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

Wyoming		26-2589503
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

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

Indicate by check mark whether the Company 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	x
(Do not check if a smaller reporting company)

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

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			Page
PART I
Item 1.	Financial Statements			F-1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operation			3
Item 3.	Controls and Procedures			7
PART II
Item 1.	Legal Proceedings			8
Item 1A.	Risk Factors
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds			8
Item 3.	Defaults Upon Senior Securities			8
Item 4.	Mine Safety Disclosures			8
Item 5.	Other Information			8
Item 6.	Exhibits			9

 

		As of November 30, 2013				As of August 31, 2013
Assets
Current assets:
Cash		$	6,214			$	7,980
Accounts receivable, net of allowances of $19,000 at November 30, 2013 and August 31, 2013			459,990				373,971
Prepaid expenses			23,602				11,076
Other current assets			108,509				-
Total current assets			598,315				393,027
Property and equipment, net			317,273				400,133
Other assets
Note receivable			163,125				160,500
Other assets			80,062				37,562
Total other assets			243,187				198,062
Total assets		$	1,158,775			$	991,222
Liabilities and stockholders’ deficit
Current liabilities:
Accounts payable and accrued expenses		$	1,491,268			$	1,376,138
Line of credit			507,879				362,331
Derivative liabilities embedded within convertible notes payable			189,745				778,074
Capital lease payable – in default			90,704				90,704
Related party payables			341,774				468,705
Convertible notes payable			96,500				200,000
Convertible notes payable, in default			224,500				127,000
Total current liabilities			2,942,370				3,402,952
Long term liabilities
Convertible promissory notes, net of debt discount of $26,255 and $30,233 as of November 30, 2013 and August 31, 2013			283,745				279,767
Related party convertible promissory notes, net of debt discount of $31,951 and $37,585 as of November 30, 2013 and August 31, 2013			493,049				487,415
Total long term liabilities			776,794				767,182
Total liabilities			3,719,164				4,170,134
Commitments and contingencies (note 5)
Stockholders’ deficit:
Preferred stock, $0.0001 par value; 5,000,000 shares authorized; Series A Preferred Stock; 0 and 0 shares issued and outstanding as of November 30, 2013 and August 31, 2013 Series B Preferred Stock; 200,000 and 0 shares issued and outstanding as of November 30, 2013 and August 31, 2013			20				-
Common stock, $0.0001 par value: 1,000,000,000 shares authorized; 19,864,459 and 17,045,823 shares issued and 18,364,459 and 17,045,823 outstanding as of November 30, 2013 and August 31, 2013, respectively			1,837				1,705
Additional paid-in capital			1,481,370				1,223,508
Deferred stock based compensation			-				(8,262	)
Accumulated deficit			(4,043,616	)			(4,395,863	)
Total stockholders’ deficit			(2,560,389	)			(3,178,912	)
Total liabilities and stockholders’ deficit		$	1,158,775			$	991,222

 

		Three Months Ended November 30, 2013				Three Months Ended November 30, 2012
Revenue:
Advertising		$	515,577			$	376,425
Services			8,250				108,612
Total revenue			523,827				485,037
Costs of sales:
Media network			127,943				175,049
Depreciation and amortization			82,296				95,547
Colocation services			47,700				77,457
Broadcaster commissions			63,793				45,344
Other costs			73,025				111,539
Total costs of sales			394,757				504,936
Gross (loss) profit			129,070				(19,899)
Operating expenses:
Product development (includes stock compensation $0 and $35,333 in 2013 and 2012)			82,752				105,801
Officer compensation			120,000				108,817
Sales and marketing (includes stock compensation $8,262 and $17,667 in 2013 and 2012)			42,639				122,584
Other expenses (includes stock compensation $0 and $26,500 in 2013 and 2012)			156,569				254,206
Total operating expenses			401,960				591,408
Loss from operations			(272,890	)			(611,307	)
Other income (expenses)
Interest income			2,625				-
Interest expense (including accretion of $9,612 and $243,833 for 2013 and 2012)			(77,683	)			(263,655	)
Gain on disposal of education lead generation			111,865				-
Change in fair value of derivatives			588,329				6,098
Total other income (expenses)			625,136				(257,557	)
Income (loss) before provision for income taxes			352,246				(868,864	)
Provision for income taxes			-				-
Net income (loss)			352,246				(868,864	)
Deemed dividend			-				(50,927	)
Net income (loss) attributable to common stockholders		$	352,246			$	(919,791	)
Basic net income (loss) per share attributable to common stockholders		$	0.02			$	(4.61	)
Diluted net income (loss) per share attributable to common stockholders		$	0.01			$	(4.61	)
Weighted-average number of shares used in computing basic per share amounts			17,592,780				199,381
Weighted-average number of shares used in computing dilutive per share amounts			39,119,011				199,381

