GRAND HAVANA INC. - Quarter Report: 2014 March (Form 10-Q)

Mark One

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

For the quarterly period ended March 31, 2014

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

For the transition period from ______ to _______

Commission File No. 333-172850

Unique Underwriters, Inc.
(Exact name of registrant as specified in its charter)

 121 North Commercial Drive,

Mooresville, NC 28815

(704) 902-5380 

 (Address and telephone number of principal executive offices)

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

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

Large accelerated filer [  ] Accelerated filer [   ] Non-accelerated filer [   ] Smaller reporting company [X]

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

Applicable Only to Issuer Involved in Bankruptcy Proceedings During the Preceding Five Years:

Indicate by checkmark whether the issuer has filed all documents and reports required to be filed by Section 12, 13 and 15(d) of the Securities Exchange Act of 1934 after the distribution of securities under a plan confirmed by a court.  Yes[   ]  No[  ] N/A

Applicable Only to Corporate Registrants

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the most practicable date:

CONTENTS

CONDENSED BALANCE SHEETS……………………………………………. 5

CONDENSED STATEMENTS OF OPERATIONS.…………………………… 6

CONDENSED STATEMENTS OF CASH FLOWS…................……………… 7

NOTES TO THE CONDENSED FINANCIAL STATEMENTS….…………… 8-11

Insert financial statements here
Unique Underwriters, Inc.

Notes to Condensed Financial Statements

March 31, 2014 (Unaudited)

NOTE 1 BUSINESS DESCRIPTION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Unique Underwriters, Inc. (the “Company”) is a national, independent insurance sales and marketing company located in the Mooresville, North Carolina area. The Company was incorporated in the State of Texas on July 28, 2009.

Basis of Presentation

The financial statements include the accounts of Unique Underwriters, Inc. under the accrual basis of accounting.

Interim financial statements

The accompanying condensed financial statements have been prepared by the Company without audit. In the opinion of management, all adjustments necessary to present the financial position, results of operations and cash flows for the stated periods have been made. Except as described below, these adjustments consist only of normal and recurring adjustments. Certain information and note disclosures normally included in the Company’s annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. These condensed financial statements should be read in conjunction with a reading of the Company’s consolidated financial statements and notes thereto included in the Company’s Form 10-K annual report filed with the Securities and Exchange Commission (SEC) on October 15, 2013. Interim results of operations for the three and nine months ended March 31, 2014 are not necessarily indicative of future results for the full year. 

Management’s Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. The financial statements above reflect all of the costs of doing business. The Company’s significant estimates include the valuation of stock-based compensation.

Reclassification

Certain amounts in the prior years' financial statements have been reclassified to conform with the current year presentation.

Cash and Cash Equivalents - For purposes of the Statements of Cash Flows, the Company considers highly liquid investments with an original maturity of three months or less to be cash equivalents.

Revenue Recognition – The Company applies paragraph 605-10-S99-1 of the FASB Accounting Standards Codification for revenue recognition. The Company recognizes revenue when services are realized or realizable and earned less estimated future doubtful accounts. The Company considers revenue realized or realizable and earned when all of the following criteria are met:

The approval from the Company’s insurance carriers, which occurs upon receipt of our commission check and the policy, is reviewed online, and related completion of services to the client is an event that triggers revenue recognition.

The lead sales revenue is recognized when one of our agents submits an order to rent leads and simultaneously their credit card is processed and the leads are distributed to them. The Company recognizes revenue when the agent submits an order to rent the leads for 30 days. After thirty days the leads become available for rental to another agent. Leads may be rented multiple times at decreasing rates due to the lead’s age and number of times it has been rented.

Membership revenue recognition occurs when an agent registers for one of the Company’s websites online and submits their payment information; the agent must give 30 days notice of request to cancel their membership. The Company recognizes revenue related to our various membership plans as income on a straight-line basis over the length of membership period.

The customer deposit is strictly related to Executive Membership Package. After submitting a $500 deposit, an Executive Member can request that the Company directly mail letters to new home owners and/or senior citizens to generate new direct mail response leads. The Company refunds these deposits back to Executive Members when they no longer request that the Company directly mail letters to new home owners and/or senior citizens to generate new direct mail response leads. However, the Executive Members may also apply these deposits towards the leads sale or membership fees in the future. After the Executive Member cancels their direct mail service, they have the choice to use these deposits for additional leads, request that the deposits be applied towards membership, or ask for refunds. If deposits are used for additional leads, revenue is recognized when services are realized or realizable and earned. If deposits are used for membership fees, revenue is recognized over the length of membership period. For the nine months ended March 31, 2014, and 2013, the Company did not issue any refunds to Executive Members.

