Quest Resource Holding Corp - FORM 10-Q

Attached files

file	filename
EXCEL - IDEA: XBRL DOCUMENT - Quest Resource Holding Corp	Financial_Report.xls
EX-2.4 - AGREEMENT AND PLAN OF MERGER DATED MAY 21, 2012. - Quest Resource Holding Corp	youchangeexh24.htm
EX-31.1 - 8650 SECTION 302 CERTIFICATION OF CHIEF EXECUTIVE OFFICER - Quest Resource Holding Corp	youchangeexh311.htm
EX-32.1 - CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 - Quest Resource Holding Corp	youchangeexh321.htm
EX-31.2 - 8650 SECTION 302 CERTIFICATION OF CHIEF FINANCIAL OFFICER - Quest Resource Holding Corp	youchangeexh312.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)
þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended March 31, 2012
	Or
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from to

Commission file number 333-152959

YouChange Holdings Corp

(Exact name of registrant as defined in its charter)

Nevada	51-0665952
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

2209 W. 1st Street, Suite A113	85281
Tempe, Arizona	(Zip Code)
(Address of principal executive offices)

866-712-9273

(Registrant’s telephone number, including area code)

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 þ No o

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

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

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

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

The number of Common Shares of the Registrant outstanding as of April 30, 2012 was 41,164,269.

DOCUMENTS INCORPORATED BY REFERENCE - None

INDEX TO FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2012




PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements.
	Condensed Consolidated Balance Sheets as of March 31, 2012 (unaudited) and June 30, 2011	2
	Unaudited Condensed Consolidated Statements of Operations for the Three and Nine Months Ended March 31, 2012 and 2011 and for the Period From August 22, 2008 (Inception) to March 31, 2012	3
	Unaudited Condensed Consolidated Statement of Changes in Shareholders' Equity (Deficit) for the Period from August 22, 2008 (Inception) to March 31, 2012	4
	Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months Ended March 31, 2012 and 2011 and for the Period From August 22, 2008 (Inception) to March 31, 2012	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	27
Item 4.	Controls and Procedures	27

PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	28
Item 1A.	Risk Factors	28
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	28
Item 3.	Defaults Upon Senior Securities	28
Item 4.	Mine Safety Disclosures	28
Item 5.	Other Information	28
Item 6.	Exhibits	29

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

YOUCHANGE HOLDINGS CORP

(A DEVELOPMENT STAGE ENTERPRISE)

CONDENSED CONSOLIDATED BALANCE SHEETS

	March 31,			June 30,
	2012			2011
ASSETS	(Unaudited)
Current assets:
Cash and cash equivalents	$	14,976		$	66,264
Inventory		7,490			3,522
Prepaid expenses and other current assets		135,934			14,541

Total current assets		158,400			84,327

Advances to Feature Marketing		95,875			96,875
Property and equipment - net		3,165			4,065
Capitalized software costs		174,650			128,650
Other assets		7,370			6,500

Total assets	$	439,460		$	320,417

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and other accrued expenses	$	112,338		$	63,212
Accrued interest payable		4,748			8,945
Notes and advances payable - related party		70,500			37,500
Notes payable - short-term		51,000			-
Convertible notes payable - short-term, net of discount of $26,638 and nilas of March 31, 2012 and June 30, 2011, respectively		33,362			75,000

Total current liabilities		271,948			184,657

Convertible notes payable - long-term		78,000			-
Convertible notes payable - related party, net of discount of nil and $20,729 as of March 31, 2012 and June 30, 2011, respectively		-			4,271

Total liabilities		349,948			188,928

Shareholders' equity:
Common stock, $.001 par value; 60,000,000 shares authorized; 40,089,269 and 38,426,227 shares issued as of March 31, 2012 and June 30, 2011, respectively; 40,014,269 and 38,351,227 shares outstanding as of March 31, 2012 and June 30, 2011, respectively		40,089			38,426
Additional paid-in capital		2,454,568			1,941,748
Treasury stock, at cost (75,000 common shares as of March 31, 2012 and June 30, 2011, respectively)		(26,250	)		(26,250	)
Deficit accumulated during the development stage		(2,378,895	)		(1,822,435	)

Total shareholders' equity		89,512			131,489

Total liabilities and shareholders' equity	$	439,460		$	320,417

Note: Balance check		-			-
Working capital		(113,548	)		(100,330	)

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

YOUCHANGE HOLDINGS CORP

(A DEVELOPMENT STAGE ENTERPRISE)

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

													Period from
													August 22,
													2008
	Three Months Ended						Nine Months Ended						(Inception) to
	March 31,						March 31,						March 31,
	2012			2011			2012			2011			2012

Net revenues	$	33,568		$	1,320		$	61,768		$	1,320		$	70,928
Cost of products sold		3,380			1,014			11,223			1,014			16,609

Gross profit		30,188			306			50,545			306			54,319

Operating expenses:
Professional fees		149,227			75,035			319,430			311,707			1,083,038
Salaries and wages		46,302			22,352			109,830			71,112			208,568
Licensing fees		-			-			-			79,130			89,130
General and administrative		32,793			15,408			71,983			45,328			182,512
Marketing		28,133			15,122			62,030			33,135			121,556
Expense of reverse merger		-			-			-			-			620,040

Total operating expenses		256,455			127,917			563,273			540,412			2,304,844

Loss from operations		(226,267	)		(127,611	)		(512,728	)		(540,106	)		(2,250,525	)

Other income (expense):
Interest income		3,300			4,858			9,900			13,486			37,473
Interest expense		(22,772	)		(29,097	)		(53,632	)		(39,407	)		(165,843	)

Total other income (expense)		(19,472	)		(24,239	)		(43,732	)		(25,921	)		(128,370	)

Net loss	$	(245,739	)	$	(151,850	)	$	(556,460	)	$	(566,027	)	$	(2,378,895	)

Basic and diluted net loss per common share	$	(0.01	)	$	-		$	(0.01	)	$	(0.02	)

Weighted average common shares outstanding - basic and diluted		39,205,804			36,725,799			38,964,217			36,195,091

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

YOUCHANGE HOLDINGS CORP

(A DEVELOPMENT STAGE ENTERPRISE)

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY (DEFICIT)

										Deficit
										Accumulated
					Additional					During the			Total
	Common Stock				Paid-in		Treasury			Development			Shareholders'
	Shares		Amount		Capital		Stock			Stage			Equity

Balance at inception, August 22, 2008		-	$	-	$	-	$	-		$	-		$	-

Issuance of common stock upon formation		1,000,000		1,000		-		-			-			1,000
Net loss		-		-		-		-			(67,103	)		(67,103	)

Balance, June 30, 2009		1,000,000		1,000		-		-			(67,103	)		(66,103	)
Common stock issued for cash		4,000,000		4,000		-		-			-			4,000
Common stock issued for intangible asset		1,500,000		1,500		1,000		-			-			2,500
Conversion of convertible notes payable and accrued interest		683,197		683		512,998		-			-			513,681
Effect of reverse merger		26,766,391		26,767		59,546		-			-			86,313
Common stock issued in connection with reverse merger		1,456,000		1,456		493,584		-			-			495,040
Net loss		-		-		-		-			(1,000,057	)		(1,000,057	)

Balance, June 30, 2010		35,405,588		35,406		1,067,128		-			(1,067,160	)		35,374
Common stock issued for cash		1,000,000		1,000		249,000		-			-			250,000
Common stock issued for services		1,404,753		1,404		407,922		-			-			409,326

Conversion of convertible notes payable and accrued interest		615,886		616		161,381		-			-			161,997
Beneficial conversion feature		-		-		56,317		-			-			56,317
Acquisition of treasury stock		-		-		-		(26,250	)		-			(26,250	)
Net loss		-		-		-		-			(755,275	)		(755,275	)

Balance, June 30, 2011		38,426,227		38,426		1,941,748		(26,250	)		(1,822,435	)		131,489
Common stock issued for services		1,226,705		1,227		350,554		-			-			351,781
Beneficial conversion feature		-		-		53,618		-			-			53,618

Conversion of convertible notes payable and accrued interest		436,337		436		108,648		-			-			109,084
Net loss		-		-		-		-			(556,460	)		(556,460	)

Balance, March 31, 2012		40,089,269	$	40,089	$	2,454,568	$	(26,250	)	$	(2,378,895	)	$	89,512

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

YOUCHANGE HOLDINGS CORP

(A DEVELOPMENT STAGE ENTERPRISE)

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

							Period from
							August 22,
							2008
							(Inception) to
	Nine Months Ended March 31,						March 31,
	2012			2011			2012
Cash flows from operating activities:
Net loss	$	(556,460	)	$	(566,027	)	$	(2,378,895	)

Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of debt discounts and deferred financing costs		47,709			30,482			133,297
Depreciation expense		900			900			2,100
Common stock issued for services		351,781			298,694			761,107
Common stock issued for interest		-			-			13,681
Cash based expense for reverse merger		-			-			125,000
Common stock issued for reverse merger		-			-			495,040
Changes in operating assets and liabilities:
Inventory		(3,968	)		-			(7,490	)
Prepaid expenses and other assets		(122,263	)		(14,505	)		(153,929	)
Accounts payable and other accrued expenses		49,126			17,222			111,348
Accrued interest payable		4,887			-			17,829

Net cash used in operating activities		(228,288	)		(233,234	)		(880,912	)

Cash flows from investing activities:
Software development costs		(46,000	)		(65,400	)		(174,650	)
Advances to Feature Marketing		-			(40,000	)		(110,000	)
Repayments from Feature Marketing		1,000			-			1,000
Purchase of property and equipment		-			-			(5,265	)
Cash paid for reverse merger		-			-			(87,500	)

Net cash used in investing activities		(45,000	)		(105,400	)		(376,415	)

