VIZCONNECT, INC. - Quarter Report: 2014 September (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

For the quarterly period ended September 30, 2014

For the transition period from _______ to _______.

Commission File Number: 001-35484

136 Dwight Road

Longmeadow, Massachusetts 01106

(Address of principal executive offices (Zip Code)

(855) 849-2666

(Registrant’s telephone number, including area code)

1350 Main Street, Suite 1407

Springfield, Massachusetts 01103

 (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 ¨

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

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

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

As of November 12, 2014, there were 66,763,390 shares of common stock, $0.001 par value per share, issued and outstanding. 

VIZCONNECT, INC.

TABLE OF CONTENTS

FORM 10-Q REPORT

September 30, 2014

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 the combined business of VizConnect, Inc. and its subsidiary, VizConnect LLC. “SEC” refers to the Securities and Exchange Commission.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

VIZCONNECT, INC. AND SUBSIDARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

See accompanying notes to the unaudited condensed consolidated financial statements

VIZCONNECT, INC. AND SUBSIDARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

See accompanying notes to the unaudited condensed consolidated financial statements

VIZCONNECT, INC. AND SUBSIDARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

See accompanying notes to the unaudited condensed consolidated financial statements

VIZCONNECT, INC. AND SUBSIDARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF SEPTEMBER 30, 2014

(UNAUDITED)

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION

(A) Basis of Presentation

The accompanying unaudited condensed consolidated 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 comprehensive presentation of financial position and results of operations.

VizConnect, Inc. (the "Company") was setup as a corporation under the laws of the State of Nevada on October 15, 2010. The Company, through its wholly-owned subsidiary, VizConnect LLC, a Massachusetts limited liability company, provides cloud based marketing services using a combination of mobile video marketing, video storage, and cloud computing in one easy to access system for a monthly fee. The Company’s year-end is December 31.

On February 13, 2013, VizConnect, Inc. consummated a share exchange with VizConnect LLC. Under the terms of the share exchange, the members of VizConnect LLC received 25,000,000 shares of the common stock of VizConnect, Inc. for 100% of the issued and outstanding member’s interest of VizConnect LLC. As a result of the transaction, the members of VizConnect LLC became the majority owners of VizConnect, Inc. and VizConnect LLC became a wholly-owned subsidiary.

The reverse merger is deemed a capital transaction and the net assets of VizConnect LLC (the accounting acquirer) are carried forward to the VizConnect, Inc. (the legal acquirer and the reporting entity) at their carrying value before the combination. The acquisition process utilizes the capital structure of VizConnect, Inc. and the assets and liabilities of VizConnect LLC, which are recorded at historical cost. The equity of VizConnect, Inc. is the historical equity of VizConnect LLC retroactively restated to reflect the number of shares issued by the Company in the transaction.

In connection with this transaction, the historical shareholders of VizConnect, Inc. were deemed to have been issued 15,680,000 shares of common stock upon completion of the reverse merger.

On February 23, 2013, VizConnect, Inc. concluded a 4-for-1 stock split, following which there were 40,680,000 shares of common stock issued and outstanding.

On October 29, 2013, the Company formed a majority owned subsidiary to conduct business solely in Canada. The majority owned subsidiary is included in the consolidated financial statements of the Company at its formation. The non-controlling interest investors have contributed $100,000 into the subsidiary, which represents 20% ownership. The Company owns the remaining 80% of the subsidiary.

It is management’s opinion that all material adjustments (consisting of normal reoccurring adjustments) have been made, which are necessary for a fair financial statement presentation. The results for the interim period are not necessarily indicative of the results expected for the year.

VIZCONNECT, INC. AND SUBSIDARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF SEPTEMBER 30, 2014

(UNAUDITED)

(B) Principal of Consolidation

The accompanying 2014 and 2013 unaudited condensed consolidated financial statements include the accounts of VizConnect, Inc., VizConnect LLC and its 80% owned-subsidiary, VizConnect Canada from the date of incorporation (October 29, 2013).

(C) 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. Significant estimates include the calculation of deferred revenue during the period and determinations of fair values of certain financial instruments

(D) Cash and Cash Equivalents

The Company considers all highly liquid temporary cash investments with an original maturity of three months or less to be cash equivalents. At September 30, 2014 and December 31, 2013, the Company had no cash equivalents.

(E) Income Taxes

The Company accounts for income taxes in accordance with FASB ASC 740 " Accounting for Income Taxes ". Under this approach, deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and their 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. 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. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amounts expected to be realized.

VIZCONNECT, INC. AND SUBSIDARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF SEPTEMBER 30, 2014

(UNAUDITED)

(F) Software Development Costs

We expense software development costs to be marketed to external users with a useful life of less than one year, before technological feasibility of such products is reached. We have determined that technological feasibility is reached shortly before the release of those products and as a result, the development costs incurred after the establishment of technological feasibility and before the release of those products were not material, and accordingly, were expensed as incurred. Software development costs totaled $48,380 and $23,872 for the nine months ended September 30, 2014 and 2013, respectively. Software Development costs with a useful life of greater than one year have been capitalized totaling $14,325.

(G) Business Segments

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

(H) Revenue Recognition

The Company will recognize revenue on arrangements in accordance with FASB ASC No. 605, “ Revenue Recognition ”. In all cases, 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.

