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

May 15, 2014

THE FOLLOWING DISCUSSION SHOULD BE READ TOGETHER WITH THE INFORMATION CONTAINED IN THE FINANCIAL STATEMENTS AND RELATED NOTES INCLUDED ELSEWHERE IN THIS REPORT ON FORM 10-Q.

The following discussion reflects our plan of operation. This discussion should be read in conjunction with the financial statements which are included in 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.

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. We have completed a prototype 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 Technology, 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 Technology, Inc. For the period, that Mind Technology, 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-dilatable 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 Technology, and one of our advisors, will receive a non-refundable, non-dilatable 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, 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 March 31, 2014, the Company had an accumulated deficit during development stage of $23,822,848 which included a net loss of $437,059 reported for the three months ended March 31, 2014. Also, during the three months ended March 31, 2014 the Company used net cash of $144,495 for operating activities. These factors raise substantial doubt about the Company's ability to continue as a going concern.

While the Company is attempting to commence operations and generate revenues, the Company's cash position may not be significant enough to support the Company's daily operations. Management intends to raise additional funds by way of a public or private offering. Management believes that the actions presently being taken to further implement its business plan and generate revenues provide the opportunity for the Company to continue as a going concern. While the Company believes in the viability of its strategy to generate revenues and in its ability to raise additional funds, there can be no assurances to that effect. The ability of the Company to continue as a going concern is dependent upon the Company's ability to further implement its business plan and generate revenues.

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Three Months Ended March 31, 2014 Compared to Three Months Ended March 31, 2013.

Revenues. During the three months ended March 31, 2014 and 2013 the Company recognized $31,111 and $0 of revenues. The $31,111 of service revenues recognized was from the Company receiving stock in a costumer as payment for consulting services. The customer is a publically traded company on the OTCQB. We are aggressively looking for ways to leverage our technology to develop revenue streams.

General and Administrative Expenses.

Consulting Fees. During the three months ended March 31, 2014, consulting expense decreased to $398,234 as compared to $847,881 from the prior three months ended March 31, 2013. The decrease was primarily the result of less stock being issued to consultants for services rendered to the Company.

Professional Fees. During the three months ended March 31, 2014, professional fees decreased to $28,827 as compared to $37,233 from the prior three months ended March 31, 2013. Professional fees decreased primarily from less services needed. Last year the Company had additional professional fees due to the merger with Mind Solutions, Inc.

Selling, General and Administrative Expense. During the three months ended March 31, 2014, selling, general and administrative expenses decreased to $23,472 as compared to $69,685 from the prior three months ended March 31, 2013. The decrease was due primarily to less travel, meals & entertainment, and marketing expenses.

Interest Expense. During the three months ended March 31, 2014, interest expense increased to $17,637 as compared to $9,785 from the prior three months ended March 31, 2013. The increase was due to additional interest expense accrued pertaining to the outstanding notes payable.

Derivative interest. During the three months ended March 31, 2014, derivative interest expense decreased to $0 as compared to $41,003 from the prior three months ended March 31, 2013. The decrease was due to less derivative liability calculated using the Black Scholes Model regarding the newly issued convertible debentures.

Forgiveness of debt. During the three months ended March 31, 2014, forgiveness of debt was $0 as compared to $111,610 for the three months ended March 31, 2013. The decrease was due to the dissolution of an affiliated entity to the Company's which was recorded as an accounts payable to related parties

Net Loss. Our net loss from operations decreased to $437,059 for the three months ended March 31, 2014 and $893,977 for the three months ended March 31, 2013.

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 March 31, 2014 and December 31, 2013:

March 31, December 31, $ % 2014 2013 Change Change Working Capital $ (6,687,732)$ (20,639,541)$ 13,951,809 67.6% Cash 57,933 47,428 10,505 22.1% Total current assets 255,329 336,978 (81,649) (24.2)% Total assets 278,953 339,396 (60,443) (17.8)% Accounts payable and accrued liabilities 401,452 398,359 3,093 0.8% Notes payable and accrued interest 677,863 670,918 6,945 1.0 % Total current liabilities 6,943,061 20,976,519 (14,033,458) (66.9) % Total liabilities 6,943,061 20,976,519 (14,033,458) (66.9)% 18



At March 31, 2014, our working capital deficit increased as compared to December 31, 2013, primarily as a result of a decrease in derivative liability of $14,062,385.

