Investview, Inc. - Quarter Report: 2012 June (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

For the quarterly period ended June 30, 2012

For the transition period from ________________ to _______________

000-27019

(Commission file number)

InvestView, Inc.

(Exact name of registrant as specified in its charter)

12244 South Business Park Drive, Suite 240

Draper, Utah 84020

(801) 889-1800

(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 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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes x  No ¨

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

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

As of August 13, 2012, there were 4,550,733 shares of common stock, (of which 1,300 shares are in treasury), par value $.001 per share, outstanding.

INVESTVIEW, INC.

FORM 10-Q

QUARTERLY PERIOD ENDED JUNE 30, 2012

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION

INVESTVIEW, INC.

(formerly known as Global Investor Services, Inc.)

CONDENSED CONSOLIDATED BALANCE SHEETS

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

INVESTVIEW, INC.

(formerly known as Global Investor Services, Inc.)

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

(unaudited)

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

INVESTVIEW, INC.

(formerly known as Global Investor Services, Inc.)

CONSOLIDATED STATEMENT OF (DEFICIENCY IN) STOCKHOLDERS' EQUITY

FROM APRIL 1, 2012 THROUGH MARCH 31, 2012

(unaudited)

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

INVESTVIEW INC.

(formerly known as Global Investor Services, Inc.)

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(unaudited)

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

INVESTVIEW, INC.

(formerly known as Global Investor Services, Inc.)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2012

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A summary of the significant accounting policies applied in the preparation of the accompanying unaudited condensed consolidated financial statements follows:

Business and Basis of Presentation

InvestView, Inc. (the "Company") was incorporated on August 10, 2005 under the laws of the State of Nevada. On September 16, 2006, the Company changed its name to TheRetirementSolution.Com, Inc. ,on October 1, 2008 to Global Investor Services, Inc. and on March 27, 2012 to InvestView, Inc. The Company currently markets directly and through its marketing partners as well as online, certain investor products and services that provide financial and educational information to its prospective customers and to its subscribers.

The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Investment Tools & Training, LLC ("ITT") and Razor Data Corp ("Razor"). All significant inter-company transactions and balances have been eliminated in consolidation.

Interim Financial Statements

The following (a) condensed consolidated balance sheet as of March 31, 2012, which has been derived from audited financial statements, and (b) the unaudited condensed consolidated interim financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and the instructions to Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP 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. Operating results for the three months ended June 30, 2012 are not necessarily indicative of results that may be expected for the year ending March 31, 2013. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended March 31, 2012 included in the Company’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission (“SEC”) on June 29, 2012.

Revenue Recognition

For revenue from product sales and services, the Company recognizes revenue in accordance with Accounting Standards Codification subtopic 605-10, Revenue Recognition (“ASC 605-10”) which requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services have been rendered; (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 or services 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.

Revenue arises from subscriptions to the websites/software, workshops, online workshops and training and coaching/counseling services where the customers are charged a monthly subscription fee for access to the online training and courses and website/data.  Revenues are recognized in the month the product and services are delivered.

INVESTVIEW, INC.

(formerly known as Global Investor Services, Inc.)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2012

The Company sells its products separately and in various bundles that contain multiple deliverables that include website/data subscriptions, educational workshops, online workshops and training, one-on-one coaching and counseling sessions, along with other products and services. In accordance with ASC 605-25, sales arrangements with multiple deliverables are divided into separate units of accounting if the deliverables in the arrangement meet the following criteria: (i) the product has value to the customer on a standalone basis; (ii) there is objective and reliable evidence of the fair value of undelivered items; and (iii) delivery or performances of any undelivered item is probable and substantially in our control. The fair value of each separate element is generally determined by prices charged when sold separately. In certain arrangements, we offer these products bundled together.  As per ASC 605-25, if fair value of all undelivered elements in an arrangement exists, but fair value does not exist for a delivered element, then revenue is recognized using the residual method. Under the residual method, the fair value of undelivered elements is deferred and the remaining portion of the arrangement fee (after allocation of 100 percent of any discount to the delivered item) is recognized as revenue.  The deferral policy for each of the different types of revenues is summarized as follows:

Cost of Sales and Service

The cost of sales and service consists of the cost of the data feeds that supply real time and stock market data to the Company’s stock analysis software based tool, external partner commissions and other costs associated with the repair or maintenance of the website.

Fair Value of Financial Instruments

Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of June 30, 2012 and March 31, 2012. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. These financial instruments include cash and accounts payable. Fair values were assumed to approximate carrying values for cash and payables because they are short term in nature and their carrying amounts approximate fair values or they are payable on demand.

INVESTVIEW, INC.

(formerly known as Global Investor Services, Inc.)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2012

Stock-Based Compensation

The Company accounts for its stock based awards in accordance with Accounting Standards Codification subtopic 718-10, Compensation (“ASC 718-10”), which requires a fair value measurement and recognition of compensation expense for all share-based payment awards made to its employees and directors, including employee stock options and restricted stock awards. The Company estimates the fair value of stock options granted using the Black-Scholes valuation model. This model requires the Company to make estimates and assumptions including, among other things, estimates regarding the length of time an employee will retain vested stock options before exercising them, the estimated volatility of our common stock price and the number of options that will be forfeited prior to vesting. The fair value is then amortized on a straight-line basis over the requisite service periods of the awards, which is generally the vesting period. Changes in these estimates and assumptions can materially affect the determination of the fair value of stock-based compensation and consequently, the related amount recognized in the Company’s condensed consolidated statements of operations.