Cash flows from financing activities:
Proceeds from convertible notes payable		138,000			233,000			396,000
Proceeds from notes payable		76,000			-			576,000
Borrowings from related parties		40,500			-			129,492
Proceeds from sale of common stock		-			250,000			255,000
Repayment of notes payable		(25,000	)		-			(25,000	)
Repayment of related party payables		(7,500	)		25,000			(9,189	)
Fees paid for financing costs		-			-			(50,000	)

Net cash provided by financing activities		222,000			508,000			1,272,303

Increase (decrease) in cash and cash equivalents		(51,288	)		169,366			14,976
Cash and cash equivalents, beginning of period		66,264			44,309			-

Cash and cash equivalents, end of period	$	14,976		$	213,675		$	14,976

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

YOUCHANGE HOLDINGS CORP

(A DEVELOPMENT STAGE ENTERPRISE)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Organization of Business and Basis of Presentation

On March 30, 2010, Youchange, Inc. and BlueStar Financial Group, Inc. (“BSFG”), a Nevada corporation and publicly traded shell company at such time, completed a merger transaction (referred to as the “reverse merger” throughout this filing), which is described in further detail below, and resulted in Youchange, Inc. shareholders obtaining control of BSFG. The surviving publicly traded entity following the reverse merger transaction changed its name to “YouChange Holdings Corp” during May 2010. The terms “youchange”, “we”, “us”, “our” or the “Company” refer to YouChange Holdings Corp and its consolidated subsidiary, Youchange, Inc., following the date of the merger transaction, and to Youchange, Inc. prior to the date of the reverse merger transaction. All significant intercompany balances and transactions are eliminated in consolidation. Our fiscal year end is June 30.

For accounting purposes, Youchange, Inc. is the acquirer in the reverse merger transaction, and consequently the assets and liabilities and the historical operations reflected in these condensed consolidated financial statements are those of Youchange, Inc. and are recorded at the historical cost basis of Youchange, Inc. All shares and per share data prior to the acquisition have been restated to reflect the stock issuance as a recapitalization of Youchange.

We were organized as a software and services venture in the Green Technology (“GreenTech”) sector to develop a leading social movement to focus on the elimination of electronic waste (“eWaste”) in the United States, which includes any used, obsolete end-of-life consumer electronics and computer devices. The GreenTech sector is a recognized business sector also known as Environmental Technology or “Envirotech”. Companies in this sector apply environmental science in an effort to help conserve the environment and choose business approaches that are environmentally and economically sustainable.

The Company’s software includes a destination website, www.youchange.com, where users can join and refer friends to learn about the problem of electronic waste through content, blogs and forums. Site members are encouraged to take action through the turn-over and sale of their end-of-life, used or obsolete electronics, which reduces the risk of adding to the waste stream. Members access the youchange calculator and offer database through www.youchange.com and by answering a series of questions, may receive a real-time cash and/or reward points offer. Initially, reward points collected by members may be used to exchange for other items in the “Shop Green” area of the youchange.com website, which is an online marketplace where points can be exchanged for product. In addition to the youchange.com website, users can join and learn about local events and electronic collection drives through youchange Facebook, Twitter and Linked-In social media pages. The local electronic collection events play an important part of the youchange strategy and are done in partnership with local sports teams, businesses, individuals, schools and charity groups.

Youchange is developing an electronic Tracking System (“eTS”) to provide asset receiving, refurbishment and disposal recycling tracking through the complete handling cycle of all electronics collected. In addition, the website and the eTS are expected to allow business to business activity. Businesses can dispose of excess electronics in bulk. The eTS is expected to extend past the website and electronic pricing and rewards calculator previously launched through youchange.com and is intended to be used by local retailers, electronic refurbishment centers and recyclers that may partner with youchange. Youchange intends on generating revenue through the refurbishment, resale (“reCommerce”) and recycling of the electronics collected, facilitating the sustainability objectives by extending the lifecycle of these items and keeping such items from the electronic waste stream. Once developed and launched, the youchange eTS is expected to become part of a system that will allow youchange to establish a reCommerce business without an investment in bricks and mortar by partnering with, and charging a management fee to, local retailers, electronic refurbishment centers and recyclers.

The Company has realized minimal revenues from its planned business purpose to the date of this filing and currently has limited operations. Accordingly, the Company is considered to be in the development stage. The Company has been in the development stage since its formation. The Company has devoted its efforts to business planning and development and has allocated a substantial portion of its time and investment in bringing its product to the market and raising capital.

YOUCHANGE HOLDINGS CORP

(A DEVELOPMENT STAGE ENTERPRISE)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

These Unaudited Condensed Consolidated Financial Statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). All significant intercompany transactions and accounts have been eliminated. Certain information related to our organization, significant accounting policies and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) has been condensed or omitted. The accounting policies followed in the preparation of these Unaudited Condensed Consolidated Financial Statements are consistent with those followed in our annual consolidated financial statements for the year ended June 30, 2011, as filed on Form 10-K. In the opinion of management, these Unaudited Condensed Consolidated Financial Statements contain all material adjustments, consisting only of normal recurring adjustments, necessary to fairly state our financial position, results of operations and cash flows for the periods presented and the presentations and disclosures herein are adequate when read in conjunction with our Form 10-K for the year ended June 30, 2011. Certain reclassifications have been made to the prior period financial statement amounts to conform to the current presentation.

Interim results are subject of significant variations and the results of operations for the nine months ended March 31, 2012 are not necessarily indicative of the results to be expected for the full year.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include carrying amounts of long-lived assets and advances to Feature Marketing, deferred financing costs and deferred taxes.

Basic earnings (loss) per share includes no dilution and is computed by dividing net income (loss) available to common shareholders by the weighted average common shares outstanding for the period. Diluted earnings (loss) per share is calculated based on the weighted average shares of Common Stock outstanding during the period plus the dilutive effect of outstanding Common Stock purchase warrants and stock options using the treasury stock method and the dilutive effects of convertible securities using the if-converted method. Basic and diluted loss per share were the same for all periods reported due to the net losses attributable to common shareholders for all periods reported. As of March 31, 2012, we had convertible notes payable outstanding that, with accrued interest, were convertible into approximately 549,650 common shares. As of March 31, 2012, the conversion ratio for these notes was lower than our closing stock price. These convertible notes payable are described in more detail in Note 7.

Reverse Merger with BSFG

On March 15, 2010, BSFG and its wholly owned subsidiary BlueStar Acquisition Corporation (“Merger Sub”) entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Youchange, Inc. The Merger Agreement and the acquisition agreed to therein was closed on March 30, 2010. At the closing of the reverse merger, Youchange, Inc. merged into Merger Sub, with Youchange, Inc. as the surviving entity. At the time the Merger Agreement was executed, Jeffrey Rassás and Richard Papworth, currently our Chief Executive Officer and Chief Financial Officer, respectively, and directors of the Company, were directors and officers of both BSFG and Youchange, Inc. BSFG acquired all 7,183,197 of the issued and outstanding common shares of Youchange Inc. from Youchange Inc. shareholders in exchange for 21,549,591 shares of BSFG Common Stock. Youchange, Inc. shareholders received three shares of BSFG Common Stock for each share of Youchange, Inc. These figures included 2,049,591 shares of BSFG Common Stock issued to the former note holders of Youchange, Inc. whereby the $500,000 principal amount of secured convertible promissory notes plus accrued interest of $13,681 was converted into 683,197 shares of Youchange, Inc. common stock immediately prior to the reverse merger. As a result of the reverse merger there were a total of 35,405,588 shares of our common stock issued and outstanding immediately following the transaction, of which the former Youchange, Inc. shareholders held 61%. Additionally, following the completion of the reverse merger, we issued 1,456,000 shares of our common stock to the sellers of BSFG.

Going Concern

The Company's financial statements are prepared using accounting principles generally accepted in the United States applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not yet established an ongoing source of revenue sufficient to cover its operating costs and allow it to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations.

YOUCHANGE HOLDINGS CORP

(A DEVELOPMENT STAGE ENTERPRISE)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management's plans to obtain such resources for the Company include (i) obtaining capital from management and significant stockholders sufficient to meet its minimal operating expenses; (ii) obtaining funding from outside sources through the sale of its debt and/or equity securities; and (iii) as a last resort, seeking out and completing a merger with another company. However, management cannot provide any assurances that the Company will be successful in accomplishing any of its plans.

The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually attaining profitable operations. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

Recently Issued Accounting Pronouncements

During September 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2011-08, “Testing Goodwill for Impairment” (“ASU 2011-08”). ASU 2011-08 is intended to simplify the testing of goodwill for impairment by permitting an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test, which is currently required for all companies that report goodwill. The amendments are effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011, although early adoption is permitted. The adoption of this guidance has not had a material impact on our financial position and results of operations.

During June 2011, the FASB issued ASU No. 2011-05, “Presentation of Comprehensive Income” (“ASU 2011-05”). ASU 2011-05 provides for the option to present the total of comprehensive income, the components of net income and the components of other comprehensive income (“OCI”) either in a single continuous statement of comprehensive income or in two separate but consecutive statements. Regardless of which format is chosen, the amendments establish a requirement for entities to present on the face of the financial statements reclassification adjustments for items that are reclassified from OCI to net income in the statement(s) where the components of net income and the components of OCI are presented. The amendments in ASU 2011-05 are effective, on a retrospective basis, for public entities for interim and annual periods beginning after December 15, 2011; however, during December 2011 the FASB issued ASU No. 2011-12, which defers those changes in ASU 2011-05 that relate to the presentation of reclassification adjustments. The adoption of this guidance has not had a material impact on our financial position and results of operations.

