payment for at least the next 6 months.

As of March 31, 2012, we had one employee, Kenneth P. Glynn. All other participants in Company activities are through purchased support services and independent contractors.

Properties

We do not own any real property. We rent office space from GlynnTech, Inc. located at 6 Minneakoning Road, Flemington, New Jersey. We also rent 2,375 square feet of retail sales space from Flemington Mall, LLC for our GreenSmart retail store. We intend to continue renting such spaces and anticipate no relocation of our offices or store front in the foreseeable future. We are unaware of any environmental problems in connection with these locations, and, because of the nature of our activities, do not anticipate such problems.

Kenergy Scientific’s Management

Kenneth P. Glynn was elected to the positions of President, Secretary and Chairman of the board on June 16, 2009.

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Condensed Balance Sheets (Parenthetical) (USD $)	Mar. 31, 2012	Dec. 31, 2011
Statement of Financial Position [Abstract]
Allowance for doubtful accounts	$ 2,862	$ 2,862
Convertible promissory note, unamortized debt discount	14,840	18,824
Convertible debentures, unamortized debt discount	$ 125,938	$ 45,098
Preferred stock, par value	$ 1	$ 1
Preferred stock, authorized shares	1,000,000	1,000,000
Preferred stock, issued shares	0	0
Preferred stock, outstanding shares	0	0
Class A Common stock, par value	$ 0	$ 0
Class A Common stock, authorized shares	625,000,000	125,000,000
Class A Common stock, issued shares	13,020,798	12,418,388
Class A Common stock, outstanding shares	13,020,798	12,418,388
Class B Common stock, par value	$ 0.01	$ 0.01
Class B Common stock, authorized shares	50,000,000	50,000,000
Class B Common stock, issued shares	10,000	10,000
Class B Common stock, outstanding shares	10,000	10,000
Class C Common stock, par value	$ 0.01	$ 0.01
Class C- Common stock, authorized shares	20,000,000	20,000,000
Class C- Common stock, issued shares	0	0
Class C- Common stock, outstanding shares	0	0

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Capital Stock

3 Months Ended

Mar. 31, 2012

Notes to Financial Statements

Capital Stock

Pursuant to Kenergy Scientific's certificate of incorporation, as amended, as of March 31, 2012, the Company is authorized to issue 1,000,000 shares of Preferred Stock, par value of $1.00 per share, 625,000,000 shares of Class A Common Stock, no par value per share, 50,000,000 shares of Class B Common Stock, par value $0.01 per share, and 20,000,000 shares of Class C Common Stock, par value $0.01 per share. Below is a description of Kenergy Scientific's outstanding securities, including Preferred Stock, Class A Common Stock, Class B Common Stock, and Class C Common Stock.

On March 5, 2012, the Company amended its Certificate of Incorporation to increase the number of authorized Class A Common Stock Shares to 625,000,000, as authorized by the Board of Directors and adopted by the shareholders on February 15, 2012. The effect of this amendment was to increase the authorized shares from 125,000,000 to 625,000,000.

a) Preferred Stock

Kenergy Scientific is authorized to issue 1,000,000 shares of Preferred Stock, par value $1.00 per share. As of March 31, 2012, Kenergy Scientific has not issued any shares of Preferred Stock.

b) Class A Common Stock

As of March 31, 2012 and December 31, 2011, there are 625,000,000 and 125,000,000 shares of Class A Common Stock authorized, respectively, no par value, and 13,020,798 and 12,418,388 shares were issued and outstanding, respectively.

Each holder of Class A Common Stock is entitled to receive ratably dividends, if any, as may be declared by the Board of Directors out of funds legally available for payment of dividends. The Company has never paid any dividends on its common stock and does not contemplate doing so in the foreseeable future. The Company anticipates that any earnings generated from operations will be used to finance its growth objectives.

For the three months ended March 31, 2012, the Company had the following transactions in its Class A common stock:

· The Company issued 602,410 shares of Class A common stock for repayment of convertible debenture in lieu of cash, valued at $12,048. The difference in the market value and the reduction in debt of $5,000 was charged to beneficial interest in the amount of $7,048.

c) Class B Common Stock

As of March 31, 2012, there are 50,000,000 shares of Class B Common Stock authorized, par value $.01 per share and 10,000 shares were issued and outstanding. Each holder of Class B Common Stock has voting rights equal to 100 shares of Class A Common Stock. A holder of Class B Common Stock has the right to convert each share of Class B Common Stock into the number of shares of Class A Common Stock determined by dividing the number of Class B Common Stock being converted by a 20% discount of the lowest price that Kenergy Scientific, Inc. had ever issued its Class A Common Stock. Upon liquidation, dissolution, or winding-up, holders of Class B Common Stock will be entitled to receive distributions.

d) Class C Common Stock

As of March 31, 2012, there are 20,000,000 shares of Class C Common Stock authorized, par value $.01 per share. Each holder of Class C Common Stock is entitled to 1,000 votes for each share held of record. Shares of Class C Common Stock are not convertible into Class A Common Stock. Upon liquidation, dissolution or wind-up, the holders of Class C Common Stock are not entitled to receive the Company’s net assets pro rata. As of March 31, 2012, no shares were issued or outstanding.

