Guitammer Co - FORM 10-Q

Attached files

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EX-32.2 - CERTIFICATION - Guitammer Co	gtmm_ex322.htm
EX-31.2 - CERTIFICATION - Guitammer Co	gtmm_ex312.htm
EX-32.1 - CERTIFICATION - Guitammer Co	gtmm_ex321.htm
EX-31.1 - CERTIFICATION - Guitammer Co	gtmm_ex311.htm
EXCEL - IDEA: XBRL DOCUMENT - Guitammer Co	Financial_Report.xls

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2014

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: 000-54331

THE GUITAMMER COMPANY

(Exact name of registrant as specified in its charter)

Nevada		61-1650777
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

6117 Maxtown Road, Westerville, OH		43082
(Address of principal executive offices)		(Zip Code)

(614) 898-9370

(Registrant’s telephone number, including area code)

None

(Former name, former address and former fiscal year, if changed since last report)

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

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

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

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). o Yes x No

As of May 14, 2014, 78,530,248 shares of Common Stock were outstanding.

The Guitammer Company

INDEX

		Page
PART I - Financial Information

Item 1.	Condensed Consolidated Financial Statements (unaudited)

	Condensed Consolidated Balance Sheets at March 31, 2014 and December 31, 2013		3

	Condensed Consolidated Statements of Operations for the three months ended March 31, 2014 and 2013		4

	Condensed Consolidated Statement of Changes in Stockholders’ Deficit for the three months ended March 31, 2014 and year ended December 31, 2013		5

	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2014 and 2013		6

	Notes to Condensed Consolidated Financial Statements		7

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations		23

Item 3.	Quantitative and Qualitative Disclosures About Market Risk		30

Item 4.	Controls and Procedures		31

PART II - Other Information

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		32

Item 6.	Exhibits		32

Signature			38

THE GUITAMMER COMPANY

CONSOLIDATED BALANCE SHEETS

	(unaudited)
	March 31,			December 31,
	2014			2013
ASSETS
Current assets
Cash and cash equivalents	$	34,815		$	140,231
Accounts receivable, net		130,780			62,505
Inventory		419,936			443,761
Prepaid expenses and other current assets		4,971			6,141
Total current assets		590,502			652,638

Property and equipment, net		116,662			127,186
Deferred financing costs, net		45,116			38,335
Other assets		19,667			21,472
Total Assets	$	771,947		$	839,631

LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
Line of credit	$	39,523		$	39,523
Accounts payable		647,522			533,438
Accrued expenses		383,119			376,188
Deferred revenue		56,284			68,823
Current portion of long-term debt - related parties		604,530			584,352
Current portion of long-term debt - non-related parties		561,467			559,987
Total current liabilities		2,292,445			2,162,311

Long-term debt, net of current portion - related parties		332,928			250,000
Long-term debt, net of current portion - non related parties		279,219			302,479
Total Liabilities		2,904,592			2,714,790

Commitments		-			-

Stockholders' deficit
Common stock, par value of $.001, 150,000,000 shares authorized;		78,093			77,906
78,092,748 and 77,905,248 shares issued and outstanding at
March 31, 2014 and December 31, 2013, respectively
Additional paid-in capital		7,350,994			7,253,730
Accumulated deficit		(9,561,732	)		(9,206,795	)
Total Stockholders' deficit		(2,132,645	)		(1,875,159	)
Total Liabilities and Stockholders' deficit	$	771,947		$	839,631

See accompanying Notes to Condensed Consolidated Financial Statements.

THE GUITAMMER COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

	For the Three Months Ended
	March 31,
	2014			2013

Total revenue	$	311,052		$	525,427

Cost of goods sold		167,463			306,618
Gross profit		143,589			218,809

Operating expenses
General and administrative		435,545			439,425
Research and development		10,782			1,293
		446,327			440,718

Loss from operations		(302,738	)		(221,909	)

Other income (expense)
Interest expense		(52,200	)		(53,834	)
Interest income		1			6
		(52,199	)		(53,828	)

Loss before provision for income taxes		(354,937	)		(275,737	)

Provision for income taxes		-			-
Net loss	$	(354,937	)	$	(275,737	)

Basic and diluted loss per share	$	(0.005	)	$	(0.004	)

Basic and diluted weighted average common shares outstanding		78,028,165			69,219,763

See accompanying Notes to Condensed Consolidated Financial Statements.

THE GUITAMMER COMPANY

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT

THREE MONTHS ENDED MARCH 31, 2014 AND YEAR ENDED DECEMBER 31, 2013

(UNAUDITED)

					Additional
	Common Stock				Paid-in		Accumulated
	Shares		Amount		Capital		Deficit			Total
Balance, January 1, 2013		68,779,482	$	68,780	$	5,641,492	$	(7,899,932	)	$	(2,189,660	)

Common stock and warrants issued to retire accrued interest		82,604		82		20,569		-			20,651

Employee stock options issued vesting over 3 years		-		-		153,455		-			153,455

Common stock and warrants issued for services		949,500		950		183,821		-			184,771

Options/warrants exercised for common stock purchase		906,162		906		11,581		-			12,487

Common stock and warrants issuance		7,187,500		7,188		1,242,812		-			1,250,000

Net loss		-		-		-		(1,306,863	)		(1,306,863	)
Balance, December 31, 2013		77,905,248	$	77,906	$	7,253,730	$	(9,206,795	)	$	(1,875,159	)

Warrants issued for debt issuance and to revise debt agreements
to include accrued interest		-		-		32,208		-			32,208
											-
Employee stock options issued vesting over 3 years		-		-		35,868		-			35,868
											-
Common stock and warrants issued for services		187,500		187		29,188		-			29,375
											-
Net loss							$	(354,937	)		(354,937	)
Balance, March 31, 2014		78,092,748	$	78,093	$	7,350,994	$	(9,561,732	)	$	(2,132,645	)

See accompanying Notes to Condensed Consolidated Financial Statements.