During May 2011, the FASB issued ASU No. 2011-04, “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs” (“ASC 2011-04”). The amendments in ASC 2011-04 were issued in order to align the fair value measurement and disclosure requirements in GAAP and International Financial Reporting Standards. Consequently, the amendments change the wording used to describe many of the requirements in GAAP for measuring fair value and for disclosing information about fair value measurements. However, many of the amendments in ASC 2011-04 will not result in a change in the application of the requirements in ASC 820, Fair Value Measurement. The amendments in ASU 2011-04 are effective, on a prospective basis, for public entities for interim and annual periods beginning after December 15, 2011, and for nonpublic entities for annual periods beginning after December 15, 2011. The adoption of this guidance has not had a material impact on our financial position and results of operations.

2. Feature Marketing Acquisition

Effective December 31, 2010, we entered into a Share Exchange Agreement (the "Exchange Agreement") with Feature Marketing, Inc. (“Feature Marketing”) an Arizona corporation. The Exchange Agreement provided for the acquisition of all issued and outstanding shares of Feature Marketing in exchange for 3,030,303 shares of our common stock and $200,000 of cash. Feature Marketing owns and operates a computer and consumer electronics refurbishment center based in Scottsdale, Arizona, which we intended to integrate with our planned operations.

YOUCHANGE HOLDINGS CORP

(A DEVELOPMENT STAGE ENTERPRISE)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Subsequent to the completion of the acquisition, on February 25, 2011, the Company and Feature Marketing entered into a Rescission Agreement that provided for the rescission of the acquisition as of December 31, 2010, so that from an economic standpoint, the acquisition never occurred and all applicable shares were never exchanged. Accordingly, the financial position and results of Feature Marketing have not been, and are never expected to be, consolidated with those of the Company. The Company believes the rescission of this transaction was in its best interests based on the discovery of a mutual mistake and impossibility to perform under the agreement, which was not contemplated by either party.

The Company executed a non-exclusive fulfillment agreement with Feature Marketing on March 29, 2011. Under the terms of the fulfillment agreement, Feature Marketing will provide receiving, refurbishment, shipping and storage services and repay the amounts previously advanced towards the acquisition discussed above. As of March 31, 2012 and June 30, 2011 advances outstanding totaled approximately $96,000 and $97,000, respectively, which are secured by the assets of Feature Marketing and are supported by a promissory note from Feature Marketing. These advances bear interest at a rate of 24.0% per annum. We have recognized interest income totaling approximately $37,000 relative to these advances for the period from August 22, 2008 (inception) to March 31, 2012. During June 2011, Feature Marketing returned 75,000 common shares it had previously owned, in exchange for a reduction of amounts due us of approximately $26,000, which was the fair value of the shares at the time they were returned. These shares have been accounted for as treasury stock. As of March 31, 2012 and June 30, 2011, management believes all outstanding advances to Feature Marketing, and interest on such advances, will be fully realized and accordingly, has not provided for any allowance for these balances as of such dates.

3. Common Stock

Our authorized common stock consists of 60,000,000 shares of common stock with a par value of $.001. The following summarizes our common stock activity for the period from August 22, 2008 (inception) to the completion of the reverse merger on March 30, 2010:

·	Upon formation on August 22, 2008, Youchange, Inc. issued 1,000,000 of its common shares to its founder and Chief Executive Officer, Jeffrey Rassás, in exchange for $1,000.

·	During fiscal 2010, Youchange, Inc. issued an additional 4,000,000 of its common shares to unrelated entities in exchange for $4,000 (except for 40,000 of these shares, which were issued to an officer / director).

·	During fiscal 2010, Youchange, Inc. issued 1,500,000 shares of its common stock to Mr. Rassás in exchange for certain intangible assets related to the youchange.com domain. This transaction was valued at $2,500. Although it may require renewal from time-to-time, this intangible asset has an indefinite life and accordingly is not being amortized.

·	During fiscal 2010, Youchange, Inc. issued 683,197 shares of its common stock upon conversion of $500,000 in convertible notes plus $13,681 of unpaid accrued interest.

As described in more detail above, on March 30, 2010, BSFG acquired all 7,183,197 of the issued and outstanding common shares of Youchange, Inc. from Youchange, Inc. shareholders in exchange for 21,549,591 shares of BSFG Common Stock. Youchange, Inc. shareholders received three shares of BSFG Common Stock for each share of Youchange, Inc.

In conjunction with the reverse merger, the Company issued 1,456,000 shares of its common stock as partial compensation for the purchase of the BSFG. The shares were valued at $0.34 per share, which was the closing stock price on March 30, 2010. The total fair value of these common shares of $495,040 was expensed as an acquisition cost.

As a result of the reverse merger there were a total of 35,405,588 shares of our common stock issued and outstanding immediately following the transaction, of which the former Youchange, Inc. shareholders held 61%. For accounting purposes, Youchange, Inc. is the acquirer in the reverse merger transaction.

YOUCHANGE HOLDINGS CORP

(A DEVELOPMENT STAGE ENTERPRISE)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

During fiscal 2011, we issued common shares for the following transactions:

·	During July 2010, we entered into a one-year consulting agreement with Naser Ahmad through NOMA Enterprises, LLC to provide services as Chief Technology Officer of Youchange, Inc., and issued 333,333 shares of our common stock as compensation for such services. The term of this agreement is from January 1, 2010 to December 31, 2010. As of June 30, 2010, we had accrued $60,000 of compensation expense, which was paid by way of the issuance of one half of these shares. We recognized the remaining $33,333 of expense during July 2010 for the 333,333 total shares issued, which was recorded as professional fees. The consulting agreement has not been renewed as of the date of this filing; however, Mr. Ahmad has continued to provide services to the Company on a month-to-month basis for $10,000 per month, and we issued an additional 142,528 common shares during June 2011 as compensation for the six months ended June 30, 2011.

·	During July 2010, we entered into a licensing agreement with a strategic partner for access to a database for pricing of used consumer electronic goods. We issued 193,322 shares of common stock upon the execution of this agreement and were required to pay $35,000 over the first year of the agreement, and under the original terms, were required to pay $63,000 over the second year of the agreement and issue additional common shares valued at $30,000 as payment for the second year of the agreement. After the one year anniversary of this agreement, we have agreed to terminate the provisions and terms of the second year and negotiate a new agreement that is more conducive to the current economic status and needs of the Company. Until such time as the new terms have been reached, the strategic partner has agreed to continue providing access to the pricing database. We expensed $54,130 as general and administrative expense for the issuance of the 193,322 shares of common stock during July 2010.

·	During December 2010, we entered into a one year consulting agreement with Mary Juetten, through Protect your Intellectual Property (PIP), LLC to provide services as Chief Operating Officer of Youchange, Inc. The term of this agreement is from October 1, 2010 to September 30, 2011. During fiscal 2011, we issued a total of 625,625 shares of our common stock as compensation for services and recognized $160,250 of expense for the issuance of these shares, which was recorded as professional fees. Additionally, we recognized expense of approximately $18,000 for cash-based consideration paid to Ms. Juetten’s for her services as Chief Operating Officer of Youchange, Inc, which is also recorded as professional fees. During the first quarter of fiscal 2012, Ms. Juetten resigned from her position with the Company.

·	During March 2011, we raised $250,000 through the sale of 1,000,000 common shares in a private placement transaction with an accredited investor at a sales price of $0.25 per common share.

·	During June 2011, we issued 28,506 common shares to Richard Papworth, our Chief Financial Officer for services rendered. We expensed $12,000 as professional fees for the issuance of these shares.

·	During fiscal 2011, we issued 615,886 common shares upon conversion of principal and interest previously outstanding on convertible notes payable. These transactions are discussed in more detail in Note 7.

·	During fiscal 2011, we also issued 81,439 common shares in exchange for other professional services. We expensed $29,022 as general and administrative expense for the issuance of these shares.

YOUCHANGE HOLDINGS CORP

(A DEVELOPMENT STAGE ENTERPRISE)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

During the first nine months of fiscal 2012, we issued common shares for the following transactions:

·	During the first nine months of fiscal 2012, we issued 248,522 common shares to an entity controlled by Naser Ahmad, the Chief Technology Officer of Youchange, Inc. We expensed $90,000 as professional fees for the issuance of these shares.

·	During the first nine months of fiscal 2012, we issued 49,705 common shares to Richard Papworth, our Chief Financial Officer for services rendered. We expensed $18,000 as professional fees for the issuance of these shares.

·	During July 2011, we issued 436,337 common shares upon conversion of principal and interest previously outstanding on convertible notes payable, of which 103,296 was with a related party. These transactions are discussed in more detail in Note 7.

·	During the first nine months of fiscal 2012, we issued 219,282 common shares to and entity controlled by Derrick Mains, our Executive Vice President of Business Development and Operations, for services rendered. We expensed $75,000 as professional fees for the issuance of these shares.

·	During the first nine months of fiscal 2012, we issued 61,521 common shares to Dan Fogel, our Vice President of Strategic Initiatives, for services rendered. We expensed $20,000 as professional fees for the issuance of these shares.

·	During the first nine months of fiscal 2012, we also issued 647,675 common shares in exchange for other professional services. We expensed approximately $28,500 as professional fees and approximately $3,000 as marketing expense and recorded $117,500 as prepaid expense for the issuance of these shares.

4. Short Term Note Payable to BSFG

On January 1, 2010, Youchange, Inc. entered into a $75,000 note payable agreement with the previous shareholders of BSFG, which, together with a $50,000 cash payment and the issuance of 1,456,000 common shares following the reverse merger, was used to complete the reverse merger with BSFG. The payable was due in two equal installments, which were due on April 1, 2010 and June 30, 2010. In the event we failed to pay the first installment in full, under the terms of the agreement, the entire balance would accrue interest at 9.0% per annum retroactive from January 1, 2010. We may pay this interest penalty in cash or stock at a price of $0.05 per share, at our option. The first payment of $37,500 was paid when due on April 1, 2010; however, we have not made the second payment as of the date of this filing.