The Company recognizes revenue from monthly subscriptions fees in the month in which services are provided.

The Company recognizes revenue from set up fees at the time the initial set up is complete and the fees are earned.

The Company recognizes revenue from distributor membership fees monthly over the one year membership period. Any fees collected in which the services are not provided are recorded as deferred revenue.

(I) Selling Expenses

The Company incurs selling expenses under a “multi-level” compensation plan, which includes commissions for subscription sales made and bonuses for assisting associated distributors in closing initial subscription sales. Commissions are earned from direct sales as well as the sales made through the sales network they have developed. Accrued commissions payable was $21,963 and $42,057 as of September 30, 2014 and December 31, 2013, respectively.

(J) Concentrations

As of September 30, 2014 and 2013, respectively, the Company has no customers whose sales account for more than 10% of total sales.

VIZCONNECT, INC. AND SUBSIDARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF SEPTEMBER 30, 2014

(UNAUDITED)

(K) Property and Equipment

Property and equipment is recorded at cost. Additions and betterments are capitalized; maintenance and repairs are expensed as incurred. Depreciation is calculated using the straight-line method over the asset’s estimated useful life, which is 5 years for furniture. Gains and losses on disposal are charged to operations.

(L) Fair Value Measurements

The Company’s capital structure includes the use of convertible debt features that are classified as derivative financial instruments. Derivative financial instruments are recognized as either assets or liabilities and are measured at fair value in accordance with FASB ASC 815 “ Derivatives and Hedging ”. ASC 815 requires that changes in fair value of derivative financial instruments with no hedging designation be recognized as gains (losses) in the earnings statement. Fair value measurement and disclosures are determined in accordance with FASB ASC 820 “ Fair Value Measurements and Disclosures ”.

FASB ASC 820 establishes a framework for measuring fair value by creating a hierarchy for observable independent market inputs and unobservable market assumptions and expands disclosures about fair value measurements. Considerable judgment may be required in interpreting market data used to develop the estimates of fair value. Accordingly, the estimates present herein are not necessarily indicative of the amounts that could be realized in a current market exchange. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value.

The following inputs are used in the valuation of the financial assets and liabilities.

Level 1 - Inputs represent unadjusted quoted prices for identical assets and liabilities exchanged in active markets.

Level 2 - Inputs include directly or indirectly observable inputs other than Level 1 inputs such as quoted prices for similar assets or liabilities exchanged in active or inactive markets; quoted prices for identical assets or liabilities exchanged in inactive markets; other inputs that are considered in fair value determinations of the assets or liabilities, such as interest rates or yield curves that are observable at commonly quoted intervals, volatilities, repayment speeds, loss severities, credit risks and default rates; and inputs that are derived principally from or corroborated by observable market data by correlation or other means.

Level 3 - Inputs include unobservable inputs used in the measurement of assets and liabilities. Management is required to use its own assumptions regarding unobservable inputs, because there is little, if any, market activity in the assets or liabilities or related observable inputs that can be corroborated at the measurement date. Measurements of non-exchange traded derivative contract assets and liabilities are primarily based on valuation models, discounted cash flow models or other valuation techniques that are believed to be used by market participants. Unobservable inputs require management to make certain projections and assumptions about the information that would be used by market participants in pricing assets and liabilities.

VIZCONNECT, INC. AND SUBSIDARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF SEPTEMBER 30, 2014

(UNAUDITED)

The fair values of financial instruments that include cash and amounts due to related parties were estimated to approximate their carrying values due to the immediate or relatively short maturity of these instruments.

The Company’s operations and financing activities are conducted primarily in United States dollars, and as a result are not subject to significant exposure to market risks from changes in foreign currency rates. Management has determined that the Company is not exposed to significant credit risk.

The following is a summary of liabilities measured at fair value on a recurring basis at September 30, 2014:

The following is a summary of liabilities measured at fair value on a recurring basis at December 31, 2013:

VIZCONNECT, INC. AND SUBSIDARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF SEPTEMBER 30, 2014

(UNAUDITED)

The changes in derivatives measured at fair value for which, the Company has used Level 3 inputs to determine fair value at September 30, 2014 are as follows:

The following is a description of the valuation methodology used for liabilities measured at fair value.

Conversion feature liability – The fair value of the derivative instrument was estimated using the Black Scholes option pricing model. (See Note 6)

(M) Re-classifications

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.

(N) Loss per Share

The Company computes net loss per share in accordance with FASB ASC 260 “ Earnings per Share ”. ASC 260 requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing net loss available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period including stock options, using the treasury stock method, and convertible preferred stock, using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential common shares if their effect is anti-dilutive.

VIZCONNECT, INC. AND SUBSIDARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF SEPTEMBER 30, 2014

(UNAUDITED)

The following summarizes potential anti-dilutive shares:

(O) Recent Account Pronouncements

Recent accounting pronouncements issued by the Financial Accounting Standards Board (FASB) (including its Emerging Issues Task Force), the AICPA, and the SEC, did not, or are not believed by management, to have a material impact on the Company’s present or future financial statements.

