Max Sound Corp - Quarter Report: 2014 March (Form 10-Q)

f10q0314_maxsoundcorporation.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

_______________

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

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

For the transition period from ______to______.

MAX SOUND CORPORATION

(Exact name of registrant as specified in charter)

DELAWARE		000-51886		26-3534190
(State or other jurisdiction of incorporation or organization)		(Commission File Number)		(I.R.S Employer Identification No.)

2902A Colorado Avenue

Santa Monica, CA 90404

(Address of principal executive offices)

_______________

310-264-0230

(Registrant’s telephone number, including area code)

_______________

N/A

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes x No o

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

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	¨	Smaller reporting company	x
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock. As of May 8, 2014, there were 326,391,750 shares, par value $0.0001 per share, of common stock issued and outstanding.

MAX SOUND CORPORATION

FORM 10-Q

for the period ended March 31, 2014

INDEX

PART I-- FINANCIAL INFORMATION

Item 1.	Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	61
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	70
Item 4.	Controls and Procedures	70

PART II-- OTHER INFORMATION

Item 1.	Legal Proceedings	71
Item 1A.	Risk Factors	72
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	72
Item 3.	Defaults Upon Senior Securities	75
Item 4.	Mine Safety Disclosures	75
Item 5.	Other Information	76
Item 6.	Exhibits	77

SIGNATURES

CAUTIONARY STATEMENT ON FORWARD-LOOKING INFORMATION

This Quarterly Report on Form 10-Q (this “Report”) contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements discuss matters that are not historical facts. Because they discuss future events or conditions, forward-looking statements may include words such as “anticipate,” “believe,” “estimate,” “intend,” “could,” “should,” “would,” “may,” “seek,” “plan,” “might,” “will,” “expect,” “predict,” “project,” “forecast,” “potential,” “continue” negatives thereof or similar expressions. Forward-looking statements speak only as of the date they are made, are based on various underlying assumptions and current expectations about the future and are not guarantees. Such statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, level of activity, performance or achievement to be materially different from the results of operations or plans expressed or implied by such forward-looking statements.

We cannot predict all of the risks and uncertainties. Accordingly, such information should not be regarded as representations that the results or conditions described in such statements or that our objectives and plans will be achieved and we do not assume any responsibility for the accuracy or completeness of any of these forward-looking statements. These forward-looking statements are found at various places throughout this Report and include information concerning possible or assumed future results of our operations, including statements about potential acquisition or merger targets; business strategies; future cash flows; financing plans; plans and objectives of management; any other statements regarding future acquisitions, future cash needs, future operations, business plans and future financial results, and any other statements that are not historical facts.

These forward-looking statements represent our intentions, plans, expectations, assumptions and beliefs about future events and are subject to risks, uncertainties and other factors. Many of those factors are outside of our control and could cause actual results to differ materially from the results expressed or implied by those forward-looking statements. In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than we have described. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Report. All subsequent written and oral forward-looking statements concerning other matters addressed in this Report and attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this Report.

Except to the extent required by law, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, a change in events, conditions, circumstances or assumptions underlying such statements, or otherwise.

CERTAIN TERMS USED IN THIS REPORT

When this report uses the words “we,” “us,” “our,” and the “Company,” they refer to Max Sound Corporation, and “SEC” refers to the Securities and Exchange Commission.

PART I – FINANCIAL INFORMATION

MAX SOUND CORPORATION

(A DEVELOPMENT STAGE COMPANY)

CONTENTS

PAGE	5	CONDENSED BALANCE SHEETS AS OF MARCH 31, 2014 (UNAUDITED) AND AS OF DECEMBER 31, 2013 (AUDITED).

PAGE	6	CONDENSED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2014 AND 2013 AND FOR THE PERIOD DECEMBER 9, 2005 (INCEPTION) TO MARCH 31, 2014.

PAGE	7	CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY FOR THE PERIOD FROM DECEMBER 9, 2005 (INCEPTION) TO MARCH 31, 2014.

PAGE	8	CONSDENSED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 2014 AND 2013 AND FOR THE PERIOD DECEMBER 9, 2005 (INCEPTION) TO MARCH 31, 2014.

PAGES	9 - 60	NOTES TO FINANCIAL STATEMENTS.

Item 1.

Financial Statements

Max Sound Corporation

(A Development Stage Company)

Balance Sheets

ASSETS

	March 31, 2014			December 31, 2013
	(UNAUDITED)

Current Assets
Cash	$	-		$	166,778
Inventory		38,071			38,071
Prepaid expenses		14,270			65,069
Debt offering costs - net		27,526			58,009
Total Current Assets		79,867			327,927

Property and equipment, net		243,832			255,317

Other Assets
Security deposit		413			413
Intangible assets		16,562,565			16,803,954
Total Other Assets		16,562,978			16,804,367

Total Assets	$	16,886,677		$	17,387,611

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities
Cash overdraft	$	90,362		$	-
Accounts payable		369,665			206,458
Accrued expenses		123,463			94,973
Line of credit - related party		192,110			140,000
Derivative liabilities		3,495,890			1,885,770
Convertible note payable, net of debt discount of $1,211,049 and $1,562,390, respectively		969,896			956,356
Total Current Liabilities		5,241,386			3,283,557

Commitments and Contingencies

Stockholders' Equity
Preferred stock, $0.0001 par value; 10,000,000 shares authorized, No shares issued and outstanding		-			-
Common stock, $0.0001 par value; 400,000,000 shares authorized, 318,422,836 and 309,543,698 shares issued and outstanding, respectively		32,143			31,255
Additional paid-in capital		43,626,932			41,915,852
Deferred compensation		(31,250	)		(50,000	)
Treasury stock		(519,700	)		(520,000	)
Deficit accumulated during the development stage		(31,462,834	)		(27,273,053	)
Total Stockholders' Equity		11,645,291			14,104,054

Total Liabilities and Stockholders' Equity	$	16,886,677		$	17,387,611

See accompanying notes to condensed unaudited financial statements.

Max Sound Corporation

(A Development Stage Company)

Statements of Operations

(UNAUDITED)

							For the Period From
							December 9, 2005
	For the Three Months Ended						(Inception) to March 31,
	March 31, 2014			March 31, 2013			2014

Revenue	$	1,236		$	988		$	27,565

Operating Expenses
General and administrative		740,785			947,816			5,965,527
Endorsement fees		-			480,000			5,422,277
Consulting		133,812			127,076			6,780,774
Professional fees		277,474			492,758			1,724,717
Website development		22,881			-			274,144
Compensation		256,400			270,359			4,735,266
Total Operating Expenses		1,431,352			2,318,009			24,902,705

Loss from Operations		(1,430,116	)		(2,317,021	)		(24,875,140	)

Other Income / (Expense)
Interest income		-			-			688
Other income		-			-			6,905
Gain on sale of intellectual property		-			-			220,000
Gain (Loss) on extinguishment of debt		(18,596	)		-			(11,953	)
Interest expense		(116,582	)		(29,656	)		(322,454	)
Derivative Expense		-			(24,126	)		(643,807	)
Amortization of debt offering costs		(78,983	)		(49,237	)		(601,031	)
Loss on conversions		(42,085	)		(46,093	)		(88,178	)
Amortization of debt discount		(786,155	)		(421,763	)		(4,274,461	)
Change in fair value of embedded derivative liability		(1,717,264	)		188,493			(736,948	)
Total Other Income / (Expense)		(2,759,665	)		(382,382	)		(6,451,239	)

Provision for Income Taxes		-			-			-

Net Loss	$	(4,189,781	)	$	(2,699,403	)	$	(31,326,379	)

Net Loss Per Share - Basic and Diluted	$	(0.01	)	$	(0.01	)

Weighted average number of shares outstanding during the year Basic and Diluted		313,207,471			290,407,275

See accompanying notes to condensed unaudited financial statements.

Max Sound Corporation
(A Development Stage Company)
Condensed Statement of Changes in Stockholders' Equity
For the Period from December 9, 2005 (Inception) to March 31, 2014
(UNAUDITED)

											Additional															Total
	Preferred stock				Common stock						paid-in			Accumulated			Subscription			Deferred			Treasury			Stockholder's
	Shares		Amount		Shares			Amount			capital			Deficit			Receivable			Compensation			Stock			Equity


Balance, December 9, 2005 (Inception)		-	$	-		-		$	-		$	-		$	-		$	-		$	-		$	-		$	-

Stock issued on acceptance of incorporation expenses		-		-		100,000			10			90			-			-			-			-			100

Net loss for the period December 9, 2005 (Inception) to December 31, 2005		-		-		-			-			-			(400	)		-			-			-			(400	)

Balance, December 31, 2005		-		-		100,000			10			90			(400	)		-			-			-			(300	)

Net loss for the year ended December 31, 2006		-		-		-			-			-			(1,450	)		-			-			-			(1,450	)

Balance, December 31, 2006		-		-		100,000			10			90			(1,850	)		-			-			-			(1,750	)

Net loss for the year ended December 31, 2007		-		-		-			-			-			(1,400	)		-			-			-			(1,400	)

Balance, December 31, 2007		-		-		100,000			10			90			(3,250	)		-			-			-			(3,150	)

Common stock issued for services to founder ($0.001/sh)		-		-		44,900,000			4,490			40,410			-			-			-			-			44,900

Common stock issued for cash ($0.25/sh)		-		-		473,000			47			118,203			-			(67,750	)		-			-			50,500

Common stock issued for services ($0.25/sh)		-		-		12,000			1			2,999			-			-			-			-			3,000

Shares issued in connection with stock dividend		-		-		136,455,000			13,646			122,809			(136,455	)		-			-			-			-

In kind contribution of rent - related party		-		-		-			-			2,913			-			-			-			-			2,913

Accrued expenses payment made by a former shareholder		-		-		-			-			4,400			-			-			-			-			4,400

Net loss for the year ended December 31, 2008		-		-		-			-			-			(117,115	)		-			-			-			(117,115	)

Balance, December 31, 2008		-		-		181,940,000			18,194			291,824			(256,820	)		(67,750	)		-			-			(14,552	)

Common stock issued for cash ($0.25/sh)		-		-		62,000			6			15,494			-			-			-			-			15,500

Common stock issued for services ($0.25/sh)		-		-		24,000			2			5,998			-			-			-			-			6,000

Common stock issued for services ($0.35/sh)		-		-		1,700,000			170			594,830			-			-			(499,333	)		-			95,667

Common stock issued for services ($0.0625/sh)		-		-		935,714			94			58,388			-			-			-			-			58,482

Warrants issued for services		-		-		-			-			823,077			-			-			-			-			823,077

Common stock issued for services ($1.50/sh)		-		-		30,000			3			44,997			-			-			(39,699	)		-			5,301

Common stock issued for services ($1.77/sh)		-		-		30,000			3			53,097			-			-			(53,100	)		-			-

Common stock issued for services ($1.78/sh)		-		-		100,000			10			177,990			-			-			(166,052	)		-			11,948

Common stock issued for services ($1.80/sh)		-		-		100,000			10			179,990			-			-			(168,904	)		-			11,096

Common stock issued for services ($1.93/sh)		-		-		2,830,000			283			5,461,617			-			-			(5,459,098	)		-			2,802

Common stock issued for services ($1.94/sh)		-		-		30,000			3			58,197			-			-			(58,200	)		-			-

Common stock issued for services ($1.95/sh)		-		-		920,000			92			1,793,908			-			-			(1,135,808	)		-			658,192

Common stock issued for services ($2.00/sh)		-		-		300,000			30			599,970			-			-			(506,423	)		-			93,577

Return of common stock issued for services ($0.35/sh)		-		-		(1,100,000	)		(110	)		(384,890	)		-			-			385,000			-			-

Shares issued in connection with stock dividend		-		-		258,000			26			(26	)		-			-			-			-			-

Stock offering costs		-		-		-			-			(850	)		-			-			-			-			(850	)

Collection of subscription receivable		-		-		-			-			-			-			67,750			-			-			67,750

In kind contribution of rent - related party		-		-		-			-			12,600			-			-			-			-			12,600

Deferred compensation realized		-		-		-			-			-			-			-			114,333			-			114,333

Net loss for the year ended December 31, 2009		-		-		-			-			-			(2,298,552	)		-			-			-			(2,298,552	)

Balance, December 31, 2009		-		-		188,159,714			18,816			9,786,211			(2,555,372	)		-			(7,587,284	)		-			(337,629	)

Common stock issued for cash ($0.25/sh)		-		-		1,200,000			120			299,880			-			-			-			-			300,000

Accrued salary conversion into common stock ($0.30/sh)		-		-		945,507			95			283,557			-			-			-			-			283,652

Common stock issued for services ($0.15/sh)		-		-		250,000			25			37,475			-			-			-			-			37,500

Common stock issued for services ($0.18/sh)		-		-		100,000			10			17,990			-			-			-			-			18,000

Common stock issued for services ($0.19/sh)		-		-		100,000			10			18,990			-			-			-			-			19,000

Common stock issued for services ($0.20/sh)		-		-		210,000			21			41,979			-			-			-			-			42,000

Common stock issued for services ($0.25/sh)		-		-		140,000			14			34,986			-			-			-			-			35,000

Common stock issued in exchange for technology rights ($0.25/sh)		-		-		30,000,000			3,000			7,497,000			-			-			-			-			7,500,000

Return of common stock issued for services ($1.05/sh)		-		-		(150,000	)		(15	)		15			-			-			-			-			-

Common stock issued for services ($1.24/Sh)		-		-		1,000,000			100			1,239,900			-			-			(1,097,315	)		-			142,685

Common stock issued for services ($1.70/sh)		-		-		100,000			10			169,990			-			-			(152,534	)		-			17,466

Cancellation of shares held in escrow ($1.93/sh)		-		-		(1,000,000	)		(100	)		(1,929,900	)		-			-			487,802			-			(1,442,198	)

Warrants issued for services		-		-		-			-			10,559			-			-			-			-			10,559

Blue sky fees		-		-		-			-			(400	)		-			-			-			-			(400	)

Stock and financing offering costs		-		-		-			-			(8,000	)											-			(8,000	)

In kind contribution of rent - related party		-		-		-			-			9,450			-			-			-			-			9,450

Deferred compensation realized		-		-		-			-			-			-			-			6,546,046			-			6,546,046

Net loss for the year ended December 31, 2010		-		-		-			-			-			(6,312,965	)		-			-			-			(6,312,965	)

Balance, December 31, 2010		-		-		221,055,221			22,106			17,509,682			(8,868,337	)		-			(1,803,285	)		-			6,860,166

Common stock issued in exchange for assets ($0.10/sh)		-		-		3,000,000			300			299,700			-			-			-			-			300,000

Common stock issued for services ($0.07/sh)		-		-		2,000,000			200			139,800			-			-			-			-			140,000

Common stock issued for services ($0.08/sh)		-		-		1,006,500			100			80,420			-			-			-			-			80,520

Common stock issued for services ($0.10/sh)		-		-		3,066,462			307			306,339			-			-			-			-			306,646

Common stock issued for services ($0.11/sh)		-		-		500,000			50			54,950			-			-			-			-			55,000

Common stock issued for services ($0.22/sh)		-		-		15,403			2			3,386			-			-			-			-			3,388

Common stock issued for services ($0.23/sh)		-		-		100,000			10			22,990			-			-			-			-			23,000

Common stock issued for services ($0.25/sh)		-		-		702,860			70			175,645			-			-			-			-			175,715

Common stock issued for services ($0.33/sh)		-		-		100,000			10			32,990			-			-			-			-			33,000

Common stock issued for services ($0.35/sh)		-		-		2,443			-			855			-			-			-			-			855

Common stock issued for services ($0.39/sh)		-		-		101,500			10			39,575			-			-			-			-			39,585

Common stock issued for services ($0.47/sh)		-		-		123,795			12			58,172			-			-			-			-			58,184

Common stock issued for services ($0.50/sh)		-		-		100,000			10			49,990			-			-			-			-			50,000

Common stock issued for services ($0.54/sh)		-		-		200,000			20			107,980			-			-			-			-			108,000

Common stock issued for services ($0.70/sh)		-		-		100,000			10			69,990			-			-			-			-			70,000

Common stock issued for services ($0.88/sh)		-		-		100,000			10			87,990			-			-			-			-			88,000

Convertible debt conversion into common stock ($0.0295/sh)		-		-		271,186			27			7,973			-			-			-			-			8,000

Convertible debt conversion into common stock ($0.0315/sh)		-		-		587,382			59			18,444			-			-			-			-			18,503

Convertible debt conversion into common stock ($0.032/sh)		-		-		109,375			11			3,489			-			-			-			-			3,500

Convertible debt conversion into common stock ($0.0336/sh)		-		-		357,143			36			11,964			-			-			-			-			12,000

Convertible debt conversion into common stock ($0.0454/sh)		-		-		220,264			22			9,978			-			-			-			-			10,000

Convertible debt conversion into common stock ($0.1339/sh)		-		-		116,505			12			15,588			-			-			-			-			15,600

Convertible debt conversion into common stock ($0.1455/sh)		-		-		96,220			9			13,991			-			-			-			-			14,000

Convertible debt conversion into common stock ($0.1554/sh)		-		-		77,220			8			11,992			-			-			-			-			12,000

Accrued salary conversion into common stock ($0.11/sh)		-		-		1,309,091			131			143,869			-			-			-			-			144,000

Line of credit conversion into common stock ($0.11/sh)		-		-		909,091			91			99,909			-			-			-			-			100,000

Common stock issued for cash ($0.10/sh)		-		-		18,857,000			1,886			1,883,814			-			-			-			-			1,885,700

Warrants issued for services		-		-		-			-			248,498			-			-			-			-			248,498

Stock offering costs		-		-		-			-			(79,780	)		-			-			-			-			(79,780	)

Amortization of stock options		-		-		-			-			1,199,794			-			-			-			-			1,199,794

Deferred compensation realized		-		-		-			-			-			-			-			1,803,285			-			1,803,285

Net loss for the year ended December 31, 2011		-		-		-			-			-			(5,491,647	)		-			-			-			(5,491,647	)

Balance, December 31, 2011		-		-		255,184,661			25,519			22,629,977			(14,359,984	)		-			-			-			8,295,512

Common stock issued in exchange for assets ($0.404/sh)		-		-		24,752,475			2,475			9,997,525			-			-			-			-			10,000,000

Common stock issued for services ($0.62/sh)		-		-		733			-			454			-			-			-			-			454

Common stock issued for services ($0.21/sh)		-		-		150,000			15			31,485			-			-			-			-			31,500

Common stock issued for services ($0.25/sh)		-		-		250,000			25			62,475			-			-			-			-			62,500

Common stock issued for services ($0.30/sh)		-		-		850,000			85			254,915			-			-			(125,000	)		-			130,000

Common stock issued for services ($0.32/sh)		-		-		3,000,000			300			959,700			-			-			(480,000	)		-			480,000

Convertible debt conversion into common stock ($0.17032/sh)		-		-		146,780			15			24,985			-			-			-			-			25,000

Convertible debt conversion into common stock ($0.1764/sh)		-		-		150,000			15			26,445			-			-			-			-			26,460

Convertible debt conversion into common stock ($0.18013/sh)		-		-		277,572			28			49,972			-			-			-			-			50,000

Convertible debt conversion into common stock ($0.18128/sh)		-		-		113,805			11			20,489			-			-			-			-			20,500

Convertible debt conversion into common stock ($0.18619/sh)		-		-		917,031			92			170,649			-			-			-			-			170,741

Convertible debt conversion into common stock ($0.19159/sh)		-		-		180,000			18			34,468			-			-			-			-			34,486

Convertible debt conversion into common stock ($0.19670/sh)		-		-		101,678			10			19,990			-			-			-			-			20,000

Convertible debt conversion into common stock ($0.1995/sh)		-		-		200,501			20			39,980			-			-			-			-			40,000

Convertible debt conversion into common stock ($0.2394/sh)		-		-		48,454			5			11,595			-			-			-			-			11,600

Convertible debt conversion into common stock ($0.2513/sh)		-		-		198,965			20			49,980			-			-			-			-			50,000

Convertible debt conversion into common stock ($0.27067/sh)		-		-		92,365			9			24,991			-			-			-			-			25,000

Convertible debt conversion into common stock ($0.2741/sh)		-		-		91,208			9			24,991			-			-			-			-			25,000

Convertible debt conversion into common stock ($0.2763/sh)		-		-		72,385			7			19,993			-			-			-			-			20,000

Convertible debt conversion into common stock ($0.322/sh)		-		-		528,035			53			169,974			-			-			-			-			170,027

Common stock issued for financing costs ($0.34/sh)		-		-		60,000			6			20,394			-			-			-			-			20,400

Reclassification of derivative liability associated with convertible debt		-		-		-			-			549,547			-			-			-			-			549,547

Warrants issued for services		-		-		-			-			48,031			-			-			-			-			48,031

Net loss for the year ended December 31, 2012		-		-		-			-			-			(4,108,182	)		-			-			-			(4,108,182	)

Balance, December 31, 2012		-		-		287,366,648			28,737			35,243,005			(18,468,166	)		-			(605,000	)		-			16,198,576

Convertible debt and accrued interest conversion into common stock						19,146,156			1,915			2,734,461			-			-			-			-			2,736,376

Shares issued as a finders fee		-		-		94,964			9			20,545			-			-			-			-			20,554

Exercise of stock warrants		-		-		540,901			54			43,026			-			-			-			-			43,080

Common stock issued for services ($0.19 - $0.37/sh)						6,145,029			615			1,512,698			-			-			(60,000	)		-			1,453,313

Return of shares		-		-		(750,000	)		(75	)		75			-			-			-			-			-

Reclassification of derivative liability associated with convertible debt		-		-		-			-			2,162,726			-			-			-			-			2,162,726

Warrants issued for services		-		-		-			-			84,028			-			-			-			-			84,028

Stock opitons issued for services		-		-		-			-			115,288			-			-			-			-			115,288

Defered compensation realized		-		-		-			-			-			-			-			615,000			-			615,000

Repurchased shares		-		-		(3,000,000	)		-			-			-			-			-			(520,000	)		(520,000	)

Net loss for the years ended December 31, 2013		-		-		-			-			-			(8,804,887	)		-			-			-			(8,804,887	)

Balance December 31, 2013		-		-		309,543,698			31,255			41,915,852			(27,273,053	)		-			(50,000	)		(520,000	)		14,104,054

Convertible debt and accrued interest conversion into common stock		-		-		10,779,138			1,078			980,005			-			-			-			-			981,083

Common stock issued for services ($0.09 - $0.26/sh)		-		-		1,100,000			110			198,315			-			-			-			-			198,425

Return of shares		-		-		(3,000,000	)		(300	)					-			-			-			300			-

Reclassification of derivative liability associated with convertible debt		-		-		-			-			514,164			-			-			-			-			514,164

Defered compensation realized		-		-		-			-			-			-			-			18,750			-			18,750

Loss on debt extinguishment		-		-		-			-			18,596			-			-			-			-			18,596

Net loss for the three months ended March 31, 2014		-		-		-			-			-			(4,189,781	)		-			-			-			(4,189,781	)

Balance March 31, 2014		-	$	-		318,422,836		$	32,143		$	43,626,932		$	(31,462,834	)	$	-		$	(31,250	)	$	(519,700	)	$	11,645,291

See accompanying notes to condensed audited financial statements.

Max Sound Corporation

(A Development Stage Company)

Statements of Cash Flows

(UNAUDITED)

	For the Three Months Ended						For the Period From December 9, 2005 (Inception) to
	March 31, 2014			March 31, 2013			March 31, 2014
Cash Flows From Operating Activities:
Net Loss	$	(4,189,781	)	$	(2,699,403	)	$	(31,326,379	)
Adjustments to reconcile net loss to net cash used in operations
Depreciation/Amortization		26,464			20,213			228,255
Depreciation for abandonment of website		-			-			57,063
In kind contribution of rent - related party		-			-			24,963
Shares issued for intellectual property		-			-
Stock and stock options issued for services		198,425			877,913			4,501,091
Stock issued for debt financing costs		-			-			20,400
Warrants issued for services		-			84,028			1,214,193
Loss on debt conversion		42,085			46,093			88,178
Trademark Impairment		-			-
Amortization of stock options		-			-			1,199,794
Amortization of intangible		241,389			-			585,287
Bluesky Fees		-			-			(1,750	)
Amortization of stock based compensation		18,750			498,750			8,160,216
Amortization of original issue discount		57,419			4,590			206,355
Security deposit		-			-			(413	)
Amortization of debt offering costs		38,983			44,647			376,094
Amortization of debt discount		728,736			377,763			4,173,991
Change in fair value of derivative liability		1,717,264			(188,493	)		735,999
Loss on debt extinguishment		18,596			-			18,596
Derivative Expense		-			24,126			643,807
Warrants issued for services treated as derivative liabilities		-			-			43,809
Gain on sale of intellectual property		-			-			(220,000	)
Changes in operating assets and liabilities:
(Increase)/Decrease in prepaid expenses		50,799			(23,745	)		141,081
Increase/(Decrease) in inventory		-			-			(29,275	)
Increase/(Decrease) accounts payable		193,191			38,044			399,647
Increase/(Decrease) cash overdraft		90,362			48,513			90,362
Increase/(Decrease) in accrued expenses		115,519			29,658			772,036
Net Cash Used In Operating Activities		(651,799	)		(817,303	)		(7,896,600	)

Cash Flows From Investing Activities:
Register of trademark		-			-			(275	)
Cash received in connection with shares issed for assets and intellectual property		-			8,011			70,895
Purchase of property equipment		(14,979	)		(3,086	)		(411,769	)
Net Cash Provided by (Used In) Investing Activities		(14,979	)		4,925			(341,149	)

Cash Flows From Financing Activities:
Proceeds from stockholder loans / lines of credit		50,000			-			988,583
Repayment of stockholder loans / lines of credit		-			-			(698,583	)
Accrued expenses payment made by a former shareholder		-			-			4,400
Proceeds from issuance of convertible note, less offering costs paid		450,000			634,000			5,662,599
Proceeds from warrants exercised		-			43,080			43,080
Proceeds from issuance of stock, net of subscriptions receivable and net of offering costs		-			-			1,772,920
Proceeds from collection of stock subscription receivable		-			-			464,750
Net Cash Provided by Financing Activities		500,000			677,080			8,237,749

Net Increase / (Decrease) in Cash		(166,778	)		(135,298	)		-

Cash at Beginning of Period		166,778			135,298			-

Cash at End of Period	$	-		$	-		$	-

Supplemental disclosure of cash flow information:

Cash paid for interest	$	-		$	231		$	-
Cash paid for taxes	$	-		$	-		$	-

Supplemental disclosure of non-cash investing and financing activities:
Shares issued in connection with assets and intellectual property	$	-		$	-		$	17,800,000
Shares issued in conversion of related party accrued compensation	$	-		$	-		$	427,652
Shares issued in conversion of related party line of credit	$	-		$	-		$	100,000
Shares issued in conversion of convertible debt and accrued interest	$	937,978		$	493,873		$	4,405,310
Shares issued in connection with stock dividend	$	-		$	-		$	136,713
Shares issued for accrued interest	$	1,020		$	-		$	6,388
Reclassification of derivative liability to additional paid in capital	$	514,180		$	339,868		$	3,226,437
Reclassification of accounts payable to convertible note	$	30,000					$	30,000
Stock sold for subscription	$	-		$	-		$	464,750
Stock issued for future services (Deferred Compensation)	$	-					$	10,834,011
Shares issued for direct offering costs	$	-		$	-		$	20,554
Accrued interest reclassified to principal	$	83,899		$	-		$	197,285
Shares purchased in connection with sale of intellectual property	$	-		$	-		$	300,000
Return of shares related to cancelled contract	$	300		$	-		$	300
Debt discount recorded on convertible and unsecured debt accounted for as a derivative liability	$	407,036		$	617,511		$	5,298,728

During the year ended December 31, 2012 the Company issued 24,752,475 shares of common stock to Liquid Spins, Inc in exchange for assets and intellectual property with a value of $10,000,000.