5. Related Party Advances

During the nine months ended March 31, 2012 we received $40,500 in short-term advances from Jeffrey Rassás, our Chief Executive Officer and Chairman of our Board of Directors, of which, $7,500 was repaid during such time.

6. Notes Payable and Advances

During November 2011, we issued a $25,000 note payable with an unrelated, accredited third party in exchange for cash. The note matures 60 days from the date of issuance and bears interest at a rate of 10.0% per annum with an increase to 12.0% per annum following the maturity date. We paid $5,000 against this note prior to March 31, 2012, and we repaid the remaining $20,000 on the note as of the date of this filing.

During November 2011, we also received $10,000 from an unrelated party under a short-term advance. This advance was repaid during December 2011 with a stated interest amount of $100.

During March 2012, we received $6,000 from an unrelated party under a short-term advance. The advance has no stated maturity nor stated interest rate.

During March 2012, we also received $10,000 from an unrelated party under a 30 day advance. This advance was repaid as of the March 31, 2012.

YOUCHANGE HOLDINGS CORP

(A DEVELOPMENT STAGE ENTERPRISE)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

During March 2012, we also received $25,000 from an unrelated party under a 30 day advance. This advance was repaid as of the filing date.

7. Convertible Notes Payable

The following summarizes convertible notes payable activity following the reverse merger described in Note 1:

·	During July 2010, we issued a $25,000 convertible note with an unrelated, accredited third party in exchange for cash. The note matured on January 19, 2011 and bears interest at a rate of 12.0% per annum. The note and any accrued interest may be converted at any time, at the discretion of the investor, to shares of our common stock at a rate of $0.25 per share. Based on our share price at the time the note agreement was entered into, there was no beneficial conversion feature associated with this convertible note. During July 2011, this convertible note, plus $3,178 of accrued interest, was converted to 112,713 common shares.

·	During August 2010, we issued a $25,000 convertible note with an unrelated, accredited third party in exchange for cash. The note matured on February 6, 2011 and bears interest at 12.0% per annum. The note and any accrued interest may be converted at any time, at the discretion of the investor, to shares of our common stock at a rate of $0.25 per share. Based on our share price at the time the note agreement was entered into, there was no beneficial conversion feature associated with this convertible note. During July 2011, this convertible note, plus $2,999 of accrued interest, was converted to 111,996 common shares.

·	During September 2010, we issued a $22,000 convertible note with an unrelated, accredited third party in exchange for cash. The note matures two years from the date of issuance and bears interest at a rate of 8.0% per annum. The note and any accrued interest may be converted at any time, at the discretion of the investor, to shares of our common stock at a rate of $0.25 per share. Based on our share price at the time the note agreement was entered into, there was no beneficial conversion feature associated with this convertible note. During June 2011, this convertible note, plus $1,247 of accrued interest, was converted to 92,983 common shares.

·	During September 2010, we issued a $25,000 convertible note with an unrelated, accredited third party in exchange for cash. The note matured 61 days from the date of issue and bears interest at a rate of 8.0% per annum. The Company had the right to extend the maturity of this note an additional 30 days. The note and any accrued interest may be converted at any time, at the discretion of the investor, to shares of our common stock at a rate of $0.25 per share. Based on our share price at the time the note agreement was entered into, we recognized a beneficial conversion feature of $5,500 for this convertible note. During July 2011, this convertible note, plus $2,083 of accrued interest, was converted to 108,332 common shares.

·	During October 2010, we issued a $25,000 convertible note with an unrelated, accredited third party in exchange for cash. The note matures two years from the date of issuance and may be extended by an additional 180 days if the Company so chooses. The note bears interest at a rate of 8.0% per annum and is convertible at any time, with accrued interest, at the discretion of the investor to shares of our common stock at a rate of $0.30 per share. During June 2011, this convertible note, plus $1,250 of accrued interest, was converted to 87,500 common shares.

·	During November 2010, we issued a $13,000 convertible note with an unrelated, accredited third party in exchange for cash. The note matures two years from the date of issuance and may be extended by an additional 180 days if the Company so chooses. The note bears interest at a rate of 8.0% per annum and is convertible at any time, with accrued interest, at the discretion of the investor to shares of our common stock at a rate of $0.30 per share. Based on our share price at the time the note agreement was entered into, we recognized a beneficial conversion feature of $1,083 for this convertible note. During June 2011, this convertible note, plus $580 of accrued interest, was converted to 45,268 common shares.

·	During December 2010, we issued an $8,000 convertible note with an unrelated, accredited third party in exchange for cash. The note matures two years from the date of issuance and may be extended by an additional 180 days if the Company so chooses. The note bears interest at a rate of 8.0% per annum and is convertible at any time, with accrued interest, at the discretion of the investor to shares of our common stock at a rate of $0.30 per share. Based on our share price at the time the note agreement was entered into, we recognized a beneficial conversion feature of $1,334 for this convertible note. During June 2011, this convertible note, plus $320 of accrued interest, was converted to 27,735 common shares.

YOUCHANGE HOLDINGS CORP

(A DEVELOPMENT STAGE ENTERPRISE)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

·	During December 2010, we issued a $90,000 convertible note with an unrelated, accredited third party in exchange for cash. The note is secured by all of the assets of the Company, matures two years from the date of issuance and may be accelerated if the Company raises $1.0 million in private financing before the maturity date. The note bears interest at a rate of 12.0% per annum and is convertible at any time, at the discretion of the investor, to shares of our common stock at a rate of $0.25 per share. Unpaid accrued interest is convertible at any time, at the discretion of the investor, to shares of our common stock, with the conversion rate equal to the average closing price of our common stock for the ten days preceding such conversion. Based on our share price at the time the note agreement was entered into, we recognized a beneficial conversion feature of $23,400 for this convertible note. During January 2011, this convertible note, plus $600 of accrued interest, was converted to 362,400 common shares.

·	During March 2011, we issued a $25,000 convertible note with the spouse of a previous officer of YouChange, Inc in exchange for cash. The note matures two years from the date of issuance and may be extended by an additional 180 days if the Company so chooses. The note bears interest at a rate of 8.0% per annum and is convertible at any time, with accrued interest, at the discretion of the investor to shares of our common stock at a rate of $0.25 per share. Based on our share price at the time the note agreement was entered into, we recognized a beneficial conversion feature of $25,000 for this convertible note. During July 2011, this convertible note, plus $824 of accrued interest, was converted to 103,296 common shares.

·	During August 2011, we issued a $25,000 convertible note with an unrelated, accredited third party in exchange for cash. The note matures two years from the date of issuance and may be extended by an additional 180 days if the Company so chooses. The note bears interest at a rate of 8.0% per annum and is convertible at any time, with accrued interest, at the discretion of the investor to shares of our common stock at a rate of $0.30 per share. Based on our share price at the time the note agreement was entered into, there was no beneficial conversion feature associated with this convertible note.

·	During October 2011, we issued a $10,000 convertible note with an unrelated, accredited third party in exchange for cash. The note matures three months from the date of issuance and may be extended by an additional 30 days if the Company so chooses. The note bears interest at a rate of 10.0% per annum and is convertible at any time, with accrued interest, at the discretion of the investor to shares of our common stock at a rate of $0.25 per share. Based on our share price at the time the note agreement was entered into, we recognized a beneficial conversion feature of $5,200 for this convertible note. This note was repaid as of the date of this filing.

·	During December 2011, we issued a $25,000 convertible note with an unrelated, accredited third party in exchange for cash. The note matures six months from the date of issuance and may be extended by an additional 30 days if the Company so chooses. The note bears interest at a rate of 10.0% per annum and is convertible at any time, with accrued interest, at the discretion of the investor to shares of our common stock at a rate of $0.25 per share. Based on our share price at the time the note agreement was entered into, we recognized a beneficial conversion feature of $25,000 for this convertible note.

·	During January 2012, we issued a $25,000 convertible note with an unrelated, accredited third party in exchange for cash. The note matures six months from the date of issuance and may be extended by an additional 30 days if the Company so chooses. The note bears interest at a rate of 10.0% per annum and is convertible at any time, with accrued interest, at the discretion of the investor to shares of our common stock at a rate of $0.25 per share. Based on our share price at the time the note agreement was entered into, we recognized a beneficial conversion feature of $9,500 for this convertible note.

·	During February 2012, we issued a $24,000 convertible note with an unrelated, accredited third party in exchange for cash. The note matures two years from the date of issuance and may be extended by an additional 180 days if the Company so chooses. The note bears interest at a rate of 8.0% per annum and is convertible at any time, with accrued interest, at the discretion of the investor to shares of our common stock at a rate of $0.25 per share. Based on our share price at the time the note agreement was entered into, we recognized a beneficial conversion feature of $4,800 for this convertible note.

·	During February 2012, we issued a $24,000 convertible note with an unrelated, accredited third party in exchange for cash. The note matures two years from the date of issuance and may be extended by an additional 180 days if the Company so chooses. The note bears interest at a rate of 8.0% per annum and is convertible at any time, with accrued interest, at the discretion of the investor to shares of our common stock at a rate of $0.25 per share. Based on our share price at the time the note agreement was entered into, we recognized a beneficial conversion feature of $6,720 for this convertible note.

·	During March 2012, we issued a $5,000 convertible note with an unrelated, accredited third party in exchange for cash. The note matures two years from the date of issuance and may be extended by an additional 180 days if the Company so chooses. The note bears interest at a rate of 8.0% per annum and is convertible at any time, with accrued interest, at the discretion of the investor to shares of our common stock at a rate of $0.25 per share. Based on our share price at the time the note agreement was entered into, we recognized a beneficial conversion feature of $2,400 for this convertible note.