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Document and Entity Information	3 Months Ended
	Mar. 31, 2012	May 18, 2012
Document And Entity Information
Entity Registrant Name	Kenergy Scientific, Inc.
Entity Central Index Key	0001307989
Document Type	10-Q
Document Period End Date	Mar. 31, 2012
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Is Entity a Well-known Seasoned Issuer?	No
Is Entity a Voluntary Filer?	No
Is Entity's Reporting Status Current?	Yes
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		226,278,298
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2012

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Additional paid-in capital

3 Months Ended

Mar. 31, 2012

Notes to Financial Statements

Additional paid-in capital

As of March 31, 2012, the Company has owed as much as $437,000 to a related party director of the Company. The loans are non-interest bearing, unsecured and due at various times up to December 28, 2010 and are included in the loans payable, related party balance. However, ASC 835-30 “Imputation of Interest” has been applied to impute the interest on loan from June 1, 2009 as there was no interest rate stipulated in the agreements. An accumulation of $38,976 has been imputed as interest over the periods and as per ASC 835-30, has been credited to Additional paid-in capital.

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Condensed Statements of Operations (Unaudited) (USD $)	3 Months Ended
	Mar. 31, 2012	Mar. 31, 2011
Income Statement [Abstract]
Net sales	$ 16,522	$ 2,547
Cost of sales	8,548	1,424
Gross margin (loss)	7,974	1,123
Operating expenses:
General and administrative expenses	156,523	106,317
Depreciation and amortization	7,666	7,110
Total operating expenses	164,189	113,427
Loss from operations	(156,215)	(112,304)
Other income (expense):
Interest expense	(31,380)	(114,946)
Amortization of debt discount	(36,694)	(141,440)
Gain (loss) on valuation of derivative	(1,611,049)	622,174
Total other income (expense)	(1,679,123)	365,788
Income (loss) before provision for income taxes	(1,835,338)	253,484
provision for income taxes	0	0
Net income (loss) attributable to common shares	$ (1,835,338)	$ 253,484
Basic income (loss) per common share	$ (0.15)	$ 0.02
Diluted income (loss) per common share	$ (0.15)	$ 0.01
Weighted average shares outstanding -
Basic	12,583,885	12,360,864
Diluted	12,583,885	25,000,000

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Income Taxes

3 Months Ended

Mar. 31, 2012

Notes to Financial Statements

Income Taxes

Deferred income taxes will be determined using the liability method for the temporary differences between the financial reporting basis and income tax basis of the Company's assets and liabilities. Deferred income taxes will be measured based on the tax rates expected to be in effect when the temporary differences are included in the Company's tax return. Deferred tax assets and liabilities are recognized based on anticipated future tax consequences attributable to differences between financial statement carrying amounts of assets and liabilities and their respective tax bases.

At March 31, 2012 and December 31, 2011 deferred tax assets consist of the following:

		March 31, 2012		December 31, 2011
Deferred tax assets	$	820,000	$	766,000
Less: Valuation Allowance		(820,000)		(766,000)
Net deferred tax assets	$	-0-	$	-0-

At March 31, 2012 and December 31, 2011, the Company had federal net operating loss carry forwards in the approximate amounts of $2,412,000 and $2,254,000, respectively, available to offset future taxable income. The Company established valuation allowances equal to the full amount of the deferred tax assets due to the uncertainty of the utilization of the operating losses in future periods.

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Intangible Assets

3 Months Ended

Mar. 31, 2012

Notes to Financial Statements

Intangible Assets

At March 31, 2012 and December 31, 2011, intangible assets consist of the following:

	2012			2011
Speech-enabled auto dialer	$	17,025		$	17,025
Cancer drug delivery system		182,600			182,600
“Green” trademark applications		2,145			2,045
Kenergy patent portfolio		54,870			52,500
Smart Bell		5,000			5,000
Less: accumulated amortization		(83,509	)		(76,154	)
Sub-total		178,131			183,016
Security deposit		21,375			21,375
Intangible assets, net	$	199,506		$	204,391

As defined in ASC 360-10-35, “Impairment or Disposal of Long-Lived Assets”, long-lived assets and certain identifiable intangibles to be held and used or disposed of by an entity be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.  The Company has adopted this statement and determined that no additional impairment loss should be recognized for applicable assets at this time.

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Stock Options

3 Months Ended

Mar. 31, 2012

Notes to Financial Statements

Stock Options

During 2005, the Company adopted the 2005 Stock Incentive Plan and the 2005 Directors’ and Officers’ Stock Incentive Plan (“Plan”) in order to attract and retain qualified personnel. Under the Plans, the Board of Directors, in its discretion may grant stock options (either incentive or non-qualified stock options) to officers, directors and employees. The Company has not issued any stock options as of March 31, 2012.