THE GUITAMMER COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	For the Three Months Ended
	March 31,
	2014			2013
Cash flows from operating activities
Net loss	$	(354,937	)	$	(275,737	)
Adjustments to reconcile net loss to net cash
used in operating activities
Depreciation and patent amortization		12,762			2,938
Amortization of deferred financing fees		6,683			8,361
Amortization of debt discount		1,672			-
Employee stock options		35,868			45,851
Stock and warrants issued for services		29,375			50,000
Change in fair value of warrant liability		(11,050	)		8,858

Changes in assets and liabilities
Accounts receivable		(68,275	)		(65,786	)
Inventory, net		23,825			8,187
Prepaid expenses		1,170			129,566
Accounts payable and accrued expenses		152,245			30,167
Deferred revenue		(12,539	)		(49,621	)
Net cash used in operating activities		(183,201	)		(107,216	)

Cash flows from investing activities
Purchase of property and equipment		(433	)		-
Net cash used in investing activities		(433	)		-

Cash flows from financing activities
Proceeds from stock and warrants		-			250,000
Proceeds from options exercised		-			300
Proceeds from debt		100,000			-
Payment of debt		(21,782	)		(20,083	)
Net cash provided by financing activities		78,218			230,217

Net increase (decrease) in cash and cash equivalents		(105,416	)		123,001
Cash and cash equivalents, beginning of year		140,231			79,136
Cash and cash equivalents, end of year	$	34,815		$	202,137

Supplemental disclosure of cash flow information
Cash paid during the period for
Interest	$	23,320		$	49,956
Income taxes	$	-		$	-

Supplemental disclosure of non-cash investing and financing activities
Issuance of common stock in connection with debt retirement	$	-		$	20,651
Issuance of common stock and warrants for professional services	$	29,375		$	50,000
Accrued interest converted to debt	$	20,178		$	-

See accompanying Notes to Condensed Consolidated Financial Statements.

1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Business

The financial information presented represents The Guitammer Company (the “Company”) originally incorporated on March 6, 1990, under the laws of the State of Ohio, and then re-domiciled to Nevada on May 18, 2011.

In April 2011, the Board of Directors approved a resolution to create a holding company to own 100% of the Ohio Company (“Guitammer-Ohio”). The holding company is incorporated in the State of Nevada and has 150 million authorized common shares. Existing shareholders of Guitammer-Ohio received 31,206 shares in the holding company for each share they owned, resulting in a total of 50,001,374 shares of Common Stock, of Guitammer-Nevada evidencing the same proportional interest in Guitammer-Nevada as they held in Guitammer-Ohio. The per share numbers and the per share amounts in the financial statements and the notes to the financial statements reflect the retroactive application of our stock split.

The Company is involved in the design and distribution of a low frequency audio transducer branded as the original ButtKicker® products. The Company, headquartered in Ohio, sells products internationally.

Basis of Presentation

All significant inter-company transactions and accounts have been eliminated in consolidation.

Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

Cash and Cash Equivalents

The Company considers all highly liquid debt instruments and other short-term investments with an initial maturity of three months or less to be cash equivalents.

The Company maintains cash and cash equivalent balances at a financial institution that is insured by the Federal Deposit Insurance Corporation, subject to certain limitations.

Accounts Receivable

Accounts receivable are carried at cost less an allowance for doubtful accounts. The allowance for doubtful accounts is established through provisions charged against income and is maintained at a level believed adequate by management to absorb estimated bad debts based on current economic conditions.

Accounts receivable are uncollateralized customer obligations due under normal trade terms generally requiring payment within 30 days from the invoice date. The Company recorded an allowance of approximately $4,600 at March 31, 2014 and December 31, 2013.

1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Inventory

Inventory, consisting of finished goods, is stated at the lower of cost or market. Cost is determined using the weighted average method. Inventory that is determined to be obsolete or not sellable is expensed immediately. The Company recorded a reserve for obsolete items of $10,415 at March 31, 2014 and December 31, 2013.

Property and Equipment, net

Property and equipment are recorded at cost less accumulated depreciation. Expenditures for major additions and improvements are capitalized, while minor replacements, maintenance, and repairs and maintenance are charged to expense as incurred. Leasehold improvements are amortized over the shorter of the assets’ economic lives or the lease term. Depreciation is provided using the straight-line method over the estimated useful lives of the assets as follows:

Equipment and electronics	2 - 7 years
Vehicles	4 years
Furniture and fixtures	7 years
Leasehold improvements	Shorter of lease terms or 7 years

Deferred Financing costs, net

Deferred financing costs are recorded at cost less accumulated amortization. Amortization is provided using the straight-line method over the life of the loan for which the financing costs were incurred.

Impairment of Long-Lived Assets

Long-lived assets to be held and used are reviewed for impairment whenever events or circumstances indicate that the carrying value of such assets may not be recoverable. Determination of recoverability is generally based on an estimate of undiscounted cash flows resulting from the use of the asset and its eventual disposition. If the evaluation indicates that the carrying amount of an asset is not recoverable from our undiscounted cash flows, then an impairment loss is measured by comparing the carrying amount of the asset to its fair value.

Revenue Recognition

The Company recognizes revenue from the sale of its products when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the fee is fixed and determinable, and collectability is reasonably assured.

Deferred Revenue

The Company received prepayment for products from some of its customers as the Company requires prepayment before goods are shipped to all international customers. As of March 31, 2014 and December 31, 2013 the Company had deferred revenue of $56,284 and $68,823, respectively. The Company recognizes revenue and decreases deferred revenue in accordance with the revenue recognition policy.