YOUCHANGE HOLDINGS CORP

(A DEVELOPMENT STAGE ENTERPRISE)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

As of March 31, 2012, the convertible notes payable and associated accrued interest described above are convertible into a total of approximately 549,650 common shares.

The intrinsic value of a beneficial conversion feature inherent to a convertible note payable, which is not bifurcated and accounted for separately from the convertible note payable and may not be settled in cash upon conversion, is treated as a discount to the convertible note payable. This discount is amortized over the period from the date of issuance to the date the note is due using the effective interest method. If the note payable is retired prior to the end of its contractual term, the unamortized discount is expensed in the period of retirement to interest expense. In general, the beneficial conversion feature is measured by comparing the effective conversion price, after considering the relative fair value of detachable instruments included in the financing transaction, if any, to the fair value of the common shares at the commitment date to be received upon conversion.

8. Professional Fees

Included in professional fees on the accompanying Condensed Consolidated Statements of Operations are charges relative to certain of the Company’s officers of approximately $105,000 and $42,000 for the three months ended March 31, 2012 and 2011, respectively, $233,000 and $236,300 for the nine months ended March 31, 2012 and 2011, respectively and $765,000 for the period from August 22, 2008 (inception) to March 31, 2012.

9. Commitments and Contingencies

Operating Leases

The Company leases approximately 2,400 square feet of office space in Scottsdale, Arizona. The lease agreement expires during August 2012 and calls for rent of approximately $2,500 per month. We entered into a lease beginning May 1, 2012 for approximately 6,800 square feet of combined office and warehouse space in Tempe, Arizona. The lease expires during June 2015.

Indemnifications

During the normal course of business, we make certain indemnities and commitments under which we may be required to make payments in relation to certain transactions. These may include: (i) intellectual property indemnities to customers in connection with the use, sales and/or license of products and services; (ii) indemnities to customers in connection with losses incurred while performing services on their premises; (iii) indemnities to vendors and service providers pertaining to claims based on negligence or willful misconduct; and (iv) indemnities involving the representations and warranties in certain contracts. In addition, under our by-laws we are committed to our directors and officers for providing for payments upon the occurrence of certain prescribed events. The majority of these indemnities and commitments do not provide for any limitation on the maximum potential for future payments that we could be obligated to make.

10. Subsequent Events

Sale of shares

During April and May 2012, we raised $287,500 through the sale of 1,150,000 restricted shares of our common shares in private placement transactions with accredited investors at a sales price of $0.25 per common share.

YOUCHANGE HOLDINGS CORP

(A DEVELOPMENT STAGE ENTERPRISE)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Merger with Earth911

On May 21, 2012, the Company entered into an Agreement and Plan of Merger (the “Agreement”) with Earth911, Inc., a Delaware corporation (“Earth911”), whereby upon the closing (intended to be July 1, 2012), the Company will issue shares of its common stock in exchange for all of the outstanding capital stock of Earth911 such that the former Earth911 stockholders will own 85% of the outstanding shares of the Company’s Common Stock on a fully diluted basis, and Earth911 will become a wholly-owned subsidiary of the Company. In addition, outstanding options and warrants to acquire shares of capital stock of Earth911 will be exchanged for options and warrants to acquire shares of the Company’s Common Stock using the same ratio that shares of Earth911 capital stock are exchanged for shares of the Company’s Common Stock to achieve the 85% noted above.

Also upon the closing, the Company’s Articles of Incorporation will be amended (i) to reverse split all issued and outstanding shares of the Company’s Common Stock at the ratio of 5 shares to 1 share, (ii) to change the name of the Company to “Infinity Resources Corp.” and (iii) to increase the Company’s authorized capital to 100,000,000 shares of Common Stock and 10,000,000 shares of Preferred Stock. The amendments to the Company’s Articles of Incorporation are subject to approval by the stockholders of the Company. The former Earth911 stockholders and ten (10) of the existing stockholders of the Company entered into voting agreements with regard to voting their shares of capital stock in favor of approval of the Agreement and in favor of approval of the amendments to the Company’s Articles of Incorporation, respectively.

Upon the closing pursuant to other requirements of the Agreement, the existing members of the Company’s Board of Directors and executive officers of the Company (other than the Company’s CFO) will resign and seven (7) new members of the Board will be appointed along with the appointment of new executive officers. The shares of the Company’s Common Stock issued pursuant to the Agreement will be issued to the Earth911 stockholders in reliance upon an exemption from registration afforded under Section 4(2) of the Securities Act of 1933, as amended, for transactions not involving a public offering and in reliance upon exemptions from registration under applicable state securities laws. This description is a summary only and is subject to the specific provisions of the Agreement, which is attached to this Report as Exhibit 2.4.

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

Forward-Looking Statements

This Quarterly Report on Form 10-Q, including Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations, contains certain “forward-looking statements,” which include information relating to future events, future financial performance, strategies, expectations, competitive environment, regulation, and availability of resources. These forward-looking statements include, without limitation, statements regarding: proposed new initiatives; expectations regarding planned operations; statements concerning projections, predictions, expectations, estimates, or forecasts as to our business, financial and operational results, and future economic performance; and statements of management’s goals and objectives and other similar expressions concerning matters that are not historical facts. Words such as “may,” “should,” “could,” “would,” “predicts,” “potential,” “continue,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates” and similar expressions, as well as statements in future tense, identify forward-looking statements.

Forward-looking statements should not be read as a guarantee of future performance or results, and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved. Forward-looking statements are based on information available at the time those statements are made or management’s good faith belief as of that time with respect to future events, and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements.

Forward-looking statements speak only as of the date the statements are made. Factors that could cause actual results to differ from those discussed in the forward-looking statements include, but are not limited to, those described in “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended June 30, 2011, as updated in our subsequent reports filed with the SEC, including any updates found in Part II, Item 1A of this or other reports on Form 10-Q. You should not place undue reliance on any forward-looking statements. We assume no obligation to update forward-looking statements to reflect actual results, changes in assumptions, or changes in other factors affecting forward-looking information, except to the extent required by applicable securities laws. If we do update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements.

Overview and Recent Developments

For accounting purposes, Youchange, Inc. is the acquirer in the reverse merger transaction, and consequently the assets and liabilities and the historical operations reflected in the condensed consolidated financial statements are those of Youchange, Inc. and are recorded at the historical cost basis of Youchange, Inc. All shares and per share data prior to the acquisition have been restated to reflect the stock issuance as a recapitalization of Youchange.

The Company’s software includes a destination website, www.youchange.com, where users can join and refer friends to learn about the problem of electronic waste through content, blogs and forums. Site members are encouraged to take action through the turn-over and sale of their end-of-life, used or obsolete electronics, which reduces the risk of adding to the waste stream. Members access the youchange calculator and offer database through www.youchange.com and by answering a series of questions, may receive a real-time cash and/or reward points offer. Initially, reward points collected by members may be used to exchange for other items in the “Shop Green” area of the youchange.com website, which is an online marketplace where points can be exchanged for product. Members may send their items to us, or drop-off their items at our offices. In addition to the youchange.com website, users can join and learn about local events and electronic collection drives through youchange Facebook, Twitter and Linked-In social media pages.

We plan to collect used electronics through:

(i)	Offers made to members through our website, which is discussed above.

(ii)	Using already existing retailers or businesses as drop-off locations for used electronics. We plan to develop strategic alliances with retailers, electronic refurbishment centers and recyclers that may partner with youchange. By listing retailers as drop-off locations on our website, we will encourage our members to visit these locations and thus, would expect an increase in foot traffic for those locations. If members drop-off items rather than use our prepaid shipping mechanism, we expect to obtain these items at a lower cost. We are in discussions with Phoenix locations of a national car dealership, a major university, and several local charities and other organizations. We currently have drop-off agreements with a local computer repair store chain, Red Seven, the Phoenix location of the national Childhelp charity, and one of our recycling partners, E-Waste Harvesters Inc.

(iii)	Collecting used electronics through Company initiated collection events. Local electronic collection events play an important part of the youchange strategy and are done in partnership with local sports teams, businesses, schools and charity groups. We have developed a collection event and brand awareness model built around employees of third party companies bringing their excess electronics to work on designated days. We have piloted these events over the past few months in the Phoenix, Arizona area. A second component of this collection event and brand awareness model is to partner with local sports teams to host pre-game collection and brand awareness events. A third component of this model, which was launched in April 2011, is a new program we refer to as GREEN Ambassadors and GREEN Leaders, where members of the youchange community host collection events at various business or charity locations. As with retail and business permanent drop-off locations, if members drop-off their items rather than use our prepaid shipping mechanism, we expect to obtain these items at a lower cost.

	The GREEN Leaders program was piloted at two Phoenix private elementary schools and is expected to be expanded to public and private high schools and colleges. We have several school districts piloting the program this fall in Arizona, including schools in Tempe and Phoenix. The GREEN Ambassadors program is expected to be piloted in a retirement community and we are in discussions with a local umbrella charity organization to allow its members to become GREEN Ambassadors.

We intend on developing limited in-house refurbishment, focusing on sanitizing data, and plan to out-source recycling to responsible recyclers with certifications (either R2 or e-stewards industry certifications). We are currently meeting with a local recycling and refurbishing company to discuss a supplier relationship.

The Company has realized minimal revenue from its planned business purpose to the date of this filing and currently has limited operations. Accordingly, the Company is considered to be in the development stage. The Company has been in the development stage since its formation. The Company has devoted its efforts to business planning and development and has allocated a substantial portion of its time and investment in bringing its product to the market and raising capital.

Background of BSFG

BSFG was incorporated in the state of Nevada on July 12, 2002. BSFG had the principal business objective of working toward establishing “small ticket” equipment leases within a small niche of the equipment leasing market. BSFG intended to provide cost effective “small ticket item” leasing to small and middle market companies primarily within the hospitality, spa and resort communities. This business plan was never implemented and no significant business activities related thereto ever occurred. Since becoming incorporated, other than the reverse merger described below, BSFG did not make any significant purchases or sales of assets, nor did it engage in any mergers, acquisitions or consolidations.