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Convertible Debenture and Derivative Liability

3 Months Ended

Mar. 31, 2012

Notes to Financial Statements

Convertible Debenture and Derivative Liability

On March 30, 2007, the Company issued a Secured Convertible Debenture (the "Debenture") to YA Global Investments (f/k/a/ Cornell Capital Partners) (“YA Global”) for the sum of $1,000,000 in exchange for a previously issued notes payable for the same amount. The Debenture has a term of three years, and pays interest at the rate of 5% per annum. YA Global has the right to convert a portion or the entire outstanding principal into the Company's Class A Common Stock at a Conversion Price equal to eighty percent (80%) of the lowest closing Bid Price of the Common Stock during the five (5) trading days immediately preceding the Conversion Date. YA Global may not convert the Debenture into shares of Class A Common Stock if such conversion would result in YA Global beneficially owning in excess of 4.99% of the then issued and outstanding shares of Class A Common Stock. The Conversion Price and number of shares of Class A Common Stock issuable upon conversion of the Debenture are subject to certain exceptions and adjustment for stock splits and combinations and other dilutive events. Subject to the terms and conditions of the Debenture, the Company has the right to redeem ("Optional Redemption") a portion or all amounts outstanding under this Debenture prior to the Maturity Date at any time provided that as of the date of the Holder's receipt of a Redemption Notice (i) the Closing Bid Price of the of the Common Stock, as reported by Bloomberg, LP, is less than the Conversion Price and (ii) no Event of Default has occurred. The Company shall pay an amount equal to the principal amount being redeemed plus a redemption premium ("Redemption Premium") equal to twenty percent (20%) of the principal amount being redeemed, and accrued interest, (collectively referred to as the "Redemption Amount"). During the time that any portion of this Debenture is outstanding, if any Event of Default has occurred, the full principal amount of this Debenture, together with interest and other amounts owing in respect thereof, to the date of acceleration shall become at the Holder's election, immediately due and payable in cash, provided however, the Holder may request (but shall have no obligation to request) payment of such amounts in Common stock of the Company. Furthermore, on addition to any other remedies, the Holder shall have the right (but not the obligation) to convert this Debenture at any time after (x) an Event of Default or (y) the Maturity Date at the Conversion Price then in-effect. The debenture is secured by substantially all of the assets of the Company.

On July 26, 2010, the convertible debenture with YA Global Investments, LP was amended and restated in order to replace the existing debenture with five (5) debentures of $208,707.74 each. The term of the debentures were amended to extend the due date until July 29, 2011. The amendments had the effect of reclassifying $156,199 of non-interest bearing accrued interest into the secured convertible debentures.

During the year ended December 31, 2010, YA Global Investments, LP assigned the debentures that it held to E-Lionheart Associates, LLC (“E-Lionheart”) with an aggregate value of $1,043,539. This was done in conjunction with the execution of a Securities Purchase Agreement with E-Lionheart whereby E-Lionheart will purchase from the Company up to $500,000 of convertible debentures which will provide new financing for the Company. The new convertible debentures are due on August 9, 2011 and have conversion rights essentially the same as YA Global.

During the year ended December 31, 2011, the Company issued an additional 577,597 (462,077,400 pre-reverse split) shares of Class A common stock to E-Lionheart for repayment valued at $143,244. The difference in the market value and the reduction in debt of $46,208 was charged to beneficial interest in the amount of $97,036.

On July 29, 2011 and August 9, 2011, the Company had defaulted on the terms of the E-Lionheart Convertible Debentures and as such, the full principal amount of these Debentures, together with interest and other amounts owing in respect thereof, shall become at the Holder's election, immediately due and payable in cash, provided however, the Holder may request (but shall have no obligation to request) payment of such amounts in Common stock of the Company.

As of March 31, 2012, the outstanding balance on the E-Lionheart Convertible Debentures were $626,123. During the calendar year 2011, the Company notified E-Lionheart that the Company was disputing the balances due upon this debenture due to miscalculations of the effective conversion rates used by E-Lionheart and as of the date of this filing, the dispute has not been settled.

In accordance with ASC 815, "Derivatives and Hedging", the Company determined that the conversion feature of the Debenture met the criteria of an embedded derivative, and therefore the conversion feature of this Debenture needed to be bifurcated and accounted for as a derivative. The fair value of the embedded conversion was estimated at the date of issuance using the Black-Scholes model with the following assumptions: risk free interest rate: 5.6%; expected dividend yield: 0%: expected life: 3 years; and volatility: 165.62%. The accounting guidance instructs that the conversion options are a derivative liability. As such, in March 2007 the Company recorded the conversion options as a liability, recorded a debt discount of $1,000,000, and charged Other Expense - Loss on Valuation of Derivative for $124,479, resulting primarily from calculation of the conversion price. For the three months ended March 31, 2012, the Company recorded a Gain on Valuation of Derivative in the amount of $624,720. For the year ended December 31, 2011, the Company recorded a Gain on Valuation of Derivative in the amount of $51,693.