1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Income Taxes

Prior to the creation of the Nevada holding company formed on May 18, 2011, the Company had elected S Corporation status for Federal and Ohio state income tax purposes. Under these elections, the Company’s taxable income was included on the stockholders individual income tax returns, and the Company made no provision for Federal and State income tax. Effective with the Company redomiciling to Nevada on May 18, 2011, the Company elected C Corporation status for both Federal and State income tax purposes.

There were no uncertain tax positions at March 31, 2014 or December 31, 2013, as the Company’s tax positions for open years meet the recognition thresholds of more likely than not to be sustained upon examinations. When necessary, the Company would accrue penalties and interest related to unrecognized tax benefits as a component of income tax expense. Tax returns for the years 2010 through 2012 are currently open to examination. Tax returns prior to 2010 are no longer subject to examination by tax authorities.

Fair Value of Financial Instruments

The Company measures and discloses the estimated fair value of financial assets and liabilities using the fair value hierarchy prescribed by U.S. generally accepted accounting principles. The fair value hierarchy has three levels, which are based on reliable available inputs of observable data. The hierarchy requires the use of observable market data when available. The levels are defined as follows:

Level 1 – quoted prices for identical instruments in active markets;

Level 2 – quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model derived valuations in which significant inputs and significant value drivers are observable in active markets; and

Level 3 – fair value measurements derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

The carrying amount reported in the balance sheets for cash and cash equivalents, accounts receivable, accounts payable and accrued expenses approximate fair value because of the immediate or short-term maturity of these financial instruments. The fair value of the long term debt and revolving line of credit at March 31, 2014 and December 31, 2013 approximated the carrying amount based on interest rates that were close to market rates or being close to maturity and were determined on a Level 2 measurement.

The Black-Scholes valuation model is used to estimate the fair value of the warrants. The significant assumptions considered by the model were the remaining term of the warrants, the fair value per share stock price of $.16 and $.17, a risk free treasury rate for 1.25 years and 1.5 years of .2075% and .2600% at March 31, 2014 and December 31, 2013, respectively and an expected volatility of 60%. At March 31, 2014 and December 31, 2013, the fair value of warrants were determined on a Level 2 measurement.

1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Advertising

Costs of advertising and marketing are expensed as incurred including the cost of making commercials. Advertising and marketing costs were $47,275 and $7,949 for the periods ending March 31, 2014 and 2013, respectively.

Shipping and Handling

Shipping and handling costs of approximately $25,859 and $46,997 for the periods ending March 31, 2014 and 2013, respectively, are included in general and administrative expenses in the statements of operations.

Research and development costs

The costs of research and development activities are expensed when incurred.

Earnings (Loss) Per Share of Common Stock

Earnings (loss) per common share is computed using the weighted average number of common shares outstanding. Diluted earnings per share (EPS) include additional dilution from common stock equivalents, such as stock issuable pursuant to the exercise of stock options and warrants. Common stock equivalents were not included in the computation of diluted earnings per share when the Company reported a loss because to do so would be antidilutive for periods presented. Anti-dilutive securities not included in net loss per share calculations for the years presented include:

	March 31,		December 31,
	2014		2013

Potentially dilutive securities:
Outstanding time-based stock options		40,761,505		40,761,505
Outstanding time-based warrants		19,441,928		18,154,428

Stock Based Compensation

Share-based compensation is measured as the fair value of the award at its grant date based on the estimated number of awards that are expected to vest and is recorded over a defined service period. Compensation expense is recognized based on the estimated grant date fair value method using a Black-Scholes valuation model. It is the Company’s policy to recognize expense using the straight-line method over the vesting period.

Reclassifications

Certain reclassifications have been made to the prior period consolidated financial statements to conform to the current period presentation.

Recently Issued Accounting Standards

In February 2013, the FASB issued ASU No. 2013-02, Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income. The update does not change the current requirements for reporting net income or other comprehensive income in financial statements. However, the update requires an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, an entity is required to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period. For other amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures required under U.S. GAAP that provide additional detail about those amounts. The amendments are effective prospectively for reporting periods beginning after December 15, 2012. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements or required disclosures.

2 – GOING CONCERN

The Company has incurred net losses, negative cash flows from operating activities, and has an accumulated deficit of approximately $9,562,000 at March 31, 2014. In addition, at March 31, 2014 the Company had a cash balance of approximately $35,000 and working capital deficiency of approximately $1,702,000. The Company has relied upon cash from its financing activities to fund its ongoing operations as it has not been able to generate sufficient cash from its operating activities in the past and there is no assurance it will be able to do so in the future. Unless the Company can obtain additional cash resources, these factors raise substantial doubt about the Company’s ability to continue as a going concern. The consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty.

The Company needs additional capital to fund current working capital requirements, ongoing debt service and to repay its obligations that are maturing over the upcoming twelve month period. Management plans to increase revenues and to control operating expenses in order to reduce losses from operations. Additionally, the Company will continue to seek equity and/or debt financing in order to enable the Company to meet its financial obligations until it achieves profitability. The Company may not be able to obtain this additional financing on acceptable terms or at all.

3 – PROPERTY AND EQUIPMENT, NET

	March 31,			December 31,
	2014			2013
Equipment and electronics	$	180,092		$	179,659
Vehicles		35,043			35,043
Furniture and fixtures		20,257			20,257
Leasehold improvements		12,313			12,313
		247,705			247,272

Less accumulated depreciation		(131,043	)		(120,086	)
Property and equipment, net	$	116,662		$	127,186

Depreciation expense for the periods ended March 31, 2014 and 2013 was $10,956 and $1,111, respectively.