After careful consideration it became clear there could be great benefit to the economic downturn resulting in the liquidation of non-performing leases and used equipment. It was further concluded that much of this excess equipment and used electronics from both small to middle market companies and individual consumers was classified as eWaste and presented a negative environmental impact. This problem was growing and very few viable solutions have made it to market leaving a substantial void in this highly visible and much anticipated GreenTech sector. It was decided that to fully take advantage and leverage this new market opportunity BSFG would need to expand the board and management team and begin an immediate search for a company with experience, relationships and leadership, focused in this newly defined sector of “GreenTech”. As discussed more fully below, BSFG was successful in locating and merging with Youchange, Inc., a company that had the desired attributes. The youchange management team will lead and execute this new direction that will focus on the eWaste challenge by launching the youchange.com website, software and services application that is expected to include paying and providing reward points to businesses and consumers for their used electronics, refurbishing and recycling through established and certified strategic partners and generating revenue from the sales and reCommerce (resale online) of these products as well as management fees for proprietary data.

Reverse Merger with BSFG

Feature Marketing Acquisition

Subsequent to the completion of the acquisition, on February 25, 2011 the Company and Feature Marketing entered into a Rescission Agreement that provided for the rescission of the acquisition as of December 31, 2010, so that from an economic standpoint, the acquisition never occurred and all applicable shares were never exchanged. Accordingly, the financial position and results of Feature Marketing have not been, and are never expected to be, consolidated with those of the Company. The Company believes the rescission of this transaction was in its best interests based on the discovery of a mutual mistake and impossibility to perform under the agreement, which was not contemplated by either party.

The Company executed a non-exclusive fulfillment agreement with Feature Marketing on March 29, 2011. Under the terms of the fulfillment agreement, Feature Marketing will provide receiving, refurbishment, shipping and storage services and repay the amounts previously advanced towards the acquisition discussed above. As of March 31, 2012 advances outstanding totaled approximately $96,000 and $97,000, respectively, which are secured by the assets of Feature Marketing and are supported by a promissory note from Feature Marketing. These advances bear interest at a rate of 24.0% per annum. We have recognized interest income totaling approximately $37,000 relative to these advances for the period from August 22, 2008 (inception) to March 31, 2012. During June 2011, Feature Marketing returned 75,000 common shares it had previously owned, in exchange for a reduction of amounts due us of approximately $26,000, which was the fair value of the shares at the time they were returned. These shares have been accounted for as treasury stock. As of March 31, 2012 and June 30, 2011, management believes all outstanding advances to Feature Marketing, and interest on such advances, will be fully realized and accordingly, has not provided for any allowance for these balances as of such dates.

Critical Accounting Estimates and Policies

General

Our discussion and analysis of our financial condition and results of operations are based on our Condensed Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). The preparation of the Condensed Consolidated Financial Statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue, expenses and related disclosure of contingent assets and liabilities. On an ongoing basis we evaluate our estimates, including those related to areas that require a significant level of judgment or are otherwise subject to an inherent degree of uncertainty. These areas include carrying amounts of long-lived assets and advances to Feature Marketing, deferred financing costs and deferred taxes. We base our estimates on historical experience, our observance of trends in particular areas and information or valuations and various other assumptions that we believe to be reasonable under the circumstances and which form the basis for making judgments about the carrying value of assets and liabilities that may not be readily apparent from other sources. Actual amounts could differ significantly from amounts previously estimated.

We believe that of our significant accounting policies, the following may involve a higher degree of judgment and complexity:

Inventory

We use the lower of cost or market method to evaluate the cost of inventory at the end of each period. In the third quarter of fiscal 2012, we began a pilot program of collection events with schools. We process the each item collected to determine if it is at end of life or if it can be refurbished and sold and based on that determination, we assign a “collection” value to each item. We pay the each school the collection value that we assign to the items from their particular collection event. Because of the unanticipated response to the collection events held during the quarter, we were unable to process the items collected. As a result, we have estimated the value of the items that were collected but not processed, and have recorded the inventory value at March 31, 2012 based on that estimate.

Long-Lived Assets

We periodically evaluate whether events and circumstances have occurred that may warrant revision of the estimated useful life of property and equipment or whether the remaining balance of property and equipment, or other long-lived assets should be evaluated for possible impairment. Instances that may lead to an impairment include: (i) a significant decrease in the market price of a long-lived asset group; (ii) a significant adverse change in the extent or manner in which a long-lived asset or asset group is being used or in its physical condition; (iii) a significant adverse change in legal factors or in the business climate that could affect the value of a long-lived asset or asset group, including an adverse action or assessment by a regulator; (iv) an accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of a long-lived asset or asset group; (v) a current-period operating or cash flow loss combined with a history of operating or cash flow losses or a projection or forecast that demonstrates continuing losses associated with the use of a long-lived asset or asset group; or (vi) a current expectation that, more likely than not, a long-lived asset or asset group will be sold or otherwise disposed of significantly before the end of its previously estimated useful life.

Upon recognition of an event, as previously described, we use an estimate of the related undiscounted cash flows, excluding interest, over the remaining life of the property and equipment and long-lived assets in assessing their recoverability. We measure impairment loss as the amount by which the carrying amount of the asset(s) exceeds the fair value of the asset(s). We primarily employ two methodologies for determining the fair value of a long-lived asset: (i) the amount at which the asset could be bought or sold in a current transaction between willing parties; or (ii) the present value of expected future cash flows grouped at the lowest level for which there are identifiable independent cash flows.

Beneficial Conversion Features

Accounting for Income Taxes

We use the asset and liability method to account for income taxes. Significant management judgment is required in determining the provision for income taxes, deferred tax assets and liabilities and any valuation allowance recorded against net deferred tax assets. In preparing the Condensed Consolidated Financial Statements, we are required to estimate income taxes in each of the jurisdictions in which we operate. This process involves estimating the actual current tax liability together with assessing temporary differences resulting from differing treatment of items, such as deferred revenue, depreciation on property, plant and equipment, intangible assets, goodwill and losses for tax and accounting purposes. These differences result in deferred tax assets, which include tax loss carry-forwards, and liabilities, which are included within the Condensed Consolidated Balance Sheet. We then assess the likelihood that deferred tax assets will be recovered from future taxable income, and to the extent that recovery is not likely or there is insufficient operating history, a valuation allowance is established. To the extent a valuation allowance is established or increased in a period, we include an expense within the tax provision of the Condensed Consolidated Statements of Operations. As of March 31, 2012 and June 30, 2011, the Company has established a full valuation allowance for all deferred tax assets.

As of March 31, 2012 and June 30, 2011, we did not recognize any assets or liabilities relative to uncertain tax positions, nor do we anticipate any significant unrecognized tax benefits will be recorded during the next 12 months. Any interest or penalties related to unrecognized tax benefits is recognized in income tax expense. Since there are no unrecognized tax benefits as a result of tax positions taken, there are no accrued penalties or interest.

Operating Results

The following table summarizes our operating results for the periods presented below:

													Period from
													August 22,
													2008
	Three Months Ended						Nine Months Ended						(Inception) to
	March 31,						March 31,						March 31,
	2012			2011			2012			2011			2012

Revenue	$	33,568		$	1,320		$	61,768		$	1,320		$	70,928
Cost of products sold.		3,380			1,014			11,223			1,014			16,609

Gross profit		30,188			306			50,545			306			54,319

Operating expenses:
Professional fees		149,227			75,035			319,430			311,707			1,083,038
Salaries and wages		46,302			22,352			109,830			71,112			208,568
Licensing fee		-			-			-			79,130			89,130
General and administrative		32,793			15,408			71,983			45,328			182,512
Marketing		28,133			15,122			62,030			33,135			121,556
Expense of reverse merger		-			-			-			-			620,040

Total operating expenses		256,455			127,917			563,273			540,412			2,304,844

Loss from operations	$	(226,267	)	$	(127,611	)	$	(512,728	)	$	(540,106	)	$	(2,250,525	)

We are a development stage enterprise for the periods presented above and accordingly, have not recognized significant revenues from our planned business to March 31, 2012.

Professional fees were $149,227 and $75,035 for the three months ended March 31, 2012 and 2011, respectively, $319,430 and $311,707 for the nine months ended March 31, 2012 and 2011, respectively, and $1,083,038 for the period from August 22, 2008 (inception) to March 31, 2012. Professional fees include fees incurred for certain of our officers of approximately $105,000 and $40,000 for the three months ended March 31, 2012 and 2011, respectively, $233,000 and $234,000 for the nine months ended March 31, 2012 and 2011, respectively and $765,000 for the period from August 22, 2008 (inception) to March 31, 2012. Also included in professional fees are legal, accounting and auditing fees. The increase in professional fees in fiscal 2012 over fiscal 2011 is a result of hiring consultants to execute on our initiative to run a pilot program for collection events at Phoenix area schools and to help support investor relations.

Salaries and wages totaled $46,302 and $22,352 for the three months ended March 31, 2012 and 2011, respectively, $109,831 and $71,112 for the nine months ended March 31, 2012 and 2011, respectively, and $208,568 for the period from August 22, 2008 (inception) to March 31, 2012. Salaries and wages represent amounts paid or accrued to officers and other employees, which commenced during the second quarter of fiscal 2011 as we began to hire staff in the anticipation of executing our business plan. The increase in salaries and wages in fiscal 2012 over fiscal 2011 is a result of executing our business plan and initiating the pilot program we are running for collection events in schools.

Licensing fees were nil and nil for the three months ended March 31, 2012 and 2011, respectively, nil and $79,130 for the nine months ended March 31, 2012 and 2010, respectively, and $89,130 for the period from August 22, 2008 (inception) to March 31, 2012. Licensing fees relate to the use of a database to support the consumer offer calculator on our website.

