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MIND SOLUTIONS INC. - 10-K/A - Management's Discussion and Analysis of Financial Condition and Results of Operations.

May 14, 2014

THE FOLLOWING DISCUSSION SHOULD BE READ TOGETHER WITH THE INFORMATION CONTAINED IN THE FINANCIAL STATEMENTS AND RELATED NOTES INCLUDED ELSEWHERE IN THIS ANNUAL REPORT ON FORM 10-K. The following discussion reflects our plan of operation. This discussion should be read in conjunction with the financial statements which are attached to this report. This discussion contains forward-looking statements, including statements regarding our expected financial position, business and financing plans. These statements involve risks and uncertainties. Our actual results could differ materially from the results described in or implied by these forward-looking statements as a result of various factors, including those discussed below and elsewhere in this report, particularly under the headings "Special Note Regarding Forward-Looking Statements." 23 Unless the context otherwise suggests, "we," "our," "us," and similar terms, as well as references to "VOIS" and "Mind Solutions," all refer to Mind Solutions as of the date of this report. Mind Solutions has successfully developed software applications described below that run on Emotive EEG headsets. We have experienced minimal sales of our software applications. It was decided by management that to better position Mind Solutions in the market, we should develop our own unique EEG headset that would allow us to have more market strength. We have invested a significant amount of money and time into developing a prototype EEG headset, which has been successfully tested on several Android devices and tablets. On August 1, 2012, Dr. Gordon Chiu, our chief scientific adviser, filed an International Patent Application No. PCT/US2012/049135. Generally, the proprietary technology we are using consists of a "Portable Brain Activity Monitor." On February 12, 2011, Mind Technologies, Inc., one of our predecessors, and Dr. Gordon Chiu, our chief science advisor, granted us a license to use the technology covered by his patent application. Through the series of mergers described in this report, Mind Solutions acquired the license granted to Mind Technologies, Inc. For the period, that Mind Technologies, Inc. (now Mind Solutions) exists and funds the development and progress of the covered invention, Dr. Chiu agreed to license the use of the technology to Mind Solutions. If Mind Solutions fails to support the launch, progress and/or funding of the production of the invention, then the license may be terminated. The agreement provided that Dr. Chiu will receive a non-refundable, non-dilutable cash royalty payment equal to 20% of the gross proceeds received by Mind Solutions from the use of the covered technology. In addition, Brent Fouch, the former president of Mind Technologies, and one of our advisors, will receive a non-refundable, non-dilutable cash royalty payment equal to 5% of the gross proceeds received by Mind Solutions from the use of the covered technology. See "Business - Patents and Intellectual Property." We believe a minimum of $350,000 is still needed to complete the EEG device, which will cover costs associated with the SDK (operating system), the design work to create a sleek, consumer-friendly final product and updates on the hardware including Bluetooth wireless updates. We have announced our desire to partner with a larger technology firm to invest in the completion of the EEG headset in return for a negotiated interest in the product. If successful, in attracting a partner, we will not need to raise this capital to complete the project. If we are not successful in attracting a financial partner to assist in the completion of the EEG headset, we plans to raise funds by means of an equity offering to raise the necessary capital to complete the project.



Mind Solutions currently has a need of approximately $20,000 per month to sustain operations until sales of the software and anticipated sales of the EEG headset increase.

Going Concern



As of December 31, 2013, Mind Solutions had an accumulated deficit during development stage of $23,385,789, which included a net loss of $22,142,473 reported for the year ended December 31, 2013. Also, during the year ended December 31, 2013, we used net cash of $388,177 for operating activities. These factors raise substantial doubt about our ability to continue as a going concern.

While we are attempting to commence operations and generate revenues, our cash position may not be significant enough to support our daily operations. Management intends to raise additional funds by way of an offering of our securities. Management believes that the actions presently being taken to further implement our business plan and generate revenues provide the opportunity for Mind Solutions to continue as a going concern. While we believe in the viability of our strategy to generate revenues and in our ability to raise additional funds, we may not be successful. Our ability to continue as a going concern is dependent upon our capability to further implement our business plan and generate revenues. Results of Operations 24



Year Ended December 31, 2013 Compared to Year Ended December 31, 2012.