NOTE 2. GOING CONCERN

The Company had a net loss of $2,776,699 attributable to common stockholders for the nine months ended September 30, 2014, a Stockholders’ deficit of $1,642,766 and a working capital deficit of $1,592,304 as of September 30, 2014. This raises substantial doubt about its ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company’s ability to raise additional capital through expanding their mobile video platform designed to help social celebrities, businesses and brands and implement its business plan. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

Management believes that actions presently being taken to obtain additional funding through implementing its strategic plans, marketing strategy and sales incentives to expand operations will provide the opportunity for the Company to continue as a going concern.

NOTE 3. NOTES PAYABLE-RELATED PARTY

During 2011, the Company entered into two notes payable for a total of $22,500. The Notes have an interest rate of 10%, are unsecured, and due March 15, 2012. On February 14, 2014, these notes plus accrued interest were converted into a new note due on November 14, 2014 with an interest rate of 15%. During the three months ended March 31, 2014, $2,500 was repaid. The Company also converted $4,842 of interest to principal on the notes. During 2014, the Company entered into two notes payable for a total of $5,000 with no interest, are unsecured, and due on demand. During the three months ended September 30, 2014, $5,000 was repaid. As of September 30, 2014 and December 31, 2013, the total amount outstanding is $24,842 and $22,500 respectively. Accrued interest totaled $2,360 and $5,171 as of September 30, 2014 and December 31, 2013, respectively.

VIZCONNECT, INC. AND SUBSIDARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF SEPTEMBER 30, 2014

(UNAUDITED)

NOTE 4. NOTES PAYABLE

During 2011, The Company entered into a note payable for $15,000. The Note has an interest rate of 2% monthly, is unsecured, and due on demand. As of September 30, 2014 and December 31, 2013, the total amount outstanding is $13,000. Accrued interest totaled $10,060 and $7,720 as of September 30, 2014 and December 31, 2013, respectively.

On February 4, 2014, the Company received $35,000 in exchange for accounts receivable of $47,915. The amount is repayable on a daily basis whereby the Company pays $300 per day. As of September 30, 2014, $3,281 was outstanding, net of note payable discount.

In January and February, 2014, the Company entered into notes payable for $30,000. The Notes have an interest rate of 15% per year, are unsecured, and due in January and February, 2015.

In March, 2014, the Company entered into a note payable for $60,000. The Note has a lump sum interest payment due of $4,000, is unsecured, and the maturity date has been extended to December 31, 2014.

In March, 2014, the Company entered into a note payable for $100,000. The Note has an interest rate of 10% with a lump sum of $10,000 due upon repayment, is unsecured, and the maturity date has been extended to December 31, 2014. The Company has received a waiver of the late payment premium and interest. In the second quarter of 2014, the Company accreted $ 10,000 of the original issuance discount. Full amount due and payable at September 30, 2014 was $110,000.

On May 15, 2014, the Company entered into a note payable for $100,000. The Note has an interest rate of 10% with a lump sum of $20,000 due upon repayment, is unsecured, and the maturity date has been extended to December 31, 2014. The Company has received a waiver of the late payment premium and interest. In the second and third quarters of 2014, the Company accreted $ 20,000 of the original issuance discount. Full amount due and payable at September 30, 2014 was $120,000.

On June 4, 2014, the Company entered into a note payable for $20,000. The Note has a lump sum interest payment due of $3,000, is unsecured, and was repaid July 22, 2014.

On July 17, 2014, the Company entered into a $75,000 Note with an interest rate of 15% with the maturity date extended to December 31, 2014.

In Summary, during 2014, the Company received $ 920,705 of notes payable, including convertible notes payable, with maturity terms ranging from one month to two years and interest rates from 8% to 15%. The notes contain various conversion rates and prepayment penalties. As of September 30, 2014, the Company has repaid $379,685 of principal and all of the notes have been retired.

NOTE 5. CONVERTIBLE NOTES PAYABLE

During 2013, the Company received various unsecured convertible loans totaling $215,250 and converted loans payable in the amount of $310,000 to convertible notes payable of which $129,940 were converted to common stock. These notes have interest rates of 8% and 12% per year and mature on February 6, 2018 and March 1, 2018. During 2013, the Company repaid one convertible note payable in the amount of $42,500. During the first quarter of 2014, the Company received $133,000 of convertible notes payable, one for $75,000 with a discount of $25,000 for a term of three months, and one for $58,000 with an interest rate of 8% per year for a term of eight months. During the first quarter of 2014, the Company repaid loans of $42,500, $59,000 and $32,750 less $9,208 of discount. During the second quarter of 2014, the Company repaid a loan of $42,500. During the third quarter of 2014, the Company received $ 355,583 of convertible notes payable, one for $55,833 with an interest rate of 12% for a term of two years, one for $78,750 with an interest rate of 8% for a term of one year, one for $68,000 with an interest rate of 8% for a term of nine months, one for $53,000 with an interest rate of 8% for a term of nine months, and two $50,000 notes with interest rates of 12% for terms of six months. During the third quarter of 2014, the Company repaid loans of $58,000 and $75,000.

VIZCONNECT, INC. AND SUBSIDARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF SEPTEMBER 30, 2014

(UNAUDITED)

The following is a summary of the unsecured convertible loans:

Interest recognized for the nine month periods ended September 30, 2014 and September 30, 2013 were $730,658 and $85,213 respectively.

