U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10Q

(Mark One)

þ Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ~~ended~~ending ~~March~~June 3130, 2010.

o Transition report under Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from ____________ to ______________

For the Period Ended ~~March~~ June 3130, 2010

Commission file number 000-33415

CYBERLUX CORPORATION

(Name of Small Business Issuer in Its Charter)

Nevada		91-2048978
(State of Incorporation)		(IRS Employer Identification No.)

4625 Creekstone Drive

Suite 130

Research Triangle Park

Durham, NC 27703

(Address of Principal Executive Offices)

(919) 474-9700

Issuer's Telephone Number

Indicate by check mark whether the issuer (1) 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 þ No o

Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

Large accelerated Filer o

accelerated filer o

non-accelerated filer o

Smaller reporting Company þ

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

~~Yes o No þ~~Number of shares outstanding of the issuer’s Common Stock as of August 16, 2010: 100,596,831 (post 1-for-200 reverse split of the registrant’s common stock, effective on July 28, 2010).

Number of shares outstanding of the issuer’s Common Stock as of May 20, 2010: 15,935,789,033

CYBERLUX CORPORATION

Quarterly Report on Form 10-Q for the

Quarterly Period Ending ~~March~~June 3130, 2010

Table of Contents

PART I. FINANCIAL INFORMATION
	Item 1.	Financial Statements
		Condensed Consolidated Balance Sheets:
		March 31, 2010 (Unaudited) and December 31, 2009 (Audited)	3
		June 30, 2010 (Unaudited) and December 31, 2009 (Audited)	3
		Condensed Consolidated Statements of Losses:
		Three months ended March 31, 2010 and 2009 (Unaudited)	4
		Three and six months ended June 30, 2010 and 2009 (Unaudited)	4
		Condensed Consolidated Statements of Cash Flows:
		Three months ended March 31, 2010 and 2009 (Unaudited)	5
		Six months ended June 30, 2010 and 2009 (Unaudited)	5
		Notes to Unaudited Condensed Consolidated Financial Information:
		March 31, 2010	6-13
		June 30, 2010	6-15
	Item 2.	Management Discussion and Analysis	1416
	Item 3.	Controls and Procedures	1820
PART II. OTHER INFORMATION
	Item 1.	Legal Proceedings	1821
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	1821
	Item 3.	Defaults Upon Senior Securities	1921
	Item 4.	(Removed and Reserved)	1921
	Item 5.	Other Information	1921
	Item 6.	Exhibits	1921
~~Signatures~~		Signatures	1922

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CYBERLUX CORPORATION ~~CONDENSED CONSOLIDATED BALANCE SHEETS~~

	March 31,		December 31,
	2010		2009
	(unaudited)
ASSETS
Current assets:
Cash & cash equivalents	$	37,550	$	24,951
Investment - restricted use		23,494		23,413
Accounts receivable, net of allowance for doubtful accounts of $14,110		3,017		72,146
Inventories, net of allowance of $43,333		31,493		32,082
Total current assets		95,473		152,592
Property, plant and equipment, net of accumulated depreciation of $112,984 and $109,223, respectively		27,414		31,175
Total Assets	$	122,968	$	183,767
LIABILITIES AND DEFICIENCY IN STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable		2,793,352		3,527,038
Accrued liabilities		3,754,392		3,631,966
Short-term notes payable - related parties		1,363,511		1,372,311
Short-term notes payable		5,225,549		5,222,549
Warrants payable		370,898		467,877
Total current liabilities		13,507,703		14,214,766
Long-term liabilities		-		-
Total liabilities		13,507,703		14,224,741
Commitments and Contingencies
Redeemable Series A convertible preferred stock, $0.001 par value; 200 shares designated, 26.98 issued and outstanding as of March 31, 2010 and December 31, 2009.		134,900		134,900
DEFICIENCY IN STOCKHOLDERS' EQUITY
Class B convertible preferred stock, $0.001 par value, 50,000,000 shares designated; 50,000,000 and 25,000,000 shares issued and outstanding as of March 31, 2010 and December 31, 2009, respectively.		50,000		25,000
Class C convertible preferred stock, $0.001 par value, 700,000 shares designated; 150,000 shares issued and outstanding as of March 31, 2010 and December 31, 2009.		150		150
Common stock, $0.001 par value, 20,000,000,000 shares authorized; 12,011,762,303 and 4,816,864,598 shares issued and outstanding as of March 31, 2010 and December 31, 2009, respectively		12,011,762		4,816,865
Additional paid-in capital		8,634,359		14,752,084
Accumulated deficit		(34,215,906)		(33,769,973)
Deficiency in stockholders' equity		(13,384,735)		(14,040,974)
Total liabilities and (deficiency) in stockholders' equity	$	122,968	$	183,767

CONDENSED CONSOLIDATED BALANCE SHEETS

	June 30,			December 31,
	2010			2009
	(unaudited)
ASSETS
Current assets:
Cash & cash equivalents	$	8,978		$	24,951
Investments-restricted use		23,413			23,413
Accounts receivable, net of allowance for doubtful accounts of $6,367 and $7,760, respectively		17,334			72,146
Inventories, net of allowance of $43,333		105,366			32,082
Other current assets		39,276			-
Total current assets		194,366			152,592

Property, plant and equipment, net of accumulated depreciation of $116,745 and $109,223, respectively		23,653			31,175

Total Assets	$	218,020		$	183,767

LIABILITIES AND DEFICIENCY IN STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	2,693,160		$	3,527,037
Accrued liabilities		4,049,566			3,631,966
Short-term notes payable - related parties		1,457,611			1,372,311
Short-term notes payable		5,225,549			5,225,549
Warrant payable		434,898			457,902
Total current liabilities		13,860,784			14,214,765

Long-term liabilities:
Warrant liability relating to convertible debentures		-			9,976
Total long-term liabilities		-			9,976

Total liabilities		13,860,784			14,224,741

Commitments and Contingencies

Redeemable Series A convertible preferred stock, $0.001 par value; 200 shares designated, 26.98 issued and outstanding as of June 30, 2010 and December 31, 2009		134,900			134,900

DEFICIENCY IN STOCKHOLDERS' EQUITY
Class B convertible preferred stock, $0.001 par value, 50,000,000 shares designated; 50,000,000 and 25,000,000 shares issued and outstanding as of June 30, 2010 and December 31, 2009, respectively		50,000			25,000
Class C convertible preferred stock, $0.001 par value, 700,000 shares designated; 150,000 shares issued and outstanding as of June 30, 2010 and December 31, 2009		150			150
Common stock, $0.001 par value, 20,000,000,000 shares authorized; 16,918,789,033 and 4,816,864,598 shares issued and outstanding as of June 30, 2010 and December 31, 2009, respectively		16,918,789			4,816,865
Additional paid-in capital		4,133,053			14,752,084
Accumulated deficit		(34,879,656	)		(33,769,973	)
Deficiency in stockholders' equity		(13,777,664	)		(14,175,874	)

Total liabilities and (deficiency) in stockholders' equity	$	218,020		$	183,767

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

CYBERLUX CORPORATION ~~CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)~~

	Three months ended March 31,
	2010		2009
REVENUE:	$	28,691	$	44,316
Cost of goods sold		(21,948)		(19,485)
Gross margin		6,743		24,831
OPERATING EXPENSES:
Depreciation		3,761		4,858
Research and development		5,901		79
General and administrative expenses		400,002		573,263
Total operating expenses		409,664		578,200
NET LOSS FROM OPERATIONS		(402,921)		(553,369)
Unrealized loss relating to adjustment of derivative and warrant liability to fair value of underlying securities		-		(5,054,640)
Interest expense, net		(52,989)		(409,330)
Impairment of warrants		9,976		-
Net loss before provision for income taxes		(445,934)		(6,017,339)
Income taxes (benefit)		-		60
LOSS AVAILABLE TO COMMON STOCKHOLDERS	$	(445,934)	$	(6,017,399)
Weighted average number of common shares outstanding-basic and fully diluted		8,020,355,348		643,052,619
Loss per share-basic and fully diluted	$	(0.00)	$	(0.01)
Preferred dividend	$	-	$	24,000

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

~~The accompanying notes are an integral part of these condensed consolidated financial statements~~(Unaudited)

	Three months ended June 30,						Six months ended June 30,
	2010			2009			2010			2009
REVENUE:	$	29,196		$	1,781		$	57,887		$	46,097
Cost of goods sold		(40,353	)		(22,900	)		(62,301	)		(42,385	)
Gross margin		(11,157	)		(21,119	)		(4,414	)		3,712

OPERATING EXPENSES:
Depreciation		3,761			4,552			7,522			9,410
Research and development		37,777			4,319			43,678			4,398
General and administrative expenses		515,485			565,563			915,487			1,138,826
Total operating expenses		557,023			574,434			966,687			1,152,634

NET LOSS FROM OPERATIONS		(568,180	)		(595,553	)		(971,101	)		(1,148,922	)

Unrealized gain (loss) relating to adjustment of derivative and warrant liability to fair value of underlying securities		-			10,386,354			-			5,331,714
Interest expense, net		(95,569	)		(360,609	)		(148,558	)		(769,939	)
Gain on warrant liability		-						9,976
Debt acquisition costs		-			(2,800	)		-			(2,800	)

Net income (loss) before provision for income taxes		(663,749	)		9,427,392			(1,109,683	)		3,410,053

Income taxes		-			-			-			60

INCOME (LOSS) AVAILABLE TO COMMON STOCKHOLDERS	$	(663,749	)	$	9,427,392		$	(1,109,683	)	$	3,409,993

Weighted average number of common shares outstanding-basic		15,483,640,718			1,033,911,576			11,732,864,027			964,158,652

Weighted average number of common shares outstanding-fully diluted				Note A						Note A

Income (Loss) per share-basic	$	(0.00	)	$	0.01		$	(0.00	)	$	0.00

Loss per share-fully diluted				Note A						Note A

Preferred dividend	$	24,000		$	24,000		$	48,000		$	48,000

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

CYBERLUX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(Unaudited)
	Three months ended March 31,
	2010		2009
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) available to common stockholders	$	(445,934)	$	(6,017,399)
Adjustments to reconcile net income (loss) to cash used in operating activities
Depreciation		3,761		4,858
Amortization		-		46,561
Impairment of warrants		(9,976)		-
Common stock issued in connection issuance of debt				-
Common stock issued in connection for services rendered		1,054,172		-
Series B preferred stock issued for services rendered		25,000		18,000
Accretion of convertible notes payable		-		234,430
Unrealized (gain) loss on adjustment of derivative and warrant liability to fair value of underlying securities		-		5,054,640
(Increase) decrease in:
Accounts receivable		69,129		31,443
Inventories		589		4,825
Prepaid expenses and other assets		(81)		(49,236)
Increase (decrease) in:
Cash overdraft		-		15,975
Accounts payable		(733,684)		264,013
Accrued liabilities		122,426		316,841
Net cash (used in) operating activities		85,402		(75,049)
CASH FLOWS FROM INVESTING ACTIVITIES:		-		-
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from conversion of warrants		(87,003)		-
Proceeds from sale of common stock		23,000		75,251
Net proceeds (payments) from borrowing on long term basis		-		-
Net proceeds (payments) to notes payable, related parties		(8,800)		24,620
Net cash provided by (used in) financing activities:		(72,803)		99,871
Net increase (decrease) in cash and cash equivalents		12,599		24,822
Cash and cash equivalents at beginning of period		24,951		260
Cash and cash equivalents at end of period	$	37,550	$	25,082
Supplemental disclosures:
Interest Paid	$	-	$	-
Income Taxes Paid	$	-	$	60
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Unrealized (gain) loss in adjustment of derivative and warrant liability to fair value of underlying securities	$	-	$	5,054,640
Series B preferred stock issued for services rendered	$	25,000	$	18,000
Common stock issued for services rendered	$	-	$	-