Operating activities

Net cash used for continuing operating activities during the three months ended March 31, 2014 was $144,495 as compared to $114,902 for the three months ended March 31, 2013. Non-cash items totaling approximately $292,564 contributing to the net cash used in continuing operating activities for the three months ended March 31, 2014 include:

$247,992 representing the value of shares issued to consultants and officers, $31,111 in service revenues from available-for-sale securities $461 of depreciation, $13,000 increase in accounts payable and accrued expenses

Net cash used for continuing operating activities for the three months ended March 31, 2013 was $114,902. Non-cash items totaling approximately $779,075 contributing to the net cash used in continuing operating activities for the three months ended March 31, 2013 include:

$794,300 representing the value of shares issued for consulting services, $41,003 of derivative expense from outstanding convertible notes payable $480,000 in available for sale securities compensation $111,610 in forgiveness of debt $24 of depreciation, $403,580 in accounts payable and accrued expenses $21,062 in accounts payable to related parties



Investing activities

Net cash used in investing activities was $0 for both three months ended March 31, 2014 and 2013.

Cash from Financing Activities

Net cash provided by financing activities was $155,000 for the three months ended March 31, 2014. This included $155,000 from proceeds from convertible notes.

Net cash provided by financing activities was $132,415 for the three months ended March 31, 2013. During the three months ended March 31, 2013, we generated $98,000 from the issuance of convertible notes payable, $48,100 in notes to related parties, and paid $13,685 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."

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:

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· 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.

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 ten (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 shareholders 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 were restricted in their transfer, pursuant to the Securities Act. In addition, all shares of our common stock which were 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.

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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.

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.



· 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, $42,500 remains unpaid.



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.

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 ten (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 shareholders or the board of directors, where applicable to raise the number of authorized shares to satisfy the Notice of Conversion.

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All shares of our common stock issued to Asher Enterprises, Inc. were restricted in their transfer, pursuant to the Securities Act. In addition, all shares of our common stock which were 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.

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.

JMJ Financial Financing

On May 15, 2013, we issued to JMJ Financial our convertible promissory in the amount up to $250,000. As a result of partial conversions of the note, we issued 75,022,674 shares of our common stock to JMJ Financial. 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, less than six months ago, in the amount of $25,000.00, and on April 16, 2014, less than six months ago, in the amount of $40,000. After allowing for conversions, only $21,396 of the note is convertible on the date of this report.

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, $21,396 of the JMJ Financial note remains unpaid.

All shares of our common stock issued to JMJ Financial were restricted in their transfer, pursuant to the Securities Act. In addition, all shares of our common stock which were 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.

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

Premier Venture Partners, LLC.

On March 11, 2013, Mind Solutions and Premier Venture Partners, LLC, a California Limited Partnership executed that certain Equity Purchase Agreement with respect to the resale of up to 200,000,000 shares of our common stock by Premier pursuant to a "put right." The Equity Purchase Agreement permits us to "put" up to $1,000,000 in shares of our common stock to Premier. Moreover, we also agreed to register the resale by Premier of an additional 12,765,957 shares of our common stock issued as Initial Commitment Shares in connection with the Equity Purchase Agreement. We will not receive any proceeds from the sale of the shares of our common stock offered by Premier. However, we will receive proceeds from the sale of securities pursuant to our exercise of the put right described in the Equity Purchase Agreement. We will bear all costs associated with the registration.