		For the Three Months Ended November 30, 2013				For the Three Months Ended November 30, 2012
Cash flows from operating activities
Net income (loss)		$	352,246			$	(868,864	)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Stock-based compensation			1,636				79,500
Bad debt expense			-				10,767
Depreciation and amortization			82,860				96,444
Re-measurement of derivative liabilities			(588,329	)			(6,098)
Accretion of discount			9,612				243,833
Amortization of finance fees			11,458				-
Changes in assets and liabilities:
Accounts receivable			(86,019)				138,248
Prepaids and other current assets			(107,493	)			3,876
Other assets			(2,625	)			(1,595	)
Accounts payable and accrued expenses			131,271				(80,063	)
Deferred revenue			-				(68,802	)
Net cash used in operating activities			(195,383	)			(452,754	)
Cash flows from financing activities
Proceeds from issuance of convertible promissory notes			-				250,000
Proceeds from line of credit			120,548				-
Payments on capital lease			-				(7,338	)
Net advances from related parties			73,069				63,468
Net (payments) advances to Factor			-				(17,615	)
Net cash provided by financing activities			193,617				288,515
Net (decrease) increase in cash and cash equivalents			(1,766	)			(164,239)
Cash and cash equivalents at beginning of period			7,980				227,435
Cash and cash equivalents at end of period		$	6,214			$	63,196
Supplemental disclosures of noncash financing activities
Deemed dividend		$	-			$	50,927
Issuance of common stock for conversion of debts and accrued interest		$	22,140			$	28,500
Issuance of preferred stock in satisfaction of amounts owed to officers		$	200,000			$	-
Acquisition of assets with issuance of common stock		$	42,500			$	-
Supplemental disclosures of cash flow information
Cash paid during the period for income taxes		$	-			$	-
Cash paid during the period for interest		$	-			$	1,231

The accompanying interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission (“SEC”), and should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s Form 10-K for year ended August 31, 2013 In the opinion of management, all adjustments necessary in order for the financial statements to be not misleading have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, StreamTrack Media, Inc., a California corporation. All intercompany balances and transactions have been eliminated in consolidation. In the opinion of the Company’s management, the consolidated financial statements include all adjustments, which include only normal recurring adjustments, necessary for the fair presentation of the Company’s financial position for the periods presented.

 

 

		November 30, 2013				August 31, 2013
Software		$	771,666			$	771,666
Servers, computers, and other related equipment			198,924				198,924
Leasehold improvements			1,675				1,675
			972,265				972,265
Less accumulated depreciation and amortization			(654,992	)			(572,132	)
Property and equipment, net		$	317,273			$	400,133

Depreciation expense totaled $82,860 and $96,444 for the three months ended November 30, 2013 and 2012, respectively. There have been no write-offs or impairments of property and equipment since the Company’s inception on November 30, 2011.