For the three months ended June 30, 2012 and 2011, the Company did not grant stock options to employees. The fair value of vesting options granted in previous years and vested during the three months ended June 30, 2012 and 2011 of $26,974 and $26,974, respectively, was recorded as a current period charge to earnings.

In addition, the Company issued a restricted stock units ("RSU") during the three months ended June 30, 2012. The fair value of the vesting RSU of $58,594 was recorded as a current period charge to earnings during the three months ended June 30, 2012.

Net Loss per Share

The Company follows Accounting Standards Codification subtopic 260-10, Earnings Per Share (“ASC 260-10”) specifying the computation, presentation and disclosure requirements of earnings per share information. Basic loss per share has been calculated based upon the weighted average number of common shares outstanding. The Company excluded 415,250 and 867,486 shares of common stock equivalents, that would be resulted from conversion of convertible debt, or exercise of stock options and warrants, from the diluted loss per share because their effect is anti-dilutive on the computation for the three months ended June 30, 2012 and 2011, respectively.

Reliance on Key Personnel and Consultants

The Company has only 18 full-time employees and no part-time employees.  Additionally, there are approximately 8 consultants performing various specialized services.  The Company is heavily dependent on the continued active participation of these current executive officers, employees and key consultants. The loss of any of the senior management or key consultants could significantly and negatively impact the business until adequate replacements can be identified and put in place.

Use of Estimates

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

Recent Accounting Pronouncements

There were various updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to a have a material impact on the Company's consolidated financial position, results of operations or cash flows.

INVESTVIEW, INC.

(formerly known as Global Investor Services, Inc.)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2012

2. GOING CONCERN MATTERS

The Company’s unaudited condensed consolidated financial statements are prepared using generally accepted accounting principles applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has incurred significant recurring losses which have resulted in an accumulated deficit of $77,189,135, net loss of $1,321,394 and net cash used in operations of $109,864 for the three months ended June 30, 2012 which raises substantial doubt about the Company’s ability to continue as a going concern.

Continuation as a going concern is dependent upon obtaining additional capital and upon the Company’s attaining profitable operations. The Company will require a substantial amount of additional funds to complete the development of its products, to build a sales and marketing organization, and to fund additional losses which the Company expects to incur over the next few years. The management of the Company intends to seek additional funding through a Private Placement Offering which will be utilized to fund product development and continue operations. The Company recognizes that, if it is unable to raise additional capital, it may find it necessary to substantially reduce or cease operations. The accompanying unaudited condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result from the outcome of this uncertainty.

3.  PREPAID EXPENSES

From time to time, the Company issues shares of its common stock for services to be performed.  The fair value of the common stock is determined at the date of the contract for services and is amortized ratably over the term of the contract.  As of June 30, 2012 and March 31, 2012, prepaid expenses were $40,574 and $82,516, respectively.  During the three months ended June 30, 2012 and 2011, the Company charged to operations an aggregate of $41,972 and $244,210, respectively.

4. PROPERTY AND EQUIPMENT

The Company’s property and equipment at June 30, 2012 and March 31, 2012:

Depreciation expense charged to operations amounted to approximately $52,000 and $53,000, respectively, for the three months ended June 30, 2012 and 2011.

INVESTVIEW, INC.

(formerly known as Global Investor Services, Inc.)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2012

5. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

Accounts payable and accrued liabilities consisted of the following at June 30, 2012 and March 31, 2012: 

6. NOTES PAYABLE

A summary of notes payable at June 30, 2012 and March 31, 2012 are as follows:

On January 20, 2009, the Company received $200,000 in exchange for a promissory note, secured by certain Directors of the Company, payable, due July 20, 2009 with interest due monthly at 20% per annum. The note is secured by common stock of the Company and is personally guaranteed by certain officers of the Company. The note contains certain first right of payment should the Company be successful in raising $500,000 to $1,500,000 in a Private Placement Offering before any payments can be distributed from the escrow. In connection with the issuance of the promissory note payable, the Company issued warrants to purchase its common stock at $0.01 per share for five years. The fair value of the warrants of $101,183, representing debt discount, has been fully amortized. This Note is currently in default.

On March 31, 2011, the Company issued a $227,049 unsecured promissory note, subsequently increased to $279,098 during the year ended March 31, 2012, due March 31, 2013 at 8% per annum in exchange for accrued fees.

On September 30, 2010, the Company issued an aggregate of $120,000 in unsecured promissory notes due five years from issuance at 8% per annum payable at maturity in exchange for the cancellation of 15,000 previously issued warrants.  The fair value of the exchanged warrants, approximately equaled the fair value of the issued notes at the date of the exchange.

On September 30, 2011, the Company issued an aggregate of $20,000 in unsecured promissory notes due September 30, 2014 at 8% per annum payable at maturity in exchange for the return and cancellation of 2,500 reset warrants to purchase the Company's common stock.  In conjunction with the exchange of promissory notes for warrant cancelation, the Company recorded a loss on warrant liability of $5,100.

At June 30, 2012 and March 31, 2012, balances consist of the following:

INVESTVIEW, INC.