Cost of Sales - The Company’s policy is to recognize cost of sales in the same manner in conjunction with revenue recognition, when the costs are incurred. Cost of sales includes the costs directly attributable to revenue recognition and include marketing and leads generation costs, leads purchased costs and agent expenses.

Loss Per Share – Net loss per common share is computed pursuant to section 260-10-45 of the FASB Accounting Standards Codification. Basic net loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period. Diluted net loss per share is computed by dividing net loss by the weighted average number of shares of common stock and potentially outstanding shares of common stock during each period. 2,258,621 shares of common stock underlying convertible debenture are not included in the calculations of diluted loss per share, as the impact of the potential common shares would antidilutive.

Stock-Based Compensation- The Company accounts for stock-based compensation using the fair value method following the guidance set forth in section 718-10 of the FASB Accounting Standards Codification for disclosure about Stock-Based Compensation. This section requires a public entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). That cost will be recognized over the period during which an employee is required to provide service in exchange for the award- the requisite service period (usually the vesting period). No compensation cost is recognized for equity instruments for which employees do not render the requisite service.

Fair Value for Financial Assets and Financial Liabilities- The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in accounting principles generally accepted in the United States of America (U.S. GAAP), and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:

The carrying amounts of the Company’s financial assets and liabilities, such as cash, accounts receivable, rent deposit, accounts payable, customer deposits and notes payable approximate their fair values because of the short maturity of these instruments.

The Company’s derivative liabilities related to convertible debt are measured at fair value on a recurring basis, using level 3 inputs. There were no assets or liabilities measured at fair value on a nonrecurring basis during the nine months ended March 31, 2014.

Recent Accounting Pronouncements

The Company has reviewed all recently issued, but not yet effective, accounting pronouncements and does not believe the future adoption of any such pronouncements may be expected to cause a material impact on its consolidated financial condition or the consolidated results of its operations.

INCOME TAXES

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amount used for federal and state income tax purposes.

The Company’s deferred tax asset at March 31, 2014 consists of net operating loss carry forwards calculated using federal and state effective tax rates equating to approximately $409,850 less a valuation allowance in the amount of approximately $409,850. Because of the Company’s lack of earnings history, the deferred tax asset has been fully offset by a valuation allowance.

ASC 740-10 prescribes a recognition threshold that a tax position is required to meet before being recognized in the financial statements and provides guidance on recognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition issues. The Company classifies interest and penalties as a component of interest and other expenses. To date, the Company has not been assessed, nor has the Company paid, any interest or penalties.

The Company measures and records uncertain tax positions by establishing a threshold for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Only tax positions meeting the more-likely-than-not recognition threshold at the effective date may be recognized or continue to be recognized. All of the Company's tax years are subject to examination.

At March 31, 2014, the Company had federal and state net operating loss carry forwards of approximately $1,171,000 that expire in various years through the year 2034.

NOTE 2 FIXED ASSETS

Fixed assets were comprised of the following as of March 31, 2014 and June 30, 2013:

Depreciation expense was $484 and $159 for the nine months ended March 31, 2014 and 2013, respectively.

NOTE 3 UNSECURED DEMAND LOAN PAYABLE

The balance of unsecured demand loan was $0 and $250,000 as of March 31, 2014 and June 30, 2013, respectively. The funds borrowed from an unrelated party were to fund the Company’s daily operations. The loan was unsecured, interest free and repayable currently. In February 2014, the company was relieved of its obligations, which remain obligations of former officers and principal stockholders. Accordingly, the Company recorded additional paid in capital of $255,000 for the nine months ended March 31, 2014.

NOTE 4 LOANS PAYABLE-RELATED PARTIES

Loans payable to related parties were $0 and $45,484 as of March 31, 2014 and June 30, 2013, respectively. The funds borrowed from the Company’s related parties were to fund the Company’s daily operations. The loan agreements were not evidenced by any promissory notes, but rather verbal agreements between the related parties and the Company. The effects of imputed interest are immaterial to the financial statements taken as a whole. On February 2014, the principal and accrued interest in total amount of $27,984 was forgiven by the related parties. Accordingly, the Company recorded additional paid in capital of $27,984 in the accompanying statements of operations for the nine months ended March 31, 2014.