NOTE 6. DERIVATIVES

The company has a balance of convertible notes totaling $588,143 with certain investors. The notes can be converted following a holding period provided in the promissory note agreement, and at a set price per share, subject to certain re-set provision. This includes price protection terms, which would reset the per-share purchase price if the Company were obligated to convert other convertible liabilities at a lower per share purchase price.

The derivative liability is recorded at fair value on the Company’s financial statements, and any changes in their fair value are included in the consolidated statement of operations as a non-cash item.

VIZCONNECT, INC. AND SUBSIDARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF SEPTEMBER 30, 2014

(UNAUDITED)

The derivative liability is revalued and reported at fair value of $582,598 and $203,850 as of September 30, 2014 and December 31, 2013 respectively.

The fair value of the convertible notes was estimated using the Black Scholes option pricing model with the following assumptions for the nine months ended September 30, 2014.

NOTE 7. STOCKHOLDERS’ EQUITY

On August 10, 2013, the Company entered into a six month consulting agreement for 5,000,000 shares of common stock. The Company expensed the fair value of $321,800 related to the portion earned during the nine months ended September 30, 2014.

On January 1, 2014, the Company entered into a six month consulting agreement for 1,000,000 shares of common stock. The Company expensed the fair value of $100,000 related to the portion earned through September 30, 2014.

On February 11, 2014, the Company granted 13,175,000 shares of common stock to its board of directors. The Company expensed the fair value of $790,500 related to the portion earned through September 30, 2014.

In April, 2014, the Company issued 1,555,430 shares of common stock pursuant to the conversion of $100,575 Convertible Notes and $48,141 interest.

On April 1, 2014, the Company entered into a one year consulting agreement for 4,750,000 shares of common stock. The Company expensed the fair value of $142,500 related to the portion earned through September 30, 2014.

In May, 2014, the Company issued 227,960 shares of common stock pursuant to the conversion of $29,365 Convertible Notes and $3,125 interest.

On May 9, 2014, the Company entered into a three month consulting agreement for 250,000 shares of common stock. The Company expensed the fair value of $35,000 related to the portion earned through September 30, 2014.

On May 14, 2014, the Company entered into a one year consulting agreement for 500,000 shares of common stock of which 125,000 vest per quarter. The Company expensed the fair value of $2,500 and $6,527 related to the portions earned through September 30, 2014 and June 30, 2014, respectively.

Increases in additional paid in capital of $80,716 for the three months ended March 31, 2014, $138,396 for the three months ended June 30, 2014, and $44,164 for the three months ended September 30, 2014 were made for the fair value of Derivative Liability associated with the conversions and repayments of Convertible Notes.

The Company is required to reserve 91,118,000 shares of common stock under the convertible note agreements.

 NOTE 8. RELATED PARTY TRANSACTIONS

During 2011, the Company entered into two notes payable for a total of $22,500. On February 14, 2014, these notes plus accrued interest were converted into a new note due on November 14, 2014 with an interest rate of 15%. During 2014, the Company entered into two notes payable for a total of $5,000 with no interest which were repaid July 3, 2014. As of September 30, 2014 and December 31, 2013, the total amount outstanding is $24,842 and $22,500 respectively. Accrued interest totaled $2,360 and $5,171 as of September 30, 2014 and December 31, 2013, respectively.

During the year ending December 31, 2013, the Company incurred software development expenses totaling $9,800 from a company owned by an officer. As of September 30, 2014, the total amount owed to the related vendor is $42,500 and is recorded in accounts payable.

VIZCONNECT, INC. AND SUBSIDARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF SEPTEMBER 30, 2014

(UNAUDITED)

NOTE 9. SUBSEQUENT EVENTS

On October 1, 2014, the Company entered into a $25,000 Convertible Note with an interest rate of 8% per year for a term of one year.

On October 21, 2014, the Company entered into a $5,000 Note with a lump sum interest payment due of $1,667, is unsecured, for a term of six months.

On October 21, 2014, the Company entered into a $15,000 Note with a lump sum interest payment due of $5,000, is unsecured, for a term of six months.

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

The following discussion 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 contained elsewhere in this Report. The following discussion and analysis contains forward-looking statements, which involve risks and uncertainties. Our actual results may differ significantly from the results, expectations and plans discussed in these forward-looking statements.

Overview

The Company was incorporated in the State of Nevada on October 15, 2010. We have decided to no longer pursue the network marketing strategy as a means of sales and software distribution, and accordingly, revenue has declined. It became clear after the second quarter of this year that the growth rate was not in line with our projections, and subsequently it was no longer a viable strategy for growth. We have now focused on a cloud-based, mobile video platform designed to help social celebrities, businesses and brands visually connect with and monetize online fans, followers and customers using mobile and online video. Our proprietary mobile video marketing platform (the “Platform”) allows social celebrities and brands to come together in an elegant manner to leverage the power of social followings to create branded video messaging with integrated native advertising that is not invasive to the consumer. We also assist companies across a wide array of industries in utilizing mobile devices and technologies to create targeted branding and advertising campaigns. Our Platform also utilizes unique keyword-activated campaigns that engage mobile users with video and automated call-to-action prompts. This dynamic, cloud-based marketing tool has both large and small business applications, enterprise solutions for large companies, and white-label opportunities for marketing and communications firms.