(formerly known as Global Investor Services, Inc.)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2012

7. CONVERTIBLE NOTES

Convertible Notes # 1

On June 30, 2011, the Company issued $1,200,000 in secured Convertible Promissory Notes ($300,000 related party, officers of the Company) that matures June 30, 2014. The Promissory Notes bears interest at a rate of 8% and can be convertible into 300,000 shares of the Company’s common stock, at a conversion rate of $4.00 per share. Interest will also be converted into common stock at the conversion rate of $4.00 per share. In connection with the issuance of the Convertible Promissory Notes, the Company issued 150,000 warrants to purchase the Company’s common stock at $6.00 per share over five years (see Note 17).

In accordance ASC 470-20, the Company recognized an embedded beneficial conversion feature present in the note. The Company allocated a portion of the proceeds equal to the intrinsic value of that feature to additional paid-in capital. The Company recognized and measured an aggregate of $735,334 of the proceeds, which is equal to the intrinsic value of the embedded beneficial conversion feature, to additional paid-in capital and a discount against the note. The debt discount attributed to the beneficial conversion feature is amortized over the note’s maturity period (three years) as interest expense.

In connection with the issuance of the promissory notes, the Company issued detachable warrants granting the holder the right to acquire an aggregate of 150,000 shares of the Company’s common stock at $6.00 per share. The warrants expire five years from the issuance. In accordance with ASC 470-20, the Company recognized the value attributable to the warrants in the amount of $464,666 to additional paid in capital and a discount against the note. The Company valued the warrants in accordance with ASC 470-20 using the Black-Scholes pricing model and the following assumptions: contractual terms of 5 years, an average risk free interest rate of 1.76%, a dividend yield of 0%, and volatility of 166.12%. The debt discount attributed to the value of the warrants issued is amortized over the note’s maturity period (three years) as interest expense.

The Company allocated proceeds based on the relative fair values of the conversion provisions of the debt and warrants, measured at an aggregate of $1,200,000, to the warrant and debt conversion provision liabilities and a discount to Convertible Promissory Notes.

For the three months ended June 30, 2012, the Company amortized $99,635 of debt discount to current period operations as interest expense.

Convertible Note # 2

The Company issued a $21,000 unsecured convertible promissory note that matures on July 31, 2013 in exchange for a previously issued convertible promissory note.  The note bears interest at a rate of 8% per annum due at maturity and can be convertible into 5,250 shares of the Company’s common stock, at a conversion rate of $4.00 per share. Interest will also be converted into common stock at the conversion rate of $4.00 per share.

In accordance ASC 470-20, the Company recognized an embedded beneficial conversion feature present in the note. The Company allocated a portion of the proceeds equal to the intrinsic value of that feature to additional paid-in capital. The Company recognized and measured an aggregate of $6,300 of the proceeds, which is equal to the intrinsic value of the embedded beneficial conversion feature, to additional paid-in capital and a discount against the note. The debt discount attributed to the beneficial conversion feature is amortized over the note’s maturity period (three years) as interest expense.

For the three months ended June 30, 2012, the Company amortized $852 of debt discount to current period operations as interest expense.

INVESTVIEW, INC.

(formerly known as Global Investor Services, Inc.)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2012

Convertible Notes # 3

During the month of December 2011, the Company issued an aggregate of $200,000 in secured Convertible Promissory Notes ($100,000 related party, officers of the Company) that matures December 2014. The Promissory Notes bear interest at a rate of 8% and can be convertible into 50,000 shares of the Company’s common stock, at a conversion rate of $4.00 per share. Interest will also be converted into common stock at the conversion rate of $4.00 per share. In connection with the issuance of the Convertible Promissory Notes, the Company issued 25,000 warrants to purchase the Company’s common stock at $6.00 per share over five years..

The Company did not record an embedded beneficial conversion feature in the note since the fair value of the common stock did not exceed the conversion rate at the date of issuance.

In connection with the issuance of the promissory notes, the Company issued detachable warrants granting the holder the right to acquire an aggregate of 25,000 shares of the Company’s common stock at $6.00 per share. The warrants expire five years from the issuance. In accordance with ASC 470-20, the Company recognized the value attributable to the warrants in the amount of $37,201 to additional paid in capital and a discount against the note. The Company valued the warrants in accordance with ASC 470-20 using the Black-Scholes pricing model and the following assumptions: contractual terms of 5 years, an average risk free interest rate of 0.88% to 0.91%, a dividend yield of 0%, and volatility of 173.57% to 173.81%. The debt discount attributed to the value of the warrants issued is amortized over the note’s maturity period (three years) as interest expense.

For the year ended June 30, 2012, the Company amortized $3,089 of debt discount to current period operations as interest expense.

Convertible Notes # 4

On March 5, 2012, the Company issued  a $100,000 in secured Convertible Promissory Note that matures June 30, 2014. The Promissory Note bears interest at a rate of 8% and can be convertible into 25,000 shares of the Company’s common stock, at a conversion rate of $4.00 per share. Interest will also be converted into common stock at the conversion rate of $4.00 per share. In connection with the issuance of the Convertible Promissory Notes, the Company issued 12,500 warrants to purchase the Company’s common stock at $6.00 per share over five years.