See accompanying notes to condensed unaudited financial statements.

MAX SOUND CORPORATION

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

AS OF MARCH 31, 2014

(UNAUDITED)

NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION

(A) Organization and Basis of Presentation

Max Sound Corporation (the "Company") was incorporated in Delaware on December 9, 2005, under the name 43010, Inc. The Company is currently in the development stage, and on or around February 2011, the Company changed its business operations to focus primarily on developing and launching audio technology software.

Prior to February 2011, the Company's business operations were focused on creating search technologies within an online networking platform.

Activities during the development stage include developing the online networking platform, launching our audio technology, and raising capital.

The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in The United States of America and the rules and regulations of the Securities and Exchange Commission for interim financial information. Accordingly, they do not include all the information necessary for a comprehensive presentation of financial position and results of operations.

It is management's opinion, however, that all material adjustments (consisting of normal and recurring adjustments) have been made which are necessary for a fair financial statements presentation. The results for the interim period are not necessarily indicative of the results to be expected for the year.

Effective March 1, 2011, the Company filed with the State of Delaware a Certificate of Amendment of Certificate of Incorporation changing our name from So Act Network, Inc. to Max Sound Corporation.

(B) Use of Estimates

In preparing financial statements in conformity with generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reported period. Actual results could differ from those estimates.

For purposes of the cash flow statements, the Company considers all highly liquid investments with original maturities of three months or less at the time of purchase to be cash equivalents. As of March 31, 2014 and December 31, 2013, the Company had no cash equivalents.

(D) Property and Equipment

Property and equipment are stated at cost, less accumulated depreciation. Expenditures for maintenance and repairs are charged to expense as incurred. Depreciation is provided using the straight-line method over the estimated useful life of three to five years.

(E) Research and Development

The Company has adopted the provisions of FASB Accounting Standards Codification No. 350, Intangibles – Goodwill & Other. Costs incurred in the planning stage of a website are expensed as research and development while costs incurred in the development stage are capitalized and amortized over the life of the asset, estimated to be three years. Expenses subsequent to the launch have been expensed as website development expenses.

MAX SOUND CORPORATION

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

AS OF MARCH 31, 2014

(UNAUDITED)

(F) Concentration of Credit Risk

The Company at times has cash in banks in excess of FDIC insurance limits. The Company had $0 in excess of FDIC insurance limits as of March 31, 2014 and December 31, 2013.

(G) Revenue Recognition

The Company recognized revenue on arrangements in accordance with FASB Codification Topic 605, “Revenue Recognition” (“ASC Topic 605”). Under ASC Topic 605, revenue is recognized only when the price is fixed and determinable, persuasive evidence of an arrangement exists, the service is performed and collectability of the resulting receivable is reasonably assured. We had revenues of $1,236, and $988 for the three months ended March 31, 2014 and 2013, respectively.

(H) Advertising Costs

Advertising costs are expensed as incurred and include the costs of public relations activities. These costs are included in consulting and general and administrative expenses and totaled $4,805 and $3,853 for the three months ended March 31, 2014 and 2013, respectively.

(I) Identifiable Intangible Assets

As of March 31, 2014 and December 31, 2013, $7,500,000 of costs related to registering a trademark and acquiring technology rights have been capitalized. It has been determined that the trademark and technology rights have an indefinite useful life and are not subject to amortization. However, the trademark and technology rights will be reviewed for impairment annually or more frequently if impairment indicators arise.

On November 15, 2012, the Company acquired the rights to assets and audio technology known as Liquid Spins, Inc. through a share exchange, whereby the Company issued 24,752,475 shares of common stock for their rights in Liquid Spins technology (See Note 8 (H)). As of March 31, 2014 and December 31, 2013, $9,062,290 and $9,303,679, respectively, of costs related to this intangible remain capitalized. The technology was placed in service on August 23, 2013 with a useful life of 10 years. However, the technology will be reviewed for impairment annually or more frequently if impairment indicators arise.

(J) Impairment of Long-Lived Assets

The Company accounts for its long-lived assets in accordance with ASC Topic 360-10-05, “Accounting for the Impairment or Disposal of Long-Lived Assets.” ASC Topic 360-10-05 requires that long-lived assets, such as technology rights, be reviewed for impairment annually, or whenever events or changes in circumstances indicate that the historical cost carrying value of an asset may no longer be appropriate. The Company assesses recoverability of the carrying value of an asset by estimating the future net cash flows expected to result from the asset, including eventual disposition. If the future net cash flows are less than the carrying value of the asset, an impairment loss is recorded equal to the difference between the asset’s carrying value and fair value or disposable value. No impairments were recorded for the three months ended March 31, 2014 and 2013, respectively.

(K) Loss Per Share

In accordance with accounting guidance now codified as FASB ASC Topic 260, “Earnings per Share,” Basic earnings per share (“EPS”) is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding during the period, excluding the effects of any potentially dilutive securities. Diluted EPS gives effect to all dilutive potential of shares of common stock outstanding during the period including stock options or warrants, using the treasury stock method (by using the average stock price for the period to determine the number of shares assumed to be purchased from the exercise of stock options or warrants), and convertible debt or convertible preferred stock, using the if-converted method. Diluted EPS excludes all dilutive potential of shares of common stock if their effect is anti-dilutive. Because of the Company’s net losses, the effects of stock warrants and stock options would be anti-dilutive and accordingly, is excluded from the computation of earnings per share.

MAX SOUND CORPORATION

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

AS OF MARCH 31, 2014

(UNAUDITED)

The computation of basic and diluted loss per share for the three months ended March 31, 2014 and 2013, excludes the common stock equivalents of the following potentially dilutive securities because their inclusion would be anti-dilutive:

	March 31, 2014		March 31, 2013

Stock Warrants (Exercise price - $0.10 - $.52/share)		3,385,000		2,485,000
Stock Options (Exercise price - $0.12 - $.50/share)		12,700,000		12,700,000
Convertible Debt (Exercise price - $0.0658 - $.1922/share)		29,778,963		9,846,205

Total		45,863,963		25,031,205

(L) Income Taxes

The Company accounts for income taxes under FASB Codification Topic 740-10-25 (“ASC 740-10-25”) Income Taxes. Under ASC 740-10-25, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under ASC 740-10-25, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

(M) Business Segments

The Company operates in one segment and therefore segment information is not presented.

(N) Recent Accounting Pronouncements

The Company's management does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted would have a material impact on the accompanying financial statements.

(O) Fair Value of Financial Instruments

The carrying amounts on the Company’s financial instruments including prepaid expenses, accounts payable, accrued expenses, derivative liability, convertible note payable, and loan payable-related party, approximate fair value due to the relatively short period to maturity for these instruments.

(P) Stock-Based Compensation

In December 2004, the FASB issued FASB Accounting Standards Codification No. 718, Compensation – Stock Compensation. Under FASB Accounting Standards Codification No. 718, companies are required to measure the compensation costs of share-based compensation arrangements based on the grant-date fair value and recognize the costs in the financial statements over the period during which employees are required to provide services. Share-based compensation arrangements include stock options, restricted share plans, performance-based awards, share appreciation rights and employee share purchase plans. As such, compensation cost is measured on the date of grant at their fair value. Such compensation amounts, if any, are amortized over the respective vesting periods of the option grant. The Company applies this statement prospectively.

MAX SOUND CORPORATION

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

AS OF MARCH 31, 2014

(UNAUDITED)

Equity instruments (“instruments”) issued to other than employees are recorded on the basis of the fair value of the instruments, as required by FASB Accounting Standards Codification No. 718. FASB Accounting Standards Codification No. 505, Equity Based Payments to Non-Employees defines the measurement date and recognition period for such instruments. In general, the measurement date is when either a (a) performance commitment, as defined, is reached or (b) the earlier of (i) the non-employee performance is complete or (ii) the instruments are vested. The measured value related to the instruments is recognized over a period based on the facts and circumstances of each particular grant as defined in the FASB Accounting Standards Codification.

(Q) Reclassification

Certain amounts from prior periods have been reclassified to conform to the current period presentation. These reclassifications had no impact on the Company's net loss or cash flows.

(R) Derivative Financial Instruments

Fair value accounting requires bifurcation of embedded derivative instruments such as conversion features in convertible debt or equity instruments, and measurement of their fair value for accounting purposes. In determining the appropriate fair value, the Company uses the Black-Scholes option-pricing model. In assessing the convertible debt instruments, management determines if the convertible debt host instrument is conventional convertible debt and further if there is a beneficial conversion feature requiring measurement. If the instrument is not considered conventional convertible debt, the Company will continue its evaluation process of these instruments as derivative financial instruments.

Once determined, derivative liabilities are adjusted to reflect fair value at each reporting period end, with any increase or decrease in the fair value being recorded in results of operations as an adjustment to fair value of derivatives. In addition, the fair value of freestanding derivative instruments such as warrants, are also valued using the Black-Scholes option-pricing model.

(S) Original Issue Discount

For certain convertible debt issued, the Company provides the debt holder with an original issue discount. The original issue discount is recorded to debt discount, reducing the face amount of the note and is amortized to interest expense over the life of the debt.

(T) Debt Issue Costs and Debt Discount

The Company may pay debt issue costs, and record debt discounts in connection with raising funds through the issuance of convertible debt. These costs are amortized to interest expense over the life of the debt. If a conversion of the underlying debt occurs, a proportionate share of the unamortized amounts is immediately expensed.

NOTE 2 GOING CONCERN

As reflected in the accompanying financial statements, the Company is in the development stage with minimal operations, has an accumulated deficit of $31,462,834 for the period from December 9, 2005 (inception) to March 31, 2014, and has negative cash flow from operations of $7,896,600. As the Company continues to incur losses, transition to profitability is dependent upon the successful commercialization of its products and achieving a level of revenues adequate to support the Company’s cost structure. The Company may never achieve profitability, and unless and until it does, the Company will continue to need to raise additional cash. Management intends to fund future operations through additional private or public debt or equity offerings. Based on the Company’s operating plan, existing working capital at March 31, 2014 was not sufficient to meet the cash requirements to fund planned operations through December 31, 2014 without additional sources of cash. This raises substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern and do not include adjustments that might result from the outcome of this uncertainty.

MAX SOUND CORPORATION

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

AS OF MARCH 31, 2014

(UNAUDITED)

NOTE 3 NOTE PAYABLE – PRINCIPAL STOCKHOLDER

During the year ended December 31, 2008, the Company received $18,803 from Greg Halpern, the Company's Chief Financial Officer and principal stockholder (referred to herein as the "principal stockholder"). Pursuant to the terms of the loan, the loan is bearing an annual interest rate of 3.25% and due on demand. In 2008, the Company repaid $15,000 in principal to the principal stockholder. In 2009, the Company repaid $3,803 in principal to the principal stockholder. As of December 31, 2010, the principal portion of this principal stockholder loan balance has been repaid (See Note 10).

On May 11, 2009, the Company received $9,500 from the principal stockholder. During the year ended December 31, 2009, the Company repaid $1,500 in principal to the principal stockholder. Pursuant to the terms of the loan, the loan is bearing an annual interest rate of 3.25% and is due on demand (See Note 10).

On May 22, 2009, the Company received $15,000 from the principal stockholder. During the year ended December 31, 2010, the Company repaid $6,000 in principal to the principal stockholder under the terms of the loan. Pursuant to the terms of the loan, the loan is bearing an annual interest rate of 3.25% and is due on demand (See Note 10).

On May 26, 2009, the Company received $16,700 from the principal stockholder. During the year ended December 31, 2010, the Company repaid $15,700 in principal to the principal stockholder under the term of this loan. Pursuant to the terms of the loan, the loan is bearing an annual interest rate of 3.25% and is due on demand (See Note 10).

During the year ended December 31, 2011, the Company repaid $18,000 in principal and $2,116 of accrued interest to the principal stockholder related to these principal stockholder loans (See Note 10).

On July 30, 2013, the Company received $28,000 from the principal stockholder which was repaid on August 13, 2013 (See Note 10).

As of March 31, 2014, the note payable balance including accrued interest totaled $0.

NOTE 4 LINE OF CREDIT – PRINCIPAL STOCKHOLDER

On May 28, 2009, the Company entered into a two year line of credit agreement with the principal stockholder in the amount of $100,000. The line of credit carries an interest rate of 3.25%. As of December 31, 2011, the principal stockholder has advanced the Company $100,000 under the terms of this line of credit agreement (See Note 10).

On November 10, 2009, the Company entered into a two year line of credit agreement with the principal stockholder in the amount of $100,000. The line of credit carries an interest rate of 3.25%. As of December 31, 2011, the principal stockholder has advanced $100,000 to the Company under the terms of this line of credit agreement (See Note 10).

On March 25, 2010, the Company entered into a two year line of credit agreement with the principal stockholder in the amount of $500,000. The line of credit carries an interest rate of 3.25%. On February 17, 2011, the principal stockholder converted $100,000 of the line of credit owed into 909,091 shares of common stock at $0.11 per share. As of December 31, 2011, the principal stockholder has advanced $360,580 to the Company under the terms of this line of credit agreement. (See Note 8(G) and Note 10).

As of December 31, 2011, the Company repaid $460,580 in principal and $11,283 of accrued interest to the principal stockholder related to these lines of credit (See Note 10).

During the year ended December 31, 2013, the Company received $290,000 from the principal stockholder, and the Company repaid $150,213 in principal and accrued interest to the principal stockholder under the term of a line of credit agreement dated September 26, 2013. Pursuant to the terms of the loan, the loan is bearing an annual interest rate of 4% and is due on or before September 26, 2015 (See Note 10). During the three months ended March 31, 2014, the principal stockholder loaned an additional $50,000. As of March 31, 2014, the line of credit balance including accrued interest totaled $192,110.

MAX SOUND CORPORATION

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

AS OF MARCH 31, 2014

(UNAUDITED)

NOTE 5 PROPERTY AND EQUIPMENT

At March 31, 2014, and December 31, 2013, respectively, property and equipment is as follows:

	March 31, 2014			December 31, 2013

Website Development	$	294,795		$	294,795
Furniture and Equipment		99,881			99,881
Leasehold Improvements		6,573			6,573
Software		53,897			53,897
Music Equipment		2,247			-
Office Equipment		69,629			56,897
Domain Name		1,500			1,500
Sign		628			628
Total		529,150			514,171
Less: accumulated depreciation and amortization		(285,318	)		(258,854	)
Property & Equipment, Net	$	243,832		$	255,317

Depreciation/amortization expense for the three months ended March 31, 2014 and 2013 totaled $26,464 and $20,213, respectively.

NOTE 6 CONVERTIBLE DEBT – DERIVATIVE LIABILITIES

On July 6, 2010, the Company entered into an agreement whereby the Company will issue up to $50,000 in a convertible note. The note matured on March 30, 2011, and bears an interest rate of 8%. Any unpaid amount as of the maturity date bears an interest rate of 22%. The holder of the note has a right to convert all or any part of the outstanding an unpaid principal amount into shares of common stock. The conversion price equals the "Variable Conversion Price", which is 59% of the "Market Price", which is the average of the lowest six trading prices for the Common Stock during the ten (10) trading day period prior to the conversion. In July of 2010, the Company received $50,000 proceeds less the $3,000 finder’s fee pursuant to the terms of this convertible note. As of December 31, 2012 the convertible note balance and accrued interest is $0.

On February 17, 2011, the Company entered into an agreement whereby the Company will issue up to $40,000 in a convertible note. The note matures on November 17, 2011, and bears an interest rate of 8%. The holder of the note has a right to convert all or any part of the outstanding an unpaid principal amount into shares of common stock. The conversion price equals the "Variable Conversion Price", which is 59% of the "Market Price", which is the average of the lowest six (6) trading prices for the Common Stock during the ten trading day period prior to the conversion. In February of 2011, the Company received $40,000 proceeds less the $2,500 finder’s fee pursuant to the terms of this convertible note. As of December 31, 2012 the convertible note balance and accrued interest is $0.

On March 8, 2012, the Company entered into an agreement whereby the Company will issue up to $166,667 in a convertible note. The note matures on March 9, 2013 and bears an interest rate of 4%. The holder of the note has a right to convert all or any part of the outstanding an unpaid principal amount into shares of common stock after six months. The conversion price equals the “Variable Conversion Price”, which is 70% of the “Market Price”, which is the average of the lowest ten (10) trading prices for the common stock during the ten trading day period prior to the conversion. The Company received $150,000 proceeds, less the $16,667 finder’s fee pursuant to the terms of this convertible note, on March 14, 2012. As of December 31, 2012 the convertible note balance and accrued interest is $0.

MAX SOUND CORPORATION

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

AS OF MARCH 31, 2014

(UNAUDITED)

On March 14, 2012, the Company entered into an agreement whereby the Company will issue up to $102,500 in a convertible note. The note matures on December 19, 2012 and bears an interest rate of 8%. The holder of the note has a right to convert all or any part of the outstanding an unpaid principal amount into shares of common stock after six months. The conversion price equals the “Variable Conversion Price”, which is 65% of the “Market Price”, which is the average of the lowest three (3) trading prices for the common stock during the ten trading day period prior to the conversion. The Company received $102,500 proceeds, less the $2,500 finder’s fee pursuant to the terms of this convertible note, on March 20, 2012. As of December 31, 2012 the convertible note balance and accrued interest is $0.

On April 4, 2012, the Company entered into an agreement whereby the Company will issue up to $166,000 in a convertible note. The note matures on December 28, 2012 and bears an interest rate of 8%. The holder of the note has a right to convert all or any part of the outstanding an unpaid principal amount into shares of common stock after six months. The conversion price equals the “Variable Conversion Price”, which is 70% of the “Market Price”, which is the average of the lowest three (3) trading prices for the common stock during the ten trading day period prior to the conversion. The Company received $138,000 proceeds, less the $28,000 finder’s fee pursuant to the terms of this convertible note, on April 4, 2012. As of December 31, 2013 and 2012 the convertible note balance and accrued interest is $0 and $10,500, respectively.

On April 25, 2012, the Company entered into an agreement whereby the Company will issue up to $166,667 in a convertible note. The note matures on April 25, 2013 and bears an interest rate of 4%. The holder of the note has a right to convert all or any part of the outstanding an unpaid principal amount into shares of common stock after six months. The conversion price equals the “Variable Conversion Price”, which is 70% of the “Market Price”, which is the average trading prices for the common stock during the ten trading day period prior to the conversion. The Company received $150,000 proceeds, less the $16,667 finder’s fee pursuant to the terms of this convertible note, on April 25, 2012. As of December 31, 2012 the convertible note balance and accrued interest is $0.

On May 8, 2012, the Company entered into an agreement whereby the Company will issue up to $333,000 in a convertible note subject to a $33,000 original issue discount (OID). On October 31, 2012 the Company entered into a new agreement whereby up to $833,000 in convertible note will be issued. The note matures on May 8, 2013, and bears an interest rate of 0% if note is repaid on or before 90 days from the effective date. If the note is not repaid within 90 days, a one-time interest charge of 5% will be applied to the principal. The holder of the note has a right to convert all or any part of the outstanding an unpaid principal amount into shares of common stock after six months. The conversion price equals the “Variable Conversion Price”, which is 70% of the “Market Price”, which is the average of the lowest three (3) trading prices for the common stock during the fifteen (15) trading day period prior to the conversion. The Company received $92,000 proceeds, less the $8,000 finder’s fee and $11,000 OID pursuant to the terms of this convertible note, on May 9, 2012. As of December 31, 2013 and 2012 the convertible note balance and accrued interest is $0 and $53,402, respectively.

On June 22, 2012, the Company entered into an agreement whereby the Company will issue up to $62,500 in a convertible note. The note matures on March 27, 2013 and bears an interest rate of 8%. The holder of the note has a right to convert all or any part of the outstanding an unpaid principal amount into shares of common stock after six months. The conversion price equals the “Variable Conversion Price”, which is 65% of the “Market Price”, which is the average of the lowest three (3) trading prices for the common stock during the ten trading day period prior to the conversion. The Company received $60,000 proceeds, less the $2,500 finder’s fee pursuant to the terms of this convertible note, on April 25, 2012. As of December 31, 2013 and 2012 the convertible note balance and accrued interest is $0 and $40,156, respectively.

On July 16, 2012, the Company entered into an agreement whereby the Company will issue up to $58,333 in a convertible note. The note matures on January 15, 2013 and bears an interest rate of 10%. The conversion price equals the “Variable Conversion Price”, which is 70% of the “Market Price”, which is the low traded price of the common stock during the twenty (20) trading day period prior to the conversion. The holder of the note has a right to convert all or any part of the outstanding an unpaid principal amount into shares of common stock after six months. The Company received $50,000 proceeds, less the $8,333 finder’s fee pursuant to the terms of this convertible note, on July 16, 2012. As of December 31, 2013 and 2012 the convertible note balance and accrued interest is $0 and $61,054, respectively.

MAX SOUND CORPORATION

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

AS OF MARCH 31, 2014

(UNAUDITED)

On July 30, 2012, the Company entered into an agreement whereby the Company will issue up to $111,000 in a convertible note. The note matures on April 30, 2013 and bears an interest rate of 8%. The conversion price equals the “Variable Conversion Price”, which is 70% of the “Market Price”, which is the average of the lowest three (3) trading prices for the common stock during the ten (10) trading day period prior to the conversion. The holder of the note has a right to convert all or any part of the outstanding an unpaid principal amount into shares of common stock after six months. The Company received $100,000 proceeds, less the $11,000 finder’s fee pursuant to the terms of this convertible note, on July 30, 2012. As of December 31, 2013 and 2012 the convertible note balance and accrued interest is $0 and $114,775, respectively.

On August 3, 2012, the Company entered into an agreement whereby the Company will issue up to $82,500 in a convertible note. The note matures on August 3, 2013 and bears an interest rate of 4%. The conversion price equals the “Variable Conversion Price”, which is 70% of the “Market Price”, which is lower of the average closing bid price for the common stock during the ten trading day period. The holder of the note has a right to convert all or any part of the outstanding an unpaid principal amount into shares of common stock after six months. The Company received $75,000 proceeds, less the $7,500 finder’s fee pursuant to the terms of this convertible note, on August 3, 2012. As of December 31, 2013 and December 31, 2012 the convertible note balance and accrued interest is $0 and $84,695, respectively.

On August 15, 2012, the Company will issue up to $50,000 in a convertible note subject to a $4,000 original issue discount (OID) related to the agreement entered into on May 8, 2012 and updated on October 31, 2012. The note matures on August 15, 2013, and bears an interest rate of 0% if note is repaid on or before 180 days from the effective date. If the note is not repaid within 90 days a one-time interest charge of 5% will be applied to the principal. The holder of the note has a right to convert all or any part of the outstanding an unpaid principal amount into shares of common stock after six months. The conversion price equals the “Variable Conversion Price”, which is 70% of the “Market Price”, which is the average of the lowest three (3) trading prices for the common stock during the fifteen (15) trading day period prior to the conversion. The Company received $50,000 proceeds, less the $4,000 finder’s fee pursuant to the terms of this convertible note, on August 15, 2012. As of December 31, 2013 and 2012 the convertible note balance and accrued interest is $0 and $55,943, respectively.

On September 10, 2012, the Company entered into an agreement whereby the Company will issue up to $83,333 in a convertible note. The note matures on September 10, 2013 and bears an interest rate of 4%. The conversion price equals the “Variable Conversion Price”, which is 70% of the “Market Price”, which is lower of the average closing bid price for the common stock during the ten trading day period. The holder of the note has a right to convert all or any part of the outstanding an unpaid principal amount into shares of common stock after six months. The Company received $75,000 proceeds, less the $8,333 finder’s fee pursuant to the terms of this convertible note, on September 10, 2012. As of December 31, 2013 and 2012 the convertible note balance and accrued interest is $0 and $84,354, respectively.

On September 26, 2012, the Company entered into an agreement whereby the Company will issue up to $166,000 in a convertible note. The note matures on June 26, 2013 and bears an interest rate of 8%. The conversion price equals the “Variable Conversion Price”, which is 70% of the “Market Price”, which is the average of the lowest three (3) trading prices for the common stock during the ten (10) trading day period prior to the conversion. The holder of the note has a right to convert all or any part of the outstanding an unpaid principal amount into shares of common stock after six months. The Company received $150,000 proceeds, less the $16,000 finder’s fee pursuant to the terms of this convertible note, on September 10, 2012. As of December 31, 2013 and 2012 the convertible note balance and accrued interest is $0 and $169,491, respectively.

On October 9, 2012, the Company entered into an agreement whereby the Company will issue up to $62,500 in a convertible note. The note matures on July 11, 2013 and bears an interest rate of 8%. The holder of the note has a right to convert all or any part of the outstanding an unpaid principal amount into shares of common stock after six months. The conversion price equals the “Variable Conversion Price”, which is 65% of the “Market Price”, which is the average of the lowest three (3) trading prices for the common stock during the ten trading day period prior to the conversion. The Company received $60,000 proceeds, less the $2,500 finder’s fee pursuant to the terms of this convertible note, on October 9, 2012. As of December 31, 2013 and 2012 the convertible note balance and accrued interest is $0 and $63,642, respectively.

MAX SOUND CORPORATION

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

AS OF MARCH 31, 2014

(UNAUDITED)

On November 1, 2012, the Company will issue up to $165,000 in a convertible note subject to a $15,000 original issue discount (OID) related to the agreement entered into on May 8, 2012 and updated on October 31, 2012. The note matures on November 1, 2013 and bears an interest rate of 0% if note is repaid on or before 180 days from the effective date. If the note is not repaid within 90 days a one-time interest charge of 5% will be applied to the principal. The holder of the note has a right to convert all or any part of the outstanding an unpaid principal amount into shares of common stock after six months. The conversion price equals the “Variable Conversion Price”, which is 70% of the “Market Price”, which is the average of the lowest three (3) trading prices for the common stock during the fifteen (15) trading day period prior to the conversion. The Company received $50,000 proceeds, less the $4,000 finder’s fee pursuant to the terms of this convertible note, on August 15, 2012. As of December 31, 2013 and 2012 the convertible note balance and accrued interest is $0 and $165,000, respectively.

On November 30, 2012, the Company entered into an agreement whereby the Company will issue up to $78,500 in a convertible note. The note matures on September 4, 2013 and bears an interest rate of 8%. The holder of the note has a right to convert all or any part of the outstanding an unpaid principal amount into shares of common stock after six months. The conversion price equals the “Variable Conversion Price”, which is 65% of the “Market Price”, which is the average of the lowest three (3) trading prices for the common stock during the ten trading day period prior to the conversion. The Company received $60,000 proceeds, less the $2,500 finder’s fee pursuant to the terms of this convertible note, on October 9, 2012. As of December 31, 2013 and 2012 the convertible note balance and accrued interest is $0 and $79,023, respectively.