NOTE 5 ADVANCES FROM THIRD PARTIES

During the nine months ended March 31, 2014, the company received advances from Yellowstone Capital, LLC totaling $26,831 to fund the Company’s daily operations. The advances were due on demand and accrued interest at 15% plus fee per annum. During the nine months end March 31, 2014, the company repaid $15,415 of principal and interest. In February 2014, the company was relieved of its obligation to repay the principal and accrued interest in amount of $11,416, which remains an obligation of former officers and principal stockholders. Accordingly, the Company recorded additional paid in capital of $11,416 for the nine months ended March 31, 2014.

During the nine months ended March 31, 2014, the company received advances from Horizon Business Funding, LLC totaling $14,500. The advances were due on demand and accrued interest at 10% plus fee per annum. In February 2014, the company was relieved of its obligation to repay the principal and accrued interest in amount of $11,120, which remains an obligation of former officers and principal stockholders. Accordingly, the Company recorded additional paid in capital of $11,120 for the nine months ended March 31, 2014.

NOTE 6 CONVERTIBLE NOTES PAYABLE AND DERIVATIVE LIABILITIES

On August 15, 2013 Unique Underwriters, Inc. (the “Company”) issued an 8% convertible note in the principal amount of $47,500 (the "Note") to an Accredited Investor (the “Lender"). 

The Note bears interest at the rate of 8% per annum.  All interest and principal must be repaid on May 30, 2014.  The Note is convertible any time during the period beginning on the date which is one hundred eighty (180) days following the date of the Note into common stock of the Company, at the Lender’s option, at a 42% discount to the average of the three lowest closing bid prices of the common stock during the 10 Trading Day period prior to conversion as Trading Day is defined in the Note.  In the event the Company prepays the Note in full, the Company is required to pay off all principal, interest and any other amounts owing multiplied by 135% if prepaid 121 days following the Issue Date through 180 days following the Issue Date.  After the expiration of 180 days following the date of the Note, the Company has no right of prepayment.   

The Lender has agreed to restrict its ability to convert the Note and receive shares of common stock such that the number of shares of common stock held by them in the aggregate and their affiliates after such conversion or exercise does not exceed 9.99% of the then issued and outstanding shares of common stock.   The total net proceeds the Company received were $45,000, net of attorney’s fees of $2,500.

The Company has determined that the conversion feature of the Notes represent an embedded derivative since the Notes are convertible into a variable number of shares upon conversion. Accordingly, the Notes are not considered to be conventional debt under EITF 00-19 and the embedded conversion feature must be bifurcated from the debt host and accounted for as a derivative liability. Accordingly, the fair value of this derivative instrument has been recorded as a liability on the balance sheet with the corresponding amount recorded as a discount to the Notes. Such discount will be accreted from the grant date to the maturity date of the Notes. The change in the fair value of the derivative liability will be recorded in other income or expenses in the statement of operations at the end of each period, with the offset to the derivative liability on the balance sheet. The beneficial conversion feature included in the Notes resulted in an initial debt discount of $47,500 and an initial loss on the valuation of derivative liabilities of $10,491 based on the initial fair value of the derivative liability of $57,991. The fair value of the embedded derivative liability was calculated at grant date utilizing the following assumptions:

At March 31, 2014, the Company revalued the embedded derivative liability. For the period from the grant date to March 31, 2014, the balance of derivative liability did not change.

The fair value of the embedded derivative liability was calculated at March 31, 2014 utilizing the following assumptions:

The carrying value of the Notes was $39,398 as of March 31, 2014, net of unamortized discount of $8,102. The Company recorded amortization of the debt discount in the amount of $28,358 during the period ended March 31, 2014. The accrued interest related to this note for the period ended March 31, 2014 is $2,735.

On November 19, 2013 Unique Underwriters, Inc. (the “Company”) issued an 8% convertible note in the principal amount of $18,000 (the "Note") to an Accredited Investor (the “Lender"). 

The Note bears interest at the rate of 8% per annum.  All interest and principal must be repaid on August 21, 2014.  The Note is convertible any time during the period beginning on the date which is one hundred eighty (180) days following the date of the Note into common stock of the Company, at the Lender’s option, at a 42% discount to the average of the three lowest closing bid prices of the common stock during the 10 Trading Day period prior to conversion as Trading Day is defined in the Note.  In the event the Company prepays the Note in full, the Company is required to pay off all principal, interest and any other amounts owing multiplied by 135% if prepaid 121 days following the Issue Date through 180 days following the Issue Date.  After the expiration of 180 days following the date of the Note, the Company has no right of prepayment.   