In accordance ASC 470-20, the Company recognized an embedded beneficial conversion feature present in the note. The Company allocated a portion of the proceeds equal to the intrinsic value of that feature to additional paid-in capital. The Company recognized and measured an aggregate of $62,113 of the proceeds, which is equal to the intrinsic value of the embedded beneficial conversion feature, to additional paid-in capital and a discount against the note. The debt discount attributed to the beneficial conversion feature is amortized over the note’s maturity period (three years) as interest expense.

In connection with the issuance of the promissory notes, the Company issued detachable warrants granting the holder the right to acquire an aggregate of 12,500 shares of the Company’s common stock at $6.00 per share. The warrants expire five years from the issuance. In accordance with ASC 470-20, the Company recognized the value attributable to the warrants in the amount of $37,887 to additional paid in capital and a discount against the note. The Company valued the warrants in accordance with ASC 470-20 using the Black-Scholes pricing model and the following assumptions: contractual terms of 5 years, an average risk free interest rate of 0.87%, a dividend yield of 0%, and volatility of 370.41%. The debt discount attributed to the value of the warrants issued is amortized over the note’s maturity period (three years) as interest expense.

The Company allocated proceeds based on the relative fair values of the conversion provisions of the debt and warrants, measured at an aggregate of $100,000, to the warrant and debt conversion provision liabilities and a discount to Convertible Promissory Notes.

INVESTVIEW, INC.

(formerly known as Global Investor Services, Inc.)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2012

For the three months ended June 30, 2012, the Company amortized $10,744 of debt discount to current period operations as interest expense.

At June 30, 2012 and March 31, 2012, convertible note balances consisted of the following:

Aggregate maturities of long-term debt as of June 30, 2012 are as follows:

8. WARRANT DERIVATIVE LIABILITY

The Company issued warrants in conjunction with the issuance of Convertible Promissory Notes.  These warrants contain certain reset provisions. Therefore, in accordance with ASC 815-40, the Company reclassified the fair value of the warrant from equity to a liability at the date of issuance.  Subsequent to the initial issuance date, the Company is required to adjust to fair value the warrant as an adjustment to current period operations.

The Company recorded a loss on change in fair value of warrant liability of $3,888 and a gain of $28,190 for the three months ended June 30, 2012 and 2011, respectively. 

At June 30, 2012, the fair value of the 2,500 warrants containing certain reset provisions were determined using the Black Scholes Option Pricing Model with the following assumptions:

INVESTVIEW, INC.

(formerly known as Global Investor Services, Inc.)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2012

9. RELATED PARTY TRANSACTIONS

The Company is periodically advanced noninterest bearing operating funds from related parties and shareholders.  The advances are due on demand and unsecured. At June 30, 2012 and March 31, 2012, due to related party was $105,975.

As described in Note 7 above, on June 30, 2011, the Company issued a $200,000 convertible promissory note with interest at 8% per annum, due June 30, 2014 to the Company's CEO.  The note is convertible into the Company's common stock at $4.00 per share. In connection with the issuance of the note, the Company issued 25,000 warrants to purchase the Company’s common stock at $6.00 per share over five years.

As described in Note 7 above, on June 30, 2011, the Company issued a $100,000 convertible promissory note with interest at 8% per annum, due June 30, 2014 to the Company's CFO.  The note is convertible into the Company's common stock at $4.00 per share. In connection with the issuance of the note, the Company issued 12,500 warrants to purchase the Company’s common stock at $6.00 per share over five years.

As described in Note 7 above, on December 29, 2011, the Company issued a $100,000 convertible promissory note with interest at 8% per annum, due June 30, 2014 to the Company's CEO.  The note is convertible into the Company's common stock at $4.00 per share. In connection with the issuance of the note, the Company issued 12,500 warrants to purchase the Company’s common stock at $6.00 per share over five years.

10. CAPITAL STOCK

Common stock

The Company is authorized to issue 7,500,000 shares of common stock with par value $.001 per share as of June 30, 2012. As of June 30, 2012 and March 31, 2012, the Company had 4,550,733 shares and 4,507,753 shares of common stock issued and 4,549,433 shares and 4,506,453 shares of common stock outstanding.

On April 9, 2012, the Company affected a two hundred-to-one (200 to 1) reverse stock split of its issued and outstanding shares of common stock, $0.001 par value (whereby every two hundred shares of Company’s  common stock will be exchanged for one share of the Company's common stock). All references in the consolidated financial statements and the notes to consolidated financial statements, number of shares, and share amounts have been retroactively restated to reflect the reverse split.

In May 2012, the Company issued an aggregate of 20,145 shares of its common stock in exchange for $100,876 of services rendered.

In May 2012, the Company issued an aggregate of 6,167 shares of its common stock, valued at $37,886 in settlement of $14,000 accounts payable, and charged $23,886 to current operations.

In June 2012, the Company issued 16,667 shares of its common stock, valued at $62,501 in settlement of $50,000 accounts payable, and charged $12,501 to current operations.

11. STOCK OPTIONS AND WARRANTS

Employee Stock Options

The following table summarizes the changes in employee stock options outstanding and the related prices for the shares of the Company’s common stock issued to employees of the Company under two employee stock option plans. The nonqualified plan adopted in 2007 is for 65,000 shares of which 47,500 have been granted as of June 30, 2012. The qualified plan adopted in October of 2008 authorizing 125,000 shares was approved by a majority of the Shareholders on September 16, 2009. To date 42,500 shares have been granted as of June 30, 2012.