Revenues. During the years ended December 31, 2013, and 2012 we had little revenue. We are aggressively looking for ways to leverage our technology to develop revenue streams.

General and Administrative Expenses.

Consulting Fees. For the year ended December 31, 2013, consulting expense increased to $1,892,785 as compared to $827,091 from the prior year ended December 31, 2012. The increase was primarily the result of expense related to stock being issued to officers and consultants for services rendered to Mind Solutions.



Professional Fees . For the year ended December 31, 2013, professional fees increased to $229,420 as compared to $25,200 from the prior year ended December 31, 2012. Professional fee expense increased primarily due to increase in accounting and legal fees due to the merger with Mind Solutions, Inc.

Selling, General and Administrative Expense . For the year ended December 31, 2013, selling, general and administrative expenses decreased to $48,564 as compared to $85,792 from the prior year ended December 31, 2012. For the years ended December 31, 2013, and 2012, general and administrative expenses consisted of the following: 2013 2012 Officer Salary $ 15,060$ -0- Research and Development - 58,330 Depreciation and Amortization 2,442 98 Other 31,062 27,364 $ 48,564$ 85,792 Research and Development . For the year ended December 31, 2013, research and development expense amounted to $0 as compared to $58,330 for the year ended December 31, 2012. The decrease was due to limited resources for product development activities.



Depreciation. For the year ended December 31, 2013, depreciation expense amounted to $2,442 as compared to $98 for the year ended December 31, 2012.

Other Expense. For the year ended December 31, 2013, other expense which includes repairs and maintenance, postage, dues and subscriptions, supplies, and the write off of other assets, amounted to $31,062 as compared to $27,364 for the year ended December 31, 2012.



Interest Expense. For the year ended December 31, 2013, interest expense increased to $46,837 as compared to $8,843 for the year ended December 31, 2012. The increase was due to additional interest expense incurred related to the amount owed on legal judgments which occurred during fiscal 2011.

Net Loss. Our net loss from operations increased to $22,142,476 for the year ended December 31, 2013, from $949,926 for the year ended December 31, 2012.

25



Liquidity and Capital Resources

Liquidity is the ability of a company to generate adequate amounts of cash to meet its needs for cash. The following table provides certain selected balance sheet comparisons between December 31, 2013, and December 31, 2012: December 31, December 31, $ % 2013 2012 Change Change Working Capital $ (20,639,541)$ (1,207,842)$ (19,431,699) (Over 100 )% Cash 47,428 208 47,220 Over 100% Total current assets 336,978 208 336,770 Over 100% Total assets 339,396 395,581 (56,185) (14.2)% Accounts payable and accrued liabilities 394,859 429,264 (34,405) (8.0)% Notes payable and accrued interest 670,918 666,676 4,242 0.6 % Total current liabilities 20,976,519 1,208,050 19,768,469 Over 100 % Total liabilities 20,976,519 1,208,050 19,768,469 Over 100%



At December 31, 2013, our working capital deficit decreased as compared to December 31, 2012, primarily as a result of an increase in derivative liability of $19,907,242.

26 Operating activities



Net cash used for continuing operating activities during fiscal 2013 was $388,177 as compared to $159,869 for fiscal 2012. Non-cash items totaling approximately $21,749,389 contributing to the net cash used in continuing operating activities for fiscal 2013 include:

· $1,467,703 representing the value of shares issued to consultants and officers;

· $19,907,242 of derivative expense;

· $480,000 of available-for-sale securities compensation;

· $111,610 of forgiveness of debt;

· $2,442 of depreciation; and

· $3,612 increase in accounts payable.

Net cash used for continuing operating activities during fiscal 2012 was $159,869. Non-cash items totaling approximately $787,057 contributing to the net cash used in continuing operating activities for fiscal 2012 include:

· $776,000 representing the value of shares issued for consulting services;

· $98 of depreciation;



· $440 of advances to related parties; and

· $10,519 in increase in accounts payable and accrued expenses.