4 – DEFERRED FINANCING COSTS, NET

	March 31,			December 31,
	2014			2013
Deferred financing costs	$	153,454		$	139,990
Less Accumulated Amortization		(108,338	)		(101,655	)
Deferred financing costs, net	$	45,116		$	38,335

Amortization expense for deferred financing costs for the periods ended March 31, 2014 and 2013 was $6,683 and $8,361, respectively. In January 2014, the notes payable to Forest Capital for $150,000 and the Julie Jacobs Trust for $100,000 were modified extending the maturity date by two years and the unpaid interest on each of these notes was added to the loan balance. As an inducement to extend the notes term and add the interest due and unpaid interest to the notes balance, the Company issued 324,000 warrants to Forest Capital and 216,000 warrants to the Julie Jacobs Trust. The cost of the warrants was valued at $13,464 using the Black Scholes valuation model and was added to deferred financing costs which will be amortized over the remaining life of the loan.

5 – LINE OF CREDIT

The Company has entered into an unsecured line of credit arrangement with Key Bank, which carries a maximum possible loan balance of $40,000 at an annual interest rate of 6.25% and is due on demand. As of March 31, 2014 and December 31, 2013, the Company had borrowed $39,523.

6 – ACCRUED EXPENSES

Accrued expenses consisted of the following at March 31, 2014 and December 31, 2013:

	March 31,		December 31,
	2014		2013
Accrued payroll	$	18,271	$	9,471
Accrued interest		160,745		160,398
Warrant liability		148,280		159,330
Miscellaneous accrued expenses		55,823		46,989
	$	383,119	$	376,188

As more fully described in footnote 8, the Company has recorded a warrant liability of $148,280 and $159,330 as of March 31, 2014 and December 31, 2013, respectively, which is based on the Black-Scholes valuation model to estimate the fair value of the warrants. The significant assumptions considered by the model were the remaining term of the warrants, the fair value per share stock price of $.16 and $.17, a risk free treasury rate for 1.25 years and 1.5 years of .2075% and .2600% at March 31, 2014 and December 31, 2013, respectively and an expected volatility of 60%.

7 – DEBT

Debt payable to related parties is as follows:

	March 31, 2014		December 31, 2013

Note payable to Julie E. Jacobs Trust, a stockholder, in the amount of $50,000 with interest on the unpaid principal balance computed from the date of this loan until paid in full at the rate equal to the Wall Street Journal Prime Rate plus 4.75%, (which is 8% as of the date of the loan and at 3/31/2014) with interest payable annually on January 3rd and with the principal balance due on January 3, 2016. As an inducement to make this loan, the Company issued 400,000 warrants to purchase stock at $.24 per share which were valued at $9,372 using the Black Scholes valuation model and were recorded as a loan discount. The discount is being amortized over the life of the loan.	$	41,464		-

Note payable to The Walter Doyle Trust, a stockholder, in the amount of $50,000 with interest on the unpaid principal balance computed from the date of this loan until paid in full at the rate equal to the Wall Street Journal Prime Rate plus 4.75%, (which is 8% as of the date of the loan and at 3/31/2014) with interest payable annually on January 3rd and with the principal balance due on January 3, 2016. As an inducement to make this loan, the Company issued 400,000 warrants to purchase stock at $.24 per share which were valued at $9,372 using the Black Scholes valuation model and were recorded as a loan discount. The discount is being amortized over the life of the loan.		41,464		-

Note payable to Forest Capital, an affiliate of the Walter J. Doyle Trust, a stockholder, in the original amount of $250,000 at an annual interest rate of 10%. Effective December 13, 2009, the annual interest rate increased to 20%. On December 21, 2011, $100,000 of the note was converted to shares of stock at a price of $.25 per share and the note was amended decreasing the annual interest rate to 8% with interest payable annually on January 3rd and with the principal balance due on January 3, 2014. The note was extended on January 27, 2014 to January 3, 2016 and the interest due at January 3, 2014 was included in the new note balance of $162,107. This addition to the loan is payable to Forest Capital upon the receipt by the Company of new equity funding of $100,000 or more and is included in the current portion of related party debt. In connection with the note extension, 324,000 warrants to purchase stock at $0.24 per share were issued in return for the agreement to extend the note to January 3, 2016.		162,107	$	150,000

7 – DEBT (Continued)

	March 31,		December 31,
	2014		2013

Note payable to Julie E. Jacobs Trust in the original amount of $100,000 at an annual interest rate of 20%. Effective September 26, 2010, the annual interest rate increased to 30% with the note payable on demand. On December 21, 2011, note was amended decreasing the annual interest rate to 8% with interest payable annually on January 3rd and with the principal balance due on January 3, 2014. The note was extended on January 27, 2014 to January 3, 2016 and the interest due at January 3, 2014 was included in the new note balance of $108,071. This addition to the loan is payable to the Julie E. Jacobs Trust upon the receipt by the Company of new equity funding of $100,000 or more and is included in the current portion of related party debt. In connection with the note extension 216,000 warrants to purchase stock at $0.24 per share were issued in return for the agreement to extend the note to January 3, 2016.		108,071		100,000

Note payable to Thelma Gault, a stockholder, in the original amount of $800,000 at an interest rate of 10%. The loan is collateralized by all assets of the Company, and on April 25, 2008 signed an agreement in which her collateralization is shared with the State of Ohio. On November 18, 2010, Thelma Gault signed an agreement subordinating up to $700,000 of debt to the Walter Doyle Trust and the Julie Jacobs Trust and to Standard Energy through the Julie Jacobs Trust. Note is due on June 1, 2014.		584,352		584,352

Total debt payable to related parties	$	937,458	$	834,352
Less current portion of debt payable to related parties		604,530		584,352
Long term debt payable to related parties	$	332,928	$	250,000

7 – DEBT (Continued)

	March 31, 2014		December 31, 2013
Other debt is as follows:
Note payable to Ohio Innovation Loan Fund at an interest rate of 8%. Monthly payments of principal, interest, escrow, and service fees are based on the loan agreement. The loan is collateralized by all assets of the Company, and this collateralization is shared with the Thelma Gault per agreement signed on April 25, 2008. On November 29, 2010, The Director of Development for the State of Ohio signed an agreement subordinating up to $700,000 of debt to the Walter Doyle Trust and the Julie Jacobs Trust and to Standard Energy through the Julie Jacobs Trust. On December 1, 2012, Note was modified extending the due date to November 2015.	$	369,540	$	391,018