On November 29, 2012, the Company entered into an agreement whereby the Company will issue up to $166,000 in a convertible note. The note matures on August 29, 2013 and bears an interest rate of 8%. The conversion price equals the “Variable Conversion Price”, which is 70% of the “Market Price”, which is the average of the lowest three (3) trading prices for the common stock during the ten (10) trading day period prior to the conversion. The holder of the note has a right to convert all or any part of the outstanding an unpaid principal amount into shares of common stock after six months. During 2012, the Company received $166,000 proceeds, less the $16,000 finder’s fee pursuant to the terms of this convertible note. As of December 31, 2013 and 2012 the convertible note balance and accrued interest is $0 and $167,143, respectively.

On January 25, 2013, the Company entered into an agreement whereby the Company will issue up to $100,000 in a convertible note. The note matures on January 25, 2014 and bears an interest rate of 4%. The conversion price equals the “Variable Conversion Price”, which is 70% of the “Market Price”, which is the average the closing bid prices for the common stock during the ten (10) trading day period prior to the conversion. The holder of the note has a right to convert all or any part of the outstanding an unpaid principal amount into shares of common stock after six months. The Company received $100,000 proceeds, less the $10,000 finder’s fee pursuant to the terms of this convertible note, on January 25, 2013. As of December 31, 2013, the convertible note balance and accrued interest is $0.

On January 24, 2013, the Company entered into an agreement whereby the Company will issue up to $166,000 in a convertible note. The note matures on October 24, 2013 and bears an interest rate of 8%. The conversion price equals the “Variable Conversion Price”, which is 70% of the “Market Price”, which is the average of the lowest three (3) trading prices for the common stock during the ten (10) trading day period prior to the conversion. The holder of the note has a right to convert all or any part of the outstanding an unpaid principal amount into shares of common stock after six months. The Company received $166,000 proceeds, less the $1,000 finder’s fee and an original issue discount of $15,000 pursuant to the terms of this convertible note, on January 24, 2013. As of December 31, 2013, the convertible note balance and accrued interest is $0.

MAX SOUND CORPORATION

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

AS OF MARCH 31, 2014

(UNAUDITED)

On February 1, 2013, the Company entered into an agreement whereby the Company will issue up to $83,333 in a convertible note. The note matures on February 1, 2014 and bears an interest rate of 4%. The conversion price equals the “Variable Conversion Price”, which is 70% of the “Market Price”, which is the average the closing bid prices for the common stock during the ten (10) trading day period prior to the conversion. The holder of the note has a right to convert all or any part of the outstanding an unpaid principal amount into shares of common stock after six months. The Company received $83,333 proceeds, less the $8,333 finder’s fee pursuant to the terms of this convertible note, on February 1, 2013. As of December 31, 2013, the convertible note balance and accrued interest is $0.

On February 6, 2013, the Company entered into an agreement whereby the Company will issue up to $25,000 in a convertible note. The note matures on February 6, 2014 and bears an interest rate of 10%. The conversion price equals the “Variable Conversion Price”, which is 70% of the “Market Price”, which is the average the closing bid prices for the lowest three (3) trading prices of the common stock during the twenty (20) trading day period prior to the conversion. The holder of the note has a right to convert all or any part of the outstanding an unpaid principal amount into shares of common stock after six months. The Company received $25,000 proceeds, on February 19, 2013. As of December 31, 2013, the convertible note balance and accrued interest is $0.

On February 25, 2013, the Company entered into an agreement whereby the Company will issue up to $62,500 in a convertible note. The note matures on November 27, 2013 and bears an interest rate of 8%. The conversion price equals the “Variable Conversion Price”, which is 65% of the “Market Price”, which is the average the closing bid prices for the lowest three (3) trading prices of the common stock during the ten (10) trading day period prior to the conversion. The holder of the note has a right to convert all or any part of the outstanding an unpaid principal amount into shares of common stock after six months. The Company received $62,500 proceeds less the $2,500 finder’s fee pursuant to the terms of this convertible note, on March 1, 2013. As of December 31, 2013, the convertible note balance and accrued interest is $0.

On February 27, 2013, the Company entered into an agreement whereby the Company will issue up to $100,000 in a convertible note. The note matures on February 27, 2014 and bears an interest rate of 4%. The conversion price equals the “Variable Conversion Price”, which is 70% of the “Market Price”, which is the average of the lowest three (3) trading prices for the common stock during the fifteen (15) trading day period prior to the conversion. The holder of the note has a right to convert all or any part of the outstanding an unpaid principal amount into shares of common stock after six months. The Company received $100,000 proceeds, less the $8,000 finder’s fee pursuant to the terms of this convertible note, on February 27, 2013. As of December 31, 2013, the convertible note balance and accrued interest is $0.

On March 13, 2013, the Company entered into an agreement whereby the Company will issue up to $111,000 in a convertible note. The note matures on December 13, 2013 and bears an interest rate of 8%. The conversion price equals the “Variable Conversion Price”, which is 70% of the “Market Price”, which is the average of the lowest three (3) trading prices for the common stock during the ten (10) trading day period prior to the conversion. The holder of the note has a right to convert all or any part of the outstanding an unpaid principal amount into shares of common stock after six months. The Company received $111,000 proceeds, less the $9,000 finder’s fee and an original issue discount of $10,000 pursuant to the terms of this convertible note, on March 13, 2013. As of December 31, 2013, the convertible note balance and accrued interest is $0.

On March 14, 2013, the Company entered into an agreement whereby the Company will issue up to $55,500 in a convertible note. The note matures on December 14, 2013 and bears an interest rate of 8%. The conversion price equals the “Variable Conversion Price”, which is 70% of the “Market Price”, which is the average of the lowest three (3) trading prices for the common stock during the ten (10) trading day period prior to the conversion. The holder of the note has a right to convert all or any part of the outstanding an unpaid principal amount into shares of common stock after six months. The Company received $55,500 proceeds, less the $500 finder’s fee and an original issue discount of $5,000 pursuant to the terms of this convertible note, on March 18, 2013. As of December 31, 2013, the convertible note balance and accrued interest is $0.

On April 4, 2013, the Company entered into an agreement whereby the Company will issue up to $61,750 in a convertible note. The note matures on January 8, 2014, and bears an interest rate of 8%. The conversion price equals the “Variable Conversion Price”, which is 65% of the “Market Price”, which is the average the closing bid prices for the lowest three (3) trading prices of the common stock during the ten (10) trading day period prior to the conversion. The holder of the note has a right to convert all or any part of the outstanding an unpaid principal amount into shares of common stock after six months. The Company received $61,750 proceeds less the $1,750 finder’s fee pursuant to the terms of this convertible note, on April 8, 2013. As of December 31, 2013, the convertible note balance and accrued interest is $0.

MAX SOUND CORPORATION

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

AS OF MARCH 31, 2014

(UNAUDITED)

On April 17, 2013, the Company entered into an agreement whereby the Company will issue up to $41,750 in a convertible note. The note matures on January 22, 2014, and bears an interest rate of 8%. The conversion price equals the “Variable Conversion Price”, which is 65% of the “Market Price”, which is the average the closing bid prices for the lowest three (3) trading prices of the common stock during the ten (10) trading day period prior to the conversion. The holder of the note has a right to convert all or any part of the outstanding an unpaid principal amount into shares of common stock after six months. The Company received $41,750 proceeds less the 1,750 finder’s fee pursuant to the terms of this convertible note, on April 23, 2013. As of December 31, 2013, the convertible note balance and accrued interest is $0.

On April 26, 2013, the Company entered into an agreement whereby the Company will issue up to $194,444 in a convertible note. The note matures on April 26, 2014 and bears an interest rate of 4%. The conversion price equals the “Variable Conversion Price”, which is 75% of the “Market Price”, which is the average the three lowest closing bid prices for the common stock during the ten (10) trading day period prior to the conversion. The holder of the note has a right to convert all or any part of the outstanding an unpaid principal amount into shares of common stock after six months. The Company received $194,444 proceeds, less the $19,444 original issue discount pursuant to the terms of this convertible note, on April 26, 2013. As of December 31, 2013, the convertible note balance and accrued interest is $0. In connection with this raise, the Company also issued 175,000 three year warrants exercisable at $0.40/share.

On May 2, 2013, the Company entered into an agreement whereby the Company will issue up to $166,000 in a convertible note. The note matures on February 2, 2014 and bears an interest rate of 8%. The conversion price equals the “Variable Conversion Price”, which is 70% of the “Market Price”, which is the average of the lowest three (3) trading prices for the common stock during the ten (10) trading day period prior to the conversion. The holder of the note has a right to convert all or any part of the outstanding an unpaid principal amount into shares of common stock after six months. The Company received $166,000 proceeds, less the $13,000 finder’s fee and an original issue discount of $15,000 pursuant to the terms of this convertible note, on May 2, 2013. As of March 31, 2014 and December 31, 2013, the convertible note balance and accrued interest is $0 and $43,346, respectively.

On May 3, 2013, the Company entered into an agreement whereby the Company will issue up to $83,333 in a convertible note. The note matures on May 3, 2014 and bears an interest rate of 4%. The conversion price equals the “Variable Conversion Price”, which is 75% of the “Market Price”, which is the average the three lowest closing bid prices for the common stock during the ten (10) trading day period prior to the conversion. The holder of the note has a right to convert all or any part of the outstanding an unpaid principal amount into shares of common stock after six months. The Company received $83,333 proceeds, less the $8,333 original issue discount pursuant to the terms of this convertible note, on May 3, 2013. As of December 31, 2013, the convertible note balance and accrued interest is $0. In connection with this raise, the Company also issued 75,000 three year warrants exercisable at $0.40/share.

On May 3, 2013, the Company entered into an agreement whereby the Company will issue up to $25,000 in a convertible note. The note matures on May 2, 2014 and bears an interest rate of 10%. The conversion price equals the “Variable Conversion Price”, which is 70% of the “Market Price”, which is the average the closing bid prices for the lowest three (3) trading prices of the common stock during the twenty (20) trading day period prior to the conversion. The holder of the note has a right to convert all or any part of the outstanding an unpaid principal amount into shares of common stock after six months. The Company received $25,000 proceeds, on May 3, 2013. As of March 31, 2014 and December 31, 2013, the convertible note balance and accrued interest is $0 and $6,624, respectively.

MAX SOUND CORPORATION

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

AS OF MARCH 31, 2014

(UNAUDITED)

On May 23, 2013, the Company entered into a Securities Purchase Agreement (“Aggregate SPA”) by and between the Company and three (3) institutional investors. The Purchase Agreement provides for the sale by the Company to the Investors of an aggregate principal amount of $2,222,222 of 4% Convertible Debentures, with 10% Original Issue Discount that is due twelve months from their date of issuance (the “Debentures”). The Subscription Amount shall be funded in the amount of $277,777.77 (net amount of $250,000 less debt offering costs to the Company after the original issue discount) on the initial closing date (the “Closing Date”) of May 23, 2013 and seven (7) additional installments in the amount of $277,777.77 (net amount of $250,000 less debt offering costs to the Company after the original issue discount) shall each be funded on or about the first day of each calendar month commencing on June 1, 2013.

In addition, the Company incurred debt offering costs (placement agent fees) equal to 7% of the aggregate purchase price paid by each purchase and equity equaling 2% of the gross proceeds received by the Company valued at the investors' conversion price.

The Debentures have an interest rate of four percent (4%) and shall have an original issue discount of ten percent (10%) from the stated principal amount. The Debentures may be prepaid in whole or in part on not less than thirty (30) days prior written notice to the investors for an amount equal to 115% multiplied by the sum of the then outstanding principal amount of the Debentures plus any accrued and unpaid interest.

The Debentures shall be convertible into common stock, at the investors’ option, at a twenty-five percent (25%) discount to the average price of the lowest three (3) closing bid prices for the common stock during the ten (10) trading days prior to the conversion date. In the event of default, the Debentures shall be convertible into common stock at a thirty-five percent (35%) discount to the Market Price. In the event that the Company fails in any material respect to comply with the reporting requirements of the Securities and Exchange Act of 1934, as amended, with regards to the filing of Form 10-Q's and 10-K's or ceases to be subject to the Exchange Act, the Debentures shall be convertible into common stock at a fifty percent (50%) discount to the Market Price, unless the Company has a registration statement declared effective by the SEC, which covers for resale the shares issued in connection with the investor’s, conversion.

Warrants

In connection with the Aggregate SPA, the investors were each issued warrants to purchase from the Company at any time after the Closing Date until 5:00 p.m., E.S.T on the third anniversary of the Closing Date (the “Expiration Date”), up to 250,000 fully-paid and non-assessable shares of common stock at a per share purchase price of $0.40 (the “Warrants”). The Company issued 750,000 three year warrants on the terms discussed above.

As of December 31, 2013, the Company (from the Aggregate SPA) received proceeds totaling $833,333 less $83,333 original issue discount and debt offering costs totaling $85,055, which includes 94,964 common shares of the Company’s common stock valued at $20,555 issued to the finder.

As of March 31, 2014 and December 31, 2013, the Aggregate SPA convertible note balance and accrued interest is $50,000 and $643,343, respectively.

On June 27, 2013, the Company entered into an agreement whereby the Company will issue up to $50,000 in a convertible note. The note matures on June 26, 2014 and bears a one-time interest charge of 5% after 90 days. The conversion price equals the “Variable Conversion Price”, which is 70% of the “Market Price”, which is the average of the lowest three (3) trading prices for the common stock during the fifteen (15) trading day period prior to the conversion. The holder of the note has a right to convert all or any part of the outstanding an unpaid principal amount into shares of common stock after six months. The Company received $50,000 proceeds on June 27, 2013. As of March 31, 2014 and December 31, 2013, the convertible note balance and accrued interest is $0 and $52,500, respectively.

MAX SOUND CORPORATION

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

AS OF MARCH 31, 2014

(UNAUDITED)

On August 8, 2013, the Company entered into an agreement whereby the Company will issue up to $103,500 in a convertible note. The note matures on May 12, 2014, and bears an interest rate of 8%. The conversion price equals the “Variable Conversion Price”, which is 65% of the “Market Price”, which is the average the closing bid prices for the lowest three (3) trading prices of the common stock during the ten (10) trading day period prior to the conversion. The holder of the note has a right to convert all or any part of the outstanding an unpaid principal amount into shares of common stock after six months. The Company received $103,500 proceeds less the $3,500 finder’s fee pursuant to the terms of this convertible note, on August 13, 2013. As of March 31, 2014 and December 31, 2013, the convertible note balance and accrued interest is $0 and $106,824, respectively.

On August 9, 2013, the Company entered into an agreement whereby the Company will issue up to $25,000 in a convertible note. The note matures on August 8, 2014 and bears an interest rate of 10%. The conversion price equals the “Variable Conversion Price”, which is 70% of the “Market Price”, which is the average the closing bid prices for the lowest three (3) trading prices of the common stock during the twenty (20) trading day period prior to the conversion. The holder of the note has a right to convert all or any part of the outstanding an unpaid principal amount into shares of common stock after six months. The Company received $25,000 proceeds, on August 9, 2013. As of March 31, 2014 and December 31, 2013, the convertible note balance and accrued interest is $0 and $26,000, respectively. In connection with this conversion, the Company issued an additional 750,730 shares valued at $22,276 as a penalty for the non-timely conversion of the debt.

On August 21, 2013, the Company entered into an agreement whereby the Company will issue up to $50,000 in a convertible note. The note matures on August 20, 2014 and bears a onetime interest charge of 5% after 90 days. The conversion price equals the “Variable Conversion Price”, which is 70% of the “Market Price”, which is the average of the lowest three (3) trading prices for the common stock during the fifteen (15) trading day period prior to the conversion. The holder of the note has a right to convert all or any part of the outstanding an unpaid principal amount into shares of common stock after six months. The Company received $50,000 proceeds on August 21, 2013. As of March 31, 2014 and December 31, 2013, the convertible note balance and accrued interest is $0 and $52,500, respectively.

On August 19, 2013, the Company entered into an agreement whereby the Company will issue up to $227,222 in a convertible note. The note matures on August 18, 2014 and bears an interest rate of 4%. The conversion price equals the “Variable Conversion Price”, which is 75% of the “Market Price”, which is the average of the lowest three (3) trading prices for the common stock during the ten (10) trading day period prior to the conversion. The holder of the note has a right to convert all or any part of the outstanding an unpaid principal amount into shares of common stock after six months. The Company received $227,222 proceeds, less the $5,000 finder’s fee and an original issue discount of $22,222 pursuant to the terms of this convertible note, on August 19, 2013. As of March 31, 2014 and December 31, 2013, the convertible note balance and accrued interest is $232,883 and $230,570, respectively. In connection with this raise, the Company also issued 200,000 three year warrants exercisable at $0.40/share.

On October 2, 2013, the Company entered into an agreement whereby the Company will issue up to $110,000 in a convertible note. The note matures on October 1, 2014, and bears an interest rate of 4%. The conversion price equals the “Variable Conversion Price”, which is 75% of the “Market Price”, which is the average the closing bid prices for the lowest three (3) trading prices of the common stock during the ten (10) trading day period prior to the conversion. The holder of the note has a right to convert all or any part of the outstanding an unpaid principal amount into shares of common stock after six months. The Company received $110,000 proceeds less the $10,000 finder’s fee pursuant to the terms of this convertible note, on October 2, 2013. As of March 31, 2014 and December 31, 2013, the convertible note balance and accrued interest is $112,201 and $111,086, respectively. In connection with this raise, the Company also issued 100,000 three year warrants exercisable at $0.40/share.

On October 3, 2013, the Company entered into an agreement whereby the Company will issue up to $221,000 in a convertible note. The note matures on October 3, 2014 and bears an interest rate of 4%. The conversion price equals the “Variable Conversion Price”, which is 75% of the “Market Price”, which is the average the three lowest closing bid prices for the common stock during the ten (10) trading day period prior to the conversion. The holder of the note has a right to convert all or any part of the outstanding an unpaid principal amount into shares of common stock after six months. The Company received $221,000 proceeds, less the $21,000 original issue discount pursuant to the terms of this convertible note, on October 3, 2013 and finder’s fees of $14,000. As of March 31, 2014 and December 31, 2013, the convertible note balance and accrued interest is $225,397 and $223,158, respectively. In connection with this raise, the Company also issued 200,000 three year warrants exercisable at $0.40/share.

MAX SOUND CORPORATION

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

AS OF MARCH 31, 2014

(UNAUDITED)

On October 7, 2013, the Company entered into an agreement whereby the Company will issue up to $25,000 in a convertible note. The note matures on October 6, 2014 and bears an interest rate of 10%. The conversion price equals the “Variable Conversion Price”, which is 70% of the “Market Price”, which is the average the closing bid prices for the lowest three (3) trading prices of the common stock during the twenty (20) trading day period prior to the conversion. The holder of the note has a right to convert all or any part of the outstanding an unpaid principal amount into shares of common stock after six months. The Company received $25,000 proceeds, on October 7, 2013. As of March 31, 2014 and December 31, 2013, the convertible note balance and accrued interest is $30,525 and $25,586, respectively.

On October 7, 2013, the Company entered into an agreement whereby the Company will issue up to $282,778 in a convertible note. The note matures on October 6, 2014 and bears an interest rate of 4%. The conversion price equals the “Variable Conversion Price”, which is 75% of the “Market Price”, which is the average the three lowest closing bid prices for the common stock during the ten (10) trading day period prior to the conversion. The holder of the note has a right to convert all or any part of the outstanding an unpaid principal amount into shares of common stock after six months. The Company received $282,778 proceeds, less the $27,778 original issue discount pursuant to the terms of this convertible note, on October 8, 2013 and finder’s fees of $5,000. As of March 31, 2014 and December 31, 2013, the convertible note balance and accrued interest is $288,278 and $285,415, respectively. In connection with this raise, the Company also issued 250,000 three year warrants exercisable at $0.40/share.

On October 10, 2013, the Company entered into an agreement whereby the Company will issue up to $78,500 in a convertible note. The note matures on July 12, 2014, and bears an interest rate of 8%. The conversion price equals the “Variable Conversion Price”, which is 65% of the “Market Price”, which is the average the closing bid prices for the lowest three (3) trading prices of the common stock during the ten (10) trading day period prior to the conversion. The holder of the note has a right to convert all or any part of the outstanding an unpaid principal amount into shares of common stock after six months. The Company received $78,500 proceeds less the $3,500 finder’s fee pursuant to the terms of this convertible note, on October 17, 2013. As of March 31, 2014 and December 31, 2013, the convertible note balance and accrued interest is $81,525 and $79,916, respectively.

On December 9, 2013, the Company entered into an agreement whereby the Company will issue up to $100,000 in a convertible note. The note matures on December 8, 2014 and bears a onetime interest charge of 5% after 90 days. The conversion price equals the “Variable Conversion Price”, which is 70% of the “Market Price”, which is the average of the lowest three (3) trading prices for the common stock during the fifteen (15) trading day period prior to the conversion. The holder of the note has a right to convert all or any part of the outstanding an unpaid principal amount into shares of common stock after six months. The Company received $100,000 proceeds on December 9, 2013. As of March 31, 2014 and December 31, 2013, the convertible note balance and accrued interest is $125,020 and $100,000, respectively.

On December 11, 2013, the Company entered into an agreement whereby the Company will issue up to $153,500 in a convertible note. The note matures on September 13, 2014, and bears an interest rate of 8%. The conversion price equals the “Variable Conversion Price”, which is 65% of the “Market Price”, which is the average the closing bid prices for the lowest three (3) trading prices of the common stock during the ten (10) trading day period prior to the conversion. The holder of the note has a right to convert all or any part of the outstanding an unpaid principal amount into shares of common stock after six months. The Company received $153,500 proceeds less the $3,500 finder’s fee pursuant to the terms of this convertible note, on December 16, 2013. As of March 31, 2014 and December 31, 2013, the convertible note balance and accrued interest is $157,277 and $154,173, respectively.

On December 6, 2013, the Company entered into an agreement whereby the Company will issue up to $25,000 in a convertible note. The note matures on December 5, 2014 and bears an interest rate of 10%. The conversion price equals the “Variable Conversion Price”, which is 70% of the “Market Price”, which is the average the closing bid prices for the lowest three (3) trading prices of the common stock during the twenty (20) trading day period prior to the conversion. The holder of the note has a right to convert all or any part of the outstanding an unpaid principal amount into shares of common stock after six months. The Company received $25,000 proceeds, on December 6, 2013. As of March 31, 2014 and December 31, 2013, the convertible note balance and accrued interest is $30,525 and $25,171, respectively.

MAX SOUND CORPORATION

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

AS OF MARCH 31, 2014

(UNAUDITED)

On December 30, 2013, the Company entered into an agreement whereby the Company will issue up to $282,778 in a convertible note. The note matures on December 29, 2014 and bears an interest rate of 4%. The conversion price equals the “Variable Conversion Price”, which is 75% of the “Market Price”, which is the average the three lowest closing bid prices for the common stock during the ten (10) trading day period prior to the conversion. The holder of the note has a right to convert all or any part of the outstanding an unpaid principal amount into shares of common stock after six months. The Company received $282,778 proceeds, less the $27,778 original issue discount pursuant to the terms of this convertible note, on December 31, 2013 and finder’s fees of $5,000. As of March 31, 2014 and December 31, 2013, the convertible note balance and accrued interest is $285,646 and $282,809, respectively. In connection with this raise, the Company also issued 250,000 three year warrants exercisable at $0.40/share.

On January 28, 2014, the Company entered into an agreement whereby the Company will issue up to $25,000 in a convertible note. The note matures on January 27, 2015 and bears an interest rate of 10%. The conversion price equals the “Variable Conversion Price”, which is 70% of the “Market Price”, which is the average the closing bid prices for the lowest three (3) trading prices of the common stock during the twenty (20) trading day period prior to the conversion. The holder of the note has a right to convert all or any part of the outstanding an unpaid principal amount into shares of common stock after six months. The Company received $25,000 proceeds, on January 28, 2014. As of March 31, 2014, the convertible note balance and accrued interest is $30,525, respectively.

On February 20, 2014, the Company entered into an agreement whereby the Company will issue up to $50,000 in a convertible note. The note matures on February 19, 2015 and bears a onetime interest charge of 5% after 90 days. The conversion price equals the “Variable Conversion Price”, which is 70% of the “Market Price”, which is the average of the lowest three (3) trading prices for the common stock during the fifteen (15) trading day period prior to the conversion. The holder of the note has a right to convert all or any part of the outstanding an unpaid principal amount into shares of common stock after six months. The Company received $50,000 proceeds on February 20, 2014. As of March 31, 2014, the convertible note balance is $50,000.

On February 27, 2014, the Company entered into an agreement whereby the Company will issue up to $282,778 in a convertible note. The note matures on February 26, 2015 and bears an interest rate of 4%. The conversion price equals the “Variable Conversion Price”, which is 75% of the “Market Price”, which is the average the three (3) lowest closing bid prices for the common stock during the ten (10) trading day period prior to the conversion. The holder of the note has a right to convert all or any part of the outstanding an unpaid principal amount into shares of common stock after six months. The Company received $282,778 proceeds, less the $27,778 original issue discount pursuant to the terms of this convertible note, on February 27, 2014 and finder’s fees of $5,000. As of March 31, 2014, the convertible note balance and accrued interest is $283,752. In connection with this raise, the Company also issued 250,000 three year warrants exercisable at $0.40/share.

On March 7, 2014, the Company entered into an agreement whereby the Company will issue up to $103,500 in a convertible note. The note matures on December 11, 2014, and bears an interest rate of 8%. The conversion price equals the “Variable Conversion Price”, which is 65% of the “Market Price”, which is the average the closing bid prices for the lowest three (3) trading prices of the common stock during the ten (10) trading day period prior to the conversion. The holder of the note has a right to convert all or any part of the outstanding an unpaid principal amount into shares of common stock after six months. The Company received $103,500 proceeds, less the $3,500 finder’s fee pursuant to the terms of this convertible note, on March 12, 2014. As of March 31, 2014, the convertible note balance and accrued interest is $104,044.

On March 19, 2014, the Company entered into an agreement whereby the Company will issue up to $25,000 in a convertible note. The note matures on March 18, 2015 and bears an interest rate of 10%. The conversion price equals the “Variable Conversion Price”, which is 70% of the “Market Price”, which is the average the closing bid prices for the lowest three (3) trading prices of the common stock during the twenty (20) trading day period prior to the conversion. The holder of the note has a right to convert all or any part of the outstanding an unpaid principal amount into shares of common stock after six months. The Company received $25,000 proceeds, on March 19, 2014. As of March 31, 2014, the convertible note balance and accrued interest is $30,525, respectively.