CYBERLUX CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW

(Unaudited)

	Six months ended June 30,
	2010			2009
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) available to common stockholders	$	(1,109,683	)	$	3,409,993
Adjustments to reconcile net income (loss) to cash used in operating activities
Depreciation		7,522			9,410
Amorization		-			93,122
Common stock issued in connection for services rendered		-			13,000
Series B preferred stock issued for services rendered		50,000			18,000
Cancellation of previously issued common stock for services rendered		(34,552	)		-
Gain on warrant liability		(9,976	)		-
Accretion of convertible notes payable		-			432,219
Unrealized (gain) loss on adjustment of derivative and warrant liability to fair value of underlying securities		-			(5,331,714	)
(Increase) decrease in:
Accounts receivable		54,812			75,988
Inventories		(73,284	)		11,796
Prepaid expenses and other assets		(39,276	)		(77,500	)
Increase (decrease) in:
Cash overdraft		-			(41,113	)
Accounts payable		545,230			444,514
Accrued liabilities		417,600			588,911
Net cash (used in) operating activities		(191,607	)		(353,374	)

CASH FLOWS FROM INVESTING ACTIVITIES:		-			-

CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of convertible debentures		-			-
Proceeds from sale of common stock		90,334			227,501
Net proceeds (payments) from borrowing on long term basis		-			40,000
Net proceeds (payments) to notes payable, related parties		85,300			86,186
Net cash provided by (used in) financing activities:		175,634			353,687

Net increase (decrease) in cash and cash equivalents		(15,973	)		313
Cash and cash equivalents at beginning of period		24,951			260
Cash and cash equivalents at end of period	$	8,978		$	573

Supplemental disclosures:
Interest Paid	$	-		$	-
Income Taxes Paid	$	-		$	60

NON-CASH INVESTING AND FINANCING ACTIVITIES:
Unrealized (gain) loss in adjustment of derivative and warrant liability to fair value of underlying securities	$	-		$	(5,331,714	)
Series B preferred stock issued for services rendered	$	50,000		$	18,000
Common stock issued for services rendered	$	-		$	13,000

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

CYBERLUX CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~MARCH~~JUNE 3130, 2010

(Unaudited)

NOTE A – SUMMARY OF ACCOUNTING POLICIES

General

The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Accordingly, the results from operations for the three month period ended ~~March~~June 3130, 2010, are not necessarily indicative of the results that may be expected for the year ended December 31, 2010. The unaudited condensed financial statements should be read in conjunction with the December 31, 2009 financial statements and footnotes thereto included in the Company's Form 10-K for the year ended December 31, 2009.

Business and Basis of Presentation

Cyberlux Corporation (the "Company") is incorporated on May 17, 2000 under the laws of the State of Nevada. Until December 31, 2004, the Company was a development stage enterprise as defined under ~~Statement on Financial~~ Accounting Standards ~~No.7,~~Codification subtopic 915-10 Development Stage ~~Enterprises ("SFAS No~~Entities.~~7").~~ The Company develops, manufactures and markets long-term portable lighting products for commercial and industrial users. While the Company has generated revenues from its sale of products, the Company has incurred expenses, and sustained losses. Consequently, its operations are subject to all risks inherent in the establishment of a new business enterprise. As of ~~March~~June 3130, 2010, the Company has accumulated losses of $34,~~215~~879,~~906~~656.

The consolidated financial statements include the accounts of its wholly owned subsidiaries, SPE Technologies, Inc. and Hybrid Lighting Technologies, Inc. All significant intercompany balances and transactions have been eliminated in consolidation.

Revenue Recognition

Revenues are recognized in the period that products are provided. For revenue from product sales, the Company recognizes revenue in accordance with FASB Accounting Standards Codification 605, REVENUE RECOGNITION SEC STAFF ACCOUNTING BULLETIN TOPIC 13". ASC 605 requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the selling price is fixed and determinable; and (4) collectability is reasonably assured. Determination of criteria (3) and (4) are based on management's judgments regarding the fixed nature of the selling prices of the products delivered and the collectability of those amounts. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded. The Company defers any revenue for which the product has not been delivered or is subject to refund until such time that the Company and the customer jointly determine that the product has been delivered or no refund will be required. At December 31, 2009 and 8June 30, 2010, the Company did not have any deferred revenue.

ASC 605 incorporates Accounting Standards Codification 605-25, REVENUE RECOGNITION MULTIPLE ELEMENT ARRANGEMENTS. ASC 605-25 addresses accounting for arrangements that may involve the delivery or performance of multiple products, services and/or rights to use assets. The effect of implementing ~~EITF~~ASC 00605-2125 on the Company’s financial position and results of operations was not significant.

Reclassification

Certain reclassifications have been made in prior year’s financial statements to conform to classifications used in the current year.

CYBERLUX CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~MARCH~~JUNE 3130, 2010

(Unaudited)

NOTE A – SUMMARY OF ACCOUNTING POLICIES (continued)

Reclassification

Certain reclassifications have been made in prior year’s financial statements to conform to classifications used in the current year.

Concentrations of Credit Risk

Financial instruments and related items which potentially subject the Company to concentrations of credit risk consist primarily of cash, cash equivalents and trade receivables. The Company places its cash and temporary cash investments with credit quality institutions. At times, such investments may be in excess of the FDIC insurance limit. The Company periodically reviews its trade receivables in determining its allowance for doubtful accounts. At ~~March~~June 3130, 2010 and December 31, 2009, allowance for doubtful receivable was $146,~~110~~367 and $7760, respectively.

Stock based compensation

OnEffective ~~December 16~~January 1, ~~2004~~2006, the ~~Financial~~beginning ~~Accounting~~of ~~Standards~~the ~~Board~~Company’s ~~(FASB)~~first ~~issued~~fiscal ~~Accounting~~quarter ~~Standards~~of ~~Codification 718~~2006, ~~"Compensation-Stock~~the ~~Compensation".~~Company ~~ASC 718~~adopted ~~supersedes~~the ~~APB~~fair ~~opinion~~value ~~No.~~recognition ~~25,~~provisions "of Accounting ~~for~~Standards ~~Stock~~Codification ~~Issued~~subtopic ~~to Employees"~~718-10, ~~and~~Compensation ~~amends~~ (“ASC ~~95,~~ ~~"Statement of Cash Flows". ASC~~ 718-10”) ~~requires~~using ~~all~~the ~~share~~modified-~~based~~prospective ~~payments~~transition tomethod. ~~employees,~~Under ~~including~~this ~~grants~~transition ofmethod, ~~employee~~ stock-based ~~options,~~compensation toexpense bewas recognized in the ~~income~~financial ~~statement~~statements ~~based~~for ongranted, ~~their~~modified, ~~fair~~or ~~values.~~settled ~~Pro-forma~~stock ~~disclosure is no longer an alternative~~options. ~~This~~Compensation ~~statement~~expense ~~does~~recognized ~~not~~included ~~change~~ the ~~accounting~~estimated ~~guidance~~expense for ~~share~~stock ~~based~~options ~~payment~~granted ~~transactions~~on ~~with~~and ~~parties~~subsequent ~~other~~to ~~than employees provided in ASC~~January ~~718.~~1, ~~This~~2006, ~~statement~~based ~~does~~on ~~not address~~ the ~~accounting~~grant ~~for~~date ~~employee~~fair ~~share~~value ~~ownership~~estimated ~~plans,~~in ~~which~~accordance ~~are~~with ~~subject~~the toprovisions ~~AICPA Statement~~ of ~~Position~~ASC 93718-610, ~~“Employers’~~and ~~Accounting for Employee Stock Ownership Plans.” On April 14, 2005,~~ the ~~SEC~~estimated ~~amended~~expense ~~the~~for ~~effective date of~~ the ~~provisions~~portion ofvesting ~~this~~in ~~statement. The effect of this amendment by~~ the ~~SEC~~period isfor ~~that~~options ~~the~~granted ~~Company~~prior ~~had~~ to, ~~comply~~but ~~with~~not ~~ASC 718~~vested ~~and~~as ~~use the Fair Value based method~~ of ~~accounting no later than the first quarter of 2006. The Company implemented ASC 718 on~~ January 1, 2006, ~~using~~based on the ~~modified~~grant ~~prospective~~date ~~method. The~~ fair value ofestimated ~~each~~in ~~option~~accordance ~~grant~~with ~~issued~~the ~~after~~original ~~January~~provisions ~~1, 2006 was determined as~~ of ~~grant~~ASC ~~date, utilizing the Black~~718-~~Scholes option pricing model~~10. ~~The~~Results ~~amortization~~for ofprior ~~each~~periods ~~option~~have ~~grant~~not ~~will~~been berestated, ~~over~~as ~~the~~provided ~~remainder~~for ofunder the ~~vesting~~modified-prospective ~~period of each option grant~~method.

InASC ~~prior years, the Company applied the intrinsic~~718-~~value method prescribed in Accounting Principles Board (“APB”) Opinion No.~~10 ~~25,~~requires ~~“Accounting~~forfeitures ~~for Stock Issued~~ to ~~Employees,”~~be toestimated ~~account~~at ~~for~~ the ~~issuance~~time of ~~stock~~grant ~~options~~and torevised, ~~employees~~if ~~and~~necessary, ~~accordingly~~in ~~compensation~~subsequent ~~expense~~periods ~~related~~if toactual ~~employees’~~forfeitures ~~stock~~differ ~~options~~from ~~were~~those ~~recognized~~estimates. inIn the ~~prior~~Company’s ~~year~~pro ~~financial~~forma ~~statements~~information torequired ~~the extent options granted~~ under ~~stock~~ASC ~~incentive~~718-10 ~~plans~~for ~~had~~the anperiods ~~exercise~~prior ~~price~~to ~~less~~fiscal ~~than~~2006, the ~~market~~Company ~~value~~accounted offor ~~the~~forfeitures ~~underlying~~as ~~common~~they ~~stock on the date of grant~~occurred.