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We have assumed that we will issue not more than 187,234,043 shares pursuant to the exercise of our put right under the Equity Purchase Agreement, although the number of shares that we will actually issue pursuant to that put right may be more or less than 187,234,043, depending on the trading price of our common stock. We currently do not intend to exercise the put right in a manner which would result in our issuance of more than 187,234,043 shares, but if we were to exercise the put right in that manner, we would be required to file a subsequent registration statement with the SEC and that registration statement would have to be declared effective prior to the issuance of any additional shares.

Notwithstanding anything to the contrary in the Equity Purchase Agreement, in no event shall Premier be entitled to purchase that number of shares our common stock, which when added to the sum of the number of shares of our common stock beneficially owned (as such term is defined under Section 13(d) and Rule 13d-3 of the Exchange Act), by Premier, would exceed 4.99 percent of the number of shares of our common stock outstanding on the a Closing Date under the Equity Purchase Agreement, as determined in accordance with Rule 13d-1(j) of the Exchange Act.

Subject to the terms and conditions of the transaction documents, as described in the Equity Purchase Agreement, and from time to time during the Open Period, Mind Solutions may, in its sole discretion, deliver a Put Notice to Premier which states the number of shares of our common stock that Mind Solutions intends to sell to Premier on a Closing Date (the "Put"). The maximum number of shares of our common stock that Mind Solutions shall be entitled to Put to Premier per any applicable Put Notice (the "Put Amount") shall not exceed the lesser of:

· 200% of the average daily trading volume of our common stock on the five

Trading Days prior to the date the Put Notice is received by Premier; and

· 120% of any previous Put Amount during the Open Period (or for the first Put

Notice, 9,000,000 shares of our common stock).

Notwithstanding the preceding sentence, the Put Amount cannot exceed 4.99% of the outstanding shares of our common stock of Mind Solutions. During the Open Period, Mind Solutions shall not be entitled to submit a Put Notice until after the previous Closing has been completed.

Premier has indicated that it will resell those shares in the open market, resell our shares to other investors through negotiated transactions, or hold our shares in its portfolio. The obligations of Premier under the Equity Purchase Agreement are not transferable.

Notwithstanding anything to the contrary in Equity Purchase Agreement, Mind Solutions shall not be entitled to deliver a Put Notice and Premier shall not be obligated to purchase any shares of our common stock at a Closing unless each of the following conditions are satisfied:

· A Registration Statement shall have been declared effective and shall remain

effective and available for the resale of all the Registrable Securities (as defined in the Registration Rights Agreement) at all times until the Closing with respect to the subject Put Notice;



· At all times during the period beginning on the related Put Notice Date and

ending on and including the related Closing Date, the shares of our common stock (i) shall have been listed or quoted for trading on the Principal Market, (ii) shall not have been suspended from trading thereon, and (iii) Mind Solutions shall not have been notified of any pending or threatened proceeding or other action to suspend the trading of the shares of our common stock;



· Mind Solutions has complied with its obligations and is otherwise not in breach

of or in default under, Equity Purchase Agreement, the Registration Rights Agreement or any other agreement executed in connection herewith which has not been cured prior to delivery of Premier's Put Notice Date;



· No injunction shall have been issued and remain in force, or action commenced

by a governmental authority which has not been stayed or abandoned, prohibiting

the purchase or the issuance of the Securities; and

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· The issuance of the Securities will not violate any shareholder approval

requirements of the Principal Market.

If any of the events described above occurs during a Pricing Period, then Premier shall have no obligation to purchase the Put Amount of Common Stock set forth in the applicable Put Notice.

The Purchase Price for the Securities for each Put shall be the Put Amount multiplied by 75% of the lowest individual daily VWAP of the shares of our common stock during the Pricing Period less $650.