Notes payable to Merrill Lynch in the original amount of $400,000, with interest payable at Libor plus .56%. In addition, this debt is guaranteed 50% each by the Walter J. Doyle Trust and the Julie E. Jacobs Trust. As compensation for their guarantees, the trusts receive 4% per annum and share a first position lien on all assets. The note is due on demand.		396,146		396,448

Notes payable to four different investors in the original amount of $250,000 at an interest rate of 12%. On January 31, 2012, all of these notes except for a $75,000 note were converted to shares of stock at a price of $.25 per share. The $75,000 note was due June 30, 2012 and is now considered due on demand.		75,000		75,000

Other debt	$	840,686	$	862,466
Less current portion of debt payable to non-related parties		561,467		559,987
Long term debt payable to non-related parties	$	279,219	$	302,479

The principal maturities of the notes payable for the next five years and in the aggregate are as follows:

	Period ending
	March 31,
2015	$	1,165,997
2016		612,147
2017		-
2018		-
2019		-
	$	1,778,144

7 – DEBT (Continued)

The Company is not in compliance with certain debt covenants and has not received waivers from the lender. As a result, the note payable with an outstanding balance of $75,000 is due on demand and is classified as current in the accompanying balance sheets.

Conversion of debt

During the year ended December 31, 2013, certain debt instruments were converted to equity. Prior to conversion, some of these debt instruments were modified to include a debt conversion feature. Based on the terms of the transactions, these modifications and conversion were treated as equity transactions.

The following table lists debt that was converted during the year ended December 31, 2013:

Conversion of Debt Table
	Debt		Accrued Interest		Total		Stock issued
Note Converted	Extinguished		Extinguished		Extinguished		Shares
Forest Capital accrued interest on note due January 3, 2013	$	-	$	12,391	$	12,391		49,562

Julie E. Jacobs Trust accrued interest on note due January 3, 2013		-		8,260		8,260		33,042

	$	-	$	20,651	$	20,651		82,604

8 – STOCKHOLDERS’ DEFICIENCY

Stock Sales

During the year ended December 31, 2013, the company sold 7,187,500 shares of stock and warrants (one share of stock and one warrant equals one unit) as part of a private placement memorandum; 1,000,000 of the units were sold for $.25 per unit with the stock warrants exercisable at $.36 per share, 250,000 of the units were sold for $.20 per unit with the stock warrants exercisable at $.24 per share and 5,937,500 of the units were sold to existing private placement investors for $.16 per unit with the stock warrants exercisable at $.24 per share. Additionally, stock options and warrants were exercised for the purchase of 906,162 shares at a purchase price ranging from $.0032 to $.021 per share.

Options

On February 1, 2012, the Board approved and granted 600,000 stock options to three of its employees, with an exercise price of $.25 per share with a vesting schedule of 60% on the first anniversary of the grant, 20% on the second anniversary of the grant and the final 20% on the third anniversary of the grant. On November 26, 2012, the Board approved and granted 3,000,000 stock options to the Company’s president and CEO, with an exercise price of $.25 per share with a vesting schedule of 33 and 1/3% on the first anniversary of the grant, 33 and 1/3% on the second anniversary of the grant and the final 33 and 1/3% on the third anniversary of the grant.

8 – STOCKHOLDERS’ DEFICIENCY (continued)

The following table summarizes the activity for all stock options:

	Number of Options			Range of Exercise Price		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term in Years		Weighted Average Grant Date Fair Value
Outstanding options as of January 1, 2013		44,725,371		$	.00320-$.25000	$	.01993		6.08	$	.03561
Options granted		-
Options cancelled/expired		(3,370,248	)	$	.02131-$.00320	$	.02131		-	$	.01168

Options exercised		(593,618	)	$	.02131	$	.01819		5.78	$	.02433
Outstanding options as of December 31, 2013		40,761,505		$	.00320-$.25000	$	.03704		5.55	$	.03285
Options granted		-			-		-		-		-
Options cancelled/expired		-			-		-		-		-
Options exercised		-			-		-		-		-
Outstanding options as of March 31, 2014		40,761,505		$	.00320-$.25000	$	.03704		5.30	$	.03285

The following table provides information about options under the Plan that are outstanding and exercisable as of March 31, 2014:

		Options Outstanding			Options Exercisable
Exercise Price		As of December 31, 2013		Weighted Average Contractual Life Remaining	As of December 31, 2013
$	.00320		10,056,677	5.51 years		10,056,677
$	.02131		27,104,828	4.80 years		27,104,828
$	.25000		3,600,000	8.52 years		1,480,000
			40,761,505			38,641,505

Included in the above table are 6,541,614 options to non-employees and 34,219,891 to officers, directors and employees of the Company.

8 – STOCKHOLDERS’ DEFICIENCY (continued)

Warrants

The Company has 19,411,928 and 18,154,428 warrants outstanding as of March 31, 2014 and December 31, 2013, respectively. For the period ending March 31, 2014, 1,527,500 warrants were issued at an exercise price of $0.24 as follows: 1,340,000 warrants were issued in connection with the new debt issuances and debt modifications and the Company issued 187,500 warrants in exchange for services.

On October 18, 2013, the Company extended any unexpired Common Stock Purchase Warrants for one additional year for all unexpired warrants issued in connection with investments in the PPM and the follow-up PPM.