Investing activities

Net cash used in investing activities was $0 for both fiscal 2013 and 2012.

IBC Funds, LLC

On November 21, 2013, IBC Funds, LLC, a Nevada limited liability company, acquired by assignment, debts owed by Mind Solutions to four creditors in the amount of $82,845.63. Likewise, on November 21, 2013, IBC Funds and Mind Solutions executed that certain Settlement Agreement and Stipulation, whereby Mind Solutions agreed to settle the debt of $82,845.63, and to pay the debt by the issuance of shares pursuant to Section 3(a)(10) of the Securities Act, which provides that the issuance of shares are exempt from the registration requirement of Section 5 of the Securities Act. In relevant part, Section 3(a)(10) of the Securities Act provides an exemption from the registration requirement for securities: (i) which are issued in exchange for a bona fide claim, (ii) where the terms of the issuance and exchange are found by a court to be fair to those receiving shares, (iii) notice of the hearing is provided to those to receive shares and they are afforded the opportunity to be heard, (iv) the issuer must advise the court prior to its hearing that it intends to rely on the exemption provided in Section 3(a)(10) of the Securities Act, and (v) there cannot be any impediments to the appearance of interested parties at the hearing. 27

On November 22, 2013, in a court proceeding styled IBC Funds, LLC, a Nevada limited Liability Company, Plaintiff vs. Mind Solutions, Inc., a Nevada corporation, Defendant, bearing Civil Action No. 2013 CA 008370 NC, in the Circuit Court in the Twelfth Judicial Circuit in and for Sarasota County, Florida, after due notice, the court entered an order approving the Settlement Agreement and Stipulation. In satisfaction of the debt, we agreed to issue shares of our common stock in one or more tranches to IBC Funds in the manner contemplated in the Settlement Agreement and Stipulation at a conversion price of $0.0045 per share. In accordance with the terms of the Settlement Agreement and Stipulation, the court was advised of our intention to rely upon the exception to registration set forth in Section 3(a)(l0) of the Securities Act to support the issuance of the shares. As set forth in the order, the court found that the terms and conditions of the exchange were fair to Mind Solutions and IBC Funds within the meaning of Section 3(a)(10) of the Securities Act, and that the exchange of the debt for our securities was not made under Title 11 of the United States Code. As permitted by the court order and the Settlement Agreement and Stipulation, we issued 77,298,674 post reverse split shares of our common stock to IBC Funds, LLC. The shares were issued free of any restrictions as permitted by Section 3(a)(10) of the Securities Act.



Hanover Holdings I, LLC Financing

In 2013, we executed various Securities Purchase Agreements with Hanover Holdings I, LLC, whereby we issued convertible promissory notes to Hanover Holdings I, LLC bearing interest on the unpaid balance at the rate of 10 percent, as follows:

· Convertible promissory note dated February 4, 2013, in the original principal

amount of $16,500. As a result of a conversion of the note, we issued 159,659

shares of our common stock to Hanover Holdings I, LLC. As of the date hereof,

the note is paid in full.

· Convertible promissory note dated March 7, 2013, in the original principal

amount of $16,500. As a result of a conversion of the note, we issued 304,379

shares of our common stock to Hanover Holdings I, LLC. As of the date hereof,

the note is paid in full.

· Convertible promissory note dated June 5, 2013, in the original principal

amount of $41,500. As a result of a conversion of the note, we issued

58,085,830 shares of our common stock to Hanover Holdings I, LLC. As of the

date hereof, the note is paid in full.

· Convertible promissory note dated August 7, 2013, in the original principal

amount of $26,500. As a result of a conversion of the note, we issued

17,084,482 shares of our common stock to Hanover Holdings I, LLC. As of the

date hereof, the note is paid in full.

· Convertible promissory note dated November 23, 2013, in the original principal

amount of $26,500. As of the date hereof, $26,500 remains unpaid on the note.