On February 13, 2013 (the “Closing Date”), we entered into a Share Exchange Agreement (the “Exchange Agreement”) with (i) VizConnect LLC (“VizConnect”), (ii) all of the members of VizConnect (the “Members”) and (iv) our former principal shareholder pursuant to which we acquired all of the outstanding units of VizConnect in exchange for the issuance of 25,000,000 shares of our common stock to the Members (the “Share Exchange”). The shares issued to the Members in the Share Exchange constituted approximately 61.46% of our issued and outstanding shares of common stock as of and immediately after the consummation of the Share Exchange. In connection with the closing, 40,000,000 shares of our common stock held by our former principal shareholder have been cancelled. As a result of the Share Exchange, VizConnect became our wholly owned subsidiary.

The acquisition is being accounted for as a “reverse merger,” and VizConnect is deemed to be the accounting acquirer in the reverse merger. Consequently, the assets and liabilities and the historical operations that will be reflected in the financial statements prior to the acquisition will be those of VizConnect and will be recorded at the historical cost, and the consolidated financial statements after completion of the acquisition will include the assets, liabilities and operation of the Company and VizConnect from the closing date of the acquisition. As a result of the issuance of the shares of common stock pursuant to the Exchange Agreement, a change in control of occurred as a result of the acquisition.

In connection with the closing of the Exchange Agreement, Mr. Anthony Pasquale, the Company’s principal shareholder, agreed to cancel his 10,000,000 pre-split (or 40,000,000 post-split) shares of common stock that he owned in the Company and we issued 6,250,000 pre-split (or 25,000,000 post-split) shares to members of VizConnect. Additionally, the existing officers and directors from the Company resigned from its board of directors and all officer positions effective immediately after the closing of the reverse merger. Accordingly, our Board of Directors appointed Mr. Paul Cooleen as our President and Treasurer, and Mr. Brian Dee as our Secretary.

The Company’s directors approved the Exchange Agreement and the transactions contemplated thereby. Simultaneously, the Members of VizConnect also approved the Exchange Agreement and the transactions contemplated thereby.

As a result of the Exchange Agreement, the Company ceased its prior business and acquired 100% of the mobile marketing operations of VizConnect, the business and operations of which now constitutes its primary business and operations. Specifically, as a result of the Exchange Agreement on February 13, 2013:

As a result of the Company’s reverse acquisition of VizConnect, the Company has assumed the business and operations of VizConnect with its principal activities engaged in the mobile marketing platform business.

We effected a 4-for-1 forward stock split, which became effective as of February 25, 2013.

On or about April 13, 2013, the Company received written consents in lieu of a meeting of Stockholders from stockholders holding 50.86% of the outstanding shares of the Company’s common stock. This written consent authorized the Company to amend its Articles of Incorporation to change the name of the Company from “VB Clothing, Inc.” to “VizConnect, Inc.” and to increase the number of authorized shares of common stock, par value $0.001, from 70,000,000 to 250,000,000. The Certificate of Amendment, referencing these amendments, was recorded with the State of Nevada on May 10, 2013.

Three Months Ended September 30, 2014 Compared with Three Months Ended September 30, 2013

Revenue:

Revenues for the three-month period ending September 30, 2014 were $32,623, compared with $140,856 for the three-month period ending September 30, 2013, reflecting a decrease of 77%. The decrease in revenues was primarily attributable to the reduction in subscription and distributor membership fee revenue with the unwinding of the network marketing model.

Operating Expenses:

Operating expenses for the three-month period ending September 30, 2014 were $140,515 compared with $273,329 for the three-month period ending September 30, 2013, reflecting a decrease of 49%. The decrease in operating expenses was primarily attributable to a reduction in sales commissions and software service fees corresponding to the reduction in the network marketing revenues.

Loss from Operations:

We incurred losses from operations totaling $107,892 for the three-month period ending September 30, 2014, compared to losses from operations totaling $132,473 for the three-month period ending September 30, 2013, reflecting an decrease of 19% The decrease in losses from operations was primarily attributable to the reduction in sales commissions and software service fees with the unwinding of the network marketing model.

Other Expense:

The Company had other expenses for the three-month period ending September 30, 2014 in the amount of $289,728 compared to other income of $549,270 for the three-month period ending September 30, 2013. This is comprised of a loss on the change in the market value of a derivative liability of $76,114, compared with a gain of $614,586 for the three-month period ending September 30, 2013, reflecting a decrease of 112% and interest expense of $213,614, compared with $65,316 of interest expense for the three-month period ending September 30, 2013, reflecting an increase of 227%. The company has derivative losses in the third quarter of 2014 associated with the fair market value on the company's financial derivatives. The increase in interest expense is primarily associated with the increased amount of borrowing by the Company.

Net loss:

We incurred a net loss of $397,400 attributable to common stockholders or 1218% of revenues, for the three-month period ending September 30, 2014, compared to a net income of $416,797 or 296% of revenues, for the three-month period ending September 30, 2013. The increase in loss is primarily attributable to the loss on the change in the market value of a derivative liability and interest expense.

Nine Months Ended September 30, 2014 Compared with Nine Months Ended September 30, 2013

Revenue:

Revenues for the nine-month period ending September 30, 2014 were $173,100, compared with $249,190 for the nine-month period ending September 30, 2013, reflecting a decrease of 31 %. The decrease in revenues was primarily attributable to the reduction in subscription and distributor membership fee revenue with the unwinding of the network marketing model.