MAX SOUND CORPORATION

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

AS OF MARCH 31, 2014

(UNAUDITED)

During the three months ended March 31, 2014 and the year ended December 31, 2013, the Company issued convertible notes totaling $486,278 and $3,843,221, respectively. The Convertible notes consist of the following terms:

			Three months ended				Year ended
			March 31, 2014				December 31, 2013
			Amount of				Amount of
			Principal Raised				Principal Raised
Interest Rate				4% - 10	%			4% - 10	%
Default interest rate				14% - 22	%			14% - 22	%
Maturity		September 11, 2014 - March 18, 2015				October 24, 2013 - December 29, 2014

Conversion terms 1	70% of the “Market Price”, which is lower of the average closing bid price for the common stock during the ten (10) trading day period		$	-			$	100,000
Conversion terms 2	70% of the “Market Price”, which is lower of the average closing bid price for the common stock during the ten (10) trading day period			-				83,333
Conversion terms 3	70% of the “Market Price”, which is the average of the lowest three (3) trading prices for the common stock during the ten (10) trading day period prior to the conversion.T			-				166,000
Conversion terms 4	70% of the “Market Price”, which is the average of the lowest three (3) trading prices for the common stock during the twenty (20) trading day period prior to the conversion.			-				25,000
Conversion terms 5	70% of the “Market Price”, which is the average of the lowest three (3) trading prices for the common stock during the ten (10) trading day period prior to the conversion.			-				111,000
Conversion terms 6	70% of the “Market Price”, which is the average of the lowest three (3) trading prices for the common stock during the ten (10) trading day period prior to the conversion.			-				55,500
Conversion terms 7	65% of the “Market Price”, which is the average of the lowest three (3) trading prices for the common stock during the ten (10) trading day period prior to the conversion.			-				62,500
Conversion terms 8	65% of the “Market Price”, which is the average of the lowest three (3) trading prices for the common stock during the fifteen (15) trading day period prior to the conversion.			-				100,000
Conversion terms 9	75% of the three (3) lowest closing prices of the common stock during the ten (10) day trading period prior to the conversion date.			-				277,777
Conversion terms 10	70% of the lower of the average of the three (3) lowest trading prices for the ten (10) day trading period prior to conversion.			-				166,000
Conversion terms 11	65% of the lower of the average of the three (3) lowest trading prices for the ten (10) day trading period prior to conversion.			-				103,500
Conversion terms 12	75% of the three (3) lowest closing prices of the common stock during the ten day trading period prior to the conversion date.			-				833,334
Conversion terms 13	70% of the lower of the average of the three (3) lowest trading prices for the twenty (20) day trading period 1 day prior to conversion.			-				25,000
Conversion terms 14	70% of the lower of the average of the three (3) lowest trading prices for the fifteen (15) day trading period 1 day prior to conversion.			-				50,000
Conversion terms 15	75% of the three (3) lowest closing prices of the common stock during the ten day trading period prior to the conversion date.			-				227,222
Conversion terms 16	70% of the “Market Price”, which is the average of the lowest three (3) trading prices for the common stock during the fifteen (15) trading day period prior to the conversion.			-				50,000
Conversion terms 17	65% of the “Market Price”, which is the average of the lowest three (3) trading prices for the common stock during the ten (10) trading day period prior to the conversion.			-				103,500
Conversion terms 18	70% of the lower of the average of the three (3) lowest trading prices for the twenty (20) day trading period 1 day prior to conversion.		$	-			$	25,000

MAX SOUND CORPORATION

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

AS OF MARCH 31, 2014

(UNAUDITED)

The Convertible notes consist of the following terms (continued):

			Three months ended				Year ended
			March 31, 2014				December 31, 2013
			Amount of				Amount of
			Principal Raised				Principal Raised
Interest Rate				4% - 10	%			4% - 10	%
Default interest rate				14% - 22	%			14% - 22	%
Maturity		September 11, 2014 - March 18, 2015				October 24, 2013 - December 29, 2014


Conversion terms 19	75% of the three (3) lowest closing prices of the common stock during the ten (10) day trading period prior to the conversion date.			-				110,000
Conversion terms 20	75% of the three (3) lowest closing prices of the common stock during the ten (10) day trading period prior to the conversion date.			-				282,778
Conversion terms 21	70% of the lower of the average of the three (3) lowest trading prices for the twenty (20) day trading period 1 day prior to conversion.			-				25,000
Conversion terms 22	65% of the “Market Price”, which is the average of the lowest three (3) trading prices for the common stock during the ten (10) trading day period prior to the conversion.			-				78,500
Conversion terms 23	70% of the lower of the average of the three (3) lowest trading prices for the fifteen (15) day trading period 1 day prior to conversion.			-				100,000
Conversion terms 24	65% of the “Market Price”, which is the average of the lowest three (3) trading prices for the common stock during the ten (10) trading day period prior to the conversion.			-				153,500
Conversion terms 25	70% of the lower of the average of the three (3) lowest trading prices for the twenty (20) day trading period 1 day prior to conversion.			-				25,000
Conversion terms 26	75% of the three (3) lowest closing prices of the common stock during the ten (10) day trading period prior to the conversion date.			-				282,778
Conversion terms 27	75% of the three (3) lowest closing prices of the common stock during the ten (10) day trading period prior to the conversion date.			-				221,000
Conversion terms 28	70% of the lower of the average of the three (3) lowest trading prices for the fifteen (15) day trading period 1 day prior to conversion.			50,000				-
Conversion terms 29	75% of the three (3) lowest closing prices of the common stock during the ten (10) day trading period prior to the conversion date.			282,778
Conversion terms 30	70% of the lower of the average of the three (3) lowest trading prices for the twenty (20) day trading period 1 day prior to conversion.			25,000
Conversion terms 31	70% of the lower of the average of the three (3) lowest trading prices for the twenty (20) day trading period 1 day prior to conversion.			25,000
Conversion terms 32	65% of the “Market Price”, which is the average of the lowest three (3) trading prices for the common stock during the ten (10) trading day period prior to the conversion.			103,500

			$	486,278			$	3,843,222

The debt holders are entitled, at their option, to convert all or part of the principal and accrued interest into shares of the Company’s common stock at conversion prices and terms discussed above. The Company classifies embedded conversion features in these notes as a derivative liability due to management’s assessment that the Company may not have sufficient authorized number of shares of common stock required to net-share settle or due to the existence of a ratchet due to an anti-dilution provision. See Note 6 regarding accounting for derivative liabilities.

During the three months ended March 31, 2014, the Company converted debt and accrued interest, totaling $937,978 into 10,771,138 shares of common stock. Conversions of debt to equity occurring after the maturity date and penalties incurred resulted in a loss on settlement of $42,085.

During the three months ended March 31, 2013, the Company converted debt and accrued interest, totaling $491,873 into 3,088,562 shares of common stock.

During the year ended December 31, 2011, the Company converted debt and accrued interest, totaling $93,603 into 1,835,295 shares of common stock.

MAX SOUND CORPORATION

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

AS OF MARCH 31, 2014

(UNAUDITED)

Convertible debt consisted of the following activity and terms:

				Interest Rate			Maturity
Balance as of December 31, 2011	$	-

Borrowings during the year ended December 31, 2012		1,924,334			0% - 10	%	December 19, 2012 - November 19, 2013

Conversion of debt to into 3,118,779 shares of common stock with a valuation of $688,814 ($0.17032 - $0.322/share) including the accrued interest of $11,534		(677,280	)
Convertible Debt Balance as of December 31, 2012		1,247,054			0% - 10	%

Borrowings during the year ended December 31, 2013		3,843,221			4% - 10	%	October 24, 2013 - December 29, 2014

Non-Cash Reclassification of accrued interest converted		113,386

Conversion of debt to into 19,146,156 shares of common stock with a valuation of $2,736,376 ($0.09 - $0.27/share) including the accrued interest of $118,754		(2,684,915	)
Convertible Debt Balance as of December 31, 2013		2,518,746			4% - 10	%	February 2, 2014 - December 29, 2014

Borrowings during the three months ended March 31, 2014		486,278			4% - 10	%	September 11, 2014 - March 18, 2015

Non-Cash Reclassification of accounts payable to debt		30,000

Non-Cash Reclassification of accrued interest converted		83,899

Conversion of debt to into 10,771,138 shares of common stock with a valuation of $854,079 ($0.09 - $0.27/share) including the accrued interest of $83,899		(937,978	)
Convertible Debt Balance as of March 31, 2014		2,180,945			4% - 10	%	June 2, 2014 - March 18, 2014

Debt Issue Costs

During the three months ended March 31, 2014, the Company paid debt issue costs totaling $8,500.

During the three months ended March 31, 2013, the Company paid debt issue costs totaling $39,333.

The following is a summary of the Company’s debt issue costs:

	3 Months Ended			3 Months Ended
	March 31, 2014			March 31, 2013

Debt issue costs	$	146,055		$	254,066
Accumulated amortization of debt issue costs		(118,529	)		(171,501	)

Debt issue costs - net	$	27,526		$	82,565

During the three months ended March 31, 2014 and 2013, the Company amortized $38,983 and $44,647 of debt issue costs, respectively.

Debt Discount & Original Issue Discount

During the three months ended March 31, 2014 and 2013, the Company recorded debt discounts totaling $407,036 and $647,511, respectively.

The debt discount recorded in 2014 and 2013 pertains to convertible debt that contains embedded conversion options that are required to bifurcated and reported at fair value and original issue discounts.

MAX SOUND CORPORATION

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

AS OF MARCH 31, 2014

(UNAUDITED)

The Company amortized $728,736 and $377,763 during the three months ended March 31, 2014 and 2013, respectively, to amortization of debt discount expense.

	3 Months Ended			3 Months Ended
	March 31, 2014			March 31, 2013

Debt discount	$	2,923,369		$	1,689,354
Accumulated amortization of debt discount		(1,712,320	)		(780,383	)

Debt discount - Net	$	1,211,049		$	908,971

Derivative Liabilities

The Company identified conversion features embedded within convertible debt issued in 2014 and 2013 and warrants issued in 2014 and 2013. The Company has determined that the features associated with the embedded conversion option should be accounted for at fair value as a derivative liability.

As a result of the application of ASC No. 815, the fair value of the conversion feature is summarized as follow:

Derivative Liability - December 31, 2011	$	-
Fair value at the commitment date for convertible instruments		1,671,028
Change in fair value of embedded derivative liability		44,805
Reclassification to additional paid in capital for financial instruments that ceased to be a derivative liability		(549,547	)
Derivative Liability - December 31, 2012		1,166,286

Fair value at the commitment date for convertible instruments		3,839,539
Fair value at the commitment date for warrants issued		43,809
Change in fair value of embedded derivative liability for warrants issued		(4,384	)
Change in fair value of embedded derivative liability for convertible instruments		(996,754	)
Reclassification to additional paid in capital for financial instruments that ceased to be a derivative liability		(2,162,726	)
Derivative Liability - December 31, 2013		1,885,770

Fair value at the commitment date for convertible instruments		407,036
Change in fair value of embedded derivative liability for warrants issued		(9,878	)
Change in fair value of embedded derivative liability for convertible instruments		1,727,142
Reclassification to additional paid in capital for financial instruments that ceased to be a derivative liability		(514,180	)
Derivative Liability - March 31, 2014	$	3,495,890

The Company recorded the debt discount to the extent of the gross proceeds raised, and expensed immediately the remaining value of the derivative as it exceeded the gross proceeds of the note. The Company also recorded the value of the warrants issued for services as derivative expense for the three months ended March 31, 2014. The Company recorded a derivative expense for the three months ended March 31, 2014 and 2013 of $0 and $24,126, respectively.

MAX SOUND CORPORATION

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

AS OF MARCH 31, 2014

(UNAUDITED)

The fair value at the commitment and re-measurement dates for the Company’s derivative liabilities were based upon the following management assumptions as of March 31, 2014:

	Commitment Date			Re-measurement Date

Expected dividends:		0	%		0	%
Expected volatility:		110.31% - 168	%		107.76% - 166.7	%
Expected term:	0.5 - 3 Years			0.17 - 2.91 Years
Risk free interest rate:		0.11% - 0.15	%		0.13% - 0.91	%

The fair value at the commitment and re-measurement dates for the Company’s derivative liabilities were based upon the following management assumptions as of December 31, 2013:

	Commitment Date			Re-measurement Date

Expected dividends:		0	%		0	%
Expected volatility:		118.99% - 303.64	%		120.24% - 299.6	%
Expected term:	0.75 - 3 Years			0.002 - 2.82 Years
Risk free interest rate:		0.15% - 0.17	%		0.11% - 0.17	%

NOTE 7 CONVERTIBLE DEBT

On December 11, 2012, the Company entered into an agreement whereby the Company will issue up to $120,000 in a convertible note. The note matured on December 11, 2013 and bears an interest rate of 8%. As of December 31, 2013 and 2012, the Company balance of the convertible note and accrued interest is $128,810 and 120,526, respectively. The holder of the note has a right to convert all or any part of the outstanding an unpaid principal amount into shares of common stock after six months. The conversion price equals to $0.50 per share. For the year ended December 31, 2013, the Company issued 24,000 shares of common stock for accrued interest having a fair value of $5,368 ($0.21 - $0.25/share).

As of December 31, 2013, the note remains outstanding and is currently in default.

During the three months ended March 31, 2014, the Company negotiated modifications to the December 11, 2012 convertible debt. For the modification, the Company compared the value of both the old and new convertible debt. The Company determined that the present value of the cash flows associated with the new convertible debt exceeded the present value of the old convertible debt by more than 10%, which resulted in the application of extinguishment accounting.

The modification of the note included extension of terms through July 31, 2014, decrease in the conversion price to $0.10 per share and an increase in the interest rate to 10%. The Company also negotiated to convert $30,000 in accounts payable owed to the debt holder to be included in the convertible debt increasing the principal balance to $150,000. In accordance with ASC 470-20-25-13, the convertible debt instrument was issued at a substantial premium which represented additional paid in capital. In connection with the extinguishment, the Company recorded a loss on extinguishment of $18,596 with the offset recorded to additional paid in capital.

MAX SOUND CORPORATION

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

AS OF MARCH 31, 2014

(UNAUDITED)

NOTE 8 STOCKHOLDERS’ EQUITY

(A) Common Stock Issued for Cash

On December 31, 2005, the Company issued 100,000 shares of common stock for cash of $100 in exchange for acceptance of the incorporation expenses for the Company ($0.001/share). As a result of the forward split, the 100,000 shares were increased to 400,000 shares ($0.00025/share) (See Note 7(D)).

For the year ended December 31, 2008, the Company issued 473,000 shares of common stock for cash of $118,250 ($0.25/share), of which $67,750 was a subscription receivable. During the month of January 2009, $67,750 of stock subscription receivable was collected. As a result of the forward split, the 473,000 shares were increased to 1,892,000 shares ($0.0625/share). (See Note 8(D)).

On January 2, 2009, the Company entered into stock purchase agreements to issue 20,000 shares of common stock for cash of $5,000 ($0.25/share). As a result of the forward split, the 20,000 shares were increased to 80,000 shares ($0.0625/share) (See Note 8(D)).

On January 3, 2009, the Company entered into stock purchase agreements to issue 2,000 shares of common stock for cash of $500 ($0.25/share). As a result of the forward split, the 2,000 shares were increased to 8,000 shares ($0.0625/share) (See Note 8(D)).

On January 11, 2009, the Company entered into stock purchase agreements to issue 32,000 shares of common stock for cash of $8,000 ($0.25/share). As a result of the forward split, the 32,000 shares were increased to 128,000 shares ($0.0625/share) (See Note 8(D)).

On January 12, 2009, the Company entered into stock purchase agreements to issue 2,000 shares of common stock for cash of $500 ($0.25/share). As a result of the forward split, the 2,000 shares were increased to 8,000 shares ($0.0625/share) (See Note 8(D)).

On January 15, 2009, the Company entered into stock purchase agreements to issue 4,000 shares of common stock for cash of $1,000 ($0.25/share). As a result of the forward split, the 4,000 shares were increased to 16,000 shares ($0.0625/share) (See Note 8(D)).

In February of 2009, the Company paid direct offering costs of $850 related to the securities sold.

On May 27, 2010, the Company issued one unit; each unit consisted of 100,000 shares of common stock and 100,000 warrants to purchase common stock, for cash of $22,500 net of the $2,500 finder’s fee ($0.25/share). Each warrant is exercisable for a three year period and has an exercise price of $0.50 per share (See Note 8(C)).

On July 23, 2010, the Company issued one unit; each unit consisted of 100,000 shares of common stock and 100,000 warrants to purchase common stock, for cash of $25,000 ($0.25/share). Each warrant is exercisable for a three year period and has an exercise price of $0.50 per share (See Note 8(C).

On August 5, 2010, the Company issued 10 units; each unit consisted of 100,000 shares of common stock and 100,000 warrants to purchase common stock, for cash of $250,000 ($0.25/share). Each warrant is exercisable for a three year period and has an exercise price of $0.50 per share (See Note 8(C).

During the year ended December 31, 2010, the Company paid direct offering costs of $2,900 related to the securities sold.

On January 24, 2011, the Company issued 10,000 shares of common stock for cash of $1,000 ($0.10/share).

On February 23, 2011, the Company issued 300,000 shares of common stock for cash of $30,000 ($0.10/share).

On March 21, 2011, the Company issued 150,000 shares of common stock for cash of $15,000 ($0.10/share).

On May 2, 2011, the Company issued 2,000,000 shares of common stock for cash of $200,000 ($0.10/share).

MAX SOUND CORPORATION

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

AS OF MARCH 31, 2014

(UNAUDITED)

During the month of June 2011, the Company issued 5,460,000 shares of common stock for cash of $546,000 ($0.10/share) of which $397,000 was a subscription receivable. The Company received the entire $397,000 of subscription receivable in July 2011.

During the months of July, August and September of 2011, the Company issued 10,937,000 shares of common stock for cash of $1,093,700 ($0.10/share).

During the year-ended December 31, 2011, the Company paid $76,780 in finder’s fees and issued 955,800 warrants (See Note 8(C)).

(B) Stock Issued for Services

On October 14, 2008, the Company issued 44,900,000 shares of common stock to its founder having a fair value of $44,900 ($0.001/share) in exchange for services provided. As a result of the forward split, the 44,900,000 shares were increased to 179,600,000 shares and its purchase price was similarly adjusted to $0.00025((See Note 8(D) and Note10).

On November 24, 2008, the Company issued 4,000 shares of common stock having a fair value of $1,000 ($0.25/share) in exchange for consulting services. As a result of the forward split, the 4,000 shares were increased to 16,000 shares and its purchase price was similarly adjusted to $0.0625/share (See Note 8(D)).

On December 5, 2008, the Company issued 4,000 shares of common stock having a fair value of $1,000 ($0.25/share) in exchange for consulting services. As a result of the forward split, the 4,000 shares were increased to 16,000 shares and its purchase price was similarly adjusted to $0.0625/share (See Note 8(D)).

On December 20, 2008, the Company issued 4,000 shares of common stock having a fair value of $1,000 ($0.25/share) in exchange for consulting services. As a result of the forward split, the 4,000 shares were increased to 16,000 shares and its purchase price was similarly adjusted to $0.0625/share (See Note 8(D)).

On January 12, 2009, the Company issued 4,000 shares of common stock having a fair value of $1,000 ($0.25/share) in exchange for consulting services. As a result of the forward split, the 4,000 shares were increased to 16,000 shares and its purchase price was similarly adjusted to $0.0625/share (See Note 8(D)).

On January 14, 2009, the Company issued 20,000 shares of common stock having a fair value of $5,000 ($0.25/share) in exchange for services related to a development services agreement entered on January 19, 2009. As a result of the forward split, the 20,000 shares were increased to 80,000 shares and its purchase price was similarly adjusted to $0.0625/share (See Note 8(D) and Note 9(B)).

On August 25, 2009, the Company issued 50,000 shares of common stock having a fair value of $3,125 ($0.0625/share), based upon the fair value on the date of grant, in exchange for professional services.

On August 31, 2009, the Company issued 885,714 shares of common stock in exchange for services valued at $62,000 related to the development services agreement entered into on January 19, 2009. Based on the most recent fair market value at that time, the shares were valued at $55,357 ($0.0625/share), resulting in the recognition of a gain on the extinguishment of debt of $6,643 (See Note 9(B)).

On September 18, 2009, the Company issued 500,000 shares of common stock as compensation pursuant to the terms of a consulting agreement, having a fair value of $175,000 ($0.35/share) based upon fair value on the date of grant. On November 11, 2009, the Company cancelled the agreement and 300,000 shares of common stock were returned to the Company. As of December 31, 2009, $70,000 is recorded as consulting expense and $105,000 of deferred compensation was reclassified to $0 (See Note 9(B)).

MAX SOUND CORPORATION

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

AS OF MARCH 31, 2014

(UNAUDITED)

On September 18, 2009, the Company issued 600,000 shares of common stock as compensation pursuant to the terms of a consulting agreement, having a fair value of $210,000 ($0.35/share) based upon fair value on the date of grant. On November 18, 2009, the Company cancelled the agreement and 400,000 shares of common stock were returned to the Company. As of December 31, 2009, $70,000 is recorded as consulting expense and $140,000 of deferred compensation was reclassified to $0 (See Note 9(B)).

On September 21, 2009, the Company issued 600,000 shares of common stock as compensation pursuant to the terms of a consulting agreement, having a fair value of $210,000 ($0.35/share) based upon fair value on the date of grant. On December 18, 2009, the Company terminated the consulting agreement and 400,000 shares were returned to the Company. As of December 31, 2009, $70,000 is recorded as consulting expense and $140,000 of deferred compensation was reclassified to $0 (See Note 9(B)).

On November 12, 2009, the Company issued 100,000 shares of common stock as compensation pursuant to the terms of the consulting agreement, having a fair value of $178,000 ($1.78/share) based upon fair value on the date of grant. During 2009 and 2010, $11,948 and $89,000 was recorded as consulting expense, respectively. For the year ended December 31, 2011, $77,052 is recorded as consulting expense and $0 is recorded as deferred compensation (See Note 9(B)).

On November 12, 2009, the Company issued 200,000 shares of common stock as compensation pursuant to the terms of the consulting agreement, having a fair value of $400,000 ($2.00/share) based upon fair value on the date of grant. During 2009 and 2010, $22,466 and $200,000 was recorded as consulting expense, respectively. For the year ended December 31, 2011, $177,534 is recorded as consulting expense and $0 is recorded as deferred compensation (See Note 9(B)).

On November 16, 2009, the Company issued 100,000 shares of common stock as compensation pursuant to the terms of the consulting agreements, having a fair value of $180,000 ($1.80/share) based upon fair value on the date of grant. During 2009 and 2010, $11,096 and $90,000 was recorded as consulting expense, respectively. For the year ended December 31, 2011, $78,904 is recorded as consulting expense and $0 is recorded as deferred compensation (See Note 9(B)).

On November 18, 2009, the Company issued 30,000 shares of common stock as compensation pursuant to the terms of the consulting agreement, having a fair value of $45,000 ($1.50/share) based upon fair value on the date of grant. During 2009, $5,301 was recorded as consulting expense. For the year ended December 31, 2010, $39,699 was recorded as consulting expense. (See Note 9(B)).

On November 21, 2009, the Company issued 30,000 shares of common stock as compensation pursuant to the terms of the marketing agreement, having a fair value of $53,100 ($1.77/share) based upon fair value on the date of grant. For the year ended December 31, 2010, $53,100 was recorded as consulting expense (See Note 9(B)).

On December 3, 2009, the Company issued 240,000 shares of common stock as compensation pursuant to the terms of the consulting agreement, having a fair value of $468,000 ($1.95/share) based upon fair value on the date of grant. As of December 31, 2009, $468,000 was recorded as consulting expense (See Note 9(B)).

On December 3, 2009, the Company issued 35,000 shares of common stock as compensation pursuant to the terms of the commission agreement, having a fair value of $68,250 ($1.95/share) based upon fair value on the date of grant. As of December 31, 2009, $68,250 was recorded as consulting expense (See Note 9(B)).

On December 3, 2009, the Company issued 35,000 shares of common stock as compensation pursuant to the terms of the consulting agreement, having a fair value of $68,250 ($1.95/share) based upon fair value on the date of grant. As of December 31, 2009, $68,250 was recorded as consulting expense (Note 9(B)).

On December 3, 2009, the Company issued 10,000 shares of common stock as compensation pursuant to the terms of the commission agreement, having a fair value of $19,500 ($1.95/share) based upon fair value on the date of grant. As of December 31, 2009, $19,500 is recorded as consulting expense (See Note 9(B)).

MAX SOUND CORPORATION

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

AS OF MARCH 31, 2014

(UNAUDITED)

On December 15, 2009, the Company issued 100,000 shares of common stock as compensation pursuant to the terms of the consulting agreement, having a fair value of $200,000 ($2.00/share) based upon fair value on the date of grant. During 2009, $71,111 was recorded as consulting expense. For the year ended December 31, 2010, $128,889 was recorded as consulting expense (See Note 9(B)).

On December 27, 2009, the Company issued 10,000 shares of common stock as compensation pursuant to the terms of the consulting agreement, having a fair value of $19,400 ($1.94/share) based upon fair value on the date of grant. For the year ended December 31, 2010, $19,400 was recorded as consulting expense (See Note 9(B)).

On December 30, 2009, the Company issued 1,500,000 shares of common stock as compensation pursuant to the terms of the advertising agreement, having a fair value of $2,895,000 ($1.93/share) based upon fair value on the date of grant. In 2010, the Company cancelled a portion of the agreement and as a result, 1,000,000 shares of common stock were returned to the Company. For the year ended December 31, 2010, $965,000 was recorded as consulting expense (See Note 9(B)).

On December 31, 2009, the Company issued 75,000 shares of common stock as compensation pursuant to the terms of the consulting agreement, having a fair value of $144,750 ($1.93/share) based upon fair value on the date of grant. For the year ended December 31, 2010, $116,374 was recorded as consulting expense. For the year ended December 31, 2011, $28,376 is recorded as consulting expense (See Note 9(B)).

On December 31, 2009, the Company issued 500,000 shares of common stock as compensation pursuant to the terms of the consulting agreement, having a fair value of $965,000 ($1.93/share) based upon fair value on the date of grant. For the year ended December 31, 2010, $965,000 was recorded as consulting expense (See Note 9(B)).

During December of 2009, the Company issued 680,000 shares of common stock as compensation pursuant to the terms of the consulting agreements, having a fair value of $1,312,400 ($1.93/share) based upon fair value on the date of grant. During 2009 and 2010, $2,802 and $709,116 was recorded as consulting expense, respectively. For the year ended December 31, 2011, $600,482 is recorded as consulting expense and $0 is recorded as deferred compensation (See Note 9(B)).

During December of 2009, the Company issued 600,000 shares of common stock as compensation pursuant to the terms of the consulting agreements, having a fair value of $1,170,000 ($1.95/share) based upon fair value on the date of grant. During 2009 and 2010, $34,192 and $585,000 was recorded as consulting expense, respectively. For the year ended December 31, 2011, $550,808 is recorded as consulting expense and $0 is recorded as deferred compensation (See Note 9(B)).

On January 15, 2010, the Company issued 100,000 shares of common stock as compensation pursuant to the terms of the consulting agreement, having a fair value of $170,000 ($1.70/share) based upon fair value on the date of grant. For the year ended December 31, 2010, $81,507 was recorded as consulting expense. For the year ended December 31, 2011, $88,493 is recorded as consulting expense and $0 is recorded as deferred compensation (See Note 9(B)).

MAX SOUND CORPORATION

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

AS OF MARCH 31, 2014

(UNAUDITED)

On February 17, 2010, the Company entered into a twelve month consulting agreement with an unrelated third party effective February 17, 2010. In exchange for the services provided, the Company issued 1,000,000 shares of common stock having a fair value of $1,240,000 ($1.24/share) based upon fair value on the date of grant. For the year ended December 31, 2010, $1,066,740 was recorded as consulting expense. For the year ended December 31, 2011, $173,260 is recorded as consulting expense (See Note 9(B)).