8 – STOCKHOLDERS’ DEFICIENCY (continued)

This table summarizes the activity for all warrants:

	Number of	Exercise
	Warrants	Price	Expiration Date
Outstanding Warrants from
January 1, 2011	1,291,928	$.02131	July, 2015
Warrants Granted	400,000	$.36000	October, 2014
	400,000	$.36000	November, 2014
	200,000	$.36000	December, 2014
	225,000	$.25000	July, 2014
Outstanding Warrants from		$.02131-	Expiration dates
December 31, 2011	2,516,928	$.36000	As listed above
Warrants Granted	312,500	$.00500	May, 2014
	900,000	$.36000	January, 2015
	200,000	$.36000	February, 2015
	100,000	$.36000	March, 2015
	80,000	$.36000	April, 2014
	1,460,000	$.36000	April, 2015
	80,000	$.36000	May, 2014
	320,000	$.36000	May, 2015
	80,000	$.36000	June, 2014
	340,000	$.36000	June, 2015
	80,000	$.36000	July, 2014
	120,000	$.36000	July, 2015
	80,000	$.36000	August, 2014
	40,000	$.36000	September, 2014
	2,500,000	$.24000	May, 2016
	200,000	$.24000	June, 2016
	500,000	$.24000	September, 2015
	100,000	$.24000	October, 2016
Outstanding Warrants from		$.00500-	Expiration dates
December 31, 2012	10,009,428	$.36000	As listed above
Warrants Granted	120,000	$.36000	January, 2015
	40,000	$.36000	February, 2015
	40,000	$.36000	March, 2015
	1,000,000	$.36000	March, 2016
	40,000	$.36000	April, 2015
	40,000	$.36000	May, 2015
	3,906,250	$.24000	May, 2016
	62,500	$.24000	June, 2015
	312,500	$.24000	June, 2016
	62,500	$.24000	July, 2015
	250,000	$.24000	July, 2016
	62,500	$.24000	August, 2015
	62,500	$.24000	September, 2015
	781,250	$.24000	September, 2016
	62,500	$.24000	October, 2015
	156,250	$.24000	October, 2016
	62,500	$.24000	November, 2015
	781,250	$.24000	November, 2016
	62,500	$.24000	December, 2015
Outstanding Warrants from		$.00500-	Expiration dates
December 31, 2013	17,914,428	$.36000	As listed above
Warrants Granted	62,500	$.24000	January, 2016
	1,340,000	$.24000	January, 2017
	62,500	$.24000	February, 2016
	62,500	$.24000	March, 2016
Outstanding Warrants as of		$.00500-	Expiration dates
March 31, 2014	19,441,928	$.36000	As listed above

8 – STOCKHOLDERS’ DEFICIENCY (continued)

The warrants for 1,219,928 shares issued prior to January 1, 2011, include certain provisions that protect the holders from a decline in the stock price of the Company. As a result of those provisions, the Company recognizes the warrants as liabilities at their fair values on each reporting date.

As shown in footnote 6, the Company has recorded a warrant liability of $148,280 and $159,330 as of March 31, 2014 and December 31, 2013, respectively, which is based on the Black-Scholes valuation model to estimate the fair value of the warrants.

The significant assumptions considered by the model were the remaining term of the warrants, the fair value per share stock price of $.16 and $.17, a risk free treasury rate for 1.25 years and 1.5 years of .2075% and .2600% at March 31, 2014 and December 31, 2013, respectively and an expected volatility of 60%.

9 – COMMITMENTS

On September 1, 2009, the Company entered into a four year lease for the rental of the office and warehouse space expiring on August 31, 2013. In July of 2013, the Company entered into a four year extension of the lease for the rental of the office and warehouse space expiring on August 31, 2017. Under the terms of the current lease and the four year extension, the Company’s future minimum rental payments are: $64,010 for 2014, $86,600 for 2015, $89,000 for 2016, and $60,400 for 2017. Total rent expense was $21,246 for periods ending March 31, 2014 and 2013.

On July 12, 2013, the company entered into the “Broadcast Technology and Promotional Rights Agreement between the NHRA and The Guitammer Company” whereby in exchange for use of its broadcast technology and certain sponsor payments the parties agreed that the NHRA telecasts on ESPN2 would be tactically enhanced and Guitammer would receive sponsor benefits including: television commercials, on-air sponsored segments, presence at certain NHRA races in the Manufacturer’s Midway, and other promotional rights and benefits. On April 10, 2014, the agreement was suspended retroactively, effective January 1, 2014 due to a disagreement between the NHRA and ESPN regarding the nature of the tactile enhancement of the previous season’s tested, approved and successfully tactile enhanced NHRA broadcasts by the Company. The agreement will be reinstated for one 12 month period when and if this situation is resolved. The $100,000 payment made by the Company in January of 2014 was refunded to the Company in April as a part of the suspension agreement.

Stock and warrants issued for services

During the 3 months ending March 31, 2014, the Company issued 187,500 shares of common stock and 187,500 warrants for consulting services valued at $29,375. During the 3 months ending March 31, 2013, the Company issued 200,000 shares of common stock and 200,000 warrants for consulting services valued at $50,000.

9 – COMMITMENTS (continued)

On February 10, 2012, the Company entered into a 3 month agreement with John Ertman for advisory services. Under the terms of the agreement, Mr. Ertman will be compensated at a rate of 40,000 shares of common stock and 40,000 warrants per month. The agreement was extended through March 31, 2014, with the compensation arrangement of 40,000 shares of common stock and 40,000 warrants per month for April and May of 2013, and 62,500 shares of common stock and 62,500 warrants per month for the months June 2013 through March 2014.

On May 20, 2013, the Company entered into a 3 month agreement with JFenway LLC for investor relations services. Under the terms of the agreement JFenway LLC was compensated at a rate of 100,000 shares of common stock for the 3 months of services.

10 – CONCENTRATION OF CREDIT RISK

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of accounts receivable. Receivables are stated at the amounts management expects to collect from outstanding balances. Generally, the Company does not require collateral or other security to support contract receivables.