Comprehensive Income (Loss)

The Company adopted Accounting Standards Codification 220 "Comprehensive Income”. ASC 220 establishes standards for the reporting and displaying of comprehensive income and its components. Comprehensive income is defined as the change in equity of a business during a period from transactions and other events and circumstances from non-owners sources. It includes all changes in equity during a period except those resulting from investments by owners and distributions to owners. ASC 220 requires other comprehensive income (loss) to include foreign currency translation adjustments and unrealized gains and losses on available for sale securities.

Liquidity

As shown in the accompanying consolidated financial statements, the Company incurred net a net loss from operations of $(445,934) and (6,017,399) for the three month periods ended March 31, 2010 and 2009, respectively. The Company's current liabilities exceeded its current assets by $13,412,230 as of March 31, 2010.

CYBERLUX CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~MARCH~~JUNE 3130, 2010

(Unaudited)

NOTE A – SUMMARY OF ACCOUNTING POLICIES (continued)

Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. Depreciation is computed using the straight-line method over the estimated useful lives of the respective assets.

The estimated useful lives of property, plant and equipment are as follows:

Furniture and fixtures		7years
Office equipment		3 to 5 years
Leasehold improvements		5 years
Manufacturing equipment		3 years

We evaluate the carrying value of items of property, plant and equipment to be held and used whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. The carrying value of an item of property, plant and equipment is considered impaired when the projected undiscounted future cash flows related to the asset are less than its carrying value. We measure impairment based on the amount by which the carrying value of the respective asset exceeds its fair value. Fair value is determined primarily using the projected future cash flows discounted at a rate commensurate with the risk involved.

Net Income (loss) Per Common Share

The Company computes earnings per share under Accounting Standards Codification subtopic 260-10, Earnings Per Share (“ASC 260-10”). Net earnings (losses) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock and dilutive common stock equivalents outstanding during the period. Dilutive common stock equivalents consist of shares issuable upon conversion of convertible preferred shares and the exercise of the Company's stock options and warrants (calculated using the treasury stock method). During the three and six months ended June 30, 2010, common stock equivalents are not considered in the calculation of the weighted average number of common shares outstanding because they would be anti-dilutive, thereby decreasing the net loss per common share.

CYBERLUX CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2010

(Unaudited)

NOTE A – SUMMARY OF ACCOUNTING POLICIES (continued)

The weighted average shares outstanding used in the basic net income per share computations for the three and six months ended June 30, 2010 was 15,483,640,718 and 11,732,864,027, respectively. In determining the number of shares used in computing diluted loss per share, the Company did not add approximately 611,373,420 potentially dilutive securities for the three and six months ended June 30, 2010 because the effect would be anti-dilutive. The potentially dilutive securities added were mostly attributable to the warrants, options and convertible debentures outstanding. As a result, the diluted loss per share for the three and six months ended June 30, 2010 was $0.00.

Fair Values

On January 1, 2008, the Company adopted Accounting Standards Codification 820, “Fair Value Measurements and Disclosures”. ASC 820 defines fair value, establishes a framework for measuring fair value, and enhances fair value measurement disclosure. The effective date for ASC 820 for all non-financial assets and non-financial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually) was the first quarter of 2009. The adoption of ASC 820 did not have a material impact on the Company’s financial position or operations.

Recent accounting pronouncements

~~Effective~~In ~~July 1,~~March ~~2009~~2010, the ~~Company adopted the Financial Accounting Standards Board (“~~FASB”) ~~Accounting~~issued ~~Standards~~new ~~Codification~~accounting ~~(“ASC”) 105-10~~guidance, ~~Generally~~under ~~Accepted~~ASC ~~Accounting~~Topic ~~Principles~~605 –on ~~Overall~~Revenue ~~(“ASC 105-10”)~~Recognition. This ~~ASC~~standard ~~105-10~~provides ~~establishes~~that the ~~FASB~~milestone ~~Accounting~~method ~~Standards~~is ~~Codification~~a ~~(the~~valid ~~“Codification”)~~application asof the ~~source~~proportional ofperformance ~~authoritative~~model ~~accounting~~for ~~principles~~revenue ~~recognized~~recognition byif the ~~FASB~~milestones toare besubstantive ~~applied~~and bythere ~~nongovernmental~~is ~~entities~~substantive inuncertainty ~~the~~about ~~preparation~~whether ofthe ~~financial~~milestones ~~statements~~will inbe ~~conformity with U~~achieved.S. Determining ~~GAAP.~~whether ~~Rules~~a ~~and~~milestone ~~interpretive~~is ~~releases~~substantive ofrequires ~~the~~judgment ~~SEC~~that ~~under~~should ~~authority~~be ofmade ~~federal~~at ~~securities~~the ~~laws~~inception ~~are also sources~~ of ~~authoritative~~the Uarrangement.S. To ~~GAAP~~meet ~~for~~the ~~SEC~~definition ~~registrants.~~of ~~All~~a ~~guidance~~substantive ~~contained~~milestone, in the ~~Codification~~consideration ~~carries~~earned anby ~~equal~~achieving ~~level~~the ofmilestone ~~authority.~~(1) ~~The~~would ~~Codification~~have ~~superseded~~to ~~all~~be ~~existing~~commensurate ~~non-SEC~~with ~~accounting~~either ~~and~~the ~~reporting~~level ~~standards.~~of ~~All~~effort ~~other~~required ~~non-grandfathered,~~to ~~non-SEC~~achieve ~~accounting~~the ~~literature~~milestone ~~not~~or ~~included~~the enhancement in the ~~Codification~~value isof ~~non-authoritative.~~the ~~The~~item ~~FASB~~delivered, ~~will~~(2) ~~not~~would ~~issue~~have ~~new~~to ~~standards~~relate insolely ~~the~~to ~~form~~past ~~of Statements~~performance, ~~FASB~~and ~~Staff~~(3) ~~Positions~~should orbe ~~Emerging~~reasonable ~~Issues~~relative ~~Task~~to ~~Force~~all ~~Abstracts.~~deliverables ~~Instead,~~and itpayment ~~will~~terms ~~issue~~in ~~Accounting~~the ~~Standards Updates (“ASUs”)~~arrangement. No ~~The~~bifurcation ~~FASB~~of ~~will~~an ~~not~~individual ~~consider~~milestone ~~ASUs~~is asallowed ~~authoritative~~and inthere ~~their~~can ~~own~~be ~~right.~~more ~~ASUs~~than ~~will~~one ~~serve~~milestone ~~only~~in toan ~~update~~arrangement. The ~~the~~standard ~~Codification,~~is ~~provide~~effective ~~background~~for ~~information~~interim ~~about~~and ~~the~~annual ~~guidance~~periods ~~and~~beginning ~~provide~~on ~~the~~or ~~bases~~after ~~for~~June ~~conclusions~~15, on2010. The ~~the~~Company ~~change(s)~~is incurrently evaluating the ~~Codification.~~impact ~~References~~the ~~made~~adoption toof ~~FASB~~this guidance ~~throughout~~will ~~this document~~ have ~~been~~on ~~updated~~its ~~for~~financial ~~the Codification~~statements.

~~Effective January 1, 2008, the Company adopted FASB ASC 820-10, Fair Value Measurements and Disclosures – Overall (“ASC 820-10”) with respect to its financial assets and liabilities.~~ In February ~~2008~~ 2010, the FASB issued ~~updated~~ASU ~~guidance related to fair value measurements~~No. 2010-09, which isupdates ~~included in~~ the ~~Codification~~guidance in ASC ~~820-10-55~~855, ~~Fair~~Subsequent Value Measurements and Disclosures – Overall – Implementation Guidance and Illustrations. The updated guidance provided a one year deferral of the effective date of ASC 820-10 for non-financial assets and non-financial liabilitiesEvents, ~~except~~such ~~those~~ that ~~are~~companies ~~recognized~~that orfile ~~disclosed~~with in the ~~financial~~SEC ~~statements~~will atno ~~fair~~longer ~~value~~be atrequired ~~least~~to ~~annually.~~indicate ~~Therefore,~~ the ~~Company~~date ~~adopted~~through ~~the~~which ~~provisions~~they ofhave ~~ASC~~analyzed ~~820-10~~subsequent ~~for~~events. ~~non-financial~~This ~~assets~~updated ~~and~~guidance ~~non-financial~~became ~~liabilities~~ effective ~~January 1,~~immediately ~~2009,~~upon issuance and ~~such~~was ~~adoption~~adopted ~~did~~as ~~not~~of ~~have a material impact on~~ the ~~Company’s~~first ~~consolidated~~quarter ~~results~~ of ~~operations or financial condition~~2010.

8In February 2010 the FASB issued Update No. 2010-08 Technical Corrections to Various Topics (“2010-08”). 2010-08 represents technical corrections to SEC paragraphs within various sections of the Codification. Management is currently evaluating whether these changes will have any material impact on its financial position, results of operations or cash flows.

CYBERLUX CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~MARCH~~JUNE 3130, 2010

(Unaudited)

NOTE A – SUMMARY OF ACCOUNTING POLICIES (continued)

~~Effective~~Recent ~~April 1,~~Accounting ~~2009,~~Pronouncements ~~the Company adopted FASB ASC 820-10-65, Fair Value Measurements and Disclosures – Overall – Transition and Open Effective Date Information~~ (~~“ASC 820-10-65”~~Continued). ASC 820-10-65 provides additional guidance for estimating fair value in accordance with ASC 820-10 when the volume and level of activity for an asset or liability have significantly decreased. ASC 820-10-65 also includes guidance on identifying circumstances that indicate a transaction is not orderly. The adoption of ASC 820-10-65 did not have an impact on the Company’s consolidated results of operations or financial condition.

~~Effective~~In ~~April 1,~~January ~~2009,~~2010 the ~~Company~~FASB ~~adopted~~issued ~~FASB~~Update ~~ASC~~No. ~~825~~2010-~~10-65,~~06 ~~Financial~~Fair ~~Instruments~~Value –Measurements ~~Overall~~and –Disclosures—Improving ~~Transition~~Disclosures ~~and~~about ~~Open~~Fair ~~Effective~~Value ~~Date~~Measurements ~~Information~~ (“~~ASC 825~~2010-~~10-65~~06”). ~~ASC 825~~2010-~~10-65~~06 ~~amends~~requires ~~ASC~~new ~~825-10~~disclosures toregarding ~~require~~significant transfers between Level 1 and Level 2 fair value measurements, and disclosures ~~about~~regarding purchases, sales, issuances and settlements, on a gross basis, for Level 3 fair value measurements. 2010-06 also calls for further disaggregation of ~~financial~~all ~~instruments~~assets inand ~~interim~~liabilities ~~financial~~based ~~statements~~on asline ~~well~~items asshown in ~~annual~~the statement of financial ~~statements~~position. ~~and~~This ~~also~~amendment ~~amends~~is ~~ASC~~effective ~~270-10~~for tofiscal ~~require~~years ~~those~~beginning ~~disclosures~~after inDecember ~~all~~15, 2010 and interim ~~financial~~periods ~~statements~~within those fiscal years. The Company is currently evaluating whether adoption of ~~ASC~~this ~~825-10-65~~standard ~~did~~will ~~not~~ have a material impact on ~~the~~its ~~Company’s~~financial ~~consolidated~~position, results of operations or ~~financial~~cash ~~condition~~flows.