On June 1, 2010, the Company entered into a twelve month consulting agreement for consulting and business services. As part of the agreement, the Company issued 40,000 shares as a nonrefundable retainer fee having a value of $10,000 ($0.25/share) based upon fair value on the date of the agreement. (See Note 9(B)).

On July 23, 2010, the Company issued 10,000 shares of common stock pursuant to a consulting agreement for consulting services having a fair value of $2,000 ($0.20/share) based upon fair value on the grant date (See Note 9(B)).

On August 1, 2010, the Company issued 200,000 shares of common stock pursuant to a consulting agreement for consulting services having a fair value of $40,000 ($0.20/share) based upon fair value on the grant date (See Note 9(B)).

On September 1, 2010, the Company issued 100,000 shares of common stock pursuant to a consulting agreement for consulting services having a fair value of $19,000 ($0.19/share) based upon fair value on the grant date (See Note 9(B)).

On October 1, 2010, the Company issued 100,000 shares of common stock pursuant to a consulting agreement for consulting services having a fair value of $18,000 ($0.18/share) based upon fair value on the grant date (See Note 9(B)).

On November 1, 2010, the Company issued 100,000 shares of common stock pursuant to a consulting agreement for consulting services having a fair value of $25,000 ($0.25/share) based upon fair value on the grant date (See Note 9(B)).

On December 14, 2010, the Company issued 250,000 shares of common stock pursuant to a consulting agreement for consulting services having a fair value of $37,500 ($0.15/share) based upon fair value on the grant date (See Note 9(B)).

On January 17, 2011, the Company issued 3,000,000 shares of common stock to its' new CEO pursuant to an employment agreement having a fair value of $300,000 ($0.10/share) based upon fair value on the grant date. (See Note 8(A)).

On February 17, 2011, the Company issued 500,000 shares of common stock pursuant to a consulting agreement for consulting services having a fair value of $55,000 ($0.11/share) based upon fair value on the grant date (See Note 9(B)).

On March 3, 2011, the Company issued 1,000,000 shares of common stock pursuant to a consulting agreement for consulting services having a fair value of $80,000 ($0.08/share) based upon fair value on the grant date (See Note 9(B)).

On May 17, 2011, the Company issued 2,000,000 shares of common stock pursuant to an employment agreement having a fair value of $140,000 ($0.07/share) based upon fair value on the grant date. (See Note 9(A)).

MAX SOUND CORPORATION

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

AS OF MARCH 31, 2014

(UNAUDITED)

During June 2011, the Company issued 300,000 shares of common stock pursuant to consulting agreements for consulting services having a fair value of $75,000 ($0.25/share) based upon fair value on the grant date (See Note 9(B)).

On June 15, 2011, the Company issued 15,980 shares of common stock pursuant to a consulting agreement for consulting services having a fair value of $1,598 ($0.10/share) based upon the terms of the consulting agreement (See Note 9(B)).

On July 1, 2011, the Company issued 6,500 shares of common stock pursuant to a consulting agreement for consulting services having a fair value of $520 ($0.08/share) based upon the terms of the consulting agreement (See Note 9(B)).

On August 14, 2011, the Company issued 2,443 shares of common stock pursuant to two consulting agreements for consulting services having a fair value of $855 ($0.35/share) based upon the terms of the consulting agreements (See Note 9(B)).

On September 12, 2011, the Company issued 2,860 shares of common stock pursuant to two consulting agreements for consulting services having a fair value of $715 ($0.25/share) based upon the terms of the consulting agreements (See Note 9(B)).

On September 18, 2011, the Company issued 15,403 shares of common stock pursuant to two consulting agreements for consulting services having a fair value of $3,388 ($0.22/share) based upon the terms of the consulting agreements (See Note 9(B)).

On September 25, 2011, the Company issued 1,500 shares of common stock pursuant to two consulting agreements for consulting services having a fair value of $585 ($0.39/share) based upon the terms of the consulting agreements (See Note 9(B)).

During the three months ended September 30, 2011, the Company issued 50,482 shares of common stock pursuant to two consulting agreements for consulting services having a fair value of $5,048 ($0.10/share) based upon the terms of the consulting agreements (See Note 8(B)).

On September 19, 2011, the Company issued 100,000 shares of common stock pursuant to a consulting agreement for consulting services having a fair value of $23,000 ($0.23/share) based upon the terms of the consulting agreement (See Note 9(B)).

On September 21, 2011, the Company issued 400,000 shares of common stock pursuant to a consulting agreement for consulting services having a fair value of $100,000 ($0.25/share) based upon the terms of the consulting agreement (See Note 9(B)).

On September 24, 2011, the Company issued 100,000 shares of common stock pursuant to a consulting agreement for consulting services having a fair value of $33,000 ($0.33/share) based upon the terms of the consulting agreement (See Note 9(B)).

On September 27, 2011, the Company issued 100,000 shares of common stock pursuant to two consulting agreements for consulting services having a fair value of $39,000 ($0.22/share) based upon the terms of the consulting agreements (See Note 9(B)).

During October 2011, the Company issued 123,795 shares of common stock for services having a fair value of $58,184 ($0.47/share).

On October 28, 2011, the Company issued 100,000 shares of common stock for consulting services having a fair value of $88,000 ($0.88/share).

MAX SOUND CORPORATION

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

AS OF MARCH 31, 2014

(UNAUDITED)

On November 18, 2011, the Company issued 100,000 shares of common stock for consulting services having a fair value of $70,000 ($0.70/share).

During December 2011, the Company issued 200,000 shares of common stock for services having a fair value of $108,000 ($0.54/share).

On December 18, 2011, the Company issued 100,000 shares of common stock for consulting services having a fair value of $50,000 ($0.50/share).

On January 25, 2012 the Company issued 733 shares of common stock pursuant to two consulting agreements for consulting services having a fair value of $455 ($0.62/share) based upon the terms of the consulting agreements (See Note 9(B)).

On March 14, 2012, the Company entered into a settlement agreement with a former employee with relation to the restriction on shares owned by the former employee. The settlement agreement will lift the restriction on his 6 million shares, and thus agreed to allow the former employee to sell 250,000 of the Company stock per quarter for two years. In addition, the Company settled a dispute over the termination of the employment agreement by agreeing to give the former employee an additional 150,000 shares to eliminate any dispute over anything owed under his old employment agreement. He is not an affiliate, not an insider and not a 5% or greater shareholder. For the year ended December 31, 2012, the Company issued 300,000 shares of common stock for consulting services having a fair value of $63,000 ($0.21/share), in relation to this settlement agreement.

On April 22, 2012, the Company issued 200,000 shares of common stock for services having a fair value of $60,000 ($0.30/share).

For the year ended December 31, 2012 , the Company issued 250,000 shares of stock to an employee per an employment agreement dated June 11, 2012 having a fair value of $62,500 ($0.25/share) based upon the terms of the employment agreement (See Note 8(A)).

On August 3, 2012, the Company issued 3,000,000 shares of common stock at an offering price of $.30 per share in exchange for consulting services rendered having a fair value at the grant date of $960,000. The Company will recognize the value of the shares over the life of the agreement. As of December 31, 2013, the Company recognized $960,000 in expense and recorded deferred compensation of $0 (See Note 8(B)).

On August 17, 2012, the Company issued 150,000 shares of common stock for consulting services having a fair value of $45,000 ($0.30/share).

On August 22, 2012, the Company issued 500,000 shares of common stock at an offering price of $.30 per share in exchange for consulting services rendered having a fair value at the grant date of $150,000. The Company will recognize the value of the shares over the life of the agreement. As of December 31, 2013, the Company recognized $81,250 in expenses and recorded deferred compensation of $68,750 (See Note 9(B)).

On October 31, 2012, the Company issued 60,000 shares of common stock for financing costs having a fair value of $20,400 ($0.34/share).

On January 1, 2013, the Company issued 300,000 shares of common stock for services having a fair value of $90,000 ($0.30/share).

For the year ended December 31, 2013, the Company issued 500,000 shares of common stock for services having a fair value of $125,000 ($0.25/share) in accordance with an employment agreement which stipulates a quarterly issuance of 125,000 shares.

MAX SOUND CORPORATION

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

AS OF MARCH 31, 2014

(UNAUDITED)

For the year ended December 31, 2013, the Company issued 500,000 shares of common stock for services having a fair value of $127,500 ($0.26/share) in accordance with an employment agreement which stipulates a quarterly issuance of 125,000 shares.

On January 21, 2013, the Company issued 120,000 shares of common stock for services having a fair value of $32,400 ($0.27/share).

On January 30, 2013, the Company issued 250,000 shares of common stock for services to be performed over a period of six months having a fair value of $60,000 ($0.24/share), of which, $0 was included in deferred compensation as of December 31, 2013.

On March 1, 2013, the Company issued 500,000 shares of common stock for services having a fair value of $148,750 ($0.30/share).

On March 20, 2013, the Company issued 60,000 shares of common stock for services having a fair value of $15,000 ($0.25/share).

On March 21, 2013, the Company issued 8,000 shares of common stock for accrued interest having a fair value of $2,000 ($0.25/share).

On April 15, 2013, the Company issued 57,692 shares of common stock for services having a fair value of $15,000 ($0.26/share).

On May 20, 2013, the Company issued 26,087 shares of common stock for services having a fair value of $6,000 ($0.23/share).

On June 30, 2013, the Company issued 250,000 to shares of common stock for services having a fair value of $60,000 ($0.24/share).

On June 30, 2013, the Company issued 250,000 to shares of common stock for services having a fair value of $61,250 ($0.25/share).

On July 8, 2013, the Company issued 1,500,000 to shares of common stock for services having a fair value of $315,000 ($0.21/share).

On July 23, 2013, the Company issued 8,000 shares of common stock for accrued interest having a fair value of $1,648 ($0.21/share).

On October 14, 2013, the Company issued 8,000 shares of common stock for accrued interest having a fair value of $1,719 ($0.22/share).

On October 21, 2013, the Company issued 31,250 shares of common stock for services having a fair value of $7,813 ($0.25/share).

On December 26, 2013, the Company issued 50,000 shares of common stock for services having a fair value of $13,500 ($0.27/share).

On December 26, 2013, the Company issued 100,000 shares of common stock for services having a fair value of $23,000 ($0.23/share).

On December 26, 2013, the Company issued 110,101 shares of common stock in connection with a cashless exercise of warrants. The number of warrants received was based on 190,000 warrants exercised using an average of five previous closing prices.

MAX SOUND CORPORATION

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

AS OF MARCH 31, 2014

(UNAUDITED)

On December 1, 2013, the Company issued 250,000 shares of common stock for services having a fair value of $57,500 ($0.23/share).

In January 2014, the Company received 3,000,000 shares which were returned in connection with the cancellation of an endorsement agreement entered into on August 3, 2012 due to non-performance. See note 9(B).

On March 31, 2014, the Company issued 125,000 shares of common stock for services having a fair value of $31,250 ($0.25/share).

On March 31, 2014, the Company issued 125,000 shares of common stock for services having a fair value of $31,875 ($0.255/share).

On March 31, 2014, the Company issued 100,000 shares of common stock for services having a fair value of $9,300 ($0.093/share).

On January 15, 2013, the Company entered into a agreement for legal services, pursuant to which the Company will pay $2,000 and issue 50,000 shares of common stock for the preparation, filing costs and fees of each provisional and regular patent application. Through March 31, 2014, a total of 43 applications have been filed. In connection with this agreement:

On March 15, 2013, the Company issued 700,000 shares of common stock for legal services having a fair value of $182,000 ($0.26/share).

On February 15, 2013, the Company issued 700,000 shares of common stock for legal services having a fair value of $173,600 ($0.25/share).

On March 31, 2014, the Company issued 750,000 shares of common stock for services having a fair value of $126,000 ($0.168/share).

On March 25, 2014, the Company issued 8,000 shares of common stock for accrued interest having a fair value of $1,020 ($0.1275/share).

On December 30, 2009, the Company issued 500,000 warrants under a consulting agreement. The Company recognized an expense of $823,077 for the year ended December 31, 2009. The Company recorded the fair value of the warrants based on the fair value of each warrant grant estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions used for grants in 2009, dividend yield of zero, expected volatility of 112.80%; risk-free interest rates of 1.65%, expected life of three years. The warrants vested immediately. The warrants expire in three years from the date of issuance and have an exercise price of $0.52 per share.

On May 27, 2010, the Company issued 10,000 warrants under a consulting agreement. The Company recognized an expense of $1,782 for the year ended December 31, 2010. The Company recorded the fair value of the warrants based on the fair value of each warrant grant estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions used for grants in 2010, dividend yield of zero, expected volatility of 152.80%; risk-free interest rates of 1.35%, expected life of three years. The warrants vested immediately. The warrants expire in three years from the date of issuance and have an exercise price of $0.50 per share (See Note 9(B)).

On June 1, 2010, the Company issued 40,000 warrants under a consulting agreement. The Company recognized an expense of $7,184 for the year ended December 31, 2010. The Company recorded the fair value of the warrants based on the fair value of each warrant grant estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions used for grants in 2010, dividend yield of zero, expected volatility of 145.70%; risk-free interest rates of 1.26%, expected life of three years. The warrants vested immediately. The warrants expire in three years from the date of issuance and have an exercise price of $0.50 per share (See Note 9(B)).

MAX SOUND CORPORATION

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

AS OF MARCH 31, 2014

(UNAUDITED)

On July 23, 2010, the Company issued 10,000 warrants under a consulting agreement. The Company recognized an expense of $1,593 for the year ended December 31, 2010. The Company recorded the fair value of the warrants based on the fair value of each warrant grant estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions used for grants in 2010, dividend yield of zero, expected volatility of 172.90%; risk-free interest rates of 0.94%, expected life of three years. The warrants vested immediately. The warrants expire in three years from the date of issuance and have an exercise price of $0.50 per share (See Note 9(B)).

During the year ended December 31, 2010, the Company issued 1,200,000 warrants in conjunction with the sale of the Company stock (See Note 8(A)).

On September 2, 2011, the Company issued 955,800 warrants under consulting agreements. The Company recognized an expense of $248,498 for the year ended December 31, 2011. The Company recorded the fair value of the warrants based on the fair value of each warrant grant estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions used for grants in 2011, dividend yield of zero, expected volatility of 461.11%; risk-free interest rates of 0.33%, expected life of three years. The warrants vested immediately. The warrants expire in three years from the date of issuance and have an exercise price of $0.10 per share (See Note 9(B)).

On June 11, 2012, the Company issued 200,000 warrants under consulting agreements. The Company recognized an expense of $48,031 for the year ended December 31, 2012. The Company recorded the fair value of the warrants based on the fair value of each warrant grant estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions used for grants in 2012, dividend yield of zero, expected volatility of 237.76%; risk-free interest rates of 0.19%, expected life of three years. The warrants vested immediately. The warrants expire in three years from the date of issuance and have an exercise price of $0.25 per share (See Note 9(B)).

On January 1, 2013, the Company issued 500,000 warrants under consulting agreements. The Company recognized an expense of $84,028 for the year ended December 31, 2013. The Company recorded the fair value of the warrants based on the fair value of each warrant grant estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions used for grants in 2013, dividend yield of zero, expected volatility of 140.30%; risk-free interest rates of 0.37%, expected life of three years. The warrants vested immediately. The warrants expire in three years from the date of issuance and have an exercise price of $0.45 per share (See Note 9(B)).

On January 31, 2013 an individual exercised 430,800 of stock warrants at an exercise price of $0.10 per share for proceeds of $43,080.

On August 7, 2013, the Company issued 100,000 warrants for services rendered. The Company recognized compensation expense of $43,809 on the date of issuance with the offset being recorded to derivative liabilities since the Company applied the provisions of ASC No. 815, pertaining to the potential settlement in a variable amount of shares given the company’s shares are tainted. The Company recorded the fair value of the warrants based on the fair value of each warrant grant estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions, dividend yield of zero, expected volatility of 297%; risk-free interest rates of 0.61%, expected life of three years. The warrants vested immediately. The warrants expire in three years from the date of issuance and have an exercise price of $0.40 per share (See Note 9(B)).

During the year ended December 31, 2013, the Company issued 2,000,000 warrants in connection with the entry into certain convertible debenture agreements. (See Note 6).

MAX SOUND CORPORATION

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

AS OF MARCH 31, 2014

(UNAUDITED)

During the three months ended March 31, 2014, the Company issued 250,000 warrants in connection with the entry into certain convertible debenture agreements. (See Note 6).

The following tables summarize all warrant grants as of March 31, 2014, and the related changes during these periods are presented below:

	Number of Warrants			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in Year)

Balance, December 31, 2011		2,715,800		$	0.36
Granted		200,000			0
Exercised
Cancelled/Forfeited		(500,000	)		0.52
Balance, December 31, 2012		2,415,800			0.28		0.8
Granted		2,600,000		$	0.41
Exercised		(620,800	)	$	0.07
Cancelled/Forfeited		(1,260,000	)	$	0.50
Balance, December 31, 2013		3,135,000		$	0.37		2.2
Granted		250,000		$	0.40
Exercised		-		$	-
Cancelled/Forfeited		-		$	-
Balance, March 31, 2014		3,385,000		$	0.37		2.0

A summary of all outstanding and exercisable warrants as of March 31, 2014 is as follows:

Exercise Price		Warrants Outstanding		Warrants Exercisable		Weighted Average Remaining Contractual Life		Aggregate Intrinsic Value

$	0.10		335,000		335,000		0.42	$	22,780
$	0.25		200,000		200,000		1.20	$	-
$	0.40		2,350,000		2,350,000		2.41	$	-
$	0.45		500,000		500,000		1.76	$	-
			3,385,000		3,385,000	2.2 years		$	22,780

(D) Stock Split Effected in the Form of a Stock Dividend

On January 16, 2009, the Company's Board of Directors declared a four-for-one stock split to be effected in the form of a stock dividend. The stock split was distributed on January 16, 2009 to shareholders of record. A total of 136,713,000 shares of common stock were issued. All basic and diluted loss per share and average shares outstanding information has been adjusted to reflect the aforementioned stock dividend.

(E) Amendment to Articles of Incorporation

On January 27, 2009, the Company amended its Articles of Incorporation to provide for an increase in its authorized share capital. The authorized capital stock increased to 250,000,000 common shares at a par value of $0.001 per share, and 10,000,000 preferred shares at a par value of $0.001 with class and series designations, voting rights, and relative rights and preferences to be determined by the Board of Directors of the Company from time to time.

MAX SOUND CORPORATION

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

AS OF MARCH 31, 2014

(UNAUDITED)

On June 2, 2010, the Company amended its Articles of Incorporation to provide for an increase in its authorized share capital. The authorized capital stock increased to 295,000,000 common shares at a par value of $0.001 per share.

On September 20, 2010, the Company amended its Articles of Incorporation to provide for an increase in its authorized share capital and a change in the par value per share. The authorized capital stock increased to 400,000,000 common shares at a par value of $0.0001 per share.

Effective March 1, 2011, the Company filed with the State of Delaware a Certificate of Amendment of Certificate of Incorporation changing our name from So Act Network, Inc. to Max Sound Corporation.

(F) In Kind Contribution

During the fourth quarter of 2008, a former stockholder of the Company paid $4,400 of operating expenses on behalf of the Company.

During the fourth quarter of 2008, the principal stockholder contributed office space with a fair market value of $2,913 (See Note 10).

For the year ended December 31, 2009, the principal stockholder contributed office space with a fair market value of $12,600 (See Note 10).

For the year ended December 31, 2010, the principal stockholder contributed office space with a fair value of $9,450 (See Note 10).

(G) Share Conversion

On June 2, 2010, a principal stockholder converted $283,652 of accrued compensation into 945,507 shares of common stock at $0.30 per share (See Note 10).

On February 17, 2011, a principal stockholder converted $144,000 of accrued compensation into 1,309,091 shares of common stock at $0.11 per share (See Note 10).

On February 17, 2011, a principal stockholder converted $100,000 of a line of credit owed into 909,091 shares of common stock at $.011 per share (See Note 4 and Note 10).

On January 18, 2011, the Company entered into a conversion agreement executed by a note holder for 109,375 shares based on a conversion price of $0.032 per share (See Note 6).

On February 9, 2011, the Company entered into a conversion agreement executed by a note holder for 271,186 shares based on a conversion price of $0.0295 per share (See Note 6).

On February 15, 2011, the Company entered into a conversion agreement executed by a note holder for 357,143 shares based on a conversion price of $0.0336 per share (See Note 6).

On February 23, 2011, the Company entered into a conversion agreement executed by a note holder for 220,264 shares based on a conversion price of $0.0454 per share (See Note 6).

On April 11, 2011, the Company entered into a conversion agreement executed by a note holder for 587,382 shares based on a conversion price of $0.0315 per share (See Note 6).

On August 25, 2011, the Company entered into a conversion agreement executed by a note holder for 77,220 shares based on a conversion price of $0.1554 per share (See Note 6).

MAX SOUND CORPORATION

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

AS OF MARCH 31, 2014

(UNAUDITED)

On August 30, 2011, the Company entered into a conversion agreement executed by a note holder for 96,220 shares based on a conversion price of $0.1455 per share (See Note 6).

On September 12, 2011, the Company entered into a conversion agreement executed by a note holder for 116,505 shares based on a conversion price of $0.1339 per share (See Note 6).

On September 14, 2012, the Company entered into a conversion agreement executed by a note holder for 528,035 shares based on a conversion price of $0.322 per share (See Note 6).

On September 21, 2012, the Company entered into a conversion agreement executed by a note holder for 72,385 shares based on a conversion price of $0.2763 per share (See Note 6).

On September 27, 2012, the Company entered into a conversion agreement executed by a note holder for 91,208 shares based on a conversion price of $0.2741 per share (See Note 6).

On October 2, 2012, the Company entered into a conversion agreement executed by a note holder for 79,586 shares based on a conversion price of $0.2513 per share (See Note 6).

On October 3, 2012, the Company entered into a conversion agreement executed by a note holder for 119,379 shares based on a conversion price of $0.2513 per share (See Note 6).

On October 5, 2012, the Company entered into a conversion agreement executed by a note holder for 92,365 shares based on a conversion price of $0.27067 per share (See Note 6).

On October 9, 2012, the Company entered into a conversion agreement executed by a note holder for 48,454 shares based on a conversion price of $0.2394 per share (See Note 6).

On October 19, 2012, the Company entered into a conversion agreement executed by a note holder for 200,501 shares based on a conversion price of $0.1995 per share (See Note 6).

On November 1, 2012, the Company entered into a conversion agreement executed by a note holder for 101,678 shares based on a conversion price of $0.19670 per share (See Note 6).

On November 5, 2012, the Company entered into a conversion agreement executed by a note holder for 917,037 shares based on a conversion price of $0.18619 per share (See Note 6).

On November 14, 2012, the Company entered into a conversion agreement executed by a note holder for 111,029 shares based on a conversion price of $0.18013 per share (See Note 6).

On November 19, 2012, the Company entered into a conversion agreement executed by a note holder for 113,805 shares based on a conversion price of $0.18128 per share (See Note 6).

On November 19, 2012, the Company entered into a conversion agreement executed by a note holder for 150,000 shares based on a conversion price of $0.1764 per share (See Note 6).

On November 23, 2012, the Company entered into a conversion agreement executed by a note holder for 166,543 shares based on a conversion price of $0.18013 per share (See Note 6).

On December 12, 2012, the Company entered into a conversion agreement executed by a note holder for 180,000 shares based on a conversion price of $0.19151 per share (See Note 6).

On December 31, 2012, the Company entered into a conversion agreement executed by a note holder for 146,780 shares based on a conversion price of $0.17032 per share (See Note 6).

MAX SOUND CORPORATION

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

AS OF MARCH 31, 2014

(UNAUDITED)

On January 7, 2013, the Company entered into a conversion agreement executed by a note holder for 147,754 shares based on a conversion price of $.1692 per share (See Note 6).

On January 9, 2013, the Company entered into a conversion agreement executed by a note holder for 92,194 shares based on a conversion price of $.1627 per share (See Note 6).

On January 15, 2013, the Company entered into a conversion agreement executed by a note holder for 134,229 shares based on a conversion price of $.149 per share (See Note 6).

On January 15, 2013, the Company entered into a conversion agreement executed by a note holder for 112,259 shares based on a conversion price of $.164733 per share (See Note 6).

On January 30, 2013, the Company entered into a conversion agreement executed by a note holder for 210,000 shares based on a conversion price of $.145369 per share (See Note 6).

On January 31, 2013, the Company entered into a conversion agreement executed by a note holder for 112,782 shares based on a conversion price of $.133 per share (See Note 6).

On February 1, 2013, the Company entered into a conversion agreement executed by a note holder for 173,370 shares based on a conversion price of $.14420 per share (See Note 6).

On February 11, 2013, the Company entered into a conversion agreement executed by a note holder for 138,696 shares based on a conversion price of $.14420 per share (See Note 6).

On February 14, 2013, the Company entered into a conversion agreement executed by a note holder for 185,293 shares based on a conversion price of $.13533 per share (See Note 6).

On February 21, 2013, the Company entered into a conversion agreement executed by a note holder for 104,445 shares based on a conversion price of $.1436 per share (See Note 6).

On February 26, 2013, the Company entered into a conversion agreement executed by a note holder for 100,000 shares based on a conversion price of $.14 per share (See Note 6).

On February 27, 2013, the Company entered into a conversion agreement executed by a note holder for 115,208 shares based on a conversion price of $.1302 per share (See Note 6).

On March 1, 2013, the Company entered into a conversion agreement executed by a note holder for 129,652 shares based on a conversion price of $.1388 per share (See Note 6).

On March 1, 2013, the Company entered into a conversion agreement executed by a note holder for 565,007 shares based on a conversion price of $.150885 per share (See Note 6).

On March 6, 2013, the Company entered into a conversion agreement executed by a note holder for 93,637 shares based on a conversion price of $.1388 per share (See Note 6).

On March 7, 2013, the Company entered into a conversion agreement executed by a note holder for 437,654 shares based on a conversion price of $.13323 per share (See Note 6).

On March 12, 2013, the Company entered into a conversion agreement executed by a note holder for 69,560 shares based on a conversion price of $.1575 per share (See Note 6).

On March 20, 2013, the Company entered into a conversion agreement executed by a note holder for 108,809 shares based on a conversion price of $.1302 per share (See Note 6).

MAX SOUND CORPORATION

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

AS OF MARCH 31, 2014

(UNAUDITED)

On March 28, 2013, the Company entered into a conversion agreement executed by a note holder for 58,013 shares based on a conversion price of $.1379 per share (See Note 6).

On April 8, 2013, the Company entered into a conversion agreement executed by a note holder for 181,291 shares based on a conversion price of $.1379 per share (See Note 6).

On April 12, 2013, the Company entered into a conversion agreement executed by a note holder for 549,173 shares based on a conversion price of $.155302 per share (See Note 6).

On April 15, 2013, the Company entered into a conversion agreement executed by a note holder for 224,048 shares based on a conversion price of $.1339 per share (See Note 6).

On April 16, 2013, the Company entered into a conversion agreement executed by a note holder for 261,389 shares based on a conversion price of $.1339 per share (See Note 6).