INVESTVIEW, INC.

(formerly known as Global Investor Services, Inc.)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2012

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 at June 30, 2012:

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

Stock-based compensation expense in connection with options granted to employees three months ended June 30, 2012 and 2011was $26,974 and $26,974, respectively.

Non-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 consultants and non-employees of the Company at June 30, 2012:

INVESTVIEW, INC.

(formerly known as Global Investor Services, Inc.)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2012

Transactions involving stock options issued to consultants and non-employees are summarized as follows: 

Restricted Stock Units ("RSU")

The Company has issued RSUs to certain employees .  RSUs issued to date vest in up to 12 months.

Transactions involving employee RSUs are summarized as follows:

During the three months ended June 30, 2012, the Company charged the vesting portion of the RSU's $58,594 to current operations.

Warrants

The following table summarizes the changes in warrants outstanding and the related prices for the shares of the Company’s common stock issued to shareholders at June 30, 2012:

INVESTVIEW, INC.

(formerly known as Global Investor Services, Inc.)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2012

Transactions involving the Company’s warrant issuance are summarized as follows:

12.  FAIR VALUE MEASUREMENT

The Company adopted the provisions of Accounting Standards Codification subtopic 825-10, Financial Instruments (“ASC 825-10”) on January 1, 2008. 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, the Company considers the principal or most advantageous market in which it would transact and considers 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.

INVESTVIEW, INC.

(formerly known as Global Investor Services, Inc.)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2012

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 and is determined based on the lowest level input that is significant to the fair value measurement.

Upon adoption of ASC 825-10, there was no cumulative effect adjustment to beginning retained earnings and no impact on the consolidated financial statements.

The carrying value of the Company’s cash and cash equivalents, accounts receivable, accounts payable, short-term borrowings (including convertible notes payable), and other current assets and liabilities approximate fair value because of their short-term maturity.

The following table provides a summary of changes in fair value of the Company’s Level 3 financial liabilities as of June 30, 2012: 

13. OFFICER COMPENSATION

During the quarter the company recognized $225,000 of accrued salary pursuant to the employment agreement of the chief executive in addition to awarding him a bonus of $300,000 for his successful efforts in performing certain activities approved by the Board of Directors. The bonus was also accrued and recognized during this quarter.

14. SUBSEQUENT EVENTS

Instilend Technologies, Inc.

On June 22, 2012, InvestView entered into a Letter of Intent (the “LOI”) with Todd Tabacco and Rich L'Insalata to acquire 100% of the equity interests of Instilend Technologies, Inc., a New York corporation to be organized ("Instilend" and together with the Company, the “Parties”). As a condition to closing, Instilend must hold the Matador/Lendex platform, website, and client list of a software program known as Stock Locate, together with a non-competition agreement from each affiliate and the prior owner of the asset. Following the closing, Instilend will be a 100% owned subsidiary of the Company.  The closing date is expected to be in the end of the third quarter or beginning of the fourth quarter of 2012 unless extended by mutual consent of the parties.  The closing of this transaction is subject to the execution of a definitive agreement, completion of due diligence and Board approval

Quick & Reilly

On June 27 2012, the Company entered into a non-binding letter of intent (the “LOI”) with First National Boston Corporation (“FNBC”) to acquire Quick & Reilly, Inc. (“Quick & Reilly”), wholly owned subsidiary of FNBC, in consideration of shares of Preferred Stock of the Company. Quick & Reilly holds a perpetual license to use the “Quick & Reilly” brand, which may only be terminated in the event the Company acquires a US banking charter/license enabling the Company to offer banking products in any US jurisdiction. Further, Quick & Reilly holds a limited license to use the name “First National Boston” and “Bank of Boston”. The LOI has expired and the Company is currently in the process of negotiating revised terms with FNBC and Quick & Reilly.

The closing is subject to Board approval of both parties, obtaining an audit for Quick & Reilly, standard due diligence and entering a definitive agreement.

Officer Loan

On August 6th, 2011, the Company’s CEO advanced a loan for working capital to the Company. The Company issued a $102,700 convertible promissory note with interest at 8% per annum, due June 30, 2014 to the Company's CEO.  The note is convertible into the Company's common stock at $4.00 per share. In connection with the issuance of the note, the Company issued 12,838 warrants to purchase the Company’s common stock at $6.00 per share over five years.

Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Forward-Looking Statements

This Quarterly Report Form 10-Q, including this discussion and analysis by management, contains or incorporates forward-looking statements. All statements other than statements of historical fact made in report are forward looking. In particular, the statements herein regarding industry prospects and future results of operations or financial position are forward-looking statements. These forward-looking statements can be identified by the use of words such as “believes,” “estimates,” “could,” “possibly,” “probably,” anticipates,” “projects,” “expects,” “may,” “will,” or “should” or other variations or similar words. No assurances can be given that the future results anticipated by the forward-looking statements will be achieved. Forward-looking statements reflect management’s current expectations and are inherently uncertain. Our actual results may differ significantly from management’s expectations. For factors that may cause actual results to differ from management’s expectations, reference should be made to the Company’s Form 10-K for the year ended March 31, 2012 filed with the Securities and Exchange Commission and our other periodic filings with the Securities and Exchange Commission.

The following discussion and analysis should be read in conjunction with our financial statements, included herewith. 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 of our management.