On June 8, 2010 and June 22, 2010, the Company executed two wrap-around agreements, in an aggregate of $337,000, to assign amounts due under various Promissory Notes due to GlynnTech, Inc to EPIC Worldwide, Inc. (the “Investor”). The wrap-around agreements also modified the original terms to extend the due dates by one year, to include provisions to allow the Investor to convert the amounts due into common stock at a 50% discount of the average three deep bid on the day of conversion and to increase the interest rate to 15% after a 60 day interest free period.

On June 22, 2011, the Company had defaulted on the terms of the 2nd wrap-around agreements and as such, the default interest rate was increased retroactively to 24.99% on the remaining balance of the debt.

As of December 31, 2011, the outstanding balance on the EPIC Convertible Notes were $50,000.

On  March 6, 2012, the Company consented to the cancelation of the wrap around agreement with EPIC Worldwide and the reassignment of a new wrap around agreement with ATG, Inc. for $50,000 plus accrued interest of $26,050. Concurrent with the cancelation of the wrap around agreement, the Company also recorded a Gain on Valuation of Derivative in the amount of $154,201 on the retirement of the derivative liability.

On August 9, 2010, the Company entered into a securities purchase agreement with E-Lionheart to purchase up to $500,000 of convertible debentures from the Company. Amounts due under this debenture are due on or before August 9, 2011 and pays interest at the rate of 5% per annum. E-Lionheart has the right to convert a portion or the entire outstanding principal into the Company's Class A Common Stock at a Conversion Price equal to eighty percent (90%) of the lowest closing Bid Price of the Common Stock during the five (5) trading days immediately preceding the Conversion Date. E-Lionheart may not convert the Debenture into shares of Class A Common Stock if such conversion would result in YA Global beneficially owning in excess of 4.99% of the then issued and outstanding shares of Class A Common Stock.

On August 9, 2011, the Company had defaulted on the terms of this Debenture and as such, the full principal amount of this Debentures, together with interest and other amounts owing in respect thereof, shall become at the Holder's election, immediately due and payable in cash, provided however, the Holder may request (but shall have no obligation to request) payment of such amounts in Common stock of the Company.

In accordance with ASC 815, "Derivatives and Hedging", the Company determined that the conversion feature of the Debenture met the criteria of an embedded derivative, and therefore the conversion feature of this Debenture needed to be bifurcated and accounted for as a derivative. The fair value of the embedded conversion was estimated at the date of issuance using the Black-Scholes model with the following assumptions: risk free interest rate: 2.25%; expected dividend yield: 0%: expected life: 1 years; and volatility: 301.66% to 308.06%. The accounting guidance instructs that the conversion options are a derivative liability. As such, on the issue dates, the Company recorded the conversion options as a liability and recorded a debt discount of $143,408. For the three months ended March 31, 2012, the Company recorded a Gain on Valuation of Derivative in the amount of $429,255 on the fluctuation in the current market prices. For the year ended December 31, 2011, the Company recorded a Loss on Valuation of Derivative in the amount of $66,609 on the fluctuation in the current market prices.

On August 26, 2011 and November 22, 2011, the Company issued two convertible promissory notes, in an aggregate of $65,000, to Asher Enterprises, Inc. (“Asher”). Amounts due under these notes are due on or before May 30, 2012 and August 28, 2012, respectively, and pays interest at the rate of 8% per annum. Asher has the right to convert a portion or the entire outstanding principal into the Company's Class A Common Stock at a Conversion Price equal to fifty five percent (55%) of the Average of the lowest three (3) Trading Prices of the Common Stock during the ten (10) Trading Day period immediately preceding the Conversion Date. Asher may not convert the note into shares of Class A Common Stock if such conversion would result in Asher beneficially owning in excess of 4.99% of the then issued and outstanding shares of Class A Common Stock.

On March 7, 2012 the Company issued an additional 602,410 shares of Class A common stock to Asher for repayment of debt valued at $12,048. The difference in the market value and the reduction in debt of $5,000 was charged to beneficial interest in the amount of $7,048.

On March 13, 2012, the Company amended the terms of the August 26, 2011 note to change the Variable Conversion Price to equal thirty five (35%) multiplied by the average of the lowest two Trading Prices of the Common Stock during the thirty (30) Trading Day period immediately preceding the Conversion Date.

As of March 31, 2012 and December 31, 2011, the outstanding balance on these Convertible Promissory Notes was $60,000 and $65,000, respectively.

In accordance with ASC 815, "Derivatives and Hedging", the Company determined that the conversion feature of the Debenture met the criteria of an embedded derivative, and therefore the conversion feature of this Debenture needed to be bifurcated and accounted for as a derivative. The fair value of the embedded conversion was estimated at the date of issuance using the Black-Scholes model with the following assumptions: risk free interest rate: 2.25%; expected dividend yield: 0%: expected life: .75 years; and volatility: 212.29%. The accounting guidance instructs that the conversion options are a derivative liability. As such, on the issue dates, the Company recorded the conversion options as a liability, recorded a debt discount of $65,000, and charged Other Expense - Loss on Valuation of Derivative for $24,294. For the three months ended March 31, 2012, the Company recorded a Gain on Valuation of Derivative in the amount of $119,313 on the fluctuation in the current market prices. For the year ended December 31, 2011, the Company recorded a Loss on Valuation of Derivative in the amount of $139,106 on the fluctuation in the current market prices.