Operating Expenses:

Operating expenses for the nine-month period ending September 30, 2014 were $1,990,702 compared with $573,556 for the nine-month period ending September 30, 2013, reflecting an increase of 247%. The increase in operating expenses was primarily attributable to an increase in professional fees of $731,280 due to our need for experts specializing in advertising, promotion, and creating brand awareness and the issuance of common stock to the board of directors for services of $790,500.

Loss from Operations:

We incurred losses from operations totaling $1,817,602 for the nine-month period ending September 30, 2014, compared to losses from operations totaling $324,366 for the nine-month period ending September 30, 2013, reflecting an increase of 460% The increase in losses from operations was primarily attributable to an increase in professional fees of $731,280 and the issuance of common stock to the board of directors for services of $790,500.

Other Expense:

The Company had other expenses for the nine-month period ending September 30, 2014 in the amount of $964,932 compared to other income of $258,396 for the nine-month period ending September 30,2014. This is comprised of a loss on the change in the market value of a derivative liability of $234,274, compared with a gain of $343,609 for the nine-month period ending September 30, 2013, reflecting a decrease of 168% and interest expense of $730,658, compared with $85,213 of interest expense for the nine-month period ending September 30, 2013, reflecting an increase of 757%. The company has derivative losses in the nine-month period ending September 30, 2014 associated with the fair market value on the company's financial derivatives. The increase in interest expense is primarily associated with the increased cost of borrowing associated with the company’s convertible debt and the payment of penalties.

Net loss:

We incurred a net loss of $2,776,699 attributable to common stockholders or 1604% of revenues, for the nine-month period ending September 30, 2014, compared to a net loss of $65,970 or 26% of revenues, for the nine-month period ending September 30, 2013. The increase in loss is attributable to professional fees, the issuance of common stock to the board of directors, loss on the change in the market value of a derivative liability and interest expense.

Plan of Operations

VizConnect is a cloud-based, mobile video platform designed to help social celebrities, businesses and brands visually connect with and monetize online fans, followers and customers using mobile and online video. Our proprietary mobile video marketing platform (the “Platform”) allows social celebrities and brands to come together in an elegant manner to leverage the power of social followings to create branded video messaging with integrated native advertising that is not invasive to the consumer. We also assist companies across a wide array of industries in utilizing mobile devices and technologies to create targeted branding and advertising campaigns. Our Platform also utilizes unique keyword-activated campaigns that engage mobile users with video and automated call-to-action prompts. This dynamic, cloud-based marketing tool has both large and small business applications, enterprise solutions for large companies and white-label opportunities for marketing and communications firms.

By the end of this fiscal year with the expansion into the social media markets, management is optimistic of expanding growth potential and subsequent increases in revenue.

Critical Accounting Policies and Estimates

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.

Software Development Costs

We expense software development costs to be marketed to external users with a useful life of less than one year, before technological feasibility of such products is reached. We have determined that technological feasibility is reached shortly before the release of those products and as a result, the development costs incurred after the establishment of technological feasibility and before the release of those products were not material, and accordingly, were expensed as incurred. Software development costs totaled $48,380 and $23,872 for the nine months ended September 30, 2014 and 2013, respectively. Software Development costs with a useful life of greater than one year have been capitalized totaling $14,325.

Revenue Recognition

The Company will recognize revenue on arrangements in accordance with FASB ASC Topic 605, “Revenue Recognition”. In all cases, 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. The Company recognizes revenue from monthly subscriptions fees in the month in which services are used. Because a portion of the fees are earned over a month period, any fees collect in which the services are not provided are recorded as deferred revenue. The Company recognizes revenue from set up fees at the time the initial set up is complete and the fees are earned. The Company recognizes revenue from distributor membership fees monthly over the one year membership period. Any fees collected in which the services are not provided are recorded as deferred revenue.

Recent Accounting Pronouncements

Recent accounting pronouncements issued by the Financial Accounting Standards Board (FASB) (including its Emerging Issues Task Force), the AICPA, and the SEC, did not, or are not believed by management, to have a material impact on the Company’s present or future financial statements.

Liquidity and Capital Resources

Our cash and cash equivalents is $741, and we have a working capital deficit of $1,592,304, as of September 30, 2014. Despite capital contributions and sales, and both related party and third party loan commitments, we may experience cash flow shortages that can slow our expected growth. We have primarily financed our activities from loans from related and third parties. A significant portion of the funds raised from loans from related and third parties have been and will be used to cover working capital needs such as office expenses, software development expenses and various professional fees.

Our cash flow requirements during this period have been met by contributions of capital and debt financing, plus receipts from sales of the Company’s services and from membership fees from the Company’s distributors. We anticipate that financing will be required until such time as we are able to generate adequate cash flow from operations to support both our cash needs for normal operations, and to support the cash needs for our investment into additional resources and assets to support our growth. Currently we cannot determine when either will occur and as such we will need to obtain financing to cover our costs for the foreseeable future. We continue to seek financing sources, such as those described herein below, as well as others, in order to continue funding normal operations. However, no assurance can be given that these sources of financing will continue to be available. If we are unable to generate profits, or unable to obtain additional funds for its working capital needs, we may have to curtail normal operations, or cease operations completely.