The Lender has agreed to restrict its ability to convert the Note and receive shares of common stock such that the number of shares of common stock held by them in the aggregate and their affiliates after such conversion or exercise does not exceed 9.99% of the then issued and outstanding shares of common stock.   

The Company has determined that the conversion feature of the Notes represent an embedded derivative since the Notes are convertible into a variable number of shares upon conversion. Accordingly, the Notes are not considered to be conventional debt under EITF 00-19 and the embedded conversion feature must be bifurcated from the debt host and accounted for as a derivative liability. Accordingly, the fair value of this derivative instrument has been recorded as a liability on the balance sheet with the corresponding amount recorded as a discount to the Notes. Such discount will be accreted from the grant date to the maturity date of the Notes. The change in the fair value of the derivative liability will be recorded in other income or expenses in the statement of operations at the end of each period, with the offset to the derivative liability on the balance sheet. The beneficial conversion feature included in the Notes resulted in an initial debt discount of $18,000 and an initial loss on the valuation of derivative liabilities of $4,246 based on the initial fair value of the derivative liability of $22,246. The fair value of the embedded derivative liability was calculated at grant date utilizing the following assumptions:

At March 31, 2014, the Company revalued the embedded derivative liability. For the period from the grant date to March 31, 2014, the balance of derivative liability did not change.

The fair value of the embedded derivative liability was calculated at March 31, 2014 utilizing the following assumptions:

The carrying value of the Notes was $11,092 as of March 31, 2014, net of unamortized discount of $6,908. The Company recorded amortization of the debt discount in the amount of $6,908 during the period ended March 31, 2014. The accrued interest related to this note for the period ended March 31, 2014 was $521.

NOTE 7 CAPITAL STOCK

The Company is currently authorized to issue 100,000,000 Class A preferred shares at $.001 par value per share with 10:1 conversion and voting rights. As of March 31, 2014, there was no Class A preferred shares issued and outstanding.

The Company is currently authorized to issue 50,000,000 Class B preferred shares at $.001 par value per share with 1:1 conversion and voting rights. As of March 31, 2014, there was no Class B preferred shares issued and outstanding.

The Company is currently authorized to issue 1,000,000,000 common shares at $.001 par value per share. As of March 31, 2014, there were 77,565,612 shares of common stock issued and outstanding.

On September 20, 2013, the Company issued as compensation for services provided a total of 30,000 common shares with a fair value of $3,300 to a third party. The fair value of the shares was based on the price quoted on the OTC bulletin board on the grant date.

On November 1, 2013, the Company issued 75,000 common shares with a market value of $7,500 as compensation for services provided. The fair value of the shares was based on the price quoted on the OTC bulletin board on the grant date.

NOTE 8 LEASE AND EMPLOYMENT COMMITMENTS AND RELATED PARTY TRANSACTION

The Company assumed and renewed its office lease with an unrelated party. The lease was for five years and expires on April 30, 2018.

Effective as of March 14, 2014, the control of registrant has been changed. The office location has been changed, and the lease agreement is no longer an obligation to the Company. The Company recognized $9,688 of $35,981 rent expense for the three or nine months ended March 31, 2014, respectively.

In March, 2014, the agreement between the Company and Samuel, and the agreement between the Company and Ralph have been terminated and cancelled. And they are not owed any amounts from the Company.

NOTE 9 GOING CONCERN AND UNCERTAINTY

The Company has suffered recurring losses from operations since inception and has a working capital deficit of $166,675, as of March 31, 2014. In addition, the Company has yet to generate an internal cash flow from its business operations. These factors raise substantial doubt as to the ability of the Company to continue as a going concern.

Management’s plans with regard to these matters encompass the following actions: 1) obtain funding from new investors to alleviate the Company’s working capital deficiency, and 2) implement a plan to generate sales. The Company’s continued existence is dependent upon its ability to resolve it liquidity problems and increase profitability in its current business operations. However, the outcome of management’s plans cannot be ascertained with any degree of certainty. The accompanying financial statements do not include any adjustments that might result from the outcome of these risks and uncertainties.

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

The following discussion should be read in conjunction with our financial statements and the notes thereto.