In ~~May~~January ~~2009,~~2010 the FASB issued ~~SFAS~~Update No. ~~165,~~2010-05 ~~“Subsequent~~Compensation—Stock ~~Events”,~~Compensation—Escrowed ~~which~~Share isArrangements ~~included~~and inPresumption ~~ASC~~of ~~Topic~~Compensation ~~855, Subsequent Events~~(“2010-05”). ~~ASC~~2010-05 ~~Topic~~re-asserts ~~855~~that ~~established~~the ~~principles~~Staff ~~and~~of ~~requirements~~the ~~for~~Securities ~~evaluating~~Exchange ~~and~~Commission ~~reporting~~(the ~~subsequent~~“SEC ~~events~~Staff”) ~~and~~has ~~distinguishes~~stated ~~which subsequent events should be recognized in~~ the ~~financial~~presumption ~~statements~~that ~~versus~~for ~~which~~certain ~~subsequent~~shareholders ~~events~~escrowed ~~should~~share berepresent ~~disclosed~~a incompensatory ~~the financial statements~~arrangement. ~~ASC~~2010-05 ~~Topic~~further ~~855~~clarifies ~~also required disclosure of~~ the ~~date~~criteria ~~through~~required ~~which~~to ~~subsequent~~be ~~events~~met ~~are~~to ~~evaluated~~establish bya ~~management. ASC~~position ~~Topic~~different ~~855~~from ~~was~~the ~~effective~~SEC ~~for~~Staff’s ~~interim periods ending after June 15, 2009 and applies prospectively~~position. ~~Because~~ ~~ASC~~The ~~Topic~~Company ~~855~~does ~~impacted the disclosure requirements, and~~ not ~~the~~believe ~~accounting~~this ~~treatment~~pronouncement ~~for~~will ~~subsequent~~have ~~events,~~any ~~the~~material ~~adoption~~impact ofon ~~ASC~~its ~~Topic~~financial ~~855~~position, ~~did not impact our~~ results of operations or ~~financial~~cash ~~condition~~flows. ~~See Note J for disclosures regarding our subsequent events.~~

~~Effective~~In ~~July 1,~~January ~~2009,~~2010 the ~~Company adopted~~ FASB ~~ASU~~issued Update No. ~~2009~~ 2010-~~05,~~04 ~~Fair~~Accounting ~~Value~~for ~~Measurements~~Various ~~and~~Topics—Technical ~~Disclosures~~Corrections ~~(Topic~~to ~~820)~~SEC Paragraphs (“~~ASU 2009~~2010-0504”). ~~ASU 2009~~2010-0504 ~~provided~~represents ~~amendments~~technical corrections to ~~ASC~~SEC ~~820-10,~~paragraphs ~~Fair~~within ~~Value~~various ~~Measurements~~sections ~~and Disclosures – Overall, for the fair value measurement~~ of ~~liabilities. ASU 2009-05 provides clarification that in circumstances in which a quoted price in an active market for~~ the ~~identical liability is not available, a reporting entity is required to measure fair value using certain techniques~~Codification. ~~ASU~~Management ~~2009-05 also clarifies that when estimating the fair value of a liability, a reporting entity~~ is ~~not~~currently ~~required~~evaluating towhether ~~include~~these achanges ~~separate~~will input or adjustment to other inputs relating to the existence of a restriction that prevents the transfer of a liability. ASU 2009-05 also clarifies that both a quoted price in an active market for the identical liability at the measurement date and the quoted price for the identical liability when traded as an asset in an active market when no adjustments to the quoted price of the asset are required are Level 1 fair value measurements. Adoption of ASU 2009-05 did not have aany material impact on ~~the~~its ~~Company’s~~financial ~~consolidated~~position, results of operations or ~~financial~~cash ~~condition~~flows.

In ~~October~~January ~~2009,~~2010 the FASB issued ~~ASU~~Update ~~2009-13,~~No. ~~Multiple~~2010-~~Deliverable~~02 ~~Revenue~~Accounting ~~Arrangements, (amendments to FASB ASC Topic 605, Revenue Recognition) (“ASU 2009-13”)~~ and ~~ASU~~Reporting ~~2009-14,~~for ~~Certain~~Decreases ~~Arrangements~~in ~~That~~Ownership ~~Include~~of ~~Software~~a ~~Elements,~~Subsidiary—a ~~(amendments~~Scope toClarification ~~FASB ASC Topic 985, Software)~~ (“~~ASU 2009~~2010-1402”)~~. ASU~~ ~~2009-13 requires entities to allocate revenue in~~ an ~~arrangement~~update ~~using estimated selling prices~~ of ~~the~~ASC ~~delivered~~810 ~~goods and services based on a selling price hierarchy~~Consolidation. ~~The~~2010-02 ~~amendments~~clarifies ~~eliminate~~ the ~~residual~~scope ~~method~~ of ~~revenue~~ASC ~~allocation~~810 ~~and~~with ~~require~~respect ~~revenue~~ to bedecreases ~~allocated~~in ~~using~~ownership ~~the~~in ~~relative~~a ~~selling~~subsidiary ~~price~~to ~~method. ASU~~those ~~2009-14~~of ~~removes~~a ~~tangible~~subsidiary ~~products~~or ~~from~~group ~~the scope~~ of ~~software~~assets ~~revenue~~that ~~guidance~~are ~~and~~a ~~provides~~business ~~guidance~~or onnonprofit, ~~determining~~a ~~whether~~subsidiary ~~software~~that ~~deliverables~~is intransferred to an ~~arrangement~~equity ~~that~~method ~~includes~~investee aor ~~tangible~~joint ~~product~~venture, ~~are~~and ~~covered~~an byexchange ~~the scope~~ of ~~the~~a ~~software~~group ~~revenue~~of ~~guidance. ASU~~assets ~~2009-13~~that ~~and~~constitutes ~~ASU~~a ~~2009-14~~business ~~should~~or benonprofit ~~applied~~activity onto a ~~prospective~~non-controlling ~~basis~~interest ~~for~~including ~~revenue~~an ~~arrangements~~equity ~~entered~~method ~~into~~investee or ~~materially~~a ~~modified~~joint inventure. ~~fiscal~~Management ~~years~~does ~~beginning~~not onexpect oradoption ~~after~~of ~~June 15,~~this ~~2010,~~standard ~~with~~to ~~early~~have ~~adoption~~any ~~permitted.~~material ~~The~~impact ~~Company~~on ~~does~~its ~~not~~financial ~~expect~~position, ~~adoption~~results of ~~ASU~~operations ~~2009-13~~ or ~~ASU~~operating ~~2009-14~~cash toflows. ~~have~~Management adoes ~~material~~not ~~impact~~intend onto ~~the~~decrease ~~Company’s~~its ~~consolidated~~ownership ~~results~~in any of ~~operations~~its orwholly-owned ~~financial condition~~subsidiaries.

9In January 2010 the FASB issued Update No. 2010-01 Accounting for Distributions to Shareholders with Components of Stock and Cash—a consensus of the FASB Emerging Issues Task Force (“2010-03”) an update of ASC 505 Equity. 2010-03 clarifies the treatment of stock distributions as dividends to shareholders and their affect on the computation of earnings per shares. Management does not expect adoption of this standard to have any material impact on its financial position, results of operations or operating cash flows.

CYBERLUX CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~MARCH~~JUNE 3130, ~~2009~~2010

(Unaudited)

NOTE B – WARRANT PAYABLE

The Company completed an equity financing with St. George Investments, LLC (SGI), an Illinois limited liability company, on March 21, 2008 for $1,500,000. The equity financing is structured as a 25% discount to market Warrant transaction that provides $500,000 in capital at closing, followed by four tranches of $250,000 each. Each $250,000 tranch is staggered at 60-day intervals commencing in six months on September 22, 2008, which is the date that shares are salable pursuant to Rule 144 upon exercise of the Warrant. The Company issued 7,500,000 shares of Common Stock to SGI in order to induce the SGI to purchase the $1,500,000 Warrant. In addition, 6,763,300 additional shares of Common Stock were issued as Performance Stock in the name of SGI to remain in their original certificated form and remain in escrow with the law firm of Anslow & Jaclin, LLP acting as escrow agent. As a provision of the Warrant Purchase Agreement, we pledged 35,736,700 shares of “Pledge Stock” to be held in escrow as a potential remedy in the event of the occurrence of certain identified “trigger events”. On June 23rd, 2008, one trigger event, the closing price of our stock, went below the identified market price of $0.012 per share, triggering the release from escrow of the 6,763,300 shares of Performance Stock and the 35,736,700 shares of “Pledge Stock”. This trigger event, as defined in the Warrant Purchase Agreement, also increased the Warrant Account by 25% of the balance, or $375,000, in exchange for the elimination of the 25% discount to market. As of ~~March~~June 3130, 2010 the remaining Warrant Liability balance was $~~370~~434,898.

NOTE C – NOTES AND CONVERTIBLE NOTES PAYABLE~~-RELATED PARTY~~

Notes payable~~-related~~ ~~party~~ is comprised of the following:

	March 31, 2010		December 31, 2009
	June 30, 2010		December 31, 2009
Notes payable, 12% per annum; due on demand; unsecured	$	~~275~~197,~~247~~899	$	284,047
Notes payable, 10% per annum, due on demand; unsecured		~~873~~1,~~204~~044,652		858,204
Notes payable, 12.5% per annum, due on demand; unsecured		155,060		170,060
Notes payable, 21% per annum, due on demand; unsecured		60,000		60,000
		1,363,511		1,372,311
Note payable, convertible at market		5,225,549		5,225,549
Less: current maturities:		(1,363,511)		(1,372,311)
		6,683,150		6,597,860
Less: current maturities:		(6,683,150)		(6,597,860)
Long term portion:	$	-	$	-

NOTE D – STOCKHOLDER'S EQUITY

Series A - Convertible Preferred stock

The Company has also authorized 5,000,000 shares of Preferred Stock, with a par value of $.001 per share.

On December 30, 2003, the Company filed a Certificate of Designation creating a Series A Convertible Preferred Stock classification for 200 shares.

The Series A Preferred stated conversion price of $.10 per shares is subject to certain anti-dilution provisions in the event the Company issues shares of its common stock or common stock equivalents below the stated conversion price. Changes to the conversion price are charged to operations and included in unrealized gain (loss) relating to adjustment of derivative and warrant liability to fair value of underlying securities.11

CYBERLUX CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~MARCH~~JUNE 3130, 2010

(Unaudited)

NOTE D – STOCKHOLDER'S EQUITY (continued)

Series B - Convertible Preferred stock

On February 19, 2004, the Company filed a Certificate of Designation creating a Series B Convertible Preferred Stock classification for 800,000 shares, increased subsequently to 3,650,000 in 2007 and 4,650,000 in 2009.