During 2013, the Company received various unsecured convertible loans totaling $215,250 and converted loans payable in the amount of $310,000 to convertible notes payable of which $129,940 were converted to common stock. These notes have interest rates of 8% and 12% per year and mature on February 6, 2018 and March 1, 2018. During 2013, the Company repaid one convertible note payable in the amount of $42,500. During the first quarter of 2014, the Company received $133,000 of convertible notes payable, one for $75,000 with a discount of $25,000 for a term of three months, and one for $58,000 with an interest rate of 8% per year for a term of eight months. During the first quarter of 2014, the Company repaid loans of $42,500, $59,000 and $32,750 less $9,208 of discount. During the second quarter of 2014, the Company repaid a loan of $42,500. During the third quarter of 2014, the Company received $ 355,583 of convertible notes payable, one for $55,833 with an interest rate of 12% for a term of two years, one for $78,750 with an interest rate of 8% for a term of one year, one for $68,000 with an interest rate of 8% for a term of nine months, one for $53,000 with an interest rate of 8% for a term of nine months, and two $50,000 notes with interest rates of 12% for terms of six months. During the third quarter of 2014, the Company repaid loans of $58,000 and $75,000.

During 2011, the Company entered into two notes payable for a total of $22,500. On February 14, 2014, these notes plus accrued interest were converted into a new note due on November 14, 2014 with an interest rate of 15%. During 2014, the Company entered into two notes payable for a total of $5,000 with no interest which were repaid July 3, 2014. As of September 30, 2014 and December 31, 2013, the total amount outstanding is $24,842 and $22,500 respectively.

During 2011, The Company entered into a note payable for $15,000. The Note has an interest rate of 2% monthly, is unsecured, and due on demand. As of September 30, 2014 and December 31, 2013, the total amount outstanding is $13,000.

On February 4, 2014, the Company received $35,000 in exchange for accounts receivable of $47,915. The amount is repayable on a daily basis whereby the Company pays $300 per day. As of September 30, 2014, $4,492 was owed under this agreement less Prepaid Interest of $1,211, netting $3,281 owed.

In January and February, 2014, the Company entered into notes payable for $30,000. The Notes have an interest rate of 15% per year, are unsecured, and due in January and February, 2015.

In March, 2014, the Company entered into a note payable for $60,000. The Note has a lump sum interest payment due of $4,000, is unsecured, and the maturity date has been extended to December 31, 2014.

In March, 2014, the Company entered into a note payable for $100,000. The Note has an interest rate of 10% with a lump sum of $10,000 due upon repayment, is unsecured, and the maturity date has been extended to December 31, 2014. Full amount due and payable at September 30, 2014 totals $110,000.

On May 15, 2014, the Company entered into a note payable for $100,000. The Note has an interest rate of 10% with a lump sum of $20,000 due upon repayment, is unsecured, and the maturity date has been extended to December 31, 2014. Full amount due and payable at September 30, 2014 totals $120,000.

On June 4, 2014, the Company entered into a note payable for $20,000. The Note has a lump sum interest payment due of $3,000, is unsecured, and was repaid July 22, 2014.

On July 2, 2014, the Company entered into a $50,000 Convertible Note with an interest rate of 0% if paid within three months, at which time the note will terminate, otherwise 12% for a term of two years.

On July 3, 2014, the Company entered into a $78,750 Convertible Note with an interest rate of 8% per year for a term of one year.

On July 17, 2014, the Company entered into two $50,000 Convertible Notes of which $50,000 was received with the second note funds received on August 25, 2014. The notes have an interest rate of 12% per year for a term of six months.

On July 17, 2014, the Company entered into a $68,000 Convertible Note with an interest rate of 8% per year for a term of nine months.

On July 17, 2014, the Company entered into a $75,000 Note with an interest rate of 15% with the maturity date extended to December 31, 2014.

On September 8, 2014, the Company entered into a $53,000 Convertible Note with an interest rate of 8% per year for a term of nine months.

On October 1, 2014, the Company entered into a $25,000 Convertible Note with an interest rate of 8% per year for a term of one year.

On October 21, 2014, the Company entered into a $5,000 Note with a lump sum interest payment due of $1,667, is unsecured, for a term of six months.

On October 21, 2014, the Company entered into a $15,000 Note with a lump sum interest payment due of $5,000, is unsecured, for a term of six months.

Going Concern

The Company had a net loss of $2,776,699 attributable to common stockholders for the nine months ended September 30, 2014, a Stockholders’ deficit of $1,642,766 and a working capital deficit of $1,592,304 as of September 30, 2014. This raises substantial doubt about its ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company’s ability to raise additional capital through expanding their mobile video platform designed to help social celebrities, businesses and brands and implement its business plan. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

Management believes that actions presently being taken to obtain additional funding through implementing its strategic plans, marketing strategy and sales incentives to expand operations will provide the opportunity for the Company to continue as a going concern.

Off-balance Sheet Commitments and Arrangements

We have no off-balance sheet transactions, arrangements, obligations (including contingent obligations), or other relationships with unconsolidated entities or other persons that have, or may have, a material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

We are a Smaller Reporting Company and are not required to provide the information under this item.

Item 4. Controls and Procedures.

Disclosure of controls and procedures.