Forward-Looking Statements

This quarterly report contains forward-looking statements relating to us that are based on the beliefs of our management as well as assumptions made by, and information currently available to, our management. When used in this Report, the words “anticipate”, “believe”, “estimate”, “expect”, “intend”, “plan” and similar expressions, as they relate to us or our management, are intended to identify forward-looking statements. These statements reflect management’s current view of us concerning future events and are subject to certain risks, uncertainties and assumptions, including among many others: our potential inability to raise additional capital, the possibility that third parties hold proprietary rights that preclude us from marketing our products, the emergence of additional competing technologies, changes in domestic and foreign laws, regulations and taxes, changes in economic conditions, a general economic downturn, a downturn in the securities markets, Securities and Exchange Commission regulations which affect trading in the securities of “penny stocks,” and other risks and uncertainties. Should any of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described in this Report as anticipated, estimated or expected.

Use of Certain Defined Terms

Except as otherwise indicated by the context, references in this report to " Unique Underwriters", "we," "us," or "our" , “UUI” and the "Company" are references to the business of Unique Underwriters, Inc.   

Use of GAAP Financial Measures

We use GAAP financial measures in the section of this quarterly report captioned “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” All of the GAAP financial measures used by us in this report relate to the inclusion of financial information.

Overview

This subsection of MD&A is an overview of the important factors that management focuses on in evaluating our businesses, financial condition and operating performance, our overall business strategy and our earnings for the periods covered.

General

Unique Underwriters, Inc. is a national Independent Marketing Organization that focuses exclusively on the sale of mortgage protection insurance policies, final expense insurance policies, annuities and life insurance policies. The Company provides sales and marketing assistance for its agents by utilizing direct-mail lead programs, insurance sales training and agency-building opportunities. The Company rents quality leads to its agents that allow the agent to generate sales of mortgage protection insurance policies, final expense insurance policies, annuities and life insurance policies. UUI generates revenue from three (3) sources: commissions from insurance carriers as a result of policies sold by our network of independent agents, renting leads to our network of independent agents, and the sales of annual membership packages to our agents that provide various levels of access to leads, training, personalized website, mentoring, customer support, company events and conventions.

During the last quarter, current management continued its reduction of expenses to insure the continued viability of the Company. Although future cash flow is always difficult to predict, by eliminating expenses and increasing our marketing, lead generation and production efforts, management continues to believe that profitability should improve during the coming year.

Results of Operations

Our financial statements have been prepared assuming that we will continue as a going concern and, accordingly, do not include adjustments relating to the recoverability and realization of assets and classification of liabilities that might be necessary should we be unable to continue in operation.

We expect we will require additional capital to meet our long term operating requirements. We expect to raise additional capital through, among other things, the sale of equity or debt securities.

Revenues

We had revenue of $29,676 and $304,333 for the three and nine months ended March 31, 2014, respectively, of which $29,676 from the commissions due to sales of insurance products, including Mortgage life insurance, Funeral expense insurance and annuities, and $0 from the sales of leads during the three months ended March 31, 2014, and $127,275 from the commissions due to sales of insurance products, including Mortgage life insurance, Funeral expense insurance and annuities, and $177,058 from the sales of leads during the nine months ended March 31, 2014. Comparatively, We had revenue of $345,421 and $1,277,001 for the three and nine months ended March 31, 2013, respectively, of which $174,875 from the commissions due to sales of insurance products, including Mortgage life insurance, Funeral expense insurance and annuities, and $170,546 from the sales of leads during the three months ended March 31, 2013, and $790,498 from the commissions due to sales of insurance products, including Mortgage life insurance, Funeral expense insurance and annuities, and $486,503 from the sales of leads during the nine months ended March 31, 2013. The decrease by $315,745 and $931,580 during the three and nine months ended March 31, 2014, respectively, was due in large part to limited capital resources which caused the number of mailings to be decreased. Less mailings going out meant fewer leads coming in which in turn resulted in less income from the sale of leads and less production from the sale of insurance policies.

Cost of Sales

The cost of sales was $1,353, or 4.6% of revenues, and $157,246, or 51.7% of revenue, for the three and nine months ended March 31, 2014, respectively. Comparatively, the cost of sales was $133,474, or 38.64% of revenues, and $466,824, or 36.56% of revenue, for the three and nine months ended March 31, 2013, respectively.