The holders of the Series B Preferred shall have the right to vote, separately as a single class, at a meeting of the holders of the Series B Preferred or by such holders' written consent or at any annual or special meeting of the stockholders of the Corporation on any of the following matters: (i) the creation, authorization, or issuance of any class or series of shares ranking on a parity with or senior to the Series B Preferred with respect to dividends or upon the liquidation, dissolution, or winding up of the Corporation, and (ii) any agreement or other corporate action which would adversely affect the powers, rights, or preferences of the holders of the Series B Preferred.

The holders of record of the Series B Preferred shall be entitled to receive cumulative dividends at the rate of twelve percent per annum (12%) on the face value ($1.00 per share) when, if and as declared by the Board of Directors, if ever. All dividends, when paid, shall be payable in cash, or at the option of the Company, in shares of the Company’s common stock. Dividends on shares of the Series B Preferred that have not been redeemed shall be payable quarterly in arrears, when, if and as declared by the Board of Directors, if ever, on a semi-annual basis. No dividend or distribution other than a dividend or distribution paid in Common Stock or in any other junior stock shall be declared or paid or set aside for payment on the Common Stock or on any other junior stock unless full cumulative dividends on all outstanding shares of the Series B Preferred shall have been declared and paid. These dividends are not recorded until declared by the Company.

Upon any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, and after payment of any senior liquidation preferences of any series of Preferred Stock and before any distribution or payment is made with respect to any Common Stock, holders of each share of the Series B Preferred shall be entitled to be paid an amount equal in the greater of (a) the face value denominated thereon subject to adjustment for stock splits, stock dividends, reorganizations, reclassification or other similar events (the "Adjusted Face Value") plus, in the case of each share, an amount equal to all dividends accrued or declared but unpaid thereon, computed to the date payment thereof is made available, or (b) such amount per share of the Series B Preferred immediately prior to such liquidation, dissolution or winding up, or (c) the liquidation preference of $1.00 per share, and the holders of the Series B Preferred shall not be entitled to any further payment, such amount payable with respect to the Series B Preferred being sometimes referred to as the "Liquidation Payments."

Series C - Convertible Preferred stock

On November 13, 2006, the Company filed a Certificate of Designation creating a Series C Convertible Preferred Stock classification for 100,000 shares. Subsequently amended on January 11, 2007 to 700,000 shares.

In December 2006, the Company issued 100,000 shares of its Series C Preferred stock in conjunction with the acquisition of SPE Technologies, Inc. The shares of the Series C Preferred are non-voting and convertible, at the option of the holder, into common shares one year from issuance. The number of common shares to be issued per Series C share is adjusted based on the average closing bid price of the previous ten days prior to the date of conversion based on divided into $25.20 The shares issued were valued at $25.20 per share, which represented the fair value of the common stock the shares are convertible into. None of the Series C Preferred shareholders have exercised their conversion right and there are 150,000 shares of Series C Preferred shares issued and outstanding at March 31, 2010.12

The holders of record of the Series C Preferred shall be entitled to receive cumulative dividends at the rate of five percent per annum (5%), compounded quarterly, on the face value ($25.00 per share) when, if and as declared by the Board of Directors, if ever. All dividends, when paid, shall be payable in cash, or at the option of the Company, in shares of the Company’s common stock.

CYBERLUX CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~MARCH~~JUNE 3130, 2010

(Unaudited)

NOTE D – STOCKHOLDER'S EQUITY (continued)

Dividends on shares of the Series C Preferred that have not been redeemed shall be payable quarterly in arrears, when, if and as declared by the Board of Directors, if ever, at the time of conversion. These dividends are not recorded until declared by the Company.

Common stock

The Company has authorized 20,000,000,000 shares of common stock, with a par value of $.001 per share. As of ~~March~~June 3130, 2010 and December 31, 2009, the Company has 1216,~~011~~918,~~762~~789,~~303~~033 and 4,816,864,598 shares issued and outstanding, respectively.

NOTE E – STOCK OPTIONS

Employee Stock Options

The following table summarizes the changes in options outstanding and the related prices for the shares of the Company's common stock issued to employees of the Company under a non-qualified employee stock option plan at ~~March~~June 3130, 2010:

		Options Outstanding						~~Options Exercisable~~	Options Exercisable
			~~Weighted Average~~	Weighted Average	~~Weighted~~	Weighted				~~Weighted~~	Weighted
			~~Remaining~~	Remaining	~~Average~~	Average				~~Average~~	Average
Exercise		Number	~~Contractual Life~~	Contractual Life	~~Exercise~~	Exercise		~~Number~~	Number	~~Exercise~~	Exercise
Prices		Outstanding	~~(Years)~~	(Years)	~~Price~~	Price		~~Exercisable~~	Exercisable	~~Price~~	Price
$	0.001	200,000,000	~~8.80~~	8.55	$	~~0.001~~$	0.001	~~200,000,000~~	200,000,000	$	~~0.001~~$	0.001
0.010		73,500,000	~~5.87~~	5.62		~~0.010~~	0.010	~~73,500,000~~	73,500,000		~~0.010~~	0.010
0.020		22,300,000	~~4.57~~	4.32		~~0.020~~	0.020	~~22,300,000~~	22,300,000		~~0.020~~	0.020
0.022		20,500,000	~~3.92~~	3.67		~~0.022~~	0.022	~~20,500,500~~	20,500,500		~~0.022~~	0.022
0.0295		3,250,000	~~5.10~~	4.85		~~0.0295~~	0.0295	~~3,250,000~~	3,250,000		~~0.0295~~	0.0295
0.100		9,502,307	~~2.69~~	2.44		~~0.100~~	0.100	~~9,502,307~~	9,502,307		~~0.100~~	0.100
0.2125		4,000,000	~~2.36~~	2.11		~~0.2125~~	0.2125	~~4,000,000~~	4,000,000		~~0.2125~~	0.2125

~~Transactions involving stock options issued to employees are summarized as follows:~~13

		Weighted Average
	Number of Shares	Price Per Share
Outstanding at December 31, 2008	52,432,307		0.0562
Granted	619,250,000		0.0016
Exercised, canceled or expired	338,600,000		0.0010
Outstanding at December 31, 2009	333,082,307		0.0112
Granted	-		-
Exercised, canceled or expired	-		-
Outstanding at March 31, 2010	333,082,307		0.0112

The Company granted employees 634,250,000 stock options in the year ended December 31, 2009 and did not grant options during the three month period ended March 31, 2010.

CYBERLUX CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~MARCH~~JUNE 3130, 2010

(Unaudited)

NOTE E – STOCK OPTIONS (continued)

Transactions involving stock options issued to employees are summarized as follows:

		Weighted Average
	Number of Shares	Price Per Share
Outstanding at December 31, 2008	52,432,307		0.0562
Granted	619,250,000		0.0016
Exercised, canceled or expired	338,600,000		0.0010
Outstanding at December 31, 2009	333,082,307		0.0112
Granted	-		-
Exercised, canceled or expired	-		-
Outstanding at June 30, 2010	333,082,307		0.0112

The Company granted employees 634,250,000 stock options in the year ended December 31, 2009 and did not grant options during the six month period ended June 30, 2010.

NOTE F – RELATED PARTY TRANSACTIONS

From time to time, the Company's principal officers have advanced funds to the Company for working capital purposes in the form of unsecured promissory notes, accruing interest at 10% to 12% per annum. As of ~~March~~June 3130, 2010 and December 31, 2009, the balance due to the officers was $~~827~~940,~~348~~248 and $827,348 respectively.

NOTE G – COMMITMENTS AND CONTINGENCIES

Consulting Agreements

The Company has consulting agreements with outside contractors, certain of whom are also Company stockholders. The Agreements are generally for a term of 12 months from inception and renewable automatically from year to year unless either the Company or Consultant terminates such engagement by written notice.

NOTE H – COMMITMENTS AND CONTINGENCIES (continued)

Operating Lease Commitments

The Company leases office space in Durham, NC on a six year lease expiring December 31, 2012, for an annualized rent payment of $60,000. At ~~March~~June 3130, 2010, schedule of the future minimum lease payments is as follows:

2010		4560,000
2011		60,000
2012		60,000
2013		-

Litigation

~~The~~From ~~Company~~time isto ~~subject~~time towe ~~other~~are ~~legal~~involved ~~proceedings~~in ~~and~~various claims, ~~which~~and ~~arise~~legal actions arising in the ordinary course of ~~its~~ business. ~~Although~~In ~~occasional~~our ~~adverse decisions or settlements may occur~~opinion, the ~~Company~~ultimate ~~believes that the final~~ disposition of ~~such~~these matters ~~should~~will not have a material ~~adverse~~ effect on ~~its~~our ~~consolidated~~ financial position, results of operations or ~~liquidity.~~cash ~~There was no outstanding litigation as of March 31, 2010~~flows.

CYBERLUX CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2010

(Unaudited)

NOTE I – GOING CONCERN MATTERS

The accompanying statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As shown in the accompanying consolidated financial statements, as of ~~March~~June 3130, 2010, the Company incurred accumulated losses of $34,~~215~~879,~~906~~656. The Company’s current liabilities exceeded its current assets by $13,~~412~~666,~~230~~418 as of ~~March~~June 3130, 2010. These factors among others may indicate that the Company will be unable to continue as a going concern for a reasonable period of time.

The Company is actively pursuing additional equity financing through discussions with investment bankers and private investors. There can be no assurance the Company will be successful in its effort to secure additional equity financing.

If operations and cash flows continue to improve through these efforts, management believes that the Company can continue to operate. However, no assurance can be given that management's actions will result in profitable operations or the resolution of its liquidity problems.

NOTE J – SUBSEQUENT EVENTS

WeSubsequent events have been evaluated ~~our~~through ~~activity~~August ~~after March 31~~16, 2010, ~~until~~a ~~the~~ date ofthat ~~issuance~~the ~~May~~financial ~~21,~~statements ~~2010 for recognized and unrecognized material subsequent events not discussed elsewhere in these footnotes and determined that there~~ were ~~none of note~~issued.

13On July 9, 2010, we completed the first shipment of 20 BrightEye Systems for $340,000 in revenue towards the fulfillment of the $3.4 million National Guard Bureau contract for 200 BrightEye Systems.

On July 28, 2010, we completed a 1:200 reverse stock split of our common stock, par value $0.001.

On August 9, 2010, we completed the second shipment of 30 BrightEye Systems for $510,000 in revenue towards the fulfillment of the $3.4 million National Guard Bureau contract for 200 BrightEye Systems.

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

The following discussion contains forward-looking statements that are subject to significant risks and uncertainties about us, our current and planned products, our current and proposed marketing and sales, and our projected results of operations. There are several important factors that could cause actual results to differ materially from historical results and percentages and results anticipated by the forward-looking statements. The Company has sought to identify the most significant risks to its business, but cannot predict whether or to what extent any of such risks may be realized nor can there be any assurance that the Company has identified all possible risks that might arise. Investors should carefully consider all of such risks before making an investment decision with respect to the Company's stock. The following discussion and analysis should be read in conjunction with the financial statements of the Company and notes thereto. This discussion should not be construed to imply that the results discussed herein will necessarily continue into the future, or that any conclusion reached herein will necessarily be indicative of actual operating results in the future. Such discussion represents only the best present assessment from our Management.