Corporate History

InvestView, Inc. (hereinafter referred to as the “Company”, “InvestView” or “INVU”) was incorporated in the State of Nevada on August 1, 2005. Effective September 18, 2006, the Company changed its name to TheRetirementSolution.com, Inc., on October 1, 2008 the Company changed its name to Global Investor Services, Inc. and on March 27, 2012, the Company changed its name to InvestView, Inc. The Company was initially formed to market portfolios of stocks via subscription. In 2007, a new chief executive officer was installed and a strategy was developed to create and market a diverse portfolio of products and services for the financial education and financial information industry. This strategy included strategic acquisitions, such as the acquisitions of Razor Data, LLC and Investment Tools and Training, LLC, which have provided the Company with an integrated platform in which it can market and deliver investor education products and investor services. The stock symbol is INVU.

Business Overview

As an investor technology and education company, we provide a broad suite of state-of-the-art products that allow the individual investor to find, analyze, track and manage his or her portfolio. Our educational services focus on empowering investors with the skills that allow them to rely on their own investing knowledge to make intelligent and sound investment decisions. Our flagship product is InvestView, an all-inclusive on-line education, analysis and application platform. InvestView is equipped with in-house, qualified professionals who have collectively taught over a quarter of a million students in the past decade on how to trade in the stock market.

These tools and educational programs arm the common investor and provide them with the ability to traverse today's turbulent marketplace, regardless of the direction of the market - whether it is moving up, down or sideways.

It is our opinion that now, more than ever before, it is critical that the individual investor come to understand the forces that influence the marketplace. We specialize in assisting common investors through this process by offering them the tools, training and confidence that is required to successfully navigate the market in these trying times.

Regardless of investors' ages or varying backgrounds, we help the everyday investor turn market uncertainty into opportunity. We do this by providing powerful investment tools and training, coupled with a rules-based system that allows individuals to make more intelligent and disciplined investment decisions.

We are committed to the education and support of the individual investor. Our innovative products, proprietary tools and all-inclusive platform are cost effective and engineered to meet the needs of investors world-wide.

The Company’s unique offerings include:

The Company believes that offering financial information and financial education, in one integrated operating platform, is a viable business strategy, but needs to evolve for greater diversification and shareholder value. Currently, our business model monetizes our products and services primarily from subscription revenues. Online brokers bundle the cost of their education platform into the commission and spreads they charge. To better monetize the value of our scalable platform, we believe our business strategy needs to evolve to be more like the online brokerage model.

Results of Operations

Three months ended June 30, 2012 compared to three months ended June 30, 2011:

Revenues:

Although we saw only a 4% increase in revenue for the three months ended June 30, 2012 from the prior year we were encouraged with the return on investment for our marketing spend. We proactively introduced both new products and a new marketing strategy to improve the lifetime value of our accounts. We are now emphasizing our online based business model which provides subscription based services including trading ideas, tools and education through live and recorded webinars and is marketed through a number of online media channels. Our trading and education tools are located at www.investview.com whereas our 7 minute trader product has its own website at www.7minute trader.com.

As we measured the attrition rates of the trading and education offerings we determined that their lifetime value was approximating our cost of acquisition. As clients move through the education modules they tend to exhaust their interest and either attrite or shift to the lower priced trading modules. Introduction of the 7 minute trader has resulted in a better adoption rate, a markedly improved retention rate and significantly lower acquisition costs.

Although the new 7 minute trader product had a good adoption rate, the lower price point offset some of this. The 7 minute trader is advertised at $49.95 per month whereas the trading and education tools are advertised at $99 and $199 per month. This quarter we recorded approximately $223,000 of receipts for this product versus only about $20,000 in the same quarter last year. This shift in marketing strategy also had the intended but inverse effect for the core education products. Receipts for this quarter fell to approximately $193,000 from about $361,000 in the same quarter last year.

This quarter also included about $56,000 less accretion of deferred revenues. However, this was offset by approximately an extra $47,000 of fees for an in-person seminar plus some licensing fee from a foreign broker who is testing with their clients our platform on a white-label basis.

Operating Costs and Expenses:

A summary of significant operating costs and expenses for the three months ended June 30, 2012 and the three months ended June 30, 2011 follows:

Operating costs were substantially lower year over year, primarily from a reduction of selling, general and administrative expenses.

During the three months ended June 30, 2012, our cost of sales and service was $156,087 as compared to $203,231 during the three months ended June 30, 2011. Most of this expense is composed of stock market data feeds to the Company’s core educational product line’s stock analysis tools. As a percentage of revenues, the operating margin improved to 72% in the current quarter from 62% in the same quarter last year primarily because the 7 minute products are not as data intensive. 

Our selling, general and administrative expenses decreased from $1,705,753 for the three months ended June 30, 2011 to $1,465,893 in current 2012 period or $239,860 (145%). Last year the Company incurred $959,011 as stock based compensation when the new CEO was hired, as compared to $228,385 for the current period. The reduction in stock based compensation was partially offset by accrued salaries due our officers of $625,000 compared to $nil for same period last year as a result of fully implementing an employment agreement with the CEO as well as approval of a $300,000 bonus for the CEO performing certain activities requested by the board of directors. In addition, the company took proactive steps to reduce personnel, audit fees and marketing spend.

This quarter we spent approximately $94,000 on direct marketing or 17% of revenues versus 48% or about $255,000 for the same quarter last year.