Each of the notes was convertible into shares of our common stock by dividing the Conversion Amount (as defined below) by the applicable Conversion Price then in effect on the date specified in the notice of conversion. The term "Conversion Amount" means, with respect to any conversion of a note, the sum of (1) the principal amount of the note to be converted in such conversion plus (2) at Hanover Holdings I, LLC's option, accrued and unpaid interest, if any, on such principal amount at the interest rates provided in the note to the Conversion Date; provided, however, that Mind Solutions shall have the right to pay any or all interest in cash plus (3) at our option, Default Interest, if any, on the amounts referred to in the immediately preceding clauses (1) and/or (2) plus (4) at Hanover Holdings I, LLC's option, any amounts owed to Hanover Holdings I, LLC under the note. Unless otherwise agreed in writing by both parties, at no time will Hanover Holdings I, LLC convert any amount of the note into common stock that would result in Hanover Holdings I, LLC owning more than 4.99% of the common stock outstanding of the registrant. 28 The conversion price (the "Conversion Price") shall be the Variable Conversion Price (subject to equitable adjustments for stock splits, stock dividends or rights offerings by Mind Solutions relating to our securities or the securities of any subsidiary of Mind Solutions, combinations, recapitalization, reclassifications, extraordinary distributions and similar events). The "Variable Conversion Price" shall mean 55% multiplied by the Market Price (as defined in the note). "Market Price" means the lowest Trading Price (as defined below) for our common stock during the 10 Trading Day period ending on the latest complete Trading Day prior to the Conversion Date. "Trading Price" means, for any security as of any date, the lowest trading price on the Over-the-Counter Bulletin Board, or applicable trading market (the "OTCBB") as reported by a reliable reporting service ("Reporting Service") mutually acceptable to Mind Solutions and Hanover Holdings I, LLC (i.e., Bloomberg). If the Trading Price cannot be calculated for such security on such date in the manner provided above, the Trading Price shall be the fair market value as mutually determined by Mind Solutions and the holders of a majority in interest of the notes being converted for which the calculation of the Trading Price is required in order to determine the Conversion Price of such notes. "Trading Day" shall mean any day on which our common stock is traded for any period on the OTCBB, or on the principal securities exchange or other securities market on which our common stock is then being traded. If our common stock is chilled for deposit at DTC and/or becomes chilled at any point while the note remains outstanding, an additional 8% discount will be attributed to the Conversion Price defined in the note. If Mind Solutions is unable to issue any shares under this provision due to the fact that there is an insufficient number of authorized and unissued shares available, Hanover Holdings I, LLC promises not to force Mind Solutions to issue these shares or trigger an Event of Default, provided that Mind Solutions takes immediate steps required to get the appropriate level of approval from stockholders or the board of directors, where applicable to raise the number of authorized shares to satisfy the Notice of Conversion. All shares of our common stock issued to Hanover Holdings I, LLC that were issued or will be issued will be free of any restrictions pursuant to Rule 144 under the Securities Act. In addition, all shares of our common stock which were issued or will be issued to Hanover Holdings I, LLC have been adjusted to take into account the one for 2,000 reverse split of the shares of our common stock which occurred on October 31, 2013. See "Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities - Recent Sales of Unregistered Securities."



The note further provides for anti-dilution adjustments in favor of Hanover Holdings I, LLC, in the event we offer additional shares of our common stock.

Copies of the Securities Purchase Agreements and convertible notes in favor of Hanover Holdings I, LLC are filed as exhibits to this report.

Asher Enterprises, Inc. Financing

In 2012, 2013, and 2014, we executed various Securities Purchase Agreements with Asher Enterprises, Inc., whereby we issued convertible promissory notes to Asher Enterprises, Inc. bearing interest on the unpaid balance at the rate of eight percent, as follows:



· Convertible promissory note dated December 26, 2012, in the original principal

amount of $32,500. As a result of a conversion of the note, we issued 44,402

shares of our common stock to Asher Enterprises, Inc. As of the date hereof,

the note is paid in full.