Overview

We have been principally devoted to designing, developing and marketing advanced lighting systems that utilize white, infrared (IR) and other) light emitting diodes as illumination elements.

We are developing and marketing new product applications of solid-state diodal illumination (TM) that ~~demonstrate~~are ~~added~~up ~~value~~to ~~over~~70% more energy efficient and require significantly less maintenance cost than traditional lighting systems. Using proprietary technology, we are creating ~~a family of products including~~ portable illumination systems for the DOD/military ~~and Homeland Security~~markets, retail products, and commercial ~~task~~lighting ~~and~~products ~~accent~~focused ~~lighting,~~on ~~emergency~~energy efficiency and ~~security~~cost ~~lighting~~of ownership minimization. We believe our solid-state lighting technology offers extended light life, greater energy efficiency and greater overall cost effectiveness than other existing forms of ~~illumination~~lighting. Our business model is to address the large lighting industry market segments with solid-state LED lighting products ~~and technologies~~, ~~including~~based ~~our~~on proprietary ~~hybrid~~design and technology, ~~that~~including ~~includes~~ DOD/military and ~~Homeland~~homeland ~~Security~~security applications, ~~direct~~commercial ~~and~~lighting ~~indirect~~applications, ~~task~~ and ~~accent~~retail ~~lighting~~OEM ~~applications,~~LED ~~indoor/outdoor~~products ~~downlighting~~for ~~applications,~~companies ~~commercial~~serving ~~and~~the ~~residential~~retail ~~lighting applications~~channel.

For the DOD/military ~~and~~markets, ~~Homeland~~our ~~Security~~ portable illumination system products, ~~our~~address ~~target~~the ~~markets~~lighting ~~include~~needs of all branches of the military and all government organizations, ~~providing~~including ~~homeland~~the ~~security~~National ~~services~~Guard, ~~such~~the asU. ~~border~~S. ~~control~~Air Force and ~~airport~~the ~~security~~U.S. Army. For ~~our~~ retail ~~products~~product distribution, our target customers include ~~the~~companies ~~home~~who ~~improvement~~act ~~and~~as OEM suppliers to consumer goods retailers. In the commercial markets, our ~~task~~LED ~~and accent~~ lighting products ~~and~~address ~~emergency~~the ~~and~~lighting ~~security~~required ~~lighting~~found ~~products~~in ~~address~~general ~~the~~commercial ~~lighting~~environments, ~~needs~~such inas restaurants, hotels, hospitals, ~~nursing homes,~~ airports, shopping centers and multiple family complexes; ~~long-term~~where ~~evacuation~~energy ~~solutions~~efficiency ~~for theaters, office~~ and ~~public buildings;~~ reduced maintenance ~~cost~~costs ~~solutions~~are ~~for~~critical ~~property managers as applied to walkway, corridor or landscape lighting unit~~needs.

On ~~March~~June 2711, ~~2009,~~ we ~~announced~~were ~~today~~awarded ~~that~~a ~~the~~$3.4 wemillion ~~had~~contract ~~introduced~~by ~~two~~the ~~new~~National ~~categories~~Guard ofBureau ~~outdoor~~to ~~commercial-grade~~purchase ~~lighting~~200 ~~products,~~BrightEye ~~the~~Dual ~~Outdoor~~Head ~~Area~~Tactical Lighting ~~and~~Systems ~~the~~to ~~Outdoor~~be ~~Overhead~~immediately ~~Lighting,~~deployed ~~that~~throughout ~~will~~the ~~expand~~United ~~our~~States. ~~product~~Our ~~offering~~BrightEye tohas ~~address~~long ~~large~~been ~~emerging~~recognized ~~commercial~~as ~~opportunities.~~an Toinnovative ~~capture~~and ~~these~~dependable ~~opportunities,~~LED welighting ~~have~~solution ~~incorporated~~within the ~~advanced~~various ~~capabilities~~branches of ~~our~~the military~~-grade~~ ~~LED~~because ~~lighting~~of ~~technology~~the ~~into~~qualities ait ~~general~~possesses ~~purpose~~that ~~lighting~~are ~~product~~unavailable ~~line~~in ~~for~~traditional ~~existing~~lighting ~~Department~~systems. ofUnique ~~Defense~~to ~~(DoD),~~the ~~Federal~~marketplace, ~~state~~the ~~and~~BrightEye ~~local~~Systems ~~governments~~provide broad area visible white lighting and ~~commercial~~night-vision ~~customers~~compatible IR lighting capable of operating all night on an advanced battery power system.

Our Outdoor Area Lighting (OAL) and the Outdoor Overhead Lighting (OOL) products deliver the most energy efficient white LED lighting for outdoor area illumination and outdoor overhead illumination commercially available. Designed to provide ideal light dispersion and illumination for outdoor areas, we have designed the OAL and OOL configurations to flexibly illuminate any outdoor area, including pathways, walkways and parking lots, where DC solar power or AC power is available.

Our Outdoor Overhead Lighting is available for general and solar street light and parking lot lighting applications and has the following operational characteristics:

· Each OOL Lighthead illuminates a minimum 40’ x 40’ grid with directed light

· Performs for over 50,000 hours without a lighting element replacement

· System is more than 37% more energy efficiency compared to traditional lighting

· Provides up to 3,000 lumens of illumination with 40 watts of 12 - 32 VDC power

· Solar System Configuration: OOL Lighthead, Solar Panel Pole Set and Batteries

· Up to 4 Lightheads per system (40, 80, 120, & 160 watts)

· Mounting hardware kit including DC control in an outdoor rated box

Our Outdoor Area Lighting is designed as a multi-use general lighting product for broad area lighting of buildings, parking garages, outdoor easements and thruways and has the following operational characteristics:

· Each OAL Lighthead illuminates a minimum 20’ x 20’ grid with directed light

· Performs for over 50,000 hours without a lighting element replacement

· System is more than 31% more energy efficiency compared to traditional lighting

· System provides up to 4500 lumens of illumination from 69 watts of power

· System operates on 120V / 69W

On March 31, 2009, we announced that the we had introduced two categories of outdoor lighting products, Outdoor Area Lighting and Outdoor Overhead Lighting, that will expand our product offerings to the Department of Defense (DoD) agencies and also address large emerging commercial opportunities. To capture these opportunities, we along with Sacred Power Corporation, a leading provider of renewable energy solutions, have teamed to incorporate the advanced capabilities of our lighting with Sacred Power’s product line for existing DoD, Federal government and commercial customers. We have received an initial order from Sacred Power for both the Overhead and Area lighting, which will be incorporated in the Sacred Power solar solutions. Sacred Power, a Native American owned and operated 8(a) certified company, specializes in solar power solutions and provides innovative renewable energy technologies to the Department of Defense (DoD), Federal government and commercial marketplace.

This joint initiative between Cyberlux and Sacred Power is the next project under the scope of the companies’ prime contractor/subcontractor partnering agreement for solid-state lighting and solar power renewable energy opportunities. The first project the two companies have delivered together is a portable, solar powered visible and covert LED security lighting system for future deployment across the DoD agencies, which is now being tested and evaluated by Sandia National Laboratories on behalf of the DoD. The combination of solar power and advance lighting capabilities position both companies as leaders in the Energy, Security and Power Surety market segments.

Results of Operations

~~Three~~Six months ended ~~March~~June 3130, 2010 compared to the ~~three~~six months ended ~~March~~June 3130, 2009

REVENUES

Revenues for the ~~three~~six months ended ~~March~~June 3130, 2010 were $2857,~~691~~887 as compared to $4446,~~316~~097 for the same period last year. The increase in revenue was attributed to sales of our BrightEye and Watchdog products into the military markets.

OPERATING EXPENSES

Operating expenses for the ~~three~~six months ended ~~March~~June 3130, 2010 were $~~409~~966,~~664~~687 as compared to $~~578~~1,~~200 for~~152,634 or the same period ended ~~last~~June ~~year~~30, 2009. Included in the six months ended June 30, 2010 were $43,678 in expenses for research & development. This compares to $4,398 for the six months ended June 30, 2009.

AsWe areported ~~result~~an ofunrealized ~~limited~~gain ~~capital~~for ~~resources~~the ~~and~~change ~~minimal~~in ~~revenues~~fair ~~from~~value ~~operations~~or ~~from~~warrants ~~its~~and ~~inception,~~debt wederivatives ~~have~~of ~~relied~~$5,331,734 onfor the ~~issuance~~six ofmonths ~~equity~~ended ~~securities~~June to30, ~~non-employees~~2009; inas ~~exchange~~compared ~~for~~to ~~services.~~a ~~Our~~loss ~~management~~of ~~enters~~$-0- ~~into~~for ~~equity~~the ~~compensation~~same ~~agreements~~period ~~with~~this ~~non-employees~~year. In ifDecember it2009, iswe inrestructured our ~~best~~debt ~~interest~~containing ~~under~~embedded ~~terms~~derivatives ~~and~~eliminating ~~conditions consistent with~~ the ~~requirements~~need ofto ~~Financial~~bifurcate ~~Accounting~~from ~~Standards~~the ~~Board~~host (~~FASB~~debt) ~~Accounting~~instrument ~~Standards~~and ~~Codification 718~~mark ~~"Compensation-Stock~~to ~~Compensation". In~~market ~~order~~each toquarter. ~~conserve~~Although ~~our~~the ~~limited~~change ~~operating~~of ~~capital resources~~$5,331,734 weis ~~anticipate~~unrelated ~~continuing~~ to ~~compensate~~our ~~non-employees~~operating ~~for~~activities, ~~services during~~ the ~~next~~gain ~~twelve~~is ~~months.~~included ~~This~~in ~~policy~~our ~~may~~reported ~~have~~net aprofit ~~material~~for ~~effect~~the onsix ~~our~~months ~~results~~ended ofJune ~~operations~~30, ~~during the next twelve months~~2009.

15Three months ended June 30, 2010 compared to the three months ended June 30, 2009.

REVENUES

Revenues for the three months ended June 30, 2010 were $29,196 as compared to $1,781 for the same period last year. The increase in revenue was attributed to sales of our BrightEye and Watchdog products into the military markets.

OPERATING EXPENSES

Operating expenses for the three months ended June 30, 2010 were $557,023 as compared to $574,434 for the same period ended June 30, 2009.

We reported an unrealized gain for the change in fair value or warrants and debt derivatives of $10,386,354 for the three months ended June 30, 2009; as compared to a loss of $-0- for the same period this year. In December 2009, we restructured our debt containing embedded derivatives eliminating the need to bifurcate from the host (debt) instrument and mark to market each quarter. Although the change of $10,386,354 is unrelated to our operating activities, the gain is included in our reported net profit for the three months ended June 30, 2009.