On February 16, 2012 and March 14, 2012, the Company issued an additional two convertible promissory notes, in an aggregate of $37,500, to Asher Enterprises, Inc. (“Asher”). Amounts due under these notes are due on or before November 21, 2012 and December 19, 2012, respectively, and pays interest at the rate of 8% per annum. Asher has the right to convert a portion or the entire outstanding principal into the Company's Class A Common Stock at a Conversion Price equal to fifty five percent (55%) of the Average of the lowest two (2) Trading Prices of the Common Stock during the twenty (20) Trading Day period immediately preceding the Conversion Date. Asher may not convert the note into shares of Class A Common Stock if such conversion would result in Asher beneficially owning in excess of 4.99% of the then issued and outstanding shares of Class A Common Stock.

As of March 31, 2012, the outstanding balance on these Convertible Promissory Notes were $37,500.

In accordance with ASC 815, "Derivatives and Hedging", the Company determined that the conversion feature of the Debenture met the criteria of an embedded derivative, and therefore the conversion feature of this Debenture needed to be bifurcated and accounted for as a derivative. The fair value of the embedded conversion was estimated at the date of issuance using the Black-Scholes model with the following assumptions: risk free interest rate: 2.25%; expected dividend yield: 0%: expected life: .75 years; and volatility: 278.05% and 301.94%, respectively. The accounting guidance instructs that the conversion options are a derivative liability. As such, on the issue dates, the Company recorded the conversion options as a liability, recorded a debt discount of $37,500, and charged Other Expense - Loss on Valuation of Derivative for $73,683. For the three months ended March 31, 2012, the Company recorded a Gain on Valuation of Derivative in the amount of $38,830 on the fluctuation in the current market prices.

On March 6, 2012, the Company consented to the reassignment of the outstanding balance of the EPIC Worldwide wrap around agreements to ATG, Inc. (“ATG”). The outstanding balance of principal and accrued interest was $76,050. ATG subsequently entered into an Assignment and Assumption Agreement with UAIM Corporation (“UAIM”) to assign $10,000 of these funds from ATG to UAIM. Amounts due under these agreements are due on or before March 6, 2013 and pays interest at the rate of 15% per annum. ATG and UAIM have the right to convert a portion or the entire outstanding principal into the Company's Class A Common Stock at a Conversion Price equal to $0.0005 per share. ATG and UAIM may not convert these agreements into shares of Class A Common Stock if such conversion would result in ATG or UAIM beneficially owning in excess of 4.99% of the then issued and outstanding shares of Class A Common Stock.

As of March 31, 2012, the outstanding balance on these agreements were $76,050.

In accordance with ASC 815, "Derivatives and Hedging", the Company determined that the conversion feature of the Debenture met the criteria of an embedded derivative, and therefore the conversion feature of this Debenture needed to be bifurcated and accounted for as a derivative. The fair value of the embedded conversion was estimated at the date of issuance using the Black-Scholes model with the following assumptions: risk free interest rate: 2.25%; expected dividend yield: 0%: expected life: 1.00 years; and volatility: 295.14. The accounting guidance instructs that the conversion options are a derivative liability. As such, on the issue dates, the Company recorded the conversion options as a liability, recorded a debt discount of $76,050, and charged Other Expense - Loss on Valuation of Derivative for $2,925,649. For the three months ended March 31, 2012, the Company recorded a Gain on Valuation of Derivative in the amount of $1,082 on the fluctuation in the current market prices.

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Related Party Transactions

3 Months Ended

Mar. 31, 2012

Notes to Financial Statements

Related Party Transactions

On June 1, 2009 and June 2, 2009, the Company issued two (2) one-year promissory notes in the aggregate of $37,000 to GlynnTech, Inc, for GlynnTech to assume a like amount of current obligations that the Company was unable to pay from current operations. The debt was due on or before the 1^st anniversary and was interest free.

On June 18, 2009, the Company acquired the patent rights and technology relating to cancer drug delivery systems developed by GlynnTech, Inc. by the issuance of three (3) $100,000 one-year promissory notes. The promissory notes were due on or before the 1^st anniversary of the notes and were interest free.

On December 28, 2009, the Company completed the transfer of the patent rights and technology relating to cancer drug delivery systems developed by GlynnTech, Inc. by the issuance of three (3) one-year promissory notes for the aggregate amount of $125,000. The promissory notes are due on or before the 1^st anniversary of the notes and are interest free.

On June 8, 2010 and June 22, 2010, the Company executed two wrap-around agreements, in an aggregate of $337,000, to assign amounts due under these one-year promissory notes to EPIC Worldwide, Inc. The Company was in default on the original notes and this allowed the Company to extend the payment terms for an additional year while the Company attains alternate financing.