· Convertible promissory note dated March 1, 2013, in the original principal

amount of $32,500. As a result of a conversion of the note, we issued 583,992

shares of our common stock to Asher Enterprises, Inc. As of the date hereof,

the note is paid in full.

· Convertible promissory note dated April 18, 2013, in the original principal

amount of $32,500. As a result of a conversion of the note, we issued

10,836,925 shares of our common stock to Asher Enterprises, Inc. As of the date

hereof, the note is paid in full.

29



· Convertible promissory note dated November 7, 2013, in the original principal

amount of $42,500. As of the date hereof, $42,500 remains unpaid on the note.

· Convertible promissory note dated February 6, 2014, in the original principal

amount of $37,500. As of the date hereof, $37,500 remains unpaid on the note.

· Convertible promissory note dated May 8, 2014, in the original principal

amount of $42,500. As of the date hereof, $42,500 remains unpaid on the note.

Each of the notes was convertible into shares of our common stock by dividing the Conversion Amount (as defined below) by the applicable Conversion Price then in effect on the date specified in the notice of conversion. The term "Conversion Amount" means, with respect to any conversion of a note, the sum of (1) the principal amount of the note to be converted in such conversion plus (2) at Asher Enterprises, Inc.'s option, accrued and unpaid interest, if any, on such principal amount at the interest rates provided in the note to the Conversion Date; provided, however, that Mind Solutions shall have the right to pay any or all interest in cash plus (3) at our option, Default Interest, if any, on the amounts referred to in the immediately preceding clauses (1) and/or (2) plus (4) at Asher Enterprises, Inc.'s option, any amounts owed to Asher Enterprises, Inc. under the note. Unless otherwise agreed in writing by both parties, at no time will Asher Enterprises, Inc. convert any amount of the note into common stock that would result in Asher Enterprises, Inc. owning more than 4.99% of the common stock outstanding of the registrant. The conversion price (the "Conversion Price") shall be the Variable Conversion Price (subject to equitable adjustments for stock splits, stock dividends or rights offerings by Mind Solutions relating to our securities or the securities of any subsidiary of Mind Solutions, combinations, recapitalization, reclassifications, extraordinary distributions and similar events). The "Variable Conversion Price" shall mean 55% multiplied by the Market Price (as defined in the note) but in no event shall the Conversion Price be less than $0.00004. "Market Price" means the lowest Trading Price (as defined below) for our common stock during the 10 Trading Day period ending on the latest complete Trading Day prior to the Conversion Date. "Trading Price" means, for any security as of any date, the lowest trading price on the Over-the-Counter Bulletin Board, or applicable trading market (the "OTCBB") as reported by a reliable reporting service ("Reporting Service") mutually acceptable to Mind Solutions and Asher Enterprises, Inc. (i.e., Bloomberg). If the Trading Price cannot be calculated for such security on such date in the manner provided above, the Trading Price shall be the fair market value as mutually determined by Mind Solutions and the holders of a majority in interest of the notes being converted for which the calculation of the Trading Price is required in order to determine the Conversion Price of such notes. "Trading Day" shall mean any day on which our common stock is traded for any period on the OTCBB, or on the principal securities exchange or other securities market on which our common stock is then being traded. If our common stock is chilled for deposit at DTC and/or becomes chilled at any point while the note remains outstanding, an additional 8% discount will be attributed to the Conversion Price defined in the note. If Mind Solutions is unable to issue any shares under this provision due to the fact that there is an insufficient number of authorized and unissued shares available, Asher Enterprises, Inc. promises not to force Mind Solutions to issue these shares or trigger an Event of Default, provided that Mind Solutions takes immediate steps required to get the appropriate level of approval from stockholders or the board of directors, where applicable to raise the number of authorized shares to satisfy the Notice of Conversion. All shares of our common stock issued to Asher Enterprises, Inc. that were issued or will be issued will be free of any restrictions pursuant to Rule 144 under the Securities Act. In addition, all shares of our common stock which were issued or will be issued to Asher Enterprises, Inc. have been adjusted to take into account the one for 2,000 reverse split of the shares of our common stock which occurred on October 31, 2013. See "Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities - Recent Sales of Unregistered Securities."