The Equity Purchase Agreement will terminate when any of the following events occur:

· When Premier has purchased an aggregate of $1,000,000 in the shares of the

common stock of Mind Solutions pursuant to this Agreement;

· On the date which is 36 months after March 11, 2014;

· If no Registration Statement has been declared effective by the SEC within ten

months after March 11, 2014;

· If at any time after March 11, 2014, the Registration Statement is no longer in

effect;

· The trading of the shares of our common stock is suspended by the SEC, the

Principal Market or FINRA for a period of two consecutive Trading Days during

the Open Period; or,

· The shares of our common stock cease to be registered under the Exchange Act or

listed or traded on the Principal Market or the Registration Statement is no longer effective (except as permitted hereunder).. Immediately upon the occurrence of one of the above-described events, Mind Solutions shall send written notice of such event to Premier.



Any and all shares, or penalties, if any, due under the Equity Purchase Agreement shall be immediately payable and due upon termination of the agreement.

As we draw down on the Equity Purchase Agreement, shares of our common stock will be sold into the market by Premier. The sale of these additional shares could cause our stock price to decline. In turn, if the stock price declines and we issue more puts, more shares will come into the market, which could cause a further drop in the stock price. You should be aware that there is an inverse relationship between the market price of our common stock and the number of shares to be issued under the Equity Purchase Agreement. If our stock price declines, we will be required to issue a greater number of shares under the Equity Purchase Agreement. We have no obligation to utilize the full amount available under the Equity Purchase Agreement.

As discussed above, in addition to the shares to be issued pursuant to the Equity Purchase Agreement, we have issued to Premier $39,574 worth of our common stock, or 12,765,957 shares of our common stock as Initial Commitment Shares in connection with the Equity Purchase Agreement, which amount of shares represents 3.0% of $1,000,000 divided by the sum equal to the average of the daily VWAP of our common stock on the three most recent trading days immediately preceding March 11, 2014, multiplied by 75% and with such shares being duly authorized, validly issued, fully paid and nonassessable. "VWAP" means the volume weighted average price (the aggregate sales price of all trades of our common stock during a trading day divided by the total number of shares of our common stock traded during such trading day) of the our common stock during a trading day.

Ceasar Capital Group LLC



On April 15, 2014, the Company entered into a securities purchase agreement and convertible promissory note in the amount of $50,000 with Caesar Capital Group LLC with 8% interest per annum, due April 15, 2015. The note holder has the right to convert the note into common shares of the Company after 6 months from the date of the executed note at a discount to market of 45% based on the lowest trading price ten days prior to conversion.

24 AARG Corp.



On April 30, 2014, the Company entered into a securities purchase agreement and convertible promissory note in the amount of $50,000 with ARRG Corp. with 8% interest per annum, due April 30, 2015. The note holder has the right to convert the note into common shares of the Company after 6 months from the date of the executed note at a discount to market of 45% based on the lowest trading price ten days prior to conversion.

KBM Worldwide, Inc.



On May 8, 2014, the Company entered into a securities purchase agreement and convertible promissory note in the amount of $42,500 with KBM Worldwide, Inc. with 8% interest per annum, due February 12, 2015. The note holder has the right to convert the note into common shares of the Company after 6 months from the date of the executed note at a discount to market of 49% based on the average of the three lowest trading prices thirty days prior to conversion.

Cicero Consulting Group, LLC



On May 12, 2014, the Company entered into a Consulting Agreement with Cicero Consulting Group, LLC ("Cicero") whereby Cicero will provide management consulting and business advisory services over a one year term. The Company will compensate Cicero with a $200,000 convertible promissory note which will be considered earned in full as of the date of executed Consulting Agreement. The convertible note issued pursuant to the Consulting Agreement will have rights to convert debt at a 10% discount to market based on the lowest trading price during the ten trading days prior to the conversion date.

Seasonality



We do not anticipate that our business will be affected by seasonal factors. The only expected impact would be increased retail sales of our software applications during the Christmas season.

Impact of Inflation

General inflation in the economy has driven the operating expenses of many businesses higher. We will continuously seek methods of reducing costs and streamlining operations while maximizing efficiency through improved internal operating procedures and controls. While we are subject to inflation as described above, our management believes that inflation currently does not have a material effect on our operating results. However, inflation may become a factor in the future.

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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