On April 18, 2013, the Company entered into a conversion agreement executed by a note holder for 205,353 shares based on a conversion price of $.14609 per share (See Note 6).

On April 30, 2013, the Company entered into a conversion agreement executed by a note holder for 146,370 shares based on a conversion price of $.17080 per share (See Note 6).

On May 1, 2013, the Company entered into a conversion agreement executed by a note holder for 350,000 shares based on a conversion price of $.162167 per share (See Note 6).

On May 10, 2013, the Company entered into a conversion agreement executed by a note holder for 175,644 shares based on a conversion price of $.1708 per share (See Note 6).

On May 23, 2013, the Company entered into a conversion agreement executed by a note holder for 195,993 shares based on a conversion price of $.1530667 per share (See Note 6).

On May 31, 2013, the Company entered into a conversion agreement executed by a note holder for 400,000 shares based on a conversion price of $.144667 per share (See Note 6).

On June 5, 2013, the Company entered into a conversion agreement executed by a note holder for 182,167 shares based on a conversion price of $.1435 per share (See Note 6).

On June 5, 2013, the Company entered into a conversion agreement executed by a note holder for 187,547 shares based on a conversion price of $.1333 per share (See Note 6).

On June 10, 2013, the Company entered into a conversion agreement executed by a note holder for 226,929 shares based on a conversion price of $.1322 per share (See Note 6).

On June 11, 2013, the Company entered into a conversion agreement executed by a note holder for 201,513 shares based on a conversion price of $.1322 per share (See Note 6).

On June 17, 2013, the Company entered into a conversion agreement executed by a note holder for 146,771 shares based on a conversion price of $.1362667 per share (See Note 6).

On June 21, 2013, the Company entered into a conversion agreement executed by a note holder for 224,383 shares based on a conversion price of $.1337 per share (See Note 6).

On June 26, 2013, the Company entered into a conversion agreement executed by a note holder for 300,000 shares based on a conversion price of $.1225 per share (See Note 6).

MAX SOUND CORPORATION

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

AS OF MARCH 31, 2014

(UNAUDITED)

On July 1, 2013, the Company entered into a conversion agreement executed by a note holder for 251,608 shares based on a conversion price of $0.119233 per share (See Note 6).

On July 2, 2013, the Company entered into a conversion agreement executed by a note holder for 655,922 shares based on a conversion price of $0.12915 per share (See Note 6).

On July 2, 2013, the Company entered into a conversion agreement executed by a note holder for 787,700 shares based on a conversion price of $0.12915 per share (See Note 6).

On July 2, 2013, the Company entered into a conversion agreement executed by a note holder for 644,002 shares based on a conversion price of $0.13025 per share (See Note 6).

On July 2, 2013, the Company entered into a conversion agreement executed by a note holder for 1,503,816 shares based on a conversion price of $0.13025 per share (See Note 6).

On July 8, 2013, the Company entered into a conversion agreement executed by a note holder for 325,910 shares based on a conversion price of $0.122733 per share (See Note 6).

On July 11, 2013, the Company entered into a conversion agreement executed by a note holder for 197,940 shares based on a conversion price of $0.119 per share (See Note 6).

On July 24, 2013, the Company entered into a conversion agreement executed by a note holder for 140,400 shares based on a conversion price of $0.14245 per share (See Note 6).

On August 1, 2013, the Company entered into a conversion agreement executed by a note holder for 247,336 shares based on a conversion price of $0.13790 per share (See Note 6).

On August 7, 2013, the Company entered into a conversion agreement executed by a note holder for 623,640 shares based on a conversion price of $0.13790 per share (See Note 6).

On August 19, 2013, the Company entered into a conversion agreement executed by a note holder for 110,000 shares based on a conversion price of $0.1388 per share (See Note 6).

On August 26, 2013, the Company entered into a conversion agreement executed by a note holder for 106,158 shares based on a conversion price of $0.1437 per share (See Note 6).

On August 27, 2013, the Company entered into a conversion agreement executed by a note holder for 250,000 shares based on a conversion price of $0.152600 per share (See Note 6).

On September 3, 2013, the Company entered into a conversion agreement executed by a note holder for 195,822 shares based on a conversion price of $0.1532 per share (See Note 6).

On September 6, 2013, the Company entered into a conversion agreement executed by a note holder for 172,176 shares based on a conversion price of $0.1452 per share (See Note 6).

On September 10, 2013, the Company entered into a conversion agreement executed by a note holder for 196,292 shares based on a conversion price of $0.152833 per share (See Note 6).

On September 11, 2013, the Company entered into a conversion agreement executed by a note holder for 71,023 shares based on a conversion price of $0.1408 per share (See Note 6).

On September 19, 2013, the Company entered into a conversion agreement executed by a note holder for 205,714 shares based on a conversion price of $0.145834 per share (See Note 6).

MAX SOUND CORPORATION

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

AS OF MARCH 31, 2014

(UNAUDITED)

On September 27, 2013, the Company entered into a conversion agreement executed by a note holder for 189,780 shares based on a conversion price of $0.147047 per share (See Note 6).

On October 1, 2013, the Company entered into a conversion agreement executed by a note holder for 135,685 shares based on a conversion price of $0.1475 per share (See Note 6).

On October 1, 2013, the Company entered into a conversion agreement executed by a note holder for 240,000 shares based on a conversion price of $0.1458 per share (See Note 6).

On October 7, 2013, the Company entered into a conversion agreement executed by a note holder for 337,990 shares based on a conversion price of $0.1486 per share (See Note 6).

On October 9, 2013, the Company entered into a conversion agreement executed by a note holder for 467,394 shares based on a conversion price of $0.138 per share (See Note 6).

On October 17, 2013, the Company entered into a conversion agreement executed by a note holder for 297,810 shares based on a conversion price of $0.1486 per share (See Note 6).

On October 21, 2013, the Company entered into a conversion agreement executed by a note holder for 198,719 shares based on a conversion price of $0.1530 per share (See Note 6).

On October 24, 2013, the Company entered into a conversion agreement executed by a note holder for 310,143 shares based on a conversion price of $0.141 per share (See Note 6).

On October 30, 2013, the Company entered into a conversion agreement executed by a note holder for 250,716 shares based on a conversion price of $0.1473 per share (See Note 6).

On November 4, 2013, the Company entered into a conversion agreement executed by a note holder for 70,000 shares based on a conversion price of $0.1461 per share (See Note 6).

On November 25, 2013, the Company entered into a conversion agreement executed by a note holder for 70,000 shares based on a conversion price of $0.1398 per share (See Note 6).

On November 8, 2013, the Company entered into a conversion agreement executed by a note holder for 207,006 shares based on a conversion price of $0.1459 per share (See Note 6).

On November 22, 2013, the Company entered into a conversion agreement executed by a note holder for 279,353 shares based on a conversion price of $0.14 per share (See Note 6).

On November 25, 2013, the Company entered into a conversion agreement executed by a note holder for 392,593 shares based on a conversion price of $0.15 per share (See Note 6).

On December 2, 2013, the Company entered into a conversion agreement executed by a note holder for 254,237 shares based on a conversion price of $0.13986 per share (See Note 6).

On December 18, 2013, the Company entered into a conversion agreement executed by a note holder for 241,935 shares based on a conversion price of $0.1503 per share (See Note 6).

On December 18, 2013, the Company entered into a conversion agreement executed by a note holder for 310,752 shares based on a conversion price of $0.161 per share (See Note 6).

On December 23, 2013, the Company entered into a conversion agreement executed by a note holder for 328,731 shares based on a conversion price of $0.1521 per share (See Note 6).

MAX SOUND CORPORATION

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

AS OF MARCH 31, 2014

(UNAUDITED)

On December 30, 2013, the Company entered into a conversion agreement executed by a note holder for 344,115 shares based on a conversion price of $0.1454 per share (See Note 6).

On December 31, 2013, the Company entered into a conversion agreement executed by a note holder for 262,605 shares based on a conversion price of $0.1345 per share (See Note 6).

On January 3, 2014, the Company entered into a conversion agreement executed by a note holder for 352,734 shares based on a conversion price of $0.142125 per share (See Note 6).

On January 7, 2014, the Company entered into a conversion agreement executed by a note holder for 360,490 shares based on a conversion price of $0.1388 per share (See Note 6).

On January 15, 2014, the Company entered into a conversion agreement executed by a note holder for 505,050 shares based on a conversion price of $0.1325 per share (See Note 6).

On January 21, 2014, the Company entered into a conversion agreement executed by a note holder for 646,465 shares based on a conversion price of $0.1268 per share (See Note 6).

On January 7, 2014, the Company entered into a conversion agreement executed by a note holder for 300,000 shares based on a conversion price of $0.1295 per share (See Note 6).

On January 8, 2014, the Company entered into a conversion agreement executed by a note holder for 80,109 shares based on a conversion price of $0.1268 per share (See Note 6).

On January 29, 2014, the Company entered into a conversion agreement executed by a note holder for 93,591 shares based on a conversion price of $0.1127 per share (See Note 6).

On February 5, 2014, the Company entered into a conversion agreement executed by a note holder for 266,599 shares based on a conversion price of $0.0996 per share (See Note 6).

On February 11, 2014, the Company entered into a conversion agreement executed by a note holder for 496,278 shares based on a conversion price of $0.1008 per share (See Note 6).

On February 12, 2014, the Company entered into a conversion agreement executed by a note holder for 67,340 shares based on a conversion price of $0.099 per share (See Note 6).

On February 12, 2014, the Company entered into a conversion agreement executed by a note holder for 44,893 shares based on a conversion price of $0.099 per share (See Note 6).

On February 14, 2014, the Company entered into a conversion agreement executed by a note holder for 477,897 shares based on a conversion price of $0.0847 per share (See Note 6).

On February 18, 2014, the Company entered into a conversion agreement executed by a note holder for 511,771 shares based on a conversion price of $0.0978 per share (See Note 6).

On February 18, 2014, the Company entered into a conversion agreement executed by a note holder for 110,943 shares based on a conversion price of $0.13 per share (See Note 6). Given the conversion occurred subsequent to the maturity date of the note, the Company recorded a $4,423 loss on conversion.

On February 19, 2014, the Company entered into a conversion agreement executed by a note holder for 147,929 shares based on a conversion price of $0.0910 per share (See Note 6). Conversion related to penalty fees incurred totaling $6,583.

MAX SOUND CORPORATION

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

AS OF MARCH 31, 2014

(UNAUDITED)

On February 24, 2014, the Company entered into a conversion agreement executed by a note holder for 580,645 shares based on a conversion price of $0.0818 per share (See Note 6).

On February 27, 2014, the Company entered into a conversion agreement executed by a note holder for 196,592 shares based on a conversion price of $0.12 per share (See Note 6). Given the conversion occurred subsequent to the maturity date of the note, the Company recorded a $8,591 loss on conversion.

On February 28, 2014, the Company entered into a conversion agreement executed by a note holder for 250,000 shares based on a conversion price of $0.0763 per share (See Note 6). Conversion related to penalty fees incurred totaling $6,113.

On March 3, 2014, the Company entered into a conversion agreement executed by a note holder for 612,745 shares based on a conversion price of $0.0817 per share (See Note 6).

On March 4, 2014, the Company entered into a conversion agreement executed by a note holder for 339,940 shares based on a conversion price of $0.0686 per share (See Note 6).

On March 6, 2014, the Company entered into a conversion agreement executed by a note holder for 631,313 shares based on a conversion price of $0.0792 per share (See Note 6).

On March 12, 2014, the Company entered into a conversion agreement executed by a note holder for 851,426 shares based on a conversion price of $0.0784 per share (See Note 6).

On March 13, 2014, the Company entered into a conversion agreement executed by a note holder for 352,801 shares based on a conversion price of $0.07 per share (See Note 6). Conversion related to penalty fees incurred totaling $9,580.

On March 19, 2014, the Company entered into a conversion agreement executed by a note holder for 229,753 shares based on a conversion price of $0.09 per share (See Note 6). Given the conversion occurred subsequent to the maturity date of the note, the Company recorded a $6,795 loss on conversion.

On March 24, 2014, the Company entered into a conversion agreement executed by a note holder for 1,260,835 shares based on a conversion price of $0.0705 per share (See Note 6).

On March 31, 2014, the Company entered into a conversion agreement executed by a note holder for 1,002,999 shares based on a conversion price of $0.0658 per share (See Note 6).

(H) Share Exchange

On May 11, 2010, the Company acquired the rights to an audio technology known as Max Audio Technology (Max) through a share exchange, whereby the Company issued 30,000,000 shares of common stock to two individuals in exchange for their rights in Max having a value of $7,500,000 based upon recent market value ($0.25/share) (See Note 8(B)).

On January 17, 2011, the Company acquired the rights to software technology known as Blog Software, Social Media Vault, Social Media Bar and Trending Topix (BSST) through a share exchange, whereby the Company issued 3,000,000 shares of common stock to two individuals in exchange for their rights to BSST having a value of $300,000 based upon recent market value ($0.10/share).

MAX SOUND CORPORATION

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

AS OF MARCH 31, 2014

(UNAUDITED)

On November 15, 2012, the Company acquired the rights to an audio technology known as Liquid Spins, Inc. through a share exchange, whereby the Company issued 24,752,475 shares of common stock for their rights in Liquid Spins technology and other assets having a value of $10,000,000 based upon recent market value ($0.404/share). The following assets were acquired in the transaction:

	Three months ended		Year ended
	March 31, 2014		December 31, 2013

Goodwill at cost/fair value, Opening Balance	$	9,647,577	$	9,655,588

Net assets acquired:
Current assets		-		281,527
Cash		-		70,896
Total net assets acquired		-		352,423

Goodwill at cost/fair value, Ending Balance	$	9,647,577	$	9,647,577
Less: Accumulated Amortization		585,287		343,898
Goodwill, net of accumulated amortization		9,062,290		9,303,679

During the year ended December 31, 2013, the Company received an additional $8,011 related to the acquisition which reduced the carrying value of the goodwill as of December 31, 2013. For the year ended December 31, 2013, the Company recorded $343,898 of amortization expense.

For the three months ended March 31, 2014 and 2013, the Company recorded $241,389 and $0, respectively, of amortization expense.

(I) Stock Options

On January 17, 2011, the Company issued 12,000,000 options to buy common shares of the Company's stock at $0.12 per share, good for three years, to its new CEO pursuant to an employment agreement. The Company recognized an expense of $1,199,794 for the year ended December 31, 2011. The Company recorded the fair value of the options based on the fair value of each option grant estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions used for grants in 2010; dividend yield of zero, expected volatility of 436.04%, risk-free interest rates of 1.00%, expected life of three years.

On June 14, 2013, the Company amended the terms of 12,000,000 fully vested stock options held by the chief financial officer of the Company. In connection with the modification, the Company extended the expiration date of the stock options by 2 years.

The extension is considered a modification for which incremental compensation cost was recognized as the excess of the fair value of the modified award over the fair value of the original award immediate before its terms are modified which was calculated to be $994,141, using the Black-Scholes valuation model. The fair value was based upon the following management assumptions:

Expected dividends		0	%
Expected volatility		299	%
Expected term:	2.59 years
Risk free interest rate		0.49	%

On January 1, 2013, the Company issued 700,000 options to buy common shares of the Company's stock at $0.50 per share, good for three years, to the Chief Technical Officer pursuant to an amended employment agreement dated December 31, 2012. The Company recognized an expense of $115,288 for the year ended December 31, 2013. The Company recorded the fair value of the options based on the fair value of each option grant estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions used for grants in 2013; dividend yield of zero, expected volatility of 140.3%, risk-free interest rates of .37%, expected life of three years.

MAX SOUND CORPORATION

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

AS OF MARCH 31, 2014

(UNAUDITED)

The following tables summarize all option grants as of March 31, 2014, and the related changes during these periods are presented below:

	Number of Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in Years)
Outstanding - December 31, 2010		-	$	-		-
Granted		12,000,000		0.120
Exercised		.		-
Forfeited or Canceled		-		-
Outstanding - December 31, 2011		12,000,000		0.12		2.05
Granted		.		-		-
Exercised		-		-		-
Forfeited or Canceled		-		-		-
Outstanding - December 31, 2012		12,000,000		0.12		1.04
Granted		700,000	$	0.500		3.00
Exercised		-		-		-
Forfeited or Canceled		-		-		-
Outstanding - December 31, 2013		12,700,000		0		2
Granted		-	$	-		-
Exercised		-		-		-
Forfeited or Canceled		-		-		-
Outstanding - March 31, 2014		12,700,000		0.14		1.80
Exercisable - March 31, 2014		12,700,000

NOTE 9 COMMITMENTS

(A) Employment Agreement

On October 13, 2008, the Company executed an employment agreement with its President and CEO. The term of the agreement is for ten years. As compensation for services, the President will receive a monthly compensation of $18,000 beginning October 13, 2008. In addition, to the base salary, the employee is entitled to receive a 10% commission of all sales of the Corporation. The agreement also called for the employee to receive health benefits. In January of 2011, the President/CEO resigned and was appointed Chairman and CFO. For the year ended December 31, 2012, the Company recorded $216,000 in compensation expense (See Note 10). In May of 2013, the Company amended the agreement for the Chairman and CFO to receive monthly compensation of $24,000 beginning May 1, 2013.

MAX SOUND CORPORATION

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

AS OF MARCH 31, 2014

(UNAUDITED)

On January 17, 2011, the Company executed an employment agreement with an executive to be the President and CEO for five years. As compensation for services, the executive will receive a monthly compensation of $8,000 beginning after the completion of at least one million dollars of new funding to the Corporation or can be paid as commissions from sales brought to the Company, whichever comes first. In addition to the base salary, the employee is entitled to receive a 20% commission of all sales the executive is directly responsible for bringing to the Company. The agreement also calls for the executive to receive, upon execution of the agreement, three million shares of Rule 144 common stock and twelve million options, which are good for three years, to buy shares of Rule 144 common stock at $0.12/share. As a supplement to the agreement, on February 4, 2011, the executive received an additional twenty million common shares directly from the Chairman of the Company. On August 25, 2011, the agreement was updated to increase the monthly compensation to $12,000 per month beginning September 1, 2011, terminate the initial 20% commission on sales and to add a commission on sales equal to 10% of gross quarterly profits. The agreement also called for the employee to receive health benefits (See Note 8(B) and 8(I)). In May of 2013, the Company amended the agreement for the President and CEO to receive monthly compensation of $18,000 beginning May 1, 2013.

On May 17, 2011, the Company executed an employment agreement with its Chief Internet Officer (“CIO”). The term of the agreement is for five years. As compensation for services, the CIO will receive a monthly compensation of $9,000 beginning at the completion of at least one million dollars of new funding. In addition to the base salary, the employee is entitled to receive health benefits. The agreement also calls for the CIO to receive two million shares of Rule 144 common stock upon the execution of the agreement. On August 25, 2011, the agreement was updated to increase the monthly compensation to $12,000 per month beginning October 1, 2011. (See Note 8(B)).

On October 1, 2011, the Company executed an employment agreement with its Chief Technical Officer (“CTO”). The term of the agreement is for five years. As compensation for services, the CTO will receive a monthly compensation of $10,000, monthly commission equal to 5% of all profits derived from the sales of all products and services related to Max Sound, and an annual bonus of 5% of all profits derived from the sales of all products and services related to Max Sound that is over one million dollars. In addition to the base salary, the employee is entitled to receive health benefits. Effective January 1, 2012, the Company increased the monthly compensation to $12,000. On December 31, 2012 the Company amended the agreement that effective January 1, 2013 the CTO will receive 300,000 shares of common stock and 700,000 three year options at 50 cents per share.

On June 11, 2012, the Company executed an employment agreement with its Senior Audio Engineer. The term of the agreement is for five years. As compensation for services, the Engineer will receive a monthly compensation of $6,000 beginning July 1, 2012. In addition to the base salary, the employee is entitled to receive health benefits, and the employee will receive 1,000,000 shares of common stock payable in 125,000 increments per quarter beginning on July 1, 2012. For the year ended December 31, 2012, the Company issued 250,000 shares with a fair value of $62,500 ($0.25/share) (See Note 8(B)).

On November 26, 2012, the Company executed an employment agreement with its VP of Music Development. . The term of the agreement is for two years. As compensation for services, the VP will receive a monthly compensation of $7,000. In addition, the employee will receive up to 1,000,000 shares of common stock payable in lots of 125,000 per quarter beginning on December 1, 2012. In addition, the employee is entitled to a monthly commission equal to 5% of all profits from any sales of music from Liquid Spins that employee is directly responsible for bringing to the Company. As of December 31, 2013 the employee received 500,000 shares with a fair value of $133,750 (See Note 8(B)),

On November 26, 2012, the Company executed an employment agreement with its VP of Music Entertainment. The term of the agreement is for two years. As compensation for services, the VP will receive a monthly compensation of $8,000. In addition, the employee will receive up to 1,000,000 shares of common stock payable in lots of 125,000 per quarter beginning on December 1, 2012. In addition, the employee is entitled to a monthly commission equal to 5% of all profits from any sales of music from Liquid Spins that employee is directly responsible for bringing to the Company. As of December 31, 2013 the employee received 500,000 shares with a fair value of $133,750 (See Note 8(B)),

MAX SOUND CORPORATION

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

AS OF MARCH 31, 2014

(UNAUDITED)

On January 9, 2013, the Company executed an employment agreement with its Director of New Business Development. The term of the agreement is for three years. As compensation for services, the Director will receive a monthly compensation of $10,000. Upon the first million dollars in gross sales the salary will increase to $12,000 per month. In addition, the Director will receive up to 1,000,000 shares of common stock payable in lots of 125,000 per quarter beginning on January 1, 2013. Also, employee for the first eight quarters of employment has a right to earn 125,000 additional 3 year stock options with a strike price of $0.50 per share as follows:

●

For each million of new gross sales - 125,000 additional 3-year stock options with a strike price of $.50 per share.

(B) Consulting Agreement

On January 19, 2009, the Company entered into a development services agreement to construct social network software for a fee of $150 and $375 an hour. The contract will remain in place until either party desires to cancel. A retainer fee of $20,000 has been paid upon the execution of the agreement and will be used towards the services provided. In addition, on January 14, 2009 the Company issued 20,000 shares in exchange for services valued at $5,000 ($0.25/share). As a result of the forward split, the 20,000 shares were increased to 80,000 shares and its purchase price was similarly adjusted to $0.0625 (See Note 7(B) and Note 7(D)). On May 29, 2009, the Company amended the consulting agreement by reducing the hourly rate to $75 an hour and reducing the outstanding balance due by $17,163. On August 31, 2009, the Company issued 885,714 shares of common stock in exchange for services valued at $62,000 related to the development services agreement entered into on January 19, 2009. Based on the most recent fair market value at that time, the shares were valued at $55,357 ($0.0625/share), resulting in the recognition of a gain on the extinguishment of debt of $6,643 (See Note 8(B)).

On January 20, 2009, the Company entered into a service agreement with a transfer agent to become the Company's transfer agent for the purpose of maintaining stock ownership and transfer records for the Company.

On September 17, 2009, the Company entered into a six month consulting agreement with an unrelated third party to provide public relations services. In exchange for the services provided, on September 18, 2009 the Company issued 500,000 shares of common stock having a fair value of $175,000 ($0.35/share) based upon fair value on the date of grant. The Company has an option to cancel the contract during the first ninety days of the agreement and 200,000 shares will be returned back to the Company. On November 11, 2009, the Company cancelled the agreement and 300,000 shares of common stock were returned to the Company. As of December 31, 2009, $70,000 is recorded as consulting expense and $105,000 of deferred compensation was reclassified to $0 (See Note 8(B)).

On September 18, 2009, the Company entered into a six month consulting agreement with an unrelated third party to provide public relations services. In exchange for the services provided the Company issued 600,000 shares of common stock having a fair value of $210,000 ($0.35/share) based upon fair value on the date of grant. Shares will be issued on or before December 18, 2009 in six 100,000 increments. The Company has an option to cancel the contract at any time, in such event; the consultant will return a prorated amount of shares based on the months remaining in the consulting agreement. On November 18, 2009, the Company cancelled the agreement and 400,000 shares of common stock were returned to the Company. As of December 31, 2009, $70,000 is recorded as consulting expense and $140,000 of deferred compensation was reclassified to $0 (See Note 8(B)).

On September 21, 2009, the Company entered into an eight month consulting agreement with an unrelated third party to provide public relations services. In exchange for the services provided, the Company issued 600,000 shares of common stock having a fair value of $210,000 ($0.35/share) based upon fair value on the date of grant. Shares will be issued on or before September 18, 2009, December 18, 2009, and March 18, 2010, in 200,000 increments. The Company has an option to cancel the contract at any time and no additional stock issuances will be due. On December 18, 2009, the Company cancelled the agreement and 400,000 shares of common stock were returned to the Company. As of December 31, 2009, $70,000 is recorded as consulting expense and $140,000 of deferred compensation was reclassified to $0 (See Note 8(B)).

On October 20, 2009, the Company entered into a marketing agreement with an unrelated third party. In exchange for the services provided, on November 21, 2009, the Company issued 30,000 shares of common stock having a fair value $53,100 ($1.77/share) based upon fair value on the date of grant, and compensation of $5,000, of which $2,500 was paid in 2009 upon the execution of the agreement and the remaining $2,500 was paid in 2010 upon completion (See Note 8(B)).

MAX SOUND CORPORATION

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

AS OF MARCH 31, 2014

(UNAUDITED)

During the months of November and December 2009, the Company entered into celebrity endorsement agreements for a period of one to two years of service. In total, 1,710,000 shares of common stock were issued having a fair value of $3,285,400 based upon fair value on the respective date of grant. During 2009 and 2010, $87,805 and $1,712,815 was recorded as consulting expense, respectively. For the year ended December 31, 2011, $1,484,780 is recorded as consulting expense, and $0 is recorded as deferred compensation (See Note 8(B)).

On December 3, 2009, the Company entered into a commission agreement with an unrelated third party. The company will pay a 10% commission in shares of common stock for every passive endorsement. In exchange for the services provided the Company issued 35,000 shares of common stock having a fair value $68,250 ($1.95/share) based upon fair value on the date of grant (See Note 8(B)).

On December 3, 2009, the Company entered into a commission agreement with an unrelated third party. The company will pay a 10% commission in shares of common stock for every passive endorsement. In exchange for the services provided the Company issued 240,000 shares of common stock having a fair value $468,000 ($1.95/share) based upon fair value on the date of grant (See Note 8(B)).

On December 3, 2009, the Company entered into a commission agreement with an unrelated third party. The company will pay a 10% commission in shares of common stock for every passive endorsement. In exchange for the services provided the Company issued 10,000 shares of common stock having a fair value $19,500 ($1.95/share) based upon fair value on the date of grant (See Note 8(B)).

On December 15, 2009, the Company entered into a consulting agreement with an unrelated third party to provide investor services. The Company will receive a 10% of the gross receipts from the investor relations revenue for a two year period. In exchange for the satisfactory services provided, on December 15, 2009, the Company issued 100,000 shares of common stock having a fair value of $200,000 ($2/share) based upon fair value on the date of grant (See Note 8(B)).

On December 27, 2009, the Company entered into a consulting agreement with an unrelated third party to provide film work. In exchange for the services provided the Company issued 10,000 shares of common stock having a fair value $19,400 ($1.94/share) based upon fair value on the date of grant (See Note 8(B)).