The Company had no major customers for the period ending March 31, 2014 and had one major customer for the period ending March 31, 2013. A major customer is defined as one that purchases ten-percent or more in a reporting period. Net sales for the three months ended March 31, 2014 and 2013 include sales to the following major customer:

Customer		2014				2013
AV Industry Le Havre			-				24.3	%

We had no accounts receivable balance from AV Industry Le Havre at March 31, 2014 and December 31, 2013.

The Company had major suppliers in each of the reporting periods presented. A major supplier is defined as one that provides ten-percent or more of total cost-of-sales in a particular reporting period or has an outstanding account payable balance of ten-percent or more as of the reporting period.

	Purchases During 3 Months ending March 31, 2014			Account Payable Percentage at March 31, 2014			Purchases During 3 Months ending March 31, 2013			Account Payable Percentage at December 31, 2013
Eminence Speaker LLC		89	%		48	%		26	%		46	%
Sonavox Canada, Inc.		8	%		12	%		41	%		16	%
Actiway Industrial Co.		-			21	%		30	%		25	%

11 – RELATED PARTY TRANSACTIONS

One of the Company’s shareholders is also a note holder and a minority shareholder of a major supplier to the Company. This shareholder is a note holder who also owns 2,590,098 shares of the Company’s common stock and is a minority shareholder in Eminence Speaker, LLC, a major supplier to the Company.

12 – OTHER ASSETS

Other assets consist of patents and trademarks related to the ButtKicker products. The assets are being amortized over 10 years based on the estimated useful lives of the patents and trademarks. Amortization of the intangible assets, which is included in general and administrative expenses, was $1,805 and $1,827 for the periods ended March 31, 2014 and 2013, respectively. The estimated future amortization expense for intangible assets is approximately $7,000 per year for 2014, $6,000 in 2015 and 2016, and $2,200 thereafter.

13 – INCOME TAXES

The Company accounts for income taxes under the asset and liability method which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of differences between the carrying amounts and the tax basis of the assets and liabilities. No provision has been recorded for a deferred tax asset due to net operating losses and full valuation allowances against deferred income taxes.

14 – SUBSEQUENT EVENTS

On April 25, 2014, 187,500 warrants were exercised at a price of $0.005 for the purchase of 187,500 shares of the Company’s stock. On May 13, 2014, 125,000 warrants were exercised at a price of $0.005 for the purchase of 125,000 shares of the Company's stock.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with Guitammer's Unaudited Condensed Consolidated Interim Financial Statements and notes thereto included elsewhere in this Form 10-Q. Except for the historical information contained herein, the discussion in this Form 10-Q contains certain forward looking statements that involve risks and uncertainties, such as statements of Guitammer plans, objectives, expectations and intentions. The cautionary statements made in this Form 10-Q should be read as being applicable to all related forward-looking statements wherever they appear in this Form 10-Q. These statements include, without limitation, statements concerning the potential operations and results of Guitammer described below. Guitammer's actual results could differ materially from those discussed here. Factors that could cause or contribute to such differences include, without limitation, those factors discussed herein and in Guitammer's Form 10 Registration Statement.

OVERVIEW

Guitammer Company (“Guitammer-Ohio”) was incorporated in Ohio on March 6, 1990, as a research, development and licensing company and manufacturer and marketer of low frequency audio transducers that allows users to feel low frequency sound (“bass”) like a subwoofer but silent.

On May 18, 2011, Guitammer-Ohio caused the formation of a Nevada corporation with the same name (the “Registrant” “Company”, “Guitammer-Nevada”, “we”, “us” and “our”) and entered into a Plan and Agreement of Reorganization with Guitammer-Nevada pursuant to which (i) the shareholders of Guitammer-Ohio would exchange (on a one (1) for thirty-one thousand, two hundred and six (31,206) shares basis) their aggregate 1,602.3 issued and outstanding shares of common stock for an aggregate of 50,001,374 shares of Common Stock, par value $0.001 per share, of Guitammer-Nevada evidencing the same proportional interest in Guitammer-Nevada as they held in Guitammer-Ohio, and (ii) option and warrant holders to purchase an aggregate of 1,397.7 shares of common stock of Guitammer-Ohio would exchange (on a one (1) for thirty-one thousand, two hundred and six (31,206) shares basis) their options and warrants for options and warrants to purchase an aggregate of 43,616,626 shares of Common Stock, par value $0.001 per share, of Guitammer-Nevada in the same proportional interest in Guitammer-Nevada as they held in Guitammer-Ohio (the “Reorganization”). In addition, the Company issued to two lenders warrants to purchase shares of Guitammer-Ohio which because of the Reorganization would be converted into warrants to purchase an aggregate of 225,000 shares of our Common Stock, par value $0.001 per share. In order to save time and expense of creating and issuing new Guitammer-Nevada options and warrants, the Company’s Board of Directors passed a resolution that the outstanding Guitammer- Ohio options and warrants would be and are deemed to be and constitute the Guitammer- Nevada options and warrants (on the said 1 for 31,206 shares basis) to purchase an aggregate of 43,841,626 shares of our Common Stock.

Critical Accounting Policies and Estimates

“Management’s Discussion and Analysis of Financial Condition and Results of Operations” discusses our interim condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these interim condensed consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the interim condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. A summary of our significant accounting policies is included in the Notes to Consolidated Financial Statements included in the Annual Report on Form 10-K for the year ended December 31, 2013.

Our management regularly reviews our accounting policies to make certain they are current and also to provide readers of the interim condensed consolidated financial statements with useful and reliable information about our operating results and financial condition. Implementation of these accounting policies includes estimates and judgments by management based on historical experience and other factors believed to be reasonable. This may include judgments about the carrying value of assets and liabilities based on considerations that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Management believes the following critical accounting policies are most important to the portrayal of our financial condition and results of operations and require more significant judgments and estimates in the preparation of our interim condensed consolidated financial statements.