Depreciation and amortization decreased from $52,717 to $51,833 or a decrease of $884 due to the full amortization of certain property and equipment during the last fiscal year.

Other:

A summary of significant other income (expenses) for the three months ended June 30, 2012 and the three months ended June 30, 2011 follows:

Interest expense decreased from $420,071 to $163,121, a $256,950 or 61% decrease.  The decrease is because of the significant recapitalization of the Company over the past year.  

During the year ended March 31, 2010, we issued promissory notes and related warrants that contain certain reset provisions.  As such, we are required to record these reset provisions as a liability and mark them to market each reporting period.  For the three months ended June 30, 2012, we recorded a loss of $3,888 in change in the fair value of these reset provisions vs. a gain for the three months ended June 30, 2011 of $28,190. The volatility of our stock price increased in fiscal year 2012 from the prior fiscal year. This increase in volatility caused the value of the warrants to increase and resulted in some of the loss in the current period.

In addition, during the year ended March 31, 2012, we modified a significant number of these outstanding warrants and reduced the number of warrants with reset provisions to 2,500 warrants.

In addition, for the three months ended June 30, 2011, we settled or restructured a significant portion of our outstanding convertible debt obligations and warrants containing reset provisions.  As such, we incurred a loss on debt settlement of $579,801 as compared to a loss of $36,387 for the three months ended June 30, 2012 as a result of settlement of outstanding payables.

Cash Used in Operating Activities:

During the three months ended June 30, 2012, we were able to decrease our rate of usage of cash from operations to approximately $110,000 as compared to approximately $143,000 in the quarter ended March 31, 2012 and also compared to approximately $293,000 for the three months ended June 30, 201. We anticipate we will see enhanced cash flow from operations at the point we produce profits as we will be able to utilize our Net Operating Loss Carry-forwards

Liquidity and Capital Resources

During three months ended June 30, 2012, the Company incurred a loss from operations of $1,321,394. However, only $109,864 was cash related. This negative cash flow was funded by existing cash. As a result, our cash and cash equivalents decreased by $109,864 to $70,057 from the beginning of the quarter of $179,921.

The Company's current liabilities exceeded its current assets (working capital deficit) by $1,777,936 as of June 30, 2012 as compared to $952,214 at March 31, 2012. The increase in the working capital deficit is primarily due to the combination of increased accounts payable and accrued expenses of $696,781 and the reduction of cash of $109,864.

Auditor’s Opinion Expresses Doubt About the Company’s Ability to Continue as a “Going Concern”

The independent auditors report on our March 31, 2012 consolidated financial statements states that the Company's historical losses and accumulated deficiency raise substantial doubts about the Company's ability to continue as a going concern, due to the losses incurred and deficiency. If we are unable to develop our business, we will have to reduce, discontinue operations or cease to exist, which would be detrimental to the value of the Company's common stock. We can make no assurances that our business operations will develop and provide us with significant cash to continue operations.

In order to improve the Company's liquidity, the Company's management is actively pursuing additional financing through discussions with investment bankers, financial institutions and private investors. There can be no assurance that the Company will be successful in its effort to secure additional financing.

Critical Accounting Policies

The preparation of our financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and judgments that affect our reported assets, liabilities, revenues, and expenses, and the disclosure of contingent assets and liabilities. We base our estimates and judgments on historical experience and on various other assumptions we believe to be reasonable under the circumstances. Future events, however, may differ markedly from our current expectations and assumptions. While there are a number of significant accounting policies affecting our consolidated financial statements; we believe the following critical accounting policy involves the most complex, difficult and subjective estimates and judgments.

Revenue Recognition

For revenue from product sales and services, the Company recognizes revenue in accordance with Accounting Standards Codification subtopic 605-10, Revenue Recognition (“ASC 605-10”) which requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services have been rendered; (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.

Revenue arises from subscriptions to the websites/software, workshops, online workshops and training and coaching/counseling services where the customers are charged  a monthly subscription fee  for access to the online training and courses and website/data.  All revenues are recognized in the month the products and services are delivered.

We sell our products separately and in various bundles that contain multiple deliverables that include website/data subscriptions, educational workshops, online workshops and training, one-on-one coaching and counseling sessions, along with other products and services. In accordance with 605-25, sales arrangements with multiple deliverables are divided into separate units of accounting if the deliverables in the arrangement meet the following criteria: (i) the product has value to the customer on a standalone basis; (ii) there is objective and reliable evidence of the fair value of undelivered items; and (iii) delivery or performances of any undelivered item is probable and substantially in our control. The fair value of each separate element is generally determined by prices charged when sold separately. In certain arrangements, we offer these products bundled together.  If there is any discount from the combined fair value of the individual elements, the discount is allocated to the portion of the revenues that is attributed to the online courses and training. As per 605-25, if fair value of all undelivered elements in an arrangement exists, but fair value does not exist for a delivered element, then revenue is recognized using the residual method. Under the residual method, the fair value of undelivered elements is deferred and the remaining portion of the arrangement fee (after allocation of 100 percent of any discount to the delivered item) is recognized as revenue.  The deferral policy for each of the different types of revenues is summarized as follows:

Stock-Based Compensation

The Company has adopted Accounting Standards Codification subtopic 718-10, Compensation-Stock Compensation (“ASC 718-10”) which requires the measurement and recognition of compensation expense for all share-based payment awards made to employees, directors and key consultants including employee stock options and employee stock purchases related to an Employee Stock Purchase Plan based on the estimated fair values.