On June 17, 2009, Kenneth P. Glynn, President and CEO of the Company, acquired debt owed by the Company to third party creditors as follows:

(1)   Promissory Note due to Jerome Mahoney dated August 5, 2005 having a balance on June 17, 2009 of $71,756 and accrued interest of $98,379;

(2)   Deferred Compensation due to Jerome Mahoney as of June 17, 2009 equal to $319,910;

(3)   Convertible promissory note to iVoice, Inc. dated March 5, 2008 having a balance on June 17, 2009, $79,936 and accrued interest of $4,344; and

(4)   Loan from iVoice Technology, Inc. to SpeechSwitch, Inc. in the amount of $3,600.

The outstanding promissory note, referred to above, will bear interest at the rate of Prime plus 1.0% per annum on the unpaid balance until paid. Under the terms of the Promissory Note, at the option of the Promissory Note holder, principal and interest can be converted into either (i) one share of SpeechSwitch Class B Common Stock, par value $.01 per share, for each dollar owed, (ii) the number of shares of SpeechSwitch Class A Common Stock calculated by dividing (x) the sum of the principal and interest that the Note holder has requested to have prepaid by (y) eighty percent (80%) of the lowest issue price of Class A Common Stock since the first advance of funds under this Note, or (iii) payment of the principal of this Promissory Note, before any repayment of interest. The Board of Directors of the Company maintains control over the issuance of shares and may decline the request for conversion of the repayment into shares of the Company.

The amount of deferred compensation, referred to above, was added to the outstanding promissory note for calculations of accrued interest and is payable in the form of cash, debt, or shares of our Class B Common Stock.

On May 27, 2010, the Company issued an aggregate of 7,057,328 (5,645,862,500 pre-reverse split) shares of Class A common stock and 10,000 shares of Class B common stock to Mr. Glynn in settlement of $509,425 (items #1 and #2 above) of promissory notes and accrued interest due to Mr. Glynn. These shares contain a restrictive legend which will limit Mr. Glynn from liquidating these into the open market.

On July 1, 2011, the Company extended the employment agreement with Mr. Glynn for an additional one (1) year period for Mr. Glynn to serve as President and CEO of the Company at an annual base salary of $96,000. During 2011 and the three month ended March 31, 2012, Mr. Glynn drew only a portion of his annual salary and the balance is being deferred. As of March 31, 2012, the total amount due to Mr. Glynn for unpaid compensation is $178,500.

During the year ended December 31, 2010 and the three month ended March 31, 2012, GlynnTech, Inc and Mr. Glynn have paid some bills on behalf of the Company. As of March 31, 2012, the aggregate amounts due for these payments is $23,307.

On July 1, 2011, the Company extended the Administrative Services Agreement with GlynnTech, Inc to provide back office administrative support to the Company. The administrative services agreement was for an initial term of one year and was extended for an additional one-year periods at the Company’s request. The amended fees are $7,500 per month but may be reduced in scope or eliminated at any time upon 90 days’ prior written notice by the Company to GlynnTech.

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Convertible Promissory Note and Derivative Liability

3 Months Ended

Mar. 31, 2012

Notes to Financial Statements

Convertible Promissory Note and Derivative Liability

The Company had entered into a temporary administrative services agreement with iVoice in 2004. The administrative services agreement continued on a month-to-month basis until December 31, 2008 at which point the agreements were suspended by mutual consent of the parties.

In March 2008, the administrative services agreement was amended to provide that accrued and unpaid administrative services shall be segregated and converted into a Convertible Promissory Note. The principal and interest shall be due and payable as follows: (a) interest shall accrue monthly on the unpaid balance and shall be paid annually, and (b) principal shall be payable on demand.

On March 5, 2008, the Company converted its outstanding accounts payable to iVoice, Inc. for unpaid administrative services in the amount of $50,652 into a convertible promissory note at the rate of prime plus 1 percent per annum. Additional amounts of $42,209 were added to this note based on any unpaid administrative services, and will accrue interest at the above specified rate from date of advance until paid.

On June 17, 2009, Kenneth P. Glynn (a related party) acquired this debt from iVoice, Inc. The Note holder may elect payment of the principal and/or interest, at the its sole discretion, owed pursuant to this Note by requiring the Company to issue either: (i) one Class B common stock share of the Company par value $.01 per share, for each dollar owed, (ii) the number of Class A common stock shares of the Company calculated by dividing (x) the sum of the principal and interest that the Note holder has decided to have paid by (y) eighty percent (80%) of the lowest issue price of Class A common stock since the first advance of funds under this Note, or (iii), payment of the principal of this Note, before any repayment of interest.

As of March 31, 2012, the outstanding balance on the Convertible Promissory Note was $79,936 plus accrued interest of $13,820.

Unless otherwise provided, this Convertible Promissory Note may be prepaid in full or in part at any time without penalty or premium. Partial prepayments shall be applied to installments due in reverse order of their maturity.

In the event of (a) default in payment of any installment of principal or interest hereof as the same becomes due and such default is not cured within ten (10) days from the due date, or (b) default under the terms of any instrument securing this Note, and such default is not cured within fifteen (15) days after written notice to maker, then in either such event the holder may, without further notice, declare the remainder of the principal sum, together with all interest accrued thereon, and the prepayment premium, if any, at once due and payable. Failure to exercise this option shall not constitute a waiver of the right to exercise the same at any other time. The unpaid principal of this Note and any part thereof, accrued interest and all other sums due under this Note shall bear interest at the rate of prime plus 1 percent per annum after default until paid.