 

		November 30, 2013				August 31, 2013
Accounts payable		$	1,126,105			$	1,028,287
Accrued interest			149,716				139,639
Accrued broadcaster commissions			94,596				90,632
Accrued consulting fees			66,910				64,049
Credit card			53,941				53,531
Accounts payable and accrued expenses		$	1,491,268			$	1,376,138

 

		Fair Value Measurement Using
		Quoted Prices in Active Markets for Identical Instruments (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)				Total
Fair values as of November 30, 2013
Liabilities:
Derivative liabilities		$	-			$	189,745			$	-			$	189,745
Total liabilities measured at fair value		$	-			$	189,745			$	-			$	189,745
Fair values as of August 31, 2013
Liabilities:
Derivative liabilities			-			$	778,074				-				778,074
Total liabilities measured at fair value		$	-			$	778,074			$	-			$	778,074

On November 21, 2013, the Company entered into an Asset Purchase Agreement with Robot Fruit, Inc., a New York corporation ("Robot Fruit") pursuant to which, the Company issued 850,000 shares of common stock in exchange for Robot Fruit Mobile Application Development Platform and related code, intellectual property and goodwill. The Company accounted for the purchase as an asset acquisition as the assets did not meet the definition of a business. In connection with the agreement, the Company determined the fair market value of the common stock issued to be $42,500, which was recorded as an intangible asset within other assets on the accompanying balance sheet. The Company is currently determining the expected life of the assets acquired.

 

 

 

		November 30, 2013				August 31, 2013
Servers		$	147,049			$	147,049
Less: accumulated depreciation			(114,215	)			(99,984	)
Net assets under capital lease		$	32,834			$	47,065

 

On March 22, 2013, the Company reached a settlement and release agreement with IBM Credit, LLC, (“IBM”) the lessor associated with the Company’s computer servers and software classified under capital lease. The balance owed to IBM as of March 22, 2013 was agreed to be $108,704. Payments of $9,000 per month are scheduled in order to satisfy this balance. The final payment due March 1, 2014 is for $9,704. As of November 30, 2013 and as of the date of these financial statements, the Company was in default of this agreement and the amount outstanding of $90,704 is reflected as a current liability on the accompanying balance sheet.

 

 

 

Subsequently, the Company executed an extension to this agreement. The Lender financing has been increased from a $250,000 to a $520,000 line of credit secured by all of the Companies assets. The line of credit maturity date has been extended from September 30, 2013 to June 27, 2014.

Creditor’s Notes, in default, principal balance as of August 31, 2013		$	230,500
Conversion of a portion of December 28, 2011 Creditor’s Note to common stock			(6,000	)
Creditor’s Notes, in default, principal balance as of November 30, 2013		$	224,500

		November 30, 2013
Stock price		$	0.0300
Effective conversion price		$	0.0375
Creditor Note and accrued interest balance outstanding		$	328,072
Actual outstanding shares of common stock			18,364,459
Shares issuable upon conversion, at actual price			8,748,587
% of outstanding common stock, at actual price			48	%
Shares issuable upon conversion, assuming 25% price decrease			11,664,782
% of outstanding common stock, assuming 25% price decrease			64	%
Shares issuable upon conversion, assuming 50% price decrease			17,497,173
% of outstanding common stock, assuming 50% price decrease			95	%
Shares issuable upon conversion, assuming 75% price decrease			34,994,347
% of outstanding common stock, assuming 75% price decrease			191	%

Vendor Notes, principal balance as of August 31, 2013		$	96,500
Conversion of Vendor Note to common stock			-
Vendor Note, principal balance, November 30, 2013		$	96,500

		November 30, 2013
Stock price		$	0.0300
Effective conversion price		$	0.0100
Convertible promissory notes balance outstanding		$	96,500
Actual outstanding shares of common stock			18,364,459
Shares issuable upon conversion, at actual price			9,650,000
% of outstanding common stock, at actual price			53	%
Shares issuable upon conversion, assuming 25% price decrease			12,866,667
% of outstanding common stock, assuming 25% price decrease			70	%
Shares issuable upon conversion, assuming 50% price decrease			19,300,000
% of outstanding common stock, assuming 50% price decrease			105	%
Shares issuable upon conversion, assuming 75% price decrease			38,600,000
% of outstanding common stock, assuming 75% price decrease			210	%

 