General and administrative expense was $32,793 and $15,408 for the three months ended March 31, 2012 and 2011, respectively, $71,983 and $45,328 for the nine months ended March 31, 2012 and 2011, respectively, and $182,512 for the period from August 22, 2008 (inception) to March 31, 2012. These expenses primarily consist of facility rent, travel, computer, network and internet costs. The increase in general and administrative expense in fiscal 2012 over fiscal 2011 is a result of executing our business plan and initiating the pilot program we are running for collection events in schools.

Marketing expense was $28,133 and $15,122 for the three months ended March 31, 2012 and 2011, respectively, $62,030 and $33,135 for the nine months ended March 31, 2012 and 2011, respectively, and $121,556 for the period from August 22, 2008 (inception) to March 31, 2012. Marketing related costs relate primarily to events, marketing collateral, press releases and other public relations efforts. The increase in marketing expense in fiscal 2012 over fiscal 2011 is a result of executing our business plan and initiating the pilot program we are running for collection events in schools.

As described above, during March 2010, we completed a reverse merger transaction. We incurred $125,000 of cash based expense for this transaction, of which $37,500 remains to be paid as of March 31, 2011, in addition to recording $495,040 for shares issued in connection with this transaction.

We recognized other expense of $19,472 and $24,239 for the three months ended March 31, 2012 and 2011, respectively, $43,732 and $25,921 for the nine months ended March 31, 2012 and 2011, respectively, and $128,370 for the period from August 22, 2008 (inception) to March 31, 2012. Since inception, other expense primarily relates to interest expense of $165,843, which relates to: (i) $50,000 for the amortization of deferred financing costs; (ii) $13,681 for interest on convertible notes that were converted prior to the reverse merger on March 30, 2010; and (iii) interest on convertible notes that were issued subsequent to the reverse merger and the amortization of discounts associated with some of these notes. Other income relates to interest income, which is primarily associated with advances previously made to Feature Marketing.

We anticipate that the execution of our business plan will result in a rapid expansion of our operations, which may place a significant strain on our management, financial and other resources. Youchange’s ability to manage the challenges associated with the expansion of our business and integration of future acquisitions, if any, will depend, among other things, on our ability to monitor operations, control costs, maintain effective quality control, secure necessary marketing arrangements, expand internal management, implement technical information and accounting systems and attract, assimilate and retain qualified management and other personnel. If we fail to effectively manage these issues, we may not be profitable in the near future, or ever.

The difficulties in managing these various business issues will be compounded by a number of unique attributes of our anticipated business operations and business strategy. Should these and other concepts not perform as expected, youchange’s financial condition and the results of our operations could be materially and adversely affected.

Liquidity and Capital Resources

As of March 31, 2012, we had $14,976 of cash and cash equivalents and a working capital deficit of approximately $113,548. Over the next twelve months we estimate in order to maintain reporting company status as defined under the Securities Exchange Act of 1934, we will require cash for expenses, which include accounting, legal and other professional fees, as well as filing fees. We must raise cash to cover these expenses and implement our business plan. In addition to the amounts raised through the financing transactions discussed below, we estimate that we will need to raise approximately $0.5 million to continue our proposed business and maintain our status as a reporting company for the next 90 to 120 days.

The Company’s ability to commence operations is entirely dependent upon the proceeds to be raised. If we do not raise at least $1.0 million, we will be unable to establish a base of operations, without which we will be unable to execute our current business plan. The Company will need to raise additional capital by issuing capital stock, notes payable or a combination of both, in exchange for cash in order to continue as a going concern. Subsequent to the reverse merger transaction in March 2010 to the date of this filing, we raised a total of $702,000, which is described in further detail below. We cannot assure any investor that, if needed, sufficient financing can be obtained or, if obtained, that it will be on reasonable terms. Without realization of additional capital, it would be unlikely that operations would continue and any investment made by an investor would be lost in its entirety.

Although we have taken steps to focus our business on the GreenTech and eWaste sectors, we currently have no ability to fund the development and implementation of our business plan. As is typical of companies going through the development stage, we currently have minimal revenue. This raises substantial doubt about the Company’s ability to continue as a going concern. We expect to rely on external sources of capital through the issuance of debt and/or equity securities in private placement offerings to provide funding of our business. We expect to initiate such actions to obtain additional capital to fund our business, however, no assurances can be made that we will be successful in obtaining additional funding on terms and conditions that are acceptable to us.

If youchange acquires its needed funding through the issuance of our equity securities, our existing shareholders may experience dilution and the value of their equity securities may decline. The acquisition of funding through the issuance of debt could result in a substantial portion of our future cash flow from operations being dedicated to the payment of principal and interest on that indebtedness, and could render us more vulnerable to competitive pressures and economic downturns.

We will require capital for key near-term milestones of our business, which we currently believe to include:

·	Acquiring or developing strategic relationships with recyclers and refurbishment centers in Phoenix, Arizona.

·	Completing certain key modules of eTS and identifying pilot locations as drop-off locations and recyclers and/or refurbishment centers.

·	Expanding collection events that are hosted by local businesses, schools and sports teams.

·	Expanding the youchange “GREEN Ambassadors” program, which we expect will allow us to expand our collection events by recruiting “Ambassadors” to host events that benefit their organizations and collect electronics for youchange.

·	Researching collection methods and equipment to develop permanent drop-off locations with local retailers.

·	Adding a national partner to have all mail-in online transactions sent directly to a partner in locations covering all of the United States.

·	Replication of the Phoenix, Arizona youchange model in other cities in the United States once the model is proven in this market.

Subsequent to the reverse merger transaction in March 2010, we raised a total of $702,000 through the following transactions:

·	During July 2010, we issued a $25,000 convertible note with an unrelated, accredited third party in exchange for cash. The note matured on January 19, 2011 and bears interest at a rate of 12.0% per annum. The note and any accrued interest may be converted at any time, at the discretion of the investor, to shares of our common stock at a rate of $0.25 per share. During July 2011, this convertible note, plus $3,178 of accrued interest, was converted to 112,713 common shares.

·	During August 2010, we issued a $25,000 convertible note with an unrelated, accredited third party in exchange for cash. The note matured on February 6, 2011 and bears interest at 12.0% per annum. The note and any accrued interest may be converted at any time, at the discretion of the investor, to shares of our common stock at a rate of $0.25 per share. During July 2011, this convertible note, plus $2,999 of accrued interest, was converted to 111,996 common shares.

·	During September 2010, we issued a $22,000 convertible note with an unrelated, accredited third party in exchange for cash. The note matures two years from the date of issuance and bears interest at a rate of 8.0% per annum. The note and any accrued interest may be converted at any time, at the discretion of the investor, to shares of our common stock at a rate of $0.25 per share. During June 2011, this convertible note, plus $1,247 of accrued interest, was converted to 92,983 common shares.

·	During September 2010, we issued a $25,000 convertible note with an unrelated, accredited third party in exchange for cash. The note matured 61 days from the date of issue and bears interest at a rate of 8.0% per annum. The Company had the right to extend the maturity of this note an additional 30 days. The note and any accrued interest may be converted at any time, at the discretion of the investor, to shares of our common stock at a rate of $0.25 per share. During July 2011 this convertible note, plus $2,083 of accrued interest, was converted to 108,332 shares.

·	During October 2010, we issued a $25,000 convertible note with an unrelated, accredited third party in exchange for cash. The note matures two years from the date of issuance and may be extended by an additional 180 days if the Company so chooses. The note bears interest at a rate of 8.0% per annum and is convertible at any time, with accrued interest, at the discretion of the investor to shares of our common stock at a rate of $0.30 per share. During June 2011, this convertible note, plus $1,250 of accrued interest, was converted to 87,500 common shares.

·	During November 2010, we issued a $13,000 convertible note with an unrelated, accredited third party in exchange for cash. The note matures two years from the date of issuance and may be extended by an additional 180 days if the Company so chooses. The note bears interest at a rate of 8.0% per annum and is convertible at any time, with accrued interest, at the discretion of the investor to shares of our common stock at a rate of $0.30 per share. During June 2011, this convertible note, plus $580 of accrued interest, was converted to 45,268 common shares.

·	During December 2010, we issued an $8,000 convertible note with an unrelated, accredited third party in exchange for cash. The note matures two years from the date of issuance and may be extended by an additional 180 days if the Company so chooses. The note bears interest at a rate of 8.0% per annum and is convertible at any time, with accrued interest, at the discretion of the investor to shares of our common stock at a rate of $0.30 per share. During June 2011, this convertible note, plus $320 of accrued interest, was converted to 27,735 common shares.

·	During December 2010, we issued a $90,000 convertible note with an unrelated, accredited third party in exchange for cash. The note is secured by all of the assets of the Company, matures two years from the date of issuance and may be accelerated if the Company raises $1.0 million in private financing before the maturity date. The note bears interest at a rate of 12.0% per annum and is convertible at any time, at the discretion of the investor, to shares of our common stock at a rate of $0.25 per share. Unpaid accrued interest is convertible at any time, at the discretion of the investor, to shares of our common stock, with the conversion rate equal to the average closing price of our common stock for the ten days preceding the such conversion. During January 2011, this convertible note, plus $600 of accrued interest, was converted to 362,400 common shares.

·	During March 2011, we raised $25,000 under a convertible note with the spouse of an officer of YouChange, Inc. The note matures two years from the date of issuance and may be extended by an additional 180 days if the Company so chooses. The note bears interest at a rate of 8.0% per annum and is convertible at any time, with accrued interest, at the discretion of the investor to shares of our common stock at a rate of $0.25 per share. During July 2011 this convertible note, plus $824 of accrued interest, was converted to 103,296 shares.