On December 27, 2009, the Company entered into an endorsement agreement with an unrelated third party to provide film work. In exchange for the services provided the Company issued 10,000 shares of common stock having a fair value $19,400 ($1.94/share) based upon fair value on the date of grant (See Note 7(B)).

On December 27, 2009, the Company entered into a consulting agreement with an unrelated third party to provide film scripting, editing and production work. In exchange for the services provided the Company issued 10,000 shares of common stock having a fair value $19,400 ($1.94/share) based upon fair value on the date of grant (See Note 8(B)).

On December 30, 2009, the Company entered into a marketing agreement with an unrelated third party for a period from January 2010 to December 2010. In exchange for the services provided, the Company issued 500,000 shares of common stock having a fair value of $965,000 ($1.93/share) based upon fair value on the date of grant. An additional 1,000,000 shares of common stock having a fair value of $1,930,000 ($1.93/share) based upon fair value on the date of grant were issued for an additional sponsorship commitment. The additional 1,000,000 shares were to be held in escrow until June 30, 2010, at which point the unrelated party would have 15 days to accept or decline the additional shares. As of December 31, 2010, the shares were returned back to the Company’s treasury due to non-performance of services and no additional shares will be issued (See Note 8(B)).

MAX SOUND CORPORATION

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

AS OF MARCH 31, 2014

(UNAUDITED)

On December 31, 2009, the Company entered into a consulting agreement with an unrelated third party for a period from December 31, 2009 through March 30, 2011. In exchange for the services provided, the Company issued 75,000 shares of common stock having a fair value of $144,750 ($1.93/share) based upon fair value on the date of grant, and deliverable in three increments of 25,000 shares of common stock each. The first 25,000 shares will be delivered upon the execution of the agreement and the other two increments will be delivered in six and twelve months upon the successful fulfillment of the agreement (See Note 8(B)).

On December 31, 2009, the Company entered into a consulting agreement with an unrelated third party for a period from December 31, 2009 through March 30, 2011. In exchange for the services provided, the Company issued 75,000 shares of common stock having a fair value of $144,750 ($1.93/share) based upon fair value on the date of grant, and deliverable in three increments of 25,000 each. The first 25,000 shares will be delivered upon the execution of the agreement and the other two will be delivered in six and twelve months upon the successful fulfillment of the agreement (See Note 8(B)).

On December 31, 2009, the Company entered into a consulting agreement with an unrelated third party for a period from December 31, 2009 through December 31, 2010. In exchange for the services provided, the Company issued 500,000 shares of common stock having a fair value of $965,000 ($1.93/share) based upon fair value on the date of grant (See Note 8(B)).

On January 11, 2010, the Company entered into a twelve month agreement with an unrelated third party for investor relations press release service for an annual fee of $14,250 and an initial onetime fee of $250.

On January 15, 2010, the Company entered into a two year celebrity endorsement agreement. In total, 100,000 shares of common stock were issued having a fair value of $170,000($1.70/share) based upon fair value on the date of grant (See Note 8(B)).

On February 1, 2010, the Company entered into a twelve month consulting agreement effective February 5, 2010, with an unrelated third party to produce music compositions for a fee of $500. The agreement can be renewed for up to two additional years for a fee of $500 for the first renewal year and $750 for the second renewal year.

On June 1, 2010, the Company entered into a twelve month consulting agreement to provide for consulting and business services in raising capital. The Company agrees to pay a finder’s fee on all capital raised in stock and warrants. The Company paid an initial nonrefundable retainer fee by issuing 40,000 shares of stock having a value of $10,000 ($0.25/share) based upon fair value on the date of the agreement. In conjunction with the stock payment, the Company also issued one warrant attached to each share of stock exercisable at $0.50 per warrant. Based upon the number of shares (40,000 shares) of stock issued, the Company issued 40,000 warrants (See Note 8(B) and Note 8(C).

In accordance with the share exchange, the former owners to the rights of Max became Executives of the Company. The two new executives individually entered into employment agreements with the Company on May 11, 2010. The term of the employment agreements are for ten years of service at a monthly compensation of $8,500 for each executive. In addition, the Executives are entitled to receive 5% of all revenues derived from the sale of all products and services related to the Max Audio Technology. On January 2, 2011, the agreement was cancelled.

MAX SOUND CORPORATION

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

AS OF MARCH 31, 2014

(UNAUDITED)

On April 15, 2010, the Company entered into a finder’s fee agreement. For each qualified investor introduced to the Company by the consultant, the Company will pay a 10% fee in cash equal to 10% of the dollar amount of securities purchased, In addition, the Company will pay a 10% fee in warrants equal to 10% of the number of shares of stock purchased (See Note 8(C)).

On August 8, 2010, the Company entered into a consulting agreement with an unrelated third party to provide consulting services. Upon the execution of the agreement, the consultant received 100,000 shares of common stock. A monthly issuance of 100,000 shares of common stock will be issued as a compensation of services provided. The term of the agreement is for three months and will continue to renew for three month intervals unless cancelled by either party. The agreement was cancelled on November 1, 2010 (See Note 8(B)).

On August 17, 2010, the Company entered into a consulting agreement. The agreement shall remain in effect until terminated. In exchange for the services provided, the consultant will receive a $500 a month allowance for general expenses. In addition, for all the new business brought to the Company the consultant will receive a 10% compensation for each gross dollar received by the Company. On February 15, 2011, the Company terminated the agreement.

On December 14, 2010, the Company entered into to a consulting agreement for consulting and advertising services. Upon the execution of the agreement, the consultant received 250,000 shares with an additional 750,000 shares to be issued upon consultant obtaining sponsorship rights in the year 2011. The sponsorship rights were not obtained and the agreement was cancelled in 2011 and the additional 750,000 shares were never issued (See Note 8(B)).

On February 17, 2011, the Company entered into a consulting agreement for public relations and communications services. In exchange for the services provided, the consultant received 500,000 shares of common stock. The term of the agreement is for one year (See Note 8 (B)).

On March 3, 2011, the Company entered into a consulting agreement for public relations and communications services. In exchange for the services provided, the consultant received 1,000,000 shares of common stock. The term of the agreement is for one year (See Note 8 (B)).

On June 10, 2011, the Company entered into a five year advisory board consulting agreement with three persons to provide for consulting and business services. In exchange for the services provided, the consultants received 100,000 shares of common stock each. (See Note 8(B)).

On June 15, 2011, the Company entered into a consulting agreement with an unrelated third party for software and computer technology services. In exchange for the services provided, the consultant will be paid $70 per hour with $50 per hour paid in cash and $20 per hour paid in Company stock at $0.10 per share. The term of the agreement is for one year. (See Note 8(B)).

On July 1, 2011, the Company entered into a consulting agreement with an unrelated third party for trade show services. In exchange for the services provided, the consultant received 6,500 shares of common stock at $0.08/per share. The agreement was for one-time services. (See Note 8(B)).

During the year ended December 31, 2011, the Company entered into an agreement with an unrelated third party for software and computer technology services. In exchange for the services provided, the consultant received 76,483 shares of common stock at $0.10 – 0.39 per share. The term of the agreement is for one year. (See Note 8(B)).

In September 2011, the Company entered into a five year advisory board consulting agreement with three persons to provide for consulting and business services. In exchange for the services provided, the consultants received 100,000 shares of Company stock at $0.23 – 0.39 per share. The terms of the agreements are for five years. (See Note 8(B)).

MAX SOUND CORPORATION

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

AS OF MARCH 31, 2014

(UNAUDITED)

On September 21, 2011, the Company entered into a consulting agreement with an unrelated third party for investor relation services. In exchange for the services provided, the consultant received 400,000 shares of Company stock at $0.25 per share. The term of the agreement is for six months. (See Note 8(B)).

During the three months ended December 31, 2011, the Company entered into a five year advisory board consulting agreement with five persons to provide for consulting and business services. In exchange for the services provided, the consultants received 100,000 shares of Company stock at $0.47 – 0.88 per share. The terms of the agreements are for five years. (See Note 8(B)).

On August 3, 2012, the Company entered into an endorsement agreement with an unrelated third party for a period from August 3, 2012 through August 3, 2015. In exchange for the services provided, the Company issued 3,000,000 shares of common stock having a fair value of $960,000 ($0.30/share) based upon fair value on the date of grant (See Note 8(B)). The delivery of the shares will be made in four 750,000 tranches to coincide with each of the four points listed below:

●

Record two (2) one-minute video endorsements (English and Spanish)

●

Release of Mobile Application

●

Use of MAXD HD technology in the next two major music projects.

●

Any additional projects that effectively promote the use of MAXD technology.

As December 31, 2012, the first two of the four points listed above have been completed and the Company recorded $480,000 as deferred compensation and $480,000 in endorsement expense. As of March 31, 2013, the second two of the four points listed above have been completed and the Company recognized $480,000 in endorsement expense (See Note 8(B)). The Company and the third party have completed the video endorsement and the mobile application and launched both in August 2013. In September 2013, the parties decided that they would not be effective working together due to a change in marketing goals. The parties reached an agreement whereby the Company will not promote the endorsement or the mobile application and the third party will return all shares received to the Company who in turn will return them to the Company treasury. As of January 2014, the August 3, 2012 agreement has been terminated and 3,000,000 shares have been returned to the Company.

On August 22, 2012, the Company entered into a consulting agreement with an unrelated third party for a period from September 1, 2012 through August 31, 2013. In exchange for the services provided, the Company issued 500,000 shares of common stock having a fair value of $150,000 ($0.30/share) based upon fair value on the date of grant (See Note 8(B)).

On September 14, 2012, the Company entered into a licensing agreement with an unrelated third party for a period from September 14, 2012 through September 14, 2013. The agreement will automatically extend on a year to year basis unless terminated by either party. Upon the execution of the agreement, the Company paid a non-refundable $15,000 upfront fee for the use of the license. Any additional technical support will be provided on as needed basis at an hourly rate of $250/hour.

On December 1, 2012, the Company entered into a consulting agreement with an unrelated third party for a period from December 1, 2012 through November 30, 2013. In exchange for the services provided, the Company will pay a monthly consulting fee of $10,000. A bonus may be provided for $26,000 after one year of service in the sole discretion of the Company. In addition, the Company will grant 500,000 three year warrants with an exercise price of $0.45 per share. Within 10 days of executing the consulting agreement the consultant will loan the Company $120,000 in convertible note converted at 50 cents per share (See Note 7).

MAX SOUND CORPORATION

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

AS OF MARCH 31, 2014

(UNAUDITED)

In July 2013, the Company entered into a financial advisor agreement for a period of six months with the advisor providing various assistance including introductions to potential investors. The Agreement calls for a fee of $25,000 with an additional $7,500 due and payable on the 1st day of the subsequent five months. On July 8, 2013, the Company issued 1,500,000 common shares as consideration for these services valued at $315,000 (See note 8(C)).

In July 2013, the Company entered into a digital content distribution agreement for a period of 1 year. The agreement calls for an advance of $25,000, the fees are recorded as prepaid expenses, earned based on downloaded content for a minimum of $120,000 per year. The agreement also calls for a onetime fee of $50,000 for synchronization services of which $25,000 has been paid and has been recorded as a prepaid expense. As of December 31, 2013, the Company paid a total of $50,000 in connection with this agreement which has been recorded as prepaid expenses.

On September 20, 2012, the Company took over a month to month operating lease upon completing the asset purchase agreement with Liquid Spins. The lease began on October 1, 2012 at a monthly rate of $1,585. The Company gave notice to end this month to month lease, with a final end date of February 28, 2014.

On September 1, 2010, the Company executed a three-year non-cancelable operating lease for its new corporate office space. The lease began on October 1, 2010 and expires on September 30, 2013. Total base rent due during the term of the lease is $134,880. At the current time the Company is continuing on with the existing office space on a month to month basis based on the previous terms and conditions of the recently expired lease.

NOTE 10 RELATED PARTY TRANSACTIONS

Loans

During the year ended December 31, 2008, the Company received $18,803 from the principal stockholder. Pursuant to the terms of the loan, the loan is bearing an annual interest rate of 3.25% and due on demand. In 2008, the Company repaid $15,000 in principal to the principal stockholder. In 2009, the Company repaid $3,803 in principal to the principal stockholder. As of December 31, 2010, the principal portion of this principal stockholder loan balance has been repaid (See Note 3).

On May 11, 2009, the Company received $9,500 from a principal stockholder. During the year ended December 31, 2009, the Company repaid $1,500 in principal to the principal stockholder. Pursuant to the terms of the loan, the loan is bearing an annual interest rate of 3.25% and is due on demand (See Note 3).

On May 22, 2009, the Company received $15,000 from a principal stockholder. During the year ended December 31, 2010, the Company repaid $6,000 in principal to a principal stockholder under the terms of the loan. Pursuant to the terms of the loan, the loan is bearing an annual interest rate of 3.25% and is due on demand (See Note 3).

On May 26, 2009, the Company received $16,700 from a principal stockholder. During the year ended December 31, 2010, the Company repaid $15,700 in principal to the principal stockholder under the terms of this loan. Pursuant to the terms of the loan, the loan is bearing an annual interest rate of 3.25% and is due on demand (See Note 3).

During the year ended December 31, 2011, the Company repaid $18,000 in principal and $2,116 of accrued interest to the principal stockholder related to these principal loans (See Note 3).

On July 30, 2013, the Company received $28,000 from the principal stockholder which was repaid on August 13, 2013 (See Note 3).

As of March 31, 2014, the note payable balance including accrued interest totaled $0.

Line of Credit

On May 28, 2009, the Company entered into a two year line of credit agreement with a principal stockholder in the amount of $100,000. The line of credit carries an interest rate at 3.25%. As of December 31, 2011, the principal shareholder has advanced the Company $100,000 under the terms of this line of credit agreement (See Note 4).

On November 10, 2009, the Company entered into a two year line of credit agreement with a principal stockholder in the amount of $100,000. The line of credit carries an interest rate at 3.25%. As of December 31, 2011, the principal shareholder has advanced $100,000 to the Company under the terms of this line of credit agreement (See Note 4).

MAX SOUND CORPORATION

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

AS OF MARCH 31, 2014

(UNAUDITED)

On March 25, 2010, the Company entered into a two year line of credit agreement with the principal stockholder in the amount of $500,000. The line of credit carries an interest rate of 3.25%. On February 17, 2011, the principal stockholder converted $100,000 of the line of credit owed into 909,091 shares of common stock at $0.11 per share. As of December 31, 2011, the principal stockholder has advanced $360,580 to the Company under this line of credit agreement (See Note 8(G) and Note 4).

As of December 31, 2011, the Company repaid $460,580 in principal and $11,283 of accrued interest to the principal stockholder related to these lines of credit (See Note 4).

During the year ended December 31, 2013, the Company received $290,000 from the principal stockholder. The Company repaid $150,213 in principal and accrued interest in the month of October 2013 to the principal stockholder under the term of this line of credit. Pursuant to the terms of the loan, the loan is bearing an annual interest rate of 4% and is due on or before September 26, 2015. During the three months ended March 31, 2014, the principal stockholder loaned an additional $50,000. As of March 31, 2014, the line of credit balance including accrued interest totaled $192,110 (See Note 4).

Services and other Contributions

On October 14, 2008, the Company issued 44,900,000 shares of common stock to its founder having a fair value of $44,900 ($0.001/share) in exchange for services provided. As a result of the forward split effected in January 2009, the 44,900,000 shares were increased to 179,600,000 shares and its purchase price was similarly adjusted to $0.00025 (See Note 8(B) and Note 7(D)).

On October 13, 2008, the Company executed an employment agreement with its President and CEO. The term of the agreement is ten years. As compensation for services, the President will receive a monthly compensation of $18,000 beginning October 13, 2008. In addition, to the base salary, the employee is entitled to receive a 10% commission of all sales of the Corporation. The agreement also calls for the employee to receive health benefits. In January of 2011, the President/CEO resigned and was appointed Chairman and CFO. In May of 2013, the Company amended the agreement for the Chairman and CFO to receive monthly compensation of $24,000 beginning May 1, 2013 (See Note 9(A)).

On June 2, 2010, a principal stockholder converted $283,652 of accrued compensation into 945,507 shares of common stock at $0.30 per share. (See Note 8(G)).

On February 17, 2011, a principal stockholder converted $144,000 of accrued compensation into 1,309,091 shares of common stock at $.0.11 per share. (See Note 8(G)).

During the fourth quarter of 2008, the principal stockholder contributed office space with a fair market value of $2,913 (See Note 8(F)).

For the year ended December 31, 2009, the principal stockholder contributed office space with a fair market value of $12,600 (See Note 8(F)).

For the year ended December 31, 2010, the principal stockholder contributed office space with a fair value of $9,450 (See Note 8(F)).

MAX SOUND CORPORATION

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

AS OF MARCH 31, 2014

(UNAUDITED)

NOTE 11 LITIGATION

From time to time, the Company 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 its business.

On February 21, 2012, the Company filed a suit for breach of contract, intentional misrepresentation, negligent misrepresentation, fraud, false advertising, and unfair competition with a former consultant. It seeks damages due to their alleged failure to meet the contractual requirements regarding promotions. The defendant has been served. In August of 2013, the Company received a Default Judgment against the Defendant. This case will be vigorously prosecuted and has a good likelihood of success. The case seeks in excess of the jurisdictional amount which is $50,000 dollars.

On August 14, 2012, the Company, along with two shareholders of the Company, were named as a defendant in an action filed in the Superior Court for the State of California and the County of San Diego. The plaintiff alleges he was terminated by his former employer “Acoustics Control Sciences, LLC” (which is a company that is not affiliated with Max Sound Corporation) in August 2008 without receiving wages and other compensation allegedly due him. The plaintiff further claims that two of the members or “shareholders” of Acoustics Control Sciences, LLC, wrongfully transferred a patent owned by his former employer and this transfer prevented his former employer from paying the wages alleged due. According to the plaintiff, when the assets of his former employer were sold to the Company, Max Sound Corporation became a successor-in-interest to the plaintiff’s former employer. Plaintiff thus seeks unpaid wages and other compensation from each alleged successor-in-interest named in his complaint. This case will be vigorously prosecuted and has a good likelihood of success.

On August 23, 2012, Koss Corporation filed a lawsuit against the Company in the United States District Court for the Eastern District of Wisconsin alleging trademark infringement. Based upon its federally registered trademark “Hearing is Believing” for stereo headphones, Koss Corporation contends that the Company’s use of “Hearing in Believing” in advertisements for mobile phone software and the Company’s related trademark application for mobile phone software constitutes trademark infringement and unfair competition. The Company denies these allegations, and contends that the goods and services of the two companies are not related and are, in fact, sold or distributed in different channels. On October 26, 2012, the Company filed a motion to dismiss the lawsuit pending in the Eastern District of Wisconsin, and the lawsuit was dismissed for lack of personal jurisdiction. On June 7, 2013, Koss Corp. re-filed its lawsuit in the U.S. District Court for the Central District of California. About the same time, the U.S. Patent and Trademark Office published in the Official Gazette “Hearing is Believing” as a trademark for the Company. Koss Corp. responded by filing an opposition to registration of that mark by Max Sound Corporation. Koss opposition to registration, pending before the Trademark Trial and Appeal Board (“TTAB”), repeats the same allegations that appear in Koss’ federal complaint. Max Sound Corporation denied the allegations of the TTAB opposition and the federal complaint. The parties are in the final stage of settlement at this time. Due to a lack of interest to use the trademark by the Company and its partners, the Company abandoned the mark and entered into a final settlement with the plaintiff in December 2013.

No assurance can be given as to the ultimate outcome of these actions or its effect on the Company.

MAX SOUND CORPORATION

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

AS OF MARCH 31, 2014

(UNAUDITED)

NOTE 12 INTANGIBLE ASSETS

As of March 31, 2014 and December 31, 2013, the Company owns certain trademarks and technology rights. See Note 1 (I).

Intangible assets were comprised of the following at March 31, 2014 and December 31, 2013:

	Useful Life	March 31, 2014			December 31, 2013

Distribution rights	10 Years	$	9,647,577	(2)	$	9,647,577
Trademarks	Indefinite		7,500,000			7,500,000
Software	3 Years		-			-	(1)
Other	Indefinite		275			275
Accumulated amortization			(585,287	)		(343,898	)

Net carrying value		$	16,562,565		$	16,803,954

During the year ended December 31, 2013, the Company entered into a settlement agreement with the seller of the software to reverse the original transaction which included the issuance of 3,000,000 shares of common stock in exchange for the software. The Company received back 3,000,000 shares of common stock which was recorded as treasury stock in exchange of returning the software to the seller. Upon the return of the shares, the Company recognized a gain of $220,000 based on the quoted trading price of the Company’s common stock, which was the best evidence of fair value.

During the year ended December 31, 2013, the Company received $8,011 as a refund in cash from the seller of the distribution rights. The refund reduced the carrying value of the purchased intangible.

For the three months ended March 31, 2014 and 2013, amortization expense related to the intangibles with finite lives totaled $241,390 and $0, respectively, and was included in general and administrative expenses in the statement of operations.

At March 31, 2014, future amortization of intangible assets is as follows:

Year ending December 31:
2014	$	724,169
2015		965,559
2016		968,204
2017		965,559
2018		965,559
Thereafter		4,473,240
	$	9,062,290

NOTE 13 SUBSEQUENT EVENTS

Through the filing of these financial statements, the Company converted a total of approximately $498,637 in convertible debt comprised of principal and accrued interest into approximately 7,613,426 common shares.

On April 25, 2014, in connection with the January 15, 2013 agreement for legal services, the Company issued an additional 50,000 common shares related to a patent application filed.

On April 17, 2014, the Company entered into an agreement whereby the Company will issue up to $78,500 in a convertible note. The note matures on January 21, 2015 and bears an interest rate of 8%. The conversion price equals the “Variable Conversion Price”, which is 65% of the “Market Price”, which is the average the three (3) lowest closing bid prices for the common stock during the ten (10) trading day period prior to the conversion. The holder of the note has a right to convert all or any part of the outstanding an unpaid principal amount into shares of common stock after six months.

On April 24, 2014 the Company issued 200,000 shares of common stock having a fair value of $21,980 ($0.1099/share) in exchange for consulting services.

In connection with the September 26, 2013 line of credit agreement, the principal stockholder loaned the Company an additional $85,000 on April 28, 2014. See Note 3.

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

The following plan of operation provides information which management believes is relevant to an assessment and understanding of our results of operations and financial condition. The discussion should be read along with our financial statements and notes thereto. This section includes a number of forward-looking statements that reflect our current views with respect to future events and financial performance. Forward-looking statements are often identified by words like believe, expect, estimate, anticipate, intend, project and similar expressions, or words which, by their nature, refer to future events. You should not place undue certainty on these forward-looking statements. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our predictions.

Corporate History and Structure

Max Sound Corporation (the “Company”) was incorporated in the State of Delaware as of December 9, 2005 as 43010, Inc. to engage in any lawful corporate undertaking, including, but not limited to, locating and negotiating with a business entity for combination in the form of a merger, stock-for-stock exchange or stock-for-assets exchange. On October 7, 2008, pursuant to the terms of a stock purchase agreement, Mr. Greg Halpern purchased a total of 100,000 shares of our common stock from Michael Raleigh for an aggregate of $30,000 in cash. The total of 100,000 shares represents 100% of our issued and outstanding common stock at the time of the transfer. As a result, Mr. Halpern became our sole shareholder. As part of the acquisition, and pursuant to the Stock Purchase Agreement, Michael Raleigh, our then President, CEO, CFO, and Chairman resigned from all the positions he held in the company, and Mr. Halpern was appointed as our President, CEO, CFO and Chairman. The current business model was developed by Mr. Halpern in September of 2008 and began when he joined the company on October 7, 2008. In October 2008, we became a development stage company focused on creating an Internet search engine and networking web site.

In May of 2010, we acquired the world-wide rights to all fields of use for Max Sound HD Audio technology. In November of 2010, we opened our post-production facility for Max Sound HD Audio in Santa Monica, California. In February of 2011, after several successful demonstrations to multi-media industry company executives, we decided to shift the focus of the Company to the marketing of the Max Sound HD Audio technology and commenced the name change from So Act Network, Inc. to Max Sound Corporation and the symbol from SOAN to MAXD.

On December 3, 2012, the Company completed the purchase of the assets of Liquid Spins, Inc., a Colorado corporation (“LSI”) (the “Asset Purchase Agreement”). Pursuant to the Asset Purchase Agreement, the assets of LSI were exchanged for 24,752,475 shares of common stock of the Company (the “Shares”), equal to $10,000,000 and a purchase price of $0.404 per share. The assets of LSI purchased included: record label distribution agreements; Liquid Spins technology inventory; independent arts programs; retail contracts for music distribution; gift card retail contracts via InComm; physical inventory and office equipment; design and retail ready concepts; brand value; records; publishing catalog; and web assets.

The Company is in negotiations with several multi-media companies that will utilize our HD Audio solution in the future.

Videos and news relating to the Company is available on the company website at http://www.maxsound.com. The MAX-D Technology Highlights Video summarizes the HD Audio™ process and shows the need for high definition (HD) Audio in several key vertical markets. The video explains MAX-D as what we believe to be the only dynamic HD Audio™ that is being offered to various markets.

Plan of Operation

We began our operations on October 8, 2008, when we purchased the Form 10 company from the previous owners. Since that date and through 2013, we have conducted financings to raise initial start-up money for the building of our internet search engine and social networking website and to start our operations. In 2011, the Company shifted the focus of its business operations from their social networking website to the marketing of the Max Sound HD Audio Technology.

The Company believes that Max Sound HD Audio Technology is a game changer for several vertical markets whose demand will create revenue opportunities in 2014.

We expect our financial requirements to increase with the additional expenses needed to market and promote the MAX-D Audio technology. We plan to fund these additional expenses through financings and through loans from our stockholders and/or officers based on existing lines of credit and we are also considering various private funding opportunities until such time that our revenue stream is adequate enough to provide the necessary funds.

Results of Operations

The following tables set forth key components of our results of operations for the periods indicated, in dollars, and key components of our revenue for the period indicated, in dollars.

	For the Three Months Ended
	March 31, 2014			March 31, 2013
Revenue		1,236		$	988

Operating Expenses
General and administrative		740,785			947,816
Endorsement fees		-			480,000
Consulting		133,812			127,076
Professional fees		277,474			492,758
Website development		22,881
Compensation		256,400			270,359
Total Operating Expenses		1,431,352			2,318,009

Loss from Operations		(1,430,116	)		(2,317,021	)

Other Income / (Expense)
Gain (Loss) on extinguishment of debt		(18,596	)		-
Interest expense		(116,582	)		(29,656	)
Derivative expense		-			(24,126	)
Amortization of debt offering costs		(78,983	)		(49,237	)
Loss on conversions		(42,085	)		(46,093	)
Amortization of debt discount		(786,155	)		(421,763	)
Change in fair value of embedded derivative liability		(1,717,264	)		188,493
Total Other Income / (Expense)		(2,759,665	)		(382,382	)

Provision for Income Taxes		-

Net Loss	$	(4,189,781	)	$	(2,699,403	)

Net Loss Per Share - Basic and Diluted	$	(0.01	)	$	(0.01	)

Weighted average number of shares outstanding during the year Basic and Diluted		313,207,471			290,407,275

For the three months ended March 31, 2014 and for the three months ended March 31, 2013

General and Administrative Expenses: Our general and administrative expenses were $740,785 for the three months ended March 31, 2014 and $947,816 for the three months ended March 31, 2013, representing a decrease of $207,031, or approximately 22%, as a result of decrease in license fees. Our expenses on the general operation of the Company included added personnel, product development and marketing of our Max Sound Technology.