Cost of sales includes the costs directly attributable to revenue recognition, such as marketing and leads generation costs, leads purchased costs, and payments to agents, which was $43,675, $41,947, and $71,534 during the nine months ended March 31, 2014, respectively, and $164,064, $84,093, and $218,667 during the nine months ended March 31, 2013, respectively.

We recognized cost of sales in the same manner in conjunction with revenue recognition, when the costs were incurred. Contract labor expenses were not directly related to the generation of sales, rather were involved in the selling, general and administrative expenses of the business.

Expenses

We had operating expenses of $39,086 and $227,307 during the three and nine months ended March 31, 2014, respectively, compared to operating expenses of $229,900 and $865,996 during the three and nine months ended March 31, 2013, respectively. The decrease by $190,814 during the three months ended March 31, 2014 was due primarily to the decrease in consulting fees, contract labor, professional fee, and rent. The decrease by $638,689 during the nine months ended March 31, 2014 was due primarily to the decrease in consulting fees, contract labor and rent.

Expenses included in other administrative expenses in the accompanying statements of operations are miscellaneous and sundry expenses pertaining to office expenses and office supplies that are immaterial to be presented separately on the face of the statements of operations.

Liquidity and Capital Resources

Operating Activities

Net cash used in operating activities was $77,048 and $68,839 during the nine months ended March 31, 2014 and 2013, respectively. Negative cash flow from operations during the nine months ended March 31, 2014 was due to the net loss of $126,241, and offset by the stock issued for services rendered of $10,800, the amortization of debt discount of $35,265, expense of deferred financing fee of $2,500, the depreciation of $484, and increase in accrued interest of $2,730, the decrease in the accounts payable of $14,053, the increase of accrued expense of $5,110, and the write off rent deposit of $4,578. Negative cash flows from operation during the nine months ended March 31, 2013 was due to the net loss of $55,694, the increase in accounts receivable by $4,243, plus the decrease in accounts payable in amount of $30,375, offset by the increase in accrued payroll taxes by $25,893.

Investing Activities

Net cash used in investing activities was $1,315 for the nine months ended March 31, 2014 due primarily to the purchase of computers. Comparatively, net cash used in investing activities was $3,371 for the nine months ended March 31, 2013 due primarily to the purchase of furniture.

Financing Activities

Net cash provided by financing activities was $68,036 for the nine months ended March 31, 2014 due to loan to shareholders, proceeds from advance from third party, issuance of note payable, and repayment of related party loans and advance from third party. Comparatively, Net cash provided by financing activities was $53,055 for the nine months ended March 31, 2013 due to proceeds from related party loans.

Critical Accounting Policies

Revenue Recognition – The Company applies paragraph 605-10-S99-1 of the FASB Accounting Standards Codification for revenue recognition. The Company recognizes revenue when services are realized or realizable and earned less estimated future doubtful accounts. The Company considers revenue realized or realizable and earned when all of the following criteria are met:

The approval from the Company’s insurance carriers, which occurs upon receipt of our commission check and the policy, is reviewed online, and related completion of services to the client is an event that triggers revenue recognition.

No revenue is recognized prior to receipt of the commission check.

The lead sales revenue is recognized when one of our agents submits an order to rent leads and simultaneously their credit card is processed and the leads are distributed to them. The Company recognizes revenue when the agent submits an order to rent the leads for 30 days. After thirty days the leads become available for rental to another agent. Leads may be rented multiple times at decreasing rates due to the lead’s age and number of times it has been rented.

Membership revenue recognition occurs when an agent registers for one of the Company’s websites online and submits their payment information; the agent must give 30 days notice of request to cancel their membership. The Company recognizes revenue related to our various membership plans as income on a straight-line basis over the length of membership period.

The customer deposit is strictly related to Executive Membership Package. After submitting a $500 deposit, an Executive Member can request that the Company directly mail letters to new home owners and/or senior citizens to generate new direct mail response leads. The Company refunds these deposits back to Executive Members when they no longer request that the Company directly mail letters to new home owners and/or senior citizens to generate new direct mail response leads. However, the Executive Members may also apply these deposits towards the leads sale or membership fees in the future. After the Executive Member cancels their direct mail service, they have the choice to use these deposits for additional leads, request that the deposits be applied towards membership, or ask for refunds. If deposits are used for additional leads, revenue is recognized when services are realized or realizable and earned. If deposits are used for membership fees, revenue is recognized over the length of membership period. For the nine months ended March 31, 2014 and 2013, the Company did not issue any refunds to Executive Members.