As a result of limited capital resources and minimal revenues from operations from its inception, we have relied on the issuance of equity securities to non-employees in exchange for services. Our management enters into equity compensation agreements with non-employees if it is in our best interest under terms and conditions consistent with the requirements of Accounting Standards Codification subtopic 718-10, Compensation (“ASC 718-10”) In order to conserve our limited operating capital resources, we anticipate continuing to compensate non-employees for services during the next twelve months. This policy may have a material effect on our results of operations during the next twelve months.

Liquidity and Capital Resources

As of ~~March~~June 3130, 2010, we had a working capital deficit of $(13,~~412~~666,~~230~~418). This compares to a working capital deficit of $(14,~~040~~062,~~974~~173) as of December 31, 2009. Accrued liabilities ~~was~~were $34,~~754~~049,~~392~~566 compared to accrued liabilities of $ 3,631,966 as December 31, 2009. Accounts payable as of ~~March~~June 3130, 2010 were $2,~~793~~693,~~352~~160 and compares to $ 3,527,~~038~~037 as compared to December 31, 2009. ~~For~~As a result of our operating losses for the ~~three~~six months ended ~~March~~June 3130, 2010, we generated a ~~positive~~ cash flow deficit of $85191,~~042~~607 from operating activities. Cash flows provided by investing activities was $-0 -for the ~~three~~six months ended ~~March~~June 3130, 2010 Cash flows from financing activities provided ~~a deficit of~~ $72175,~~803~~634 from the sale of common stock, ~~conversion~~in the amount of ~~warrants~~$90,334, and $85,300 in loans from related parties for the six months ended June 30, 2010.

While we have raised capital to meet our working capital and financing needs in the past, additional financing is required in order to meet our current and projected cash flow deficits from operations and development.

By adjusting our operations and development to the level of capitalization, we believe we have sufficient capital resources to meet projected cash flow deficits through the next twelve months. However, if thereafter, we are not successful in generating sufficient liquidity from operations or in raising sufficient capital resources, on terms acceptable to us, this could have a material adverse effect on our business, results of operations, liquidity and financial condition.

Our independent certified public accountant has stated in their report included in our December 31, 2009, Form 10-K that we have incurred operating losses in the last two years, and that we are dependent upon management's ability to develop profitable operations. These factors among others may raise substantial doubt about our ability to continue as a going concern.

We will still need additional investments in order to continue operations to cash flow break even. Additional investments are being sought, but we cannot guarantee that we will be able to obtain such investments. Financing transactions may include the issuance of equity or debt securities, obtaining credit facilities, or other financing mechanisms. However, the trading price of our common stock and the downturn in the U.S. stock and debt markets could make it more difficult to obtain financing through the issuance of equity or debt securities. Even if we are able to raise the funds required, it is possible that we could incur unexpected costs and expenses, fail to collect significant amounts owed to us, or experience unexpected cash requirements that would force us to seek alternative financing. Further, if we issue additional equity or debt securities, stockholders may experience additional dilution or the new equity securities may have rights, preferences or privileges senior to those of existing holders of our common stock. If additional financing is not available or is not available on acceptable terms, we will have to curtail our operations again.

The proceeds received from the sale of the secured convertible notes will be used for business development purposes, working capital needs, pre-payment of interest, payment of consulting and legal fees and purchasing inventory.

Critical Accounting Policies

~~Effective~~The ~~July 1,~~preparation ~~2009,~~of ~~the~~financial ~~Company~~statements ~~adopted~~in ~~the~~conformity ~~Financial~~with ~~Accounting~~U.S. ~~Standards~~generally ~~Board~~accepted ~~(“FASB”)~~accounting ~~Accounting~~principles ~~Standards Codification~~ (“~~ASC~~GAAP”) ~~105-10,~~requires ~~Generally~~us ~~Accepted~~to ~~Accounting~~make ~~Principles~~estimates –and ~~Overall~~judgments ~~(“ASC~~that ~~105-10”).~~affect ~~ASC 105-10 establishes~~ the ~~FASB~~reported ~~Accounting~~amounts ~~Standards Codification (the “Codification”) as the source~~ of ~~authoritative~~assets, ~~accounting~~liabilities, ~~principles~~revenues ~~recognized~~and byexpenses ~~the~~and ~~FASB to be applied by nongovernmental entities in~~ the ~~preparation~~disclosure of ~~financial~~contingent ~~statements~~assets inand ~~conformity with U~~liabilities.S. ~~GAAP.~~A ~~Rules~~summary ~~and interpretive releases~~ of the ~~SEC~~critical ~~under~~accounting ~~authority~~policies ofand ~~federal~~the ~~securities~~judgments ~~laws~~that ~~are~~we ~~also~~make ~~sources~~in ofthe ~~authoritative~~application ~~U.S.~~of ~~GAAP~~those ~~for~~policies ~~SEC~~is ~~registrants.~~presented ~~All guidance contained~~ in ~~the~~Note ~~Codification~~1 ~~carries~~to anour ~~equal~~consolidated ~~level~~financial ~~of authority~~statements. ~~The Codification superseded all existing~~

16Our consolidated financial statements are based on the selection of accounting policies and the application of accounting estimates, some of which require management to make significant assumptions. Actual results could differ materially from the estimated amounts. The following accounting policy is critical to understanding and evaluating our reported financial results:

~~non-SEC~~Revenue accounting and reporting standards. All other non-grandfathered, non-SEC accounting literature not included in the Codification is non-authoritative. The FASB will not issue new standards in the form of Statements, FASB Staff Positions or Emerging Issues Task Force Abstracts. Instead, it will issue Accounting Standards Updates (“ASUs”). The FASB will not consider ASUs as authoritative in their own right. ASUs will serve only to update the Codification, provide background information about the guidance and provide the bases for conclusions on the change(s) in the Codification. References made to FASB guidance throughout this document have been updated for the Codification.Recognition

~~Effective~~We ~~January 1,~~recognize ~~2008,~~revenue ~~the~~in ~~Company~~accordance ~~adopted~~with ~~FASB~~Accounting ~~ASC~~Standards ~~820~~Codification subtopic 605-10, ~~Fair~~Revenue ~~Value~~Recognition ~~Measurements and Disclosures – Overall~~ (“ASC ~~820~~605-10”) ~~with~~which ~~respect~~requires tothat ~~its~~four ~~financial~~basic ~~assets~~criteria ~~and~~must ~~liabilities.~~be Inmet ~~February~~before ~~2008,~~revenue ~~the~~can ~~FASB~~be ~~issued~~recognized: ~~updated~~(1) ~~guidance~~persuasive ~~related~~evidence toof ~~fair~~an ~~value~~arrangement ~~measurements,~~exists; ~~which~~(2) isdelivery ~~included~~has inoccurred; (3) the ~~Codification~~selling inprice ~~ASC~~is ~~820-10-55,~~fixed ~~Fair~~and ~~Value~~determinable; ~~Measurements~~ and ~~Disclosures~~(4) –collectability ~~Overall~~is –reasonably ~~Implementation Guidance and Illustrations~~assured. ~~The~~Determination ~~updated guidance provided a one year deferral~~ of ~~the~~criteria ~~effective~~(3) ~~date of ASC 820-10 for non-financial assets~~ and ~~non-financial~~(4) ~~liabilities, except those that~~ are ~~recognized~~based oron ~~disclosed~~management's injudgments regarding the ~~financial~~fixed ~~statements~~nature atof ~~fair~~the ~~value~~selling atprices ~~least~~of ~~annually. Therefore,~~ the ~~Company~~products ~~adopted~~delivered and the ~~provisions~~collectability of ~~ASC~~those ~~820-10~~amounts. Provisions for ~~non-financial~~discounts ~~assets~~ and ~~non-financial~~rebates ~~liabilities~~to ~~effective January 1~~customers, ~~2009,~~estimated returns and ~~such~~allowances, ~~adoption~~and ~~did~~other ~~not~~adjustments ~~have~~are aprovided ~~material~~for ~~impact~~in on the ~~Company’s~~same ~~consolidated~~period ~~results~~the ofrelated ~~operations~~sales orare ~~financial condition~~recorded.

~~Effective April 1, 2009, the Company adopted FASB~~ ASC ~~820~~605-10~~-65,~~ ~~Fair~~incorporates ~~Value~~Accounting ~~Measurements~~Standards ~~and~~Codification ~~Disclosures~~subtopic –605-25, ~~Overall~~Multiple-Element –Arraignments ~~Transition and Open Effective Date Information~~ (“ASC ~~820~~605-~~10-65~~25”). ASC ~~820~~605-~~10-65~~25 ~~provides~~addresses ~~additional~~accounting ~~guidance~~ for ~~estimating~~arrangements ~~fair~~that ~~value~~may ininvolve ~~accordance with ASC 820-10 when~~ the ~~volume~~delivery ~~and~~or ~~level~~performance of ~~activity~~multiple ~~for~~products, anservices ~~asset~~ and/or ~~liability~~rights ~~have~~to ~~significantly~~use ~~decreased~~assets. ~~ASC 820-10-65 also includes guidance on identifying circumstances that indicate a transaction is not orderly.~~ The ~~adoption~~effect of ~~ASC~~implementing ~~820~~605-~~10-65~~25 ~~did not have an impact~~ on the Company’'s ~~consolidated~~financial position and results of operations orwas ~~financial~~not ~~condition~~significant.

~~Effective~~Accounting ~~April 1,~~for ~~2009, the Company adopted FASB ASC 825~~Stock-~~10-65,~~Based Financial Instruments – Overall – Transition and Open Effective Date Information (“ASC 825-10-65”). ASC 825-10-65 amends ASC 825-10 to require disclosures about fair value of financial instruments in interim financial statements as well as in annual financial statements and also amends ASC 270-10 to require those disclosures in all interim financial statements. The adoption of ASC 825-10-65 did not have a material impact on the Company’s consolidated results of operations or financial condition.Compensation

InWe ~~May~~account ~~2009,~~for ~~the~~our ~~FASB~~stock ~~issued~~options ~~SFAS~~and ~~No.~~warrants ~~165,~~using ~~“Subsequent~~the ~~Events”,~~fair ~~which~~value ismethod ~~included~~promulgated inby ~~ASC~~Accounting ~~Topic~~Standards ~~855,~~Codification ~~Subsequent~~subtopic ~~Events.~~480-10, ~~ASC~~Distinguishing ~~Topic~~Liabilities ~~855~~from ~~established~~Equity ~~principles~~(“ASC ~~and~~480-10”) ~~requirements for evaluating and reporting subsequent events and distinguishes~~ which ~~subsequent~~addresses ~~events should be recognized in~~ the ~~financial~~accounting ~~statements~~for ~~versus~~transactions ~~which subsequent events should be disclosed~~ in ~~the financial statements. ASC Topic 855 also required disclosure of the date through~~ which ~~subsequent~~an ~~events~~entity ~~are~~exchanges ~~evaluated~~its byequity ~~management. ASC~~instruments ~~Topic 855 was effective~~ for ~~interim~~goods ~~periods~~or ~~ending~~services. ~~after June 15~~Therefore, ~~2009~~our ~~and~~results ~~applies~~include ~~prospectively. Because~~non-cash ~~ASC~~compensation ~~Topic~~expense ~~855~~as ~~impacted~~a ~~the~~result ~~disclosure~~of ~~requirements, and not~~ the ~~accounting~~issuance ~~treatment for subsequent events, the adoption~~ of ~~ASC~~stock ~~Topic~~options ~~855~~and ~~did~~warrants ~~not~~and ~~impact~~we ~~our~~expect ~~results~~to ofrecord ~~operations~~additional ornon-cash ~~financial~~compensation ~~condition. See~~expense ~~Note~~in 14the ~~for disclosures regarding our subsequent events~~future.