Convertible promissory notes, principal balance as of August 31, 2013		$	835,000
Issuance of convertible promissory notes			-
Conversion of convertible promissory notes to common stock			-
Convertible promissory notes, principal balance, November 30, 2013		$	835,000

 

2014		$	100,000
2015			625,000
2016			110,000
Thereafter			-
		$	835,000

		November 30, 2013				November 30, 2012
Expected life (in years)			0.10				0.10
Balance of note and accrued interest outstanding		$	328,072			$	26,000
Stock price		$	0.0300			$	1.0800
Effective conversion price		$	0.0375			$	0.7200
Shares issuable upon conversion			8,748,587				36,111
Risk-free interest rate			0.04	%			0.08	%
Expected volatility			61.83	%			61.83	%
Expected dividend yield			-				-

		November 30, 2013				November 30, 2012
Expected life (in years)			0.10				0.10
Balance of note outstanding		$	96,500			$	140,000
Stock price		$	0.0300			$	1.0843
Effective conversion price		$	0.0100			$	0.3615
Shares issuable upon conversion			9,650,000				387,329
Risk-free interest rate			0.18	%			0.18	%
Expected volatility			61.83	%			61.83	%
Expected dividend yield

 

 

Each share of Series A Preferred Stock has voting rights equal to the voting equivalent of the common stock into which it is convertible at the time of the vote. The holders of the Series A Preferred Stock are not entitled to dividends. The Series A Preferred Stock has no preferential rights to the Company’s common stock and will share in any liquidation proceeds with the common stock on an as converted basis.

Diluted net loss per share is computed by giving effect to all potential shares of common stock, including convertible debt instruments, preferred stock, restricted stock unit grants and detachable stock warrants. Basic and diluted net loss per share for the three months ended November 30, 2012 was the same as the inclusion of all potential common shares outstanding would have been anti-dilutive. The following is the calculation of dilutive shares for the three months ended November 30, 2013. 

 

		For the Three Months Ended November 30, 2013
Weighted-average common shares outstanding used in computing basic net income per share:			17,592,780
Common stock equivalents:
Creditor Notes			8,748,587
Vendor Note			9,650,000
Convertible promissory notes			3,127,644
Series B Preferred Stock (A)			-
Weighted-average common shares outstanding used in computing dilutive net income per share:			39,119,011

 

		For the Three Months Ended November 30, 2013
Net income available to common stock holders:		$	352,246
Adjustments:
Accrued interest on convertible notes			25,823
Accretion of discount on convertible notes			9,612
Net income used in the calculation of the dilutive income per share:		$	387,681

 

 

 

 

1.	We barter with audio content providers, namely internet and terrestrial radio stations, to obtain control and management of their desktop advertising opportunity (“Ad Inventory”). We also routinely purchase any Ad Inventory the content providers have not previously transferred to us by barter.
2.	In exchange for the Ad Inventory, we pay for all internet and mobile streaming costs associated with the broadcaster’s content that is streamed through our platform. We barter in order to scale our business. The end result of the barter is that we aggregate Ad Inventory from broadcasters that management believes can reach substantial size while maintaining a primarily fixed cost structure for our hardware, content delivery, labor and other costs, respectively.
3.	We re-broadcast original audio broadcast content through the Platform in a streaming media format in desktop and mobile environments. By re-broadcasting we ensure that we do not pay any royalties. Royalties are the responsibility of our broadcasters. This is a substantial advantage for us as many of our competitors pay royalties of up to 70% of revenues generated from licensed broadcast content.
4.	We serve advertisements (“Ads”) within the Platform in audio, display and video formats in a desktop environment and display ads in a mobile environment using our RadioLoyaltyTM Apps.
5.	Ads are served by our automated systems based on geography and demographics data, among others.
6.	The primary technology that makes our Platform unique in the industry is that we are able to re-broadcast audio content with geographically targeted Ads that replace Ads served within an original broadcast targeting a listener in a certain geography. By having this capability we can also choose to replace audio Ads that do not generate as high of Ad revenues with video-based Ads that generate much higher Ad revenues. In effect, we make the broadcaster’s original broadcast capable of delivering Ads that are geographically targeted throughout a global broadcast marketplace while also utilizing video Ads and our proprietary video in-stream technology to increase advertising rates.
7.	All of our primary technology that supports the Platform is automated and capable of operating in a live environment. Audio content is streamed, Ads are targeted and served, audio Ads are replaced as needed and video Ads replace audio Ads, as desired and when possible.