Cost of Sales - The Company’s policy is to recognize cost of sales in the same manner in conjunction with revenue recognition, when the costs are incurred. Cost of sales includes the costs directly attributable to revenue recognition and include marketing and leads generation costs, leads purchased costs and agent expenses. Selling, general and administrative expenses are charged to expense as incurred.

Plan of Operation and Funding

We expect that working capital requirements will continue to be funded through a combination of our existing funds and further issuances of securities. Our working capital requirements are expected to increase in line with the growth of our business. In connection with our business plan, management anticipates additional increases in operating expenses and capital expenditures relating to: (i) mailing expenses; (ii) advertisement expenses; and (iii) marketing expenses. We intend to finance these expenses with further issuances of securities, and potentially debt issuances. Thereafter, we expect we will need to raise additional capital and generate revenues to meet long-term operating requirements. Additional issuances of equity or debt securities could potentially result in dilution to our current shareholders. Further, such securities might have rights, preferences or privileges senior to our common stock. Additional financing may not be available upon acceptable terms, or at all. If adequate funds are not available or are not available on acceptable terms, we may not be able to take advantage of prospective new business endeavors or opportunities, which could significantly and materially restrict our business operations. We will have to raise additional funds in the next twelve months in order to sustain and expand our operations. We currently do not have a specific plan of how we will obtain such funding; however, we anticipate that additional funding will be in the form of equity financing from the sale of our common stock.

We had cash of $262 on hand as of March 31, 2014. The accumulated deficit as of March 31, 2014 was $11,484,067.

The Company’s current cash on hand is not sufficient to meet our working capital requirements for the next twelve month period. Completion of our plan of operations is subject to attaining adequate revenue. We cannot assure investors that adequate revenues will be generated. Even without adequate revenues within the next twelve months, we still anticipate being able to continue with our present activities, but we may require financing to achieve operation and growth goals and to meet our working capital requirements. We will not receive any proceeds from the sale of common stock in this offering. If we are able to conduct an equity offering, there will be dilution to the current stockholders of the Company and to the investors that acquire shares in the offering; and if we are able to conduct a debt offering, we will likely be subject to various covenants on our business operations and may be required to make payments during the term of the securities.

Off-Balance Sheet Arrangements

As of the date of this Quarterly Report, we do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

Going Concern

The Company has suffered recurring losses from operations since inception and has a negative working capital. In addition, the Company has yet to generate an internal cash flow from its business operations. These factors raise substantial doubt as to the ability of the Company to continue as a going concern.

Management’s plans with regard to these matters encompass the following actions: 1) obtain funding from new investors to alleviate the Company’s working deficiency, and 2) implement a plan to generate sales. The Company’s continued existence is dependent upon its ability to resolve it liquidity problems and increase profitability in its current business operations. However, the outcome of management’s plans cannot be ascertained with any degree of certainty. The accompanying financial statements do not include any adjustments that might result from the outcome of these risks and uncertainties.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

No report required.

ITEM 4. CONTROLS AND PROCEDURES

Our management is responsible for establishing and maintaining a system of disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) that is designed to ensure that information required to be disclosed by us in the reports that we file or submit under the

Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive officer or officers and principal financial officer or officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

On April 2, 2013, the Company was served with the Original Petition of Crimson Gray LLC, a vendor that had provided web site hosting services to the Company until the Company discovered that Crimson Gray LLC had, without the Company’s permission, set up a link on the Company’s web site designed to divert the Company’s agents to a web site owned by Crimson Gray LLC for the purpose of selling products to the Company’s customers. The actions of Crimson Gray LLC constituted breach of contract and fraud. Crimson Gray LLC is seeking payment for unpaid fees in the total amount of $9,593.41. On April 22, 2013, the Company filed its answer by denying each and every allegation in the Original Petition of Crimson Gray LLC and has filed a counterclaim against Crimson Gray LLC seeking damages for breach of contract and fraud. As of the date of this report, Company Management is not aware of any other legal proceedings filed by any governmental authority or any other party involving our Company.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

No report required.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

No report required.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

No report required.

ITEM 6. EXHIBITS

Exhibits:

31. Certification of Chief Executive Officer and principal financial officer pursuant to Securities Exchange Act of 1934 Rule 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes- Oxley Act of 2002.

32. Certification pursuant to Securities Exchange Act of 1934 Rule 13a-14(b) or 15d-14(b) and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes- Oxley Act of 2002.

SIGNATURES

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

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