The Convertible Promissory Note has a security interest in substantially all of the assets of the Company.

In accordance with ASC 815, "Derivatives and Hedging", the Company determined that the conversion feature of the Promissory Note met the criteria of an embedded derivative, and therefore the conversion feature of this Promissory Note needed to be bifurcated and accounted for as a derivative. The fair value of the embedded conversion was estimated at the date of issuance using the Black-Scholes model with the following assumptions: risk free interest rate: 5.6%; expected dividend yield: 0%: expected life: 5 years; and volatility: 263.04%. The accounting guidance instructs that the conversion options are a derivative liability. As such, at March 5, 2008 the Company recorded the conversion options as a liability, recorded a debt discount of $50,652, and charged Other Expense - Loss on Valuation of Derivative for $67,530, resulting primarily from calculation of the conversion price. For the three months ended March 31, 2012, the Company recorded a Gain on Valuation of Derivative in the amount of $20,882. For the year ended December 31, 2011, the Company recorded a Gain on Valuation of Derivative in the amount of $265,822.

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Promissory Notes

3 Months Ended

Mar. 31, 2012

Notes to Financial Statements

Promissory Notes

On June 15, 2011, the Company issued a promissory note, in an aggregate of $25,000, to Stuart W. DeJonge (“DeJonge”). Amounts due under this note are due on or before January 15, 2012 and pays interest at the rate of 9% per annum. On January 15, 2012, the Company defaulted on this note and as such, the lender may take whatever action he may elect to recover his loss while continuing to accrue 9% interest. As of March 31, 2012, the outstanding balance on the DeJonge note was $25,000 and accrued interest of $1,788.

On July 12, 2011, the Company issued a promissory note, in an aggregate of $15,000, to Opal Marketing Corp. Amounts due under this note are due on or before March 15, 2012 and pays interest at the rate of 7% per annum. On March 15, 2012, the Company defaulted on this note and as such, the lender may take whatever action he may elect to recover his loss while continuing to accrue 7% interest. As of March 31, 2012, the outstanding balance on the Opal Marketing Corp. note was $15,000 and accrued interest of $736.

On July 22, 2011, the Company issued a promissory note, in an aggregate of $100,000, to Charles M. Basner (“Basner”). Amounts due under this note are due on or before March 22, 2012 and pays interest at the rate of 7% per annum. On March 22, 2012, the Company defaulted on this note and as such, the lender may take whatever action he may elect to recover his loss while continuing to accrue 7% interest. As of March 31, 2012, the outstanding balance on the Basner note was $100,000 and accrued interest of $4,319.

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Fair Value Measurements

3 Months Ended

Mar. 31, 2012

Notes to Financial Statements

Fair Value Measurements

In September 2006, the FASB issued ASC 820, “Fair Value Measurements and Disclosures”, which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. The provisions of ASC 820 were effective January 1, 2008. As defined in ASC 820, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The Company utilizes market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable. The Company classifies fair value balances based on the observability of those inputs. ASC 820 establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the lowest priority to unobservable inputs (level 3 measurement).

ASC 820 classifies these inputs into the following hierarchy:

        Level 1 Inputs– Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Level 1 primarily consists of financial instruments such as exchange-traded derivatives, marketable securities and listed equities.

        Level 2 Inputs– Pricing inputs are other than quoted prices in active markets included in level 1, which are either directly or indirectly observable as of the reported date. Level 2 includes those financial instruments that are valued using models or other valuation methodologies. These models are primarily industry-standard models that consider various assumptions, including quoted forward prices for commodities, time value, volatility factors, and current market and contractual prices for the underlying instruments, as well as other relevant economic measures. Substantially all of these assumptions are observable in the marketplace throughout the full term of the instrument, can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace. Instruments in this category generally include non-exchange-traded derivatives such as commodity swaps, interest rate swaps, options and collars.

        Level 3 Inputs– Pricing inputs include significant inputs that are generally less observable from objective sources. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value.

The following table sets forth by level within the fair value hierarchy the Company’s financial assets and liabilities that were accounted for at fair value as of March 31, 2012 and December 31, 2010. As required by ASC 820, financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the valuation of fair value assets and liabilities and their placement within the fair value hierarchy levels.