~~Effective~~We ~~July 1,~~account ~~2009,~~for ~~the~~our ~~Company~~stock ~~adopted~~options ~~FASB~~and ~~ASU~~warrants ~~No. 2009-05,~~using ~~Fair~~the ~~Value~~fair ~~Measurements~~value ~~and~~method ~~Disclosures~~promulgated ~~(Topic~~by ~~820)~~Accounting ~~(“ASU~~Standards ~~2009-05”).~~Codification ~~ASU~~subtopic ~~2009~~718-0510, ~~provided~~Compensation ~~amendments to~~ (“ASC ~~820~~718-10,”) ~~Fair~~which ~~Value~~requires ~~Measurements~~all ~~and~~share-based ~~Disclosures~~payments –to ~~Overall~~employees, ~~for~~including ~~the~~grants ~~fair value measurement~~ of ~~liabilities.~~employee ~~ASU~~stock ~~2009-05~~options, ~~provides~~to ~~clarification~~be ~~that~~recognized in ~~circumstances in which a quoted price in an active market for~~ the ~~identical~~income ~~liability~~statement isbased ~~not~~on ~~available,~~their ~~a reporting entity is required to measure~~ fair ~~value using certain techniques~~values. This ~~ASU~~statement ~~2009-05~~does ~~also clarifies that when estimating the fair value of a liability, a reporting entity is~~ not ~~required~~change ~~to include a separate input or adjustment to other inputs relating to~~ the ~~existence~~accounting ofguidance ~~a restriction that prevents the transfer of a liability. ASU 2009-05 also clarifies that both a quoted price in an active market~~ for ~~the~~share ~~identical~~based ~~liability~~payment attransactions ~~the~~with ~~measurement~~parties ~~date~~other ~~and~~than ~~the quoted price for the identical liability when traded as an asset in an active market when no adjustments to the quoted price of the asset are required are Level 1 fair value measurements~~employees. ~~Adoption of ASU 2009-05 did not have a material impact on the Company’s consolidated results of operations or financial condition.~~

InFinancial ~~October~~Instruments ~~2009,~~Measured ~~the~~at ~~FASB~~Fair issued ASU 2009-13, Multiple-Deliverable Revenue Arrangements, (amendments to FASB ASC Topic 605, Revenue Recognition) (“ASU 2009-13”) and ASU 2009-14, Certain Arrangements That Include Software Elements, (amendments to FASB ASC Topic 985, Software) (“ASU 2009-14”). ASU 2009-13 requires entities to allocate revenue in an arrangement using estimated selling prices of the delivered goods and services based on a selling price hierarchy. The amendments eliminate the residual method of revenue allocation and require revenue to be allocated using the relative selling price method. ASU 2009-14 removes tangible products from the scope of software revenue guidance and provides guidance on determining whether software deliverables in an arrangement that includes a tangible product are covered by the scope of the software revenue guidance. ASU 2009-13 and ASU 2009-14 should be applied on a prospective basis for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010, with early adoption permitted. The Company does not expect adoption of ASU 2009-13 or ASU 2009-14 to have a material impact on the Company’s consolidated results of operations or financial condition.Value

17Accounting Standards Codification subtopic 825-10, Financial Instruments (“ASC 825-10”) defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, we considered the principal or most advantageous market in which we would transact and considered assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance. ASC 825-10 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 825-10 establishes three levels of inputs that may be used to measure fair value:

Level 1 - Quoted prices in active markets for identical assets or liabilities.

Level 2 - Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 - Unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities.

To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement is disclosed is determined based on the lowest level input that is significant to the fair value measurement.

We adopted the provisions of ASC 825-10 prospectively effective as of the beginning of Fiscal 2008 with certain additional provision adopted prospectively as of the beginning of Fiscal 2009. The adoption of ASC 825-10 did not have a material impact on our consolidated financial position or results of operations.

Non-GAAP Financial Measures

The financial statements appearing in this quarterly report on Form 10-Q do not contain any financial measures which are not in accordance with generally accepted accounting procedures.

Inflation

In the opinion of management, inflation has not had a material effect on our financial condition or results of its operations.

Climate Change

Our opinion is that neither climate change, nor governmental regulations related to climate change, have had, or are expected to have, any material effect on our operations.

Off-Balance Sheet Arrangements

We do not maintain off-balance sheet arrangements nor do we participate in non-exchange traded contracts requiring fair value accounting treatment.

Acquisition or Disposition of Plant and Equipment

We do not anticipate the sale of any significant property, plant or equipment during the next twelve months. We do not anticipate the acquisition of any significant property, plant or equipment during the next 12 months.

ITEM 3. CONTROLS AND PROCEDURES

~~(a)~~ Evaluation of Disclosure Controls and Procedures.

InAs ~~connection~~required ~~with~~by Rule 13a-15 under the ~~preparation~~Securities Exchange Act of ~~this~~1934, ~~Report~~as ~~and~~of inthe ~~accordance~~end ~~with~~of ~~Item~~the ~~307~~period ofcovered ~~Regulation~~by ~~S-K~~this report, we have carried out an evaluation, ~~under~~of the ~~supervision~~effectiveness ~~and~~of ~~with~~ the ~~participation~~design ~~of management, including our Chief Executive Officer~~ and ~~Chief~~operation ~~Financial Officer,~~ of ~~the effectiveness of~~ our company’s disclosure controls and procedures. asUnder of the ~~end~~direction of ~~the~~our ~~period~~Chief ~~covered~~Executive byOfficer ~~this~~and ~~report.~~Chief ~~Based~~Financial onOfficer, ~~that~~we ~~evaluation,~~evaluated our ~~Chief~~disclosure ~~Executive~~controls ~~Officer~~and procedures and ~~Chief~~internal ~~Financial~~control ~~Officer~~over financial reporting and concluded that our disclosure controls and procedures were effective as of June ~~March 31~~30, 2010.

~~(b)~~Disclosure ~~Changes~~controls and procedures and other procedures are designed to ensure that information required to be disclosed in ~~Internal~~our ~~Control~~reports ~~Over~~or ~~Financial~~submitted ~~Reporting~~under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time period specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934 is accumulated and communicated to management including our president and financial officer as appropriate, to allow timely decisions regarding required disclosure.

~~During~~Changes ~~the~~in ~~three~~Internal ~~month~~Control ~~period~~Over ~~ended~~Financial March 31, 2010, there were no changes to our internal control over financial reporting, other than the remediation of a pre-existing material weakness identified above, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.Reporting

~~PART~~There IIwas -no ~~OTHER~~change ~~INFORMATION~~in our internal control over financial reporting during the most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

~~ITEM 1. LEGAL PROCEEDINGS.~~20

~~From~~PART ~~time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business~~II. ~~However,~~OTHER ~~litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business.~~INFORMATION

OnItem ~~December 11, 2009, Cyberlux Corporation reached a resolution of its litigation with the NIR Group, Ltd~~1. ~~and~~Legal ~~its affiliates~~Proceedings. ~~On March 15, 2010, upon cross motion, final disposition of the matter was entered.~~

~~ITEM~~From 2time to time we are involved in various claims and legal actions arising in the ordinary course of business. ~~UNREGISTERED~~In ~~SALES~~our OFopinion, ~~EQUITY~~the ~~SECURITIES~~ultimate ~~AND~~disposition ~~USE~~of OFthese ~~PROCEEDS~~matters will not have a material effect on our financial position, results of operations or cash flows.

OnItem ~~January 20, 2009, we borrowed an aggregate of $55,000~~1A. In ~~conjunction~~Risk ~~with the borrowing, we issued a total of 25,000,000 shares of our common stock~~Factors.

OnThere ~~January~~have ~~22,~~been ~~2009,~~no wematerial ~~reissued~~changes 1in our risk factors from those disclosed in Part I,~~000,000~~ ~~shares~~Item 1A of ~~Series~~our BAnnual ~~Convertible~~Report ~~Preferred~~on ~~shares~~Form ~~(“Series~~10-K Bfor ~~shares”)~~the tofiscal ~~management~~year ended December 31, 2009.

OnItem ~~February~~2. ~~12,~~Unregistered ~~2009,~~Sales ~~we borrowed an aggregate~~ of ~~$30,000. In~~Equity ~~conjunction~~Securities ~~with~~and ~~the~~Use ~~borrowing, we issued a total~~ of ~~25,000,000 shares of our common stock~~Proceeds.

~~On March 31, 2009, we borrowed an aggregate of $42,500 In conjunction with the borrowing, we issued a total of 25,000,000 shares of our common stock.~~None

18Item 3. Defaults Upon Senior Securities.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

~~ITEM~~Item 4. ~~(REMOVED~~Removed ~~AND~~and ~~RESERVED)~~Reserved.

~~ITEM~~Item 5. ~~OTHER~~Other ~~INFORMATION~~Information.

~~None~~On July 28, 2010, we completed a 1:200 reverse stock split of our common stock, par value $0.001

~~ITEM~~Item 6. ~~EXHIBITS~~Exhibits.

31.1	Certification ofby Chief Executive Officer pursuant to ~~Rule~~Sarbanes ~~13a-14~~Oxley ~~and Rule 15d-14(a), promulgated under the Securities and Exchange~~ Act of ~~1934,~~2002 asSection ~~amended~~302.
31.2	Certification ofby Chief Financial Officer pursuant to ~~Rule~~Sarbanes ~~13a-14~~Oxley ~~and Rule 15d 14(a), promulgated under the Securities and Exchange~~ Act of ~~1934,~~2002 asSection ~~amended~~302.
32.1	~~Certifications~~Certification ~~pursuant~~by tochief 18executive ~~U.S.C.~~officer ~~Section~~and ~~1350~~chief asfinancial ~~adopted~~officer pursuant to ~~Section 906 of the~~ Sarbanes -Oxley Act of 2002 Section 906.

SIGNATURES

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

	CYBERLUX CORPORATION
Date: May 20, 2010	By:	/s/ MARK D. SCHMIDT
Date: August 16, 2010	By:	/s/ MARK D. SCHMIDT
		Mark D. Schmidt
		Chief Executive Officer (Principal Executive Officer)
Date: May 20, 2010	By:	/s/ DAVID D. DOWNING
		David D. Downing
		Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)

Date: August 16, 2010	By:	/s/ DAVID D. DOWNING
		David D. Downing
		Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)

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