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports, filed under the Securities Exchange Act of 1934, 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 our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable and not absolute assurance of achieving the desired control objectives. In reaching a reasonable level of assurance, management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. In addition, 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 design will succeed in achieving its stated goals under all potential future conditions. Over time, a control may become inadequate because of changes in conditions or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

As required by the SEC Rule 13a-15(b), we carried out an evaluation under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on the foregoing, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were not effective at the reasonable assurance level due to the material weaknesses described below. 

In light of the material weaknesses described below, we performed additional analysis and other post-closing procedures to ensure our financial statements were prepared in accordance with generally accepted accounting principles. Accordingly, we believe that the financial statements included in this report fairly present, in all material respects, our financial condition, results of operations and cash flows for the periods presented.

A material weakness is a control deficiency (within the meaning of the Public Company Accounting Oversight Board (PCAOB) Auditing Standard No. 2) or combination of control deficiencies that result in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. Management has identified the following two material weaknesses which have caused management to conclude that as of September 30, 2014 our disclosure controls and procedures were not effective at the reasonable assurance level:

To address these material weaknesses, management performed additional analyses and other procedures to ensure that the financial statements included herein fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented.

Changes in internal controls over financial reporting.

There has been no change in our internal control over financial reporting that occurred during the fiscal 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.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

We are not currently involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our company or any of our subsidiaries, threatened against or affecting our company, our common stock, any of our subsidiaries or of our companies or our subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.

Item 1A. Risk Factors.

We are a Smaller Reporting Company and are not required to provide the information under this item.

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

On July 2, 2014, we entered into a convertible note financing transaction for the principal amount of $55,833. This note matures on June 25, 2016. It bears interest at 12% per annum. The note is convertible into common stock at the lender’s option with a conversion rate equal to the lesser of: (a) $0.10; or (b) 60% of the lowest trade price in the 25 trading days previous to the conversion. Based on our current stock price of $0.018 per share, this note could convert at a conversion price of $0.0108 per share which would result in an additional issuance of 5,169,722 shares of common stock.

On July 3, 2014, we entered into a convertible note financing transaction for the principal amount of $78,750. This note matures on July 3, 2015. It bears interest at 8% per annum. The note is convertible into common stock at the lender’s option with a conversion price set at 58% of the lowest trading price for 20 prior trading days upon notice of conversion. Based on our current stock price of $0.018 per share, this note could convert at a conversion price of $0.0104 per share which would result in an additional issuance of 7,572,115 shares of common stock.

On July 17, 2014, we entered into a convertible note financing transaction for the principal amount of $50,000. This note matures on January 17, 2015. It bears interest at 12% per annum. The note is convertible into common stock at the lender’s option with a conversion rate equal to the lower of: (a) a 50% discount to the average of the three lowest daily trading prices for the previous 20 trading days to the date of conversion; or (b) a 50% discount to the average of the three lowest daily trading prices for the previous 20 trading days before the date that the notice was executed. Based on our current stock price of $0.018 per share, this note could convert at a conversion price of $0.009 per share which would result in an additional issuance of 5,555,556 shares of common stock.

On July 17, 2014, we entered into a convertible note financing transaction for the principal amount of $68,000. This note matures on April 21, 2015. It bears interest at 8% per annum. The note is convertible into common stock at the lender’s option with a conversion price of 58% of the lowest three trading prices during the 10 trading day period prior to conversion. Based on our current stock price of $0.018 per share, this note could convert at a conversion price of $0.0104 per share which would result in an additional issuance of 6,538,462 shares of common stock.

On August 25, 2014, we entered into a convertible note financing transaction for the principal amount of $50,000. This note matures on February 25, 2015. It bears interest at 12% per annum. The note is convertible into common stock at the lender’s option with a conversion rate equal to the lower of: (a) a 50% discount to the average of the three lowest daily trading prices for the previous 20 trading days to the date of conversion; or (b) a 50% discount to the average of the three lowest daily trading prices for the previous 20 trading days before the date that the notice was executed. Based on our current stock price of $0.018 per share, this note could convert at a conversion price of $0.009 per share which would result in an additional issuance of 5,555,556 shares of common stock.

On September 8, 2014, we entered into a convertible note financing transaction for the principal amount of $53,000. This note matures on June 10, 2015. It bears interest at 8% per annum. The note is convertible into common stock at the lender’s option with a conversion price of 58% of the lowest three trading prices during the 10 trading day period prior to conversion. Based on our current stock price of $0.018 per share, this note could convert at a conversion price of $0.0104 per share which would result in an additional issuance of 5,096,154 shares of common stock.

On October 1, 2014, we entered into a convertible note financing transaction for the principal amount of $25,000. This note matures on September 25, 2015. It bears interest at 8% per annum. The note is convertible into common stock at the lender’s option at any time after 180 days to convert at a conversion price of 55% of the lowest closing bid price for the 15 prior trading day period prior to conversion. Based on our current stock price of $0.018 per share, this note could convert at a conversion price of $0.0099 per share which would result in an additional issuance of 2,525,253 shares of common stock.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable

Item 5. Other Information

None.

Item 6. Exhibits

__________________

* Filed herewith.

+ In accordance with SEC Release 33-8238, Exhibit 32.1 is being furnished and not filed.

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. 

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