March 31, 2012

Assets	Level I		Level II		Level III		Total
Total Assets	$-		$-		$-		$-
Convertible promissory notes	$	—	$	65,096	$	—	$	65,096
Notes payable - related parties		—		125,000		—		125,000
Notes payable - trade		—		140,000		—		140,000
Convertible debentures		—		1,173,735		—		1,173,735
Derivative liabilities		—		3,995,457		—		3,995,457
Total Liabilities	$	—	$	5,499,288	$	—	$	5,499,288

December 31, 2010

Assets	Level I		Level II		Level III		Total
Total Assets	$-		$-		$-		$-
Convertible promissory notes	$	—	$	61,112	$	—	$	61,112
Notes payable related parties		—		125,000		—		125,000
Notes payable trade		—		140,000		—		140,000
Convertible debentures		—		1,196,025		—		1,196,025
Derivative liabilities		—		2,270,858		—		2,270,858
Total Liabilities	$	—	$	3,792,995	$	—	$	3,792,995

The Company’s derivatives are classified within Level 2 of the valuation hierarchy. The Company’s derivatives are valued using internal models that use as their basis readily observable market inputs, such as time value, forward interest rates, and volatility factors. Refer to Notes 9 & 10 for more discussion on derivatives.

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Condensed Statements of Cash Flows (Unaudited) (USD $)	3 Months Ended
	Mar. 31, 2012	Mar. 31, 2011
Cash flows from operating activities:
Net income (loss)	$ (1,835,338)	$ 253,484
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Amortization of intangibles and depreciation expense	7,666	7,110
(Gain) loss on valuation of derivative	1,611,049	(622,174)
Amortization of discount on debt	36,694	141,440
Beneficial interest on conversion of debt	7,048	97,036
Changes in assets and liabilities:
Decrease in accounts receivable	391	0
Increase in inventories	(249)	(31,581)
Decrease (increase) in prepaid expenses	44	(542)
Increase in accounts payable and accrued expenses	102,891	33,477
Increase in amounts due to related parties	32,500	0
Net cash (used in) operating activities	(37,304)	(121,750)
Cash flows from investing activities:
Purchase of office equipment	0	(3,800)
Security deposit on GreenSmart store	0	(21,375)
Purchase of intangible assets	(2,470)	(5,000)
Net cash (used in) investing activities	(2,470)	(30,175)
Cash flows from financing activities:
Issuance of promissory notes	37,500	0
Net cash provided by financing activities	37,500	0
Net (decrease) in cash and cash equivalents	(2,274)	(151,925)
Cash and cash equivalents at beginning of period	6,960	190,322
Cash and cash equivalents at end of period	4,686	38,397
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash Paid During the Year Taxes paid	0	0
Cash Paid During the Year Interest paid	$ 0	$ 0

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Income (Loss) Per Share

3 Months Ended

Mar. 31, 2012

Notes to Financial Statements

Income (Loss) Per Share

ASC 260, “Earnings Per Share” requires presentation of basic earnings per share (“basic EPS”) and diluted earnings per share (“diluted EPS”). The Company’s basic income (loss) per common share is based on net income or loss for the relevant period, divided by the weighted average number of common shares outstanding during the period. Diluted income or loss per common share is based on net income or loss, divided by the weighted average number of common shares outstanding during the year, including common share equivalents, such as outstanding stock options. The computation of diluted loss per share also does not assume conversion, exercise or contingent exercise of securities due to the beneficial conversion of related party accounts as these shares that would have an anti-dilutive effect.  

The computation of income (loss) per share is as follows:

	Three months Ended			Three months Ended
	March 31, 2012			March 31, 2011
Basic net income (loss) per share computation:
Net income (loss) attributable to common stockholders	$	(1,835,338	)	$	253,484
Weighted-average common shares outstanding (see below)		12,583,885			12,360,864
Basic net income (loss) per share attributable to    common stockholders (see below)	$	(0.15	)	$	0.02
Diluted net income (loss) per share computation
Net income (loss) attributable to common stockholders	$	(1,835,338	)	$	253,484
Weighted-average common shares outstanding (see below)		12,583,885			12,360,864
Incremental shares attributable to the assumed conversion of    Convertible debenture and convertible promissory note		—			12,639,136
Total adjusted weighted-average shares		12,583,885			25,000,000
Diluted net income (loss) per share attributable to common stockholders (see below)	$	(0.15	)	$	0.01

At March 31, 2012, the Company had common stock equivalents of 241,540,640. At March 31, 2011, the Company had common stock equivalents of 14,981,883 (11,985,506,505 pre-reverse split), but when added to the common stock outstanding, they are in excess of the authorized capital, so the maximum authorized shares of 25,000,000 are shown for diluted earnings per common share calculations.

On May 31, 2011, the Company executed a reverse stock split in the ratio of one new share for every eight hundred shares held by stockholders. Concurrent with this change, the weighted average shares outstanding and basic and diluted net income (loss) per share were restated to reflect this change. For the three months ended March 31, 2011, weighted average common shares was changed from 9,888,691,090 to 12,360,864 and net income per common share was changed from $0.00 to $0.02.

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New Accounting Pronouncements

3 Months Ended

Mar. 31, 2012

Notes to Financial Statements

New Accounting Pronouncements

In December 2011, the FASB issued ASU 2011-11, “Disclosures about Offsetting Assets and Liabilities.” ASU 2011-11 amends the disclosure requirements on offsetting in Section 210-20-50 which requires an entity to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial position. The amended guidance is effective for interim and annual financial periods beginning on or after January 1, 2013. We do not expect adoption of this guidance to have an impact on our financial statements.

Management does not believe that any other recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying financial statements.