 

We recently completed an asset purchase of RobotFruit, a mobile loyalty and application platform. Robot Fruit provides a complete SAAS based mobile platform for publishers and content owners to directly sell their mobile web and in-app ad inventory on leading mobile devices. The platform is a self-service mobile loyalty and development platform that has an easy to use interface which enables station owners, content owners, business owners, artists and bands to quickly deploy in HTML5, native iOS and Android based application environments. We anticipate making the technology available to broadcasters, content owners and artists in the coming months.

 

 

 

 

 

 

		Three Months Ended November 30, 2013				Three Months Ended November 30, 2012
Operating expenses
Product development		$	82,752			$	105,801
Officer compensation			120,000				108,817
Sales and marketing			42,639				122,584
Other			156,569				254,206
Total operating expenses		$	401,960			$	591,408

 

		Three Months Ended November 30, 2013				Three Months Ended November 30, 2012
Other income (expenses)
Interest income		$	2,625			$	-
Interest expense			(68,071	)			(19,822	)
Interest expense – accretion			(9,612	)			(243,833	)
Gain on disposal of education lead generation			111,865				-
Change in fair value of derivatives			588,329				6,098
Total other income (expenses)		$	625,136			$	(257,557	)

Other (expense) income for the three months ended November 30, 2013 and 2012, totaled $625,136 and $(257,557), respectively. We generated interest income on the note receivable. We incurred interest expense calculated on our convertible promissory notes and fees charged by the provider of our factoring line of credit, among others. During the month of November we completed the sales of our education lead generation vertical, Student Matching Service. We also recorded the accretion of various debt discounts associated with our convertible promissory notes. The accretion is a result of the amortization of the debt discounts associated with the convertible promissory notes over the term of the convertible promissory notes. As a result of the derivative classification regarding the beneficial conversion feature on some of our convertible notes, the derivative liabilities have to be re-measured as of each reporting date. For the three months ended November 30, 2013and 2012, the re-measurement resulted in a decrease to the derivative liabilities of $588,329 and $6,098, respectively. If the convertible promissory notes issued to the Creditor remain outstanding at any time subsequent to the six-month anniversary of the date the convertible promissory notes were issued, a derivative liability exists and will have to be measured as of each reporting date. Similarly, if any portion of the Vendor Note remains outstanding at the reporting date, the derivative liability has to be re-measured as of the reporting date. During the three months ended November 30, 2013, the Company's stock price decreased substantially from August 31, 2013 which impacted the valuation of the derivative liabilities.

 

The Company’s financial statements are prepared using accounting principles generally accepted in the United States of America applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. For the three months ended November 30, 2013, the Company recorded an operating loss of $272,890, which was the result and used cash flow from operations of $195,383. As of November 30, 2013, the Company had a working capital deficit of $2,344,055, indicated that the Company may have difficulty continuing as a going concern.

 

 

		Three Months Ended November 30, 2013				Three Months Ended November 30, 2012
Net cash used in operating activities of continuing operations		$	(195,383	)		$	(452,754	)
Net cash provided by financing activities of continuing operations			193,617				288,515

Number		Description
31.1		Certification of Chief Executive and Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1		Certification of Chief Executive and Financial Officer pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema Document
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		XBRL Taxonomy Extension Label Linkbase Document
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

	STREAMTRACK, INC.
Date: January 21, 2014	By:	/s/ Michael Hill
	Name:	Michael Hill
	Title:	Chairman of the Board of Directors, Chief Executive Officer, President, and Chief Financial Officer (Principal Executive Officer and Principal Financial Officer)

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