Endorsement Fees: Our endorsement fees were $0 for the three months ended March 31, 2014 and $480,000 for the three months ended March 31, 2013, representing a decrease of $480,000, or approximately 100%, as a result of an endorsement agreement with Pitbull signed in 2013.

Consulting Fees: Our consulting fees were $133,812 for the three months ended March 31, 2014 and $127,076 for the three months ended March 31, 2013, representing an increase of $6,736, or approximately 5%. The Company has increased the use of consultants to assist the Company in raising capital and promoting the Max Sound Technology.

Professional Fees: Our professional fees were $277,474 for the three months ended March 31, 2014 and $492,758 for the three months ended March 31, 2013, representing a decrease of $215,284, or approximately 44%, as a result of reduced legal fees.

Compensation: Our compensation expenses were $256,400 for the three months ended March 31, 2014 and $270,359 for the three months ended March 31, 2013, representing a decrease of $13,959, or approximately 5%, as a result of our expensing of monthly compensation to our CFO, CEO, CIO and to our CTO pursuant to their employment agreements.

Net Loss: Our net loss for the three months ended March 31, 2014 and 2013, was $4,189,781, compared to $2,699,403 for the three months ended March 31, 2013. While the operational expenses in marketing our Max Sound technology decreased from the same period of last year, the overall amount of our net loss substantially increased as a result of an increase in the change in the fair value of embedded derivative liability associated with the convertible debt.

Liquidity and Capital Resources

Revenues for the three months ended March 31, 2014 and 2013 were $1,236 and $988, respectively. We have an accumulated deficit of $31,462,834 for the period from December 9, 2005 (inception) to March 31, 2014, and have negative cash flow from operations of $7,896,600 from inception.

From our inception through March 31, 2014, our primary source of funds has been the proceeds of private offerings of our common stock, private financing, and loans from stockholders. Our need to obtain capital from outside investors is expected to continue until we are able to achieve profitable operations and convertible notes, if ever. There is no assurance that management will be successful in fulfilling all or any elements of its plans.

Private Financings

Below is a summary of our capital-raising activities for the three months ended March 31, 2014:

During the three months ended March 31, 2014 and the year ended December 31, 2013, the Company issued convertible notes totaling $486,278 and $3,843,221 respectively. The Convertible notes consist of the following terms:

			Three months ended				Year ended
			March 31, 2014				December 31, 2013
			Amount of				Amount of
			Principal Raised				Principal Raised
Interest Rate				4% - 10	%			4% - 10	%
Default interest rate				14% - 22	%			14% - 22	%
Maturity		December 11, 2014 - March 18, 2015				October 24, 2013 - December 29, 2014

Conversion terms 1	70% of the “Market Price”, which is lower of the average closing bid price for the common stock during the ten (10) trading day period		$	-			$	100,000
Conversion terms 2	70% of the “Market Price”, which is lower of the average closing bid price for the common stock during the ten (10) trading day period			-				83,333
Conversion terms 3	70% of the “Market Price”, which is the average of the lowest three (3) trading prices for the common stock during the ten (10) trading day period prior to the conversion.			-				166,000
Conversion terms 4	70% of the “Market Price”, which is the average of the lowest three (3) trading prices for the common stock during the twenty (20) trading day period prior to the conversion.			-				25,000
Conversion terms 5	70% of the “Market Price”, which is the average of the lowest three (3) trading prices for the common stock during the ten (10) trading day period prior to the conversion.			-				111,000
Conversion terms 6	70% of the “Market Price”, which is the average of the lowest three (3) trading prices for the common stock during the ten (10) trading day period prior to the conversion.			-				55,500
Conversion terms 7	65% of the “Market Price”, which is the average of the lowest three (3) trading prices for the common stock during the ten (10) trading day period prior to the conversion.			-				62,500
Conversion terms 8	65% of the “Market Price”, which is the average of the lowest three (3) trading prices for the common stock during the fifteen (15) trading day period prior to the conversion.			-				100,000
Conversion terms 9	75% of the three (3) lowest closing prices of the common stock during the ten (10) day trading period prior to the conversion date.			-				277,777
Conversion terms 10	70% of the lower of the average of the three (3) lowest trading prices for the ten (10) day trading period prior to conversion.			-				166,000
Conversion terms 11	65% of the lower of the average of the three (3) lowest trading prices for the ten (10) day trading period prior to conversion.			-				103,500
Conversion terms 12	75% of the three (3) lowest closing prices of the common stock during the ten day trading period prior to the conversion date.			-				833,334
Conversion terms 13	70% of the lower of the average of the three (3) lowest trading prices for the twenty (20) day trading period 1 day prior to conversion.			-				25,000
Conversion terms 14	70% of the lower of the average of the three (3) lowest trading prices for the fifteen (15) day trading period 1 day prior to conversion.			-				50,000
Conversion terms 15	75% of the three (3) lowest closing prices of the common stock during the ten day trading period prior to the conversion date.			-				227,222
Conversion terms 16	70% of the “Market Price”, which is the average of the lowest three (3) trading prices for the common stock during the fifteen (15) trading day period prior to the conversion.			-				50,000
Conversion terms 17	65% of the “Market Price”, which is the average of the lowest three (3) trading prices for the common stock during the ten (10) trading day period prior to the conversion.			-				103,500
Conversion terms 18	70% of the lower of the average of the three (3) lowest trading prices for the twenty (20) day trading period 1 day prior to conversion.			-				25,000

The Convertible notes consist of the following terms (continued):

			Three months ended				Year ended
			March 31, 2014				December 31, 2013
			Amount of				Amount of
			Principal Raised				Principal Raised
Interest Rate				4% - 10	%			4% - 10	%
Default interest rate				14% - 22	%			14% - 22	%
Maturity		December 11, 2014 - March 18, 2015				October 24, 2013 - December 29, 2014


Conversion terms 19	75% of the three (3) lowest closing prices of the common stock during the ten (10) day trading period prior to the conversion date.			-				110,000
Conversion terms 20	75% of the three (3) lowest closing prices of the common stock during the ten (10) day trading period prior to the conversion date.			-				282,778
Conversion terms 21	70% of the lower of the average of the three (3) lowest trading prices for the twenty (20) day trading period 1 day prior to conversion.			-				25,000
Conversion terms 22	65% of the “Market Price”, which is the average of the lowest three (3) trading prices for the common stock during the ten (10) trading day period prior to the conversion.			-				78,500
Conversion terms 23	70% of the lower of the average of the three (3) lowest trading prices for the fifteen (15) day trading period 1 day prior to conversion.			-				100,000
Conversion terms 24	65% of the “Market Price”, which is the average of the lowest three (3) trading prices for the common stock during the ten (10) trading day period prior to the conversion.			-				153,500
Conversion terms 25	70% of the lower of the average of the three (3) lowest trading prices for the twenty (20) day trading period 1 day prior to conversion.			-				25,000
Conversion terms 26	75% of the three (3) lowest closing prices of the common stock during the ten (10) day trading period prior to the conversion date.			-				282,778
Conversion terms 27	75% of the three (3) lowest closing prices of the common stock during the ten (10) day trading period prior to the conversion date.			-				221,000
Conversion terms 28	70% of the lower of the average of the three (3) lowest trading prices for the fifteen (15) day trading period 1 day prior to conversion.			50,000				-
Conversion terms 29	75% of the three (3) lowest closing prices of the common stock during the ten (10) day trading period prior to the conversion date.			282,778
Conversion terms 30	70% of the lower of the average of the three (3) lowest trading prices for the twenty (20) day trading period 1 day prior to conversion.			25,000
Conversion terms 31	70% of the lower of the average of the three (3) lowest trading prices for the twenty (20) day trading period 1 day prior to conversion.			25,000
Conversion terms 32	65% of the “Market Price”, which is the average of the lowest three (3) trading prices for the common stock during the ten (10) trading day period prior to the conversion.			103,500

			$	486,278			$	3,843,222

During the year ended December 31, 2013, the Company received $290,000 from Greg Halpern, the Company's Chief Financial Officer and principal stockholder (referred to herein as the "principal stockholder"), and the Company repaid $150,213 in principal and accrued interest. Pursuant to the terms of the loan, the loan bears an annual interest rate of 4% and is due on or before September 26, 2015 (See Note 10). During the three months ended March 31, 2014, the principal stockholder loaned an additional $50,000. As of March 31, 2014, the line of credit balance including accrued interest totaled $192,110.

On April 28, 2014, the principal stockholder loaned an additional $85,000 to the Company under the September 26, 2013 line of credit.

In the event that we are unable to obtain additional financing and/or funding or our principal stockholder either fails to extend us more financing, declines to loan additional cash, declines to fund the line of credit, or declines to defer his salary payments, we will no longer be able to continue to operate and will have to cease operations unless we begin to generate sufficient revenue to cover our costs.

Recent Accounting Pronouncements

The Company’s management does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted would have a material impact on the accompanying financial statements.

Critical Accounting Policies and Estimates

Our financial statements and related public financial information are based on the application of accounting principles generally accepted in the United States (“GAAP”). GAAP requires the use of estimates; assumptions, judgments and subjective interpretations of accounting principles that have an impact on the assets, liabilities, revenues and expense amounts reported. These estimates can also affect supplemental information contained in our external disclosures including information regarding contingencies, risk and financial condition. We believe our use of estimates and underlying accounting assumptions adhere to GAAP and are consistently and conservatively applied. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions or conditions. We continue to monitor significant estimates made during the preparation of our financial statements.

Use of Estimates:

Revenue Recognition:

Revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable and collectability is assured. We had $1,236 and $988 in revenue for the three months ended March 31, 2014, and 2013, respectively.

Stock-Based Compensation:

Derivative Financial Instruments

Impairment of Long-Lived Assets

The Company accounts for its long-lived assets in accordance with ASC Topic 360-10-05, Accounting for the Impairment or Disposal of Long-Lived Assets." ASC Topic 360-10-05 requires that long-lived assets, such as technology rights, be reviewed for impairment annually, or whenever events or changes in circumstances indicate that the historical cost carrying value of an asset may no longer be appropriate. The Company assesses recoverability of the carrying value of an asset by estimating the future net cash flows expected to result from the asset, including the eventual disposition. If the future net cash flows are less than the carrying value of an asset, an impairment loss is recorded equal to the difference between the asset's carrying value and fair value or disposable value. For the year ended December 31, 2013, the Company completed an impairment analysis on its' long-lived assets, their technology rights, and determined that no impairment was necessary.

The Company believes that the accounting estimate related to asset impairment is a "critical accounting estimate" because the impairment methodology is highly susceptible to change from period to period, because it requires management to make assumptions about future cash flows, and because the impact of recognizing impairment could have a significant effect on operations. Management's assumptions about future cash flows require significant judgment because actual business operations of marketing the technology rights is in its infancy stages and managements expects that their future operating levels to fluctuate. The analysis included assumptions that are based on annual business plans and other forecasted results which are used to reflect market-based estimates of the risks associated with the projected cash flows, based on the best information available as of the date of the impairment test. There can be no assurance that the estimates and assumptions used in the impairment tests will prove to be accurate predictions of the future. If the future adversely differs from management's best estimate of key economic assumptions, and if associated future cash flows materially decrease, the Company may be required to record impairment charges related to its indefinite life intangible asset.

Prior to February of 2011, the Company's business operations were related to the development and launching of a social networking website. However, since February of 2011, our business focus has been on the developing and marketing of our Max Sound HD Audio Technology. The year 2013 was our initial year of marketing and demonstrating our developed technology, management considers past operational levels to be inconsistent with future operations mainly due to the shift in business focus. In our impairment testing, the Company made assumptions towards the income and expenses expected in the future including, but not limited to, determining the actual expenses incurred in the current year that were attributable to the new business focus in order to develop an annual cost benchmark, trends in the marketplace, feedback from current and past marketing activities, and assessments upon the useful life of the technology rights.

The Company's primary focus over the next three to five years will be centered around the marketing and implementation of their technology in order to take advantage of the current trends in the marketplace for users of their technology. In particular, the Company expects that expenses will increase significantly from year to year over the next five years, at which time in year six and beyond the year to year change will be a minimal increase. In addition, the Company expects minimal revenue over the next two years, while in year three to six the Company expects to realize significant year to year increases in revenue, at which time in year seven and beyond the year to year change will be a minimal increase.

As part of the impairment test, the Company reviewed its initial useful life analysis, in reference to their technology, and updated this analysis with factors that existed at the time of the impairment testing and determined that nothing had occurred in the marketplace that would change their initial determination of the useful life of their technology. The analysis included researching known technological advances in the marketplace and determining if those advances which are similar to the Company's products would limit the useful life of the asset. The Company believes that the technological advances in the marketplace are geared to developing different playback devices and the implementation of technology that is similar to the Company's technology. Thus, the Company concluded that its technology rights continue to have an indefinite useful life. However, it is understood that technological advancements could happen in the future that would limit the useful life of its technology. If a technology was created in the future that would limit the useful life of the technology, the Company would be required to update its impairment testing to include a useful life determination of the technology and may be required to record impairment charges at some time in the future.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements, financings, or other relationships with unconsolidated entities or other persons, also known as “special purpose entities”.

Subsequent Events

On April 25, 2014, in connection with the January 15, 2013 agreement for certain legal services, the Company issued an additional 50,000 common shares relating to a patent application filed.

On April 17, 2014, the Company entered into an agreement with KBM Worldwide, Inc., whereby the Company will issue up to $78,500 in a convertible note. The note matures on January 21, 2015 and bears an interest rate of 8%. The conversion price equals the “Variable Conversion Price”, which is 65% of the “Market Price”, which is the average the three (3) lowest closing bid prices for the common stock during the ten (10) trading day period prior to the conversion. The holder of the note has a right to convert all or any part of the outstanding an unpaid principal amount into shares of common stock after six months.

On April 24, 2014 the Company issued 200,000 shares of common stock having a fair value of $21,980 ($0.1099/share) in exchange for consulting services.

In connection with the September 26, 2013 line of credit agreement, the principal stockholder loaned the Company an additional $85,000 on April 28, 2014. See Note 3.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not required for smaller reporting companies.

Item 4. Controls and Procedures

Disclosure controls and procedures. Pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 (“Exchange Act”), the Company carried out an evaluation, with the participation of the Company’s management, including the Company’s principal executive officer and principal financial officer, of the effectiveness of the Company’s disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, the Company’s principal executive officer and principal financial officer concluded that the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including the Company’s principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in internal control over financial reporting. There have been no changes in our internal control over financial reporting that occurred during the quarter covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Limitations on the Effectiveness of Internal Controls. Readers are cautioned that our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will necessarily prevent all fraud and material error. An internal control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our control have been detected. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any control design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

To the best of our knowledge, there are no known or pending litigation proceedings against us, except as follows:

On August 14, 2012, the Company, along with two shareholders of the Company, were named as a defendant in an action filed in the Superior Court for the State of California and the County of San Diego. The plaintiff alleges he was terminated by his former employer “Acoustics Control Sciences, LLC” (which is a company that is not affiliated with Max Sound Corporation) in August, 2008 without receiving wages and other compensation allegedly due him. The plaintiff further claims that two of the members or “shareholders” of Acoustics Control Sciences, LLC, wrongfully transferred a patent owned by his former employer and this transfer prevented his former employer from paying the wages alleged due. According to the plaintiff, when the assets of his former employer were sold to the Company, Max Sound Corporation became a successor-in-interest to the plaintiff’s former employer. Plaintiff thus seeks unpaid wages and other compensation from each alleged successor-in-interest named in his complaint. This case will be vigorously prosecuted and has a good likelihood of success; plaintiff has initiated settlement discussions with the Company.

On August 23, 2012, Koss Corporation filed a lawsuit against the Company in the United States District Court for the Eastern District of Wisconsin alleging trademark infringement. Based upon its federally registered trademark “Hearing is Believing” for stereo headphones, Koss Corporation contends that the Company’s use of “Hearing in Believing” in advertisements for mobile phone software and the Company’s related trademark application for mobile phone software constitutes trademark infringement and unfair competition. The Company denies these allegations, and contends that the goods and services of the two companies are not related and are, in fact, sold or distributed in different channels. On October 26, 2012, the Company filed a motion to dismiss the lawsuit pending in the Eastern District of Wisconsin, and the lawsuit was dismissed for lack of personal jurisdiction. On June 7, 2013, Koss Corp. re-filed its lawsuit in the U.S. District Court for the Central District of California. About the same time, the U.S. Patent and Trademark Office published in the Official Gazette “Hearing is Believing” as a trademark for the Company. Koss responded by filing an opposition to registration of that mark by Max Sound Corporation. Koss’ opposition to registration, pending before the Trademark Trial and Appeal Board (“TTAB”), repeated the same allegations that appear in Koss’ federal complaint. The Company denied the allegations of the TTAB opposition and the federal complaint. Due to a lack of interest to use the trademark by the Company and its partners, the Company abandoned the mark and entered into a final settlement with the plaintiff in December 2013.

Item 1A.

Risk Factors.

Not required for smaller reporting companies.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

On March 31, 2014, the Company issued 125,000 shares of common stock for services having a fair value of $31,250 ($0.25/share).

On March 31, 2014, the Company issued 125,000 shares of common stock for services having a fair value of $31,875 ($0.255/share).

On March 31, 2014, the Company issued 100,000 shares of common stock for services having a fair value of $9,300 ($0.093/share).

On January 15, 2013, the Company entered into an agreement for legal services pursuant to which the Company will pay $2,000 and issue 50,000 shares of common stock corresponding to the preparation, filing costs and fees of each provisional and regular patent application. Through March 31, 2014, a total of 43 applications have been filed. In connection with this agreement:

·	On March 15, 2013, the Company issued 700,000 shares of common stock for legal services having a fair value of $182,000 ($0.26/share).

·	On February 15, 2013, the Company issued 700,000 shares of common stock for legal services having a fair value of $173,600 ($0.25/share).

·	On March 31, 2014, the Company issued 750,000 shares of common stock for services having a fair value of $126,000 ($0.168/share).

On March 25, 2014, the Company issued 8,000 shares of common stock for accrued interest having a fair value of $1,020 ($0.1275/share).

On January 3, 2014, the Company entered into a conversion agreement with Dominion Capital, LLC relating to a convertible promissory note dated May 5, 2013, with the original principal amount of $277,778 for 352,734 shares based on a conversion price of $0.142125 per share (See Note 6).

On January 7, 2014, the Company entered into a conversion agreement with Redwood Management, LLC relating to a convertible promissory note dated June 17, 2013, with the original principal amount of $166,667 for 360,490 shares based on a conversion price of $0.1388 per share (See Note 6).

On January 7, 2014, the Company entered into a conversion agreement with JMJ Financial relating to a convertible promissory note dated June 27, 2013, with the original principal amount of $50,000 for 300,000 shares based on a conversion price of $0.1295 per share (See Note 6).

On January 8, 2014, the Company entered into a conversion agreement with BOU Trust relating to a convertible promissory note dated June 17, 2013, with the original principal amount of $111,111 for 80,109 shares based on a conversion price of $0.1268 per share (See Note 6).

On January 15, 2014, the Company entered into a conversion agreement with Redwood Management, LLC relating to a convertible promissory note dated June 17, 2013, with the original principal amount of $166,667 for 505,050 shares based on a conversion price of $0.1325 per share (See Note 6).

On January 21, 2014, the Company entered into a conversion agreement with Dominion Capital, LLC relating to a convertible promissory note dated May 23, 2013, with the original principal amount of $277,778 for 646,465 shares based on a conversion price of $0.1268 per share (See Note 6).

On January 29, 2014, the Company entered into a conversion agreement with Vista Capital Investments, LLC relating to a convertible promissory note dated May 3, 2013, with the original principal amount of $25,000 for 93,591 shares based on a conversion price of $0.1127 per share (See Note 6).

On February 5, 2014, the Company entered into a conversion agreement with JMJ Financial relating to a convertible promissory note dated June 27, 2013, with the original principal amount of $50,000 for 266,599 shares based on a conversion price of $0.0996 per share (See Note 6).

On February 11, 2014, the Company entered into a conversion agreement with Dominion Capital, LLC relating to a convertible promissory note dated May 23, 2013, with the original principal amount of $277,778 for 496,278 shares based on a conversion price of $0.1008 per share (See Note 6).

On February 12, 2014, the Company entered into a conversion agreement with BOU Trust relating to a convertible promissory note dated June 17, 2013, with the original principal amount of $111,111 for 67,340 shares based on a conversion price of $0.099 per share (See Note 6).

On February 12, 2014, the Company entered into a conversion agreement with BOU Trust relating to a convertible promissory note dated June 17, 2013, with the original principal amount of $111,111 for 44,893 shares based on a conversion price of $0.099 per share (See Note 6).

On February 14, 2014, the Company entered into a conversion agreement with Asher Enterprises, Inc. relating to a convertible promissory note dated August 8, 2013, with the original principal amount of $103,500 for 477,897 shares based on a conversion price of $0.0847 per share (See Note 6).

On February 18, 2014, the Company entered into a conversion agreement with Dominion Capital, LLC relating to a convertible promissory note dated June 3, 2013, with the original principal amount of $277,778 for executed by a note holder for 511,771 shares based on a conversion price of $0.0978 per share (See Note 6).

On February 18, 2014, the Company entered into a conversion agreement with Tonaquint, Inc. relating to a convertible promissory note dated May 2, 2013, with the original principal amount of $166,000 for 110,943 shares based on a conversion price of $0.13 per share (See Note 6). Given the conversion occurred subsequent to the maturity date of the note, the Company recorded a $4,423 loss on conversion.

On February 19, 2014, the Company entered into a conversion agreement with Vista Capital Investments, LLC relating to a convertible promissory note dated August 9, 2013, with the original principal amount of $25,000 for 147,929 shares based on a conversion price of $0.0910 per share (See Note 6). Conversion related to penalty fees incurred totaling $6,583.

On February 24, 2014, the Company entered into a conversion agreement with Asher Enterprises, Inc. relating to a convertible promissory note dated August 8, 2013, with the original principal amount of $103,500 for 580,645 shares based on a conversion price of $0.0818 per share (See Note 6).

On February 27, 2014, the Company entered into a conversion agreement with Tonaquint, Inc. relating to a convertible promissory note dated May 2, 2013, with the original principal amount of $166,000 for 196,592 shares based on a conversion price of $0.12 per share (See Note 6). Given the conversion occurred subsequent to the maturity date of the note, the Company recorded a $8,591 loss on conversion.

On February 28, 2014, the Company entered into a conversion agreement with Vista Capital Investments, LLC relating to a convertible promissory note dated August 9, 2013, with the original principal amount of $25,000 for 250,000 shares based on a conversion price of $0.0763 per share (See Note 6). Conversion related to penalty fees incurred totaling $6,113.

On March 3, 2014, the Company entered into a conversion agreement with Dominion Capital, LLC relating to a convertible promissory note dated June 3, 2013, with the original principal amount of $277,778 for 612,745 shares based on a conversion price of $0.0817 per share (See Note 6).

On March 4, 2014, the Company entered into a conversion agreement with Asher Enterprises, Inc. relating to a convertible promissory note dated August 8, 2013, with the original principal amount of $103,500 for 339,940 shares based on a conversion price of $0.0686 per share (See Note 6).

On March 6, 2014, the Company entered into a conversion agreement with Dominion Capital, LLC relating to a convertible promissory note dated May 23, 2013, with the original principal amount of $277,778 for 631,313 shares based on a conversion price of $0.0792 per share (See Note 6).

On March 12, 2014, the Company entered into a conversion agreement with Dominion Capital, LLC relating to a convertible promissory note dated June 3, 2013, with the original principal amount of $277,778 for 851,426 shares based on a conversion price of $0.0784 per share (See Note 6).

On March 13, 2014, the Company entered into a conversion agreement with Vista Capital Investments, LLC relating to a convertible promissory note dated August 9, 2013, with the original principal amount of $25,000 for 352,801 shares based on a conversion price of $0.07 per share (See Note 6). Conversion related to penalty fees incurred totaling $9,580.

On March 19, 2014, the Company entered into a conversion agreement with Tonaquint, Inc. relating to a convertible promissory note dated May 2, 2013, with the original principal amount of $166,000 for 229,753 shares based on a conversion price of $0.09 per share (See Note 6). Given the conversion occurred subsequent to the maturity date of the note, the Company recorded a $6,795 loss on conversion.

On March 24, 2014, the Company entered into a conversion agreement with Dominion Capital, LLC relating to a convertible promissory note dated June 3, 2013, with the original principal amount of $277,778 for 1,260,835 shares based on a conversion price of $0.0705 per share (See Note 6).

On March 31, 2014, the Company entered into a conversion agreement with JMJ Financial relating to a convertible promissory note dated August 21, 2013, with the original principal amount of $50,000 for 1,002,999 shares based on a conversion price of $0.0658 per share (See Note 6).

On April 24, 2014 the Company issued 200,000 shares of common stock having a fair value of $21,980 ($0.1099/share) in exchange for consulting services.

The Company determined that the securities described above were issued in transactions that were exempt from the registration under the Securities Act of 1933, as amended (the “Securities Act”), pursuant to Section 4(a)(2) thereunder. This determination was based on the non-public manner in which we offered the securities and on the representations of the recipients of the securities, which included, in pertinent part, that they were “accredited investors” within the meaning of Rule 501 of Regulation D promulgated under the Securities Act, that they were acquiring such securities for investment purposes for their own account and not with a view toward resale or distribution, and that they understood such securities may not be sold or otherwise disposed of without registration under the Securities Act or an applicable exemption therefrom.

Item 3.

Defaults Upon Senior Securities.

None.

Item 4.

Mine Safety Disclosures.

Not applicable.

Item 5.

Other Information.

On April 17, 2014, the Company entered into an agreement with KBM Worldwide, Inc. whereby the Company will issue up to $78,500 in a convertible note. The note matures on January 21, 2015 and bears an interest rate of 8%. The conversion price equals the “Variable Conversion Price”, which is 65% of the “Market Price”, which is the average the three (3) lowest closing bid prices for the common stock during the ten (10) trading day period prior to the conversion. The holder of the note has a right to convert all or any part of the outstanding an unpaid principal amount into shares of common stock after six months.

Item 6.

Exhibits

Exhibit Number		Description
10.1		Securities Purchase Agreement, dated April 17, 2014, with KBM Worldwide, Inc.
10.2		8% Convertible Note, due January 21, 2015, issued to KBM Worldwide, Inc.
31.1		Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 - Chief Executive Officer
31.2		Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 - Chief Financial Officer
32		Certifications Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema
101.CAL		XBRL Taxonomy Extension Calculation Linkbase
101.DEF		XBRL Taxonomy Extension Definition Linkbase
101.LAB		XBRL Taxonomy Extension Label Linkbase
101.PRE		XBRL Taxonomy Extension Presentation Linkbase

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.

	MAX SOUND CORPORATION
	(Registrant)

Date: May 15, 2014	By:	/s/ John Blaisure
		John Blaisure
		Chief Executive Officer (Principal Executive Officer)

	By:	/s/ Greg Halpern
		Greg Halpern
		Chief Financial Officer (Principal Financial and Accounting Officer)