For the three months ended June 30, 2012 and 2011, the Company did not grant stock options to employees. The fair value of vesting options granted in previous years and vested during the three months ended June 30, 2012 and 2011 of $26,974 and $26,974, respectively, was recorded as a current period charge to earnings.

In addition, the Company issued a restricted stock units ("RSU") during the three months ended June 30, 2012. The fair value of the vesting RSU of $58,594 was recorded as a current period charge to earnings during the three months ended June 30, 2012.

Derivative Instruments and Fair Value of Financial Instruments

We have evaluated the application of Accounting Standards Codification 815-40, Derivatives and Hedging, Contracts in Entity’s Own Equity (“ASC 815-40”) to certain freestanding warrants and convertible promissory notes that contain exercise price adjustment features known as reset provisions.  Based on the guidance in ASC 815-40, we have concluded these instruments are required to be accounted for as derivatives effective upon issuance.

We have recorded the fair value of the warrants and reset provisions of the convertible promissory notes and classified as derivative liabilities in our balance sheet at fair value with changes in the value of these derivatives reflected in the consolidated statements of operations as gain or loss on derivative liabilities.  These derivative instruments are not designated as hedging instruments under ASC 815-10.

Recent Accounting Pronouncements

There were various updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to a have a material impact on the Company's consolidated financial position, results of operations or cash flows.

Off-Balance Sheet Arrangements

The Company does not have any off balance sheet arrangements that are reasonably likely to have a current or future effect on our financial condition, revenues, results of operations, liquidity or capital expenditures.

ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and, as such, are not required to provide the information under this item.

ITEM 4 – CONTROLS AND PROCEDURES 

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15 under the Securities Exchange Act of 1934 (the “Exchange Act”)) as of the end of the period covered by this Quarterly Report on Form 10-Q. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Our disclosure controls and procedures are designed to provide reasonable, not absolute, assurance that the objectives of our disclosure control system are met. Because of inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within a company have been detected. Our Chief Executive Officer and Chief Financial Officer have concluded, based on their evaluation as of the end of the period covered by this report, that our disclosure controls and procedures were not effective.

Control Deficiencies and Remediation Plan

Management has identified control deficiencies regarding the lack of segregation of duties and the need for a stronger internal control environment. Management of the Company believes that these material weaknesses are due to the small size of the Company’s accounting staff and reliance on outside consultants for external reporting.  The small size of the Company’s accounting staff may prevent adequate controls in the future, such as segregation of duties, due to the cost/benefit of such remediation.

To mitigate the current limited resources and limited employees, we rely heavily on direct management oversight of transactions, along with the use of outside legal and accounting professionals. As we grow, we expect to increase our number of employees, which will enable us to implement adequate segregation of duties within the internal control framework.

These control deficiencies could result in a misstatement of account balances that would result in a reasonable possibility that a material misstatement to our consolidated financial statements may not be prevented or detected on a timely basis. Accordingly, we have determined that these control deficiencies as described above together constitute a material weakness.

Changes in Internal Controls

Other than mentioned above, there were no changes in our internal controls over financial reporting during the fiscal quarter ended June 30, 2012 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business.  However, 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. We are not involved in a legal proceeding which commenced or in which there was a material development during the quarter ended June 30, 2012.

None of our directors, officers, or affiliates are involved in a proceeding adverse to our business or have a material interest adverse to our business.

ITEM 1A – RISK FACTORS

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and, as such, are not required to provide the information under this item.

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

In May 2012, the Company issued an aggregate of 20,145 shares of its common stock in exchange for services rendered.

In May 2012, the Company issued an aggregate of 6,167 shares of its common stock in settlement of accounts payable.

In June 2012, the Company issued 16,667 shares of its common stock in settlement of accounts payable.

The above transactions were approved by the Board of Directors of the Company.

All of the above offerings and sales were deemed to be exempt under Rule 506 of Regulation D and/or Section 4(2) of the Securities Act of 1933, as amended. No advertising or general solicitation was employed in offering the securities. The offerings and sales were made to a limited number of persons, all of whom were accredited investors, business associates of the Company or executive officers of the Company, and transfer was restricted by the Company in accordance with the requirements of the Securities Act of 1933. In addition to representations by the above-referenced persons, we have made independent determinations that all of the above-referenced persons were accredited or sophisticated investors, and that they were capable of analyzing the merits and risks of their investment, and that they understood the speculative nature of their investment. Furthermore, all of the above-referenced persons were provided with access to our Securities and Exchange Commission filings.

ITEM 3 – DEFAULTS UPON SENIOR SECURITIES

In January of 2009, the Company received $200,000 in exchange for the issuance of a non-convertible Promissory Note that matured on July 20, 2009. The note bears an interest rate of 20% and is in default. The Company has been advised that the US department of Justice is negotiating a settlement with the noteholder. Interest payments of approximately $17,334 were made to date and interest continues to be accrued pending settlement with the US Department of Justice.

ITEM 4 – Mine Safety Disclosures.

Not Applicable.  

ITEM 5 – OTHER INFORMATION

NONE

ITEM 6 – EXHIBITS

** Furnished herewith. XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.