The note further provides for anti-dilution adjustments in favor of Asher Enterprises, Inc., in the event we offer additional shares of our common stock.

Copies of the Securities Purchase Agreements and convertible notes in favor of Asher Enterprises, Inc. are filed as exhibits to this report.

JMJ Financial Financing

On May 15, 2013, we executed a convertible promissory note in favor of JMJ Financial in the amount up to $250,000 bearing interest on the unpaid balance at the rate of 12 percent. While the note was in the original principal amount of $250,000, it was only partially funded on May 15, 2013, over six months ago, in the amount of $30,000.00, plus pro-rated original issue discount and pro-rated interest in the amount of $7,333.33, on August 14, 2013, over six months ago, in the amount of $20,000.00, on December 9, 2013, in the amount of $25,000, and on April 16, 2014, in the amount of $40,000. After allowing for conversions, only $26,278 of the note was convertible on the date of this report. 30

The Conversion Price of the note is 60% of the lowest trade price in the 25 trading days previous to the conversion (In the case that conversion shares are not deliverable by DWAC an additional 10% discount will apply; and if the shares are ineligible for deposit into the DTC system and only eligible for )(clearing deposit an additional 5% discount shall apply; in the case of both an additional cumulative 15% discount shall apply). Unless otherwise agreed in writing by both parties, at no time will JMJ Financial convert any amount of the note into common stock that would result in JMJ Financial owning more than 4.99% of the common stock outstanding of the registrant. JMJ Financial has the right, at any time after 180 days from the effective date of the note, at its election, to convert all or part of the outstanding and unpaid principal sum and accrued interest (and any other fees) into shares of fully paid and non-assessable shares of common stock of the registrant as per this conversion formula: Number of shares receivable upon conversion equals the dollar conversion amount divided by the Conversion Price.



As of the date hereof, $26,278 of the JMJ Financial note remains unpaid.

All shares of our common stock issued to JMJ Financial that were issued or will be issued will be free of any restrictions pursuant to Rule 144 under the Securities Act. In addition, all shares of our common stock which were issued or will be issued to JMJ Financial have been adjusted to take into account the one for 2,000 reverse split of the shares of our common stock which occurred on October 31, 2013. See "Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities - Recent Sales of Unregistered Securities."



The note further provides for anti-dilution adjustments in favor of JMJ Financial, in the event we offer additional shares of our common stock.

A copy of the convertible promissory note in favor of JMJ Financial is filed as an exhibit to this report.

Cash from Financing Activities

Net cash provided by financing activities was $435,397 during fiscal 2013. This included $425,345 from proceeds from convertible notes, $48,526 in proceeds from convertible notes to a related party and $38,474 in payments on convertible notes to a related party. Net cash provided by financing activities was $159,135 during fiscal 2012. During the fiscal 2012 period we generated $10,000 from the sale of our common stock, $61,000 from officer contributions, $101,835 from notes to related parties, and paid $13,700 on notes to related parties. See "Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities - Recent Sales of Unregistered Securities." 31 Critical Accounting Policies

Our financial statements and accompanying notes are prepared in accordance with generally accepted accounting principles in the United States. Preparing financial statements requires management to make estimates and assumptions that impact the reported amounts of assets, liabilities, revenue, and expenses. These estimates and assumptions are affected by management's application of accounting policies. Critical accounting policies include revenue recognition and impairment of long-lived assets. We recognize revenue in accordance with Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements." Sales are recorded when products are shipped to customers. Provisions for discounts and rebates to customers, estimated returns and allowances and other adjustments are provided for in the same period the related sales are recorded. We evaluate our long-lived assets for financial impairment on a regular basis in accordance with Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" which evaluates the recoverability of long-lived assets not held for sale by measuring the carrying amount of the assets against the estimated discounted future cash flows associated with them. At the time such evaluations indicate that the future discounted cash flows of certain long-lived assets are not sufficient to recover the carrying value of such assets, the assets are adjusted to their fair values.


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