·	During March 2011, we raised $250,000 through the sale of 1,000,000 common shares in a private placement transaction with an accredited investor at a sales price of $0.25 per common share.

·	During August 2011, we issued a $25,000 convertible note with an unrelated, accredited third party in exchange for cash. The note matures two years from the date of issuance and may be extended by an additional 180 days if the Company so chooses. The note bears interest at a rate of 8.0% per annum and is convertible at any time, with accrued interest, at the discretion of the investor to shares of our common stock at a rate of $0.30 per share.

·	During October 2011, we issued a $10,000 convertible note with an unrelated, accredited third party in exchange for cash. The note matures three months from the date of issuance and may be extended by an additional 30 days if the Company so chooses. The note bears interest at a rate of 10.0% per annum and is convertible at any time, with accrued interest, at the discretion of the investor to shares of our common stock at a rate of $0.25 per share. This advance was repaid as of the date of this filing.

·	During November 2011, we issued a $25,000 note payable with an unrelated, accredited third party in exchange for cash. The note matures 60 days from the date of issuance and bears interest at a rate of 10.0% per annum with an increase to 12.0% per annum following the maturity date. We paid $5,000 against this note prior to March 31, 2012, and we repaid the remaining $20,000 on the note as of the date of this filing.

·	During December 2011, we issued a $25,000 convertible note with an unrelated, accredited third party in exchange for cash. The note matures six months from the date of issuance and may be extended by an additional 30 days if the Company so chooses. The note bears interest at a rate of 10.0% per annum and is convertible at any time, with accrued interest, at the discretion of the investor to shares of our common stock at a rate of $0.25 per share. Based on our share price at the time the note agreement was entered into, we recognized a beneficial conversion feature of $25,000 for this convertible note.

·	During January 2012, we issued a $25,000 convertible note with an unrelated, accredited third party in exchange for cash. The note matures six months from the date of issuance and may be extended by an additional 30 days if the Company so chooses. The note bears interest at a rate of 10.0% per annum and is convertible at any time, with accrued interest, at the discretion of the investor to shares of our common stock at a rate of $0.25 per share. Based on our share price at the time the note agreement was entered into, we recognized a beneficial conversion feature of $9,500 for this convertible note.

·	During February 2012, we issued a $24,000 convertible note with an unrelated, accredited third party in exchange for cash. The note matures two years from the date of issuance and may be extended by an additional 180 days if the Company so chooses. The note bears interest at a rate of 8.0% per annum and is convertible at any time, with accrued interest, at the discretion of the investor to shares of our common stock at a rate of $0.25 per share. Based on our share price at the time the note agreement was entered into, we recognized a beneficial conversion feature of $4,800 for this convertible note.

·	During February 2012, we issued a $24,000 convertible note with an unrelated, accredited third party in exchange for cash. The note matures two years from the date of issuance and may be extended by an additional 180 days if the Company so chooses. The note bears interest at a rate of 8.0% per annum and is convertible at any time, with accrued interest, at the discretion of the investor to shares of our common stock at a rate of $0.25 per share. Based on our share price at the time the note agreement was entered into, we recognized a beneficial conversion feature of $6,720 for this convertible note.

·	During March 2012, we issued a $5,000 convertible note with an unrelated, accredited third party in exchange for cash. The note matures two years from the date of issuance and may be extended by an additional 180 days if the Company so chooses. The note bears interest at a rate of 8.0% per annum and is convertible at any time, with accrued interest, at the discretion of the investor to shares of our common stock at a rate of $0.25 per share. Based on our share price at the time the note agreement was entered into, we recognized a beneficial conversion feature of $2,400 for this convertible note.

·	During March 2012, we received $6,000 from an unrelated party under a short-term advance. The advance has no stated maturity nor stated interest rate.

·	During March 2012, we also received $25,000 from an unrelated party under a 30 day advance. This advance was repaid as of the filing date.

Until such time, if at all, as we receive adequate funding, we intend to defer payment of all other obligations that are capable of being deferred. Such deferment has resulted in the past, and may result in the future, in some vendors demanding cash payment for their goods and services in advance, and other vendors refusing to continue to do business with us, which may adversely affect our ability to obtain goods and services in the future, or to do so on favorable terms.

Cash Flows

The following discussion relates to the major components of our cash flows:

Cash Flows from Operating Activities

Cash used in operating activities was $228,288 and $290,376 for the nine months ended March 31, 2012 and 2011, respectively, and $880,912 for the period from August 22, 2008 (inception) to March 31, 2012. Cash used in operating activities primarily relates to payments for professional fees and general and administrative costs. We expect our operating activities will require additional cash in the future as we commence our planned operations.

Cash Flows from Investing Activities

Cash used in investing activities was $45,000 and $89,400 for the nine months ended March 31, 2012 and 2011, respectively, and $376,415 for the period from August 22, 2008 (inception) to March 31, 2012. Cash used in investing activities for the nine months ended March 31, 2012 primarily relates to cash used for the development of our proprietary business platform. Cash used in investing activities for the nine months ended March 31, 2012 primarily relates to cash used for the development of our proprietary business platform and cash used for advances to Feature Marketing, which is described more fully above. Cash used in investing activities for the period from August 22, 2010 (inception) to March 31, 2012 also includes cash used for our reverse merger transaction in March 2010, which is discussed more fully above.

Cash Flows from Financing Activities

Cash provided by financing activities was $222,000 and $233,000 for the nine months ended March 31, 2012 and 2011, respectively, and $1,272,303 for the period from August 22, 2008 (inception) to March 31, 2012. Cash provided by financing activities for the nine months ended March 31, 2012 and 2011 primarily relates to various convertible and non-convertible note agreements entered into, which are described further above. Cash provided by financing activities for the period from August 22, 2010 (inception) to March 31, 2012 primarily relates to the activities described above, as well as sales of our common stock and other borrowings from related partie

Recently Issued Accounting Pronouncements

During June 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2011-05, “Presentation of Comprehensive Income” (“ASU 2011-05”). ASU 2011-05 provides for the option to present the total of comprehensive income, the components of net income and the components of other comprehensive income (“OCI”) either in a single continuous statement of comprehensive income or in two separate but consecutive statements. Regardless of which format is chosen, the amendments establish a requirement for entities to present on the face of the financial statements reclassification adjustments for items that are reclassified from OCI to net income in the statement(s) where the components of net income and the components of OCI are presented. The amendments in ASU 2011-05 are effective, on a retrospective basis, for public entities for interim and annual periods beginning after December 15, 2011; however, during December 2011 the FASB issued ASU No. 2011-12, which defers those changes in ASU 2011-05 that relate to the presentation of reclassification adjustments. The adoption of this guidance has not had a material impact on our financial position and results of operations.

Off-Balance Sheet Financing

We have no off-balance sheet debt or similar obligations. We have no transactions or obligations with related parties that are not disclosed, consolidated into or reflected in our reported results of operations or financial position. We do not guarantee any third-party debt.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not applicable.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) are designed to provide a reasonable assurance that the information required to be disclosed by us in this quarterly report on Form 10-Q was (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and regulations and (ii) accumulated and communicated to our management, being the Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

Based on their evaluation as of March 31, 2012, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective at providing a reasonable assurance that the information required to be disclosed by us in this quarterly report on Form 10-Q meets the objective of being (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and regulations and (ii) accumulated and communicated to our management to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting or in other factors that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting in our most recent fiscal quarter.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

None.

Item 1A. Risk Factors

There have been no material changes in risk factors previously disclosed in our Form 10-K for the year ended June 30, 2011.

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

None.

Item 3. Defaults Upon Senior Securities

On January 1, 2010, Youchange, Inc. entered into a $75,000 note payable agreement with the previous shareholders of BSFG, which, together with a $50,000 cash payment and the issuance of 1,456,000 common shares following the reverse merger, was used to complete the reverse merger with BSFG. The payable was due in two equal installments, which were due on April 1, 2010 and June 30, 2010. The first payment of $37,500 was paid when due on April 1, 2010; however, we have not made the second payment as of the date of this filing. We have received a verbal waiver of the default from the note holders.

During October 2011, we issued a $10,000 convertible note with an unrelated, accredited third party in exchange for cash. The note matures three months from the date of issuance and may be extended by an additional 30 days if the Company so chooses. The note bears interest at a rate of 10.0% per annum and is convertible at any time, with accrued interest, at the discretion of the investor to shares of our common stock at a rate of $0.25 per share. This note has been repaid as of the date of this filing.

During November 2011, we issued a $25,000 note payable with an unrelated, accredited third party in exchange for cash. The note matures 60 days from the date of issuance and bears interest at a rate of 10.0% per annum with an increase to 12.0% per annum following the maturity date. This note has been repaid as of the date of this filing.

Item 4. Mine Safety Disclosures

Item 5. Other Information

None.

Item 6. Exhibits

No. Exhibit


2.4	Agreement and Plan of Merger dated May 21, 2012.
31.1	8650 Section 302 Certification of Chief Executive Officer
31.2	8650 Section 302 Certification of Chief Financial Officer
32.1	Certification Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101 INS	XBRL Instance Document*
101 SCH	XBRL Schema Document*
101 CAL	XBRL Calculation Linkbase Document*
101 DEF	XBRL Definition Linkbase Document*
101 LAB	XBRL Labels Linkbase Document*
101 PRE	XBRL Presentation Linkbase Document*

* The XBRL related information in Exhibit 101 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability of that section and shall not be incorporated by reference into any filing or other document pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing or document.

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.


	YOUCHANGE HOLDINGS CORP

Date: May 21, 2012

	By: /s/ JEFFREY I. RASSÁS
	Jeffrey I. Rassás
	Chief Executive Officer and Director

	By: /s/ RICHARD A. PAPWORTH
	Richard A. Papworth
	Chief Financial Officer and Director

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