Accounts Receivable

Inventory

Revenue Recognition

Deferred Revenue

The Company received prepayment for products from some of its customers as the Company requires prepayment before goods are shipped to almost all international customers. As of March 31, 2014 and December 31, 2013 the Company had deferred revenue of $56,284 and $68,823, respectively. The Company recognizes revenue and decreases deferred revenue in accordance with the revenue recognition policy.

Income Taxes

Effective with the Company redomiciling to Nevada on May 18, 2011, the Company elected C Corporation status for both Federal and State income tax purposes.

There were no uncertain tax positions at March 31, 2014 or December 31, 2013, as the Company’s tax positions for open years meet the recognition thresholds of more likely than not to be sustained upon examinations. Tax returns for the years 2010 through 2012 are currently open to examination. Tax returns prior to 2010 are no longer subject to examination by tax authorities.

Shipping and Handling

Research and development costs

The costs of research and development activities are expensed when incurred.

Stock Based Compensation

RESULTS OF OPERATIONS

Three months ended March 31, 2014

All references below to per share and shares of Common Stock of the Company reflect the reorganization.

Results of Operations

During the second half of 2013 and the first quarter of 2014, the Company spent considerable capital resources implementing and commercializing its patented tactile broadcast technology for the ESPN2 broadcasts of the National Hot Rod Association (NHRA) and in related activities with other broadcast parties in order to prove that it has the ability to bring the actual feel of live sporting events to sports fans while watching in the comfort of their own home. Because of this, the Company experienced a shortage of available working capital required to fund certain inventory requirements related to its existing consumer products business and this had a corresponding negative effect on revenues for the quarter.

Management believes that the further development and implementation of this broadcast technology will produce the greatest amount of long term value for its shareholders and will help to enable it to secure the financing needed to purchase adequate levels of all inventory items in future periods while continuing the implementation and commercializing its patented tactile broadcast technology for live sporting events.

Revenue decreased $214,375 or 40.8%, to $311,052 for the three months ended March 31, 2014, compared to revenue of $525,427 for the three months ended March 31, 2013. Management believes revenues for the three months ended March 31, 2014, could have been significantly larger, but the company sold out of the Bk4-4 transducer in mid-February, a key component in our best-selling home theater kit, which was a major factor in the Company’s sales backorders accumulating to approximately $100,000 at March 31, 2014.

Cost of goods sold decreased $139,155, or 45.4%, to $167,463, for the three months ended March 31, 2014, compared to cost of goods sold of $306,618 for the three months ended March 31, 2013. The 45.4% decrease in the cost of goods sold for the three months ending March 31, 2014 corresponds closely with the 40.8% decrease in revenue for the same time period, but is slightly larger due to variations in the sales mix of products sold as the profit margin on some products are slightly higher.

Gross profit decreased by $75,220 or 34.4% to $143,589 for the three months ended March 31, 2014, compared to gross profit of $218,809 for the three months ended March 31, 2013. Our gross margin percentage increased to 46.2% for the three months ended March 31, 2014 compared to 41.6% for the three months ended March 31, 2013, for the reasons mentioned in the cost of goods sold paragraph above.

General and administrative expenses decreased $3,880, or .9%, to $435,545 for the three months ended March 31, 2014, compared to general and administrative expenses of $439,425 for the three months ended March 31, 2013. Significant variations within the general and administrative expenses were as follows:

	March 31, 2014			March 31, 2013		Increase (Decrease)
Advertising and marketing	$	47,275		$	7,949	$	39,326
Freight and related expenses		26,950			63,730		(36,780	)
Stock warrant expense		(11,050	)		8,858		(19,908	)
Professional fees		105,149			122,279		(17,130	)
Travel and entertainment expense		23,655			12,307		11,348
Depreciation		10,956			1,111		9,845
All other general & admin. expenses		232,610			223,191		9,419
	$	435,545		$	439,425	$	3,880

Advertising and marketing increased by $39,326 in the three months ended March 31, 2014 compared to the three months ended March 31, 2013 due to advertising and marketing activities related to its agreement with the NHRA including an onsite fan experience trailer and television commercials airing on ESPN2.

Freight and related expenses decreased $36,780 in the three months ended March 31, 2014 compared to the three months ended March 31, 2013, primarily due to the receipt of fewer containers of finished product from our overseas manufactures during the three months ending March 31, 2014.

Stock warrant expense decreased by approximately $19,908 in the three months ended March 31, 2014 compared to the three months ended March 31, 2013 due to adjusting the stock warrants liability based the Black-Scholes valuation model which is used to estimate the fair value of the warrants.

Professional fees decreased $17,130 in the three months ended March 31, 2014 compared to the three months ended March 31, 2013, primarily due to a decrease in consulting expenses.

Depreciation expense increased by $9,845 in the three months ended March 31, 2014 compared to the three months ended March 31, 2013, due to the increased depreciation associated with equipment purchased for the tactile enhanced live sports broadcast of the NHRA.

Travel and entertainment expense increased by $11,348 in the three months ended March 31, 2014 compared to the three months ended March 31, 2013, primarily due to the increase in travel related to the tactile enhanced live sports broadcast of the NHRA.

Research and development expenses increased $9,489 to $10,782 for the three months ended March 31, 2014, compared to $1,293 for the three months ended March 31, 2013. The increase was attributable to development costs for its haptic-tactile broadcast technology for live sports broadcasts including a series of successful integration and broadcast tests on a regional sports network with a major sports team. The Company was able to capture, process, and broadcast the tactile effect of a live sporting event from the sports arena to the home for a second type of major sporting event, the first being the NHRA.

Loss from operations increased by $80,829 or 36.4% for the three months ended March 31, 2014 to $302,738 as compared to $221,909 for the three months ended March 31, 2013. The increase was caused by the decrease in gross profit and research and development expense as explained above offset partially by the decrease in general and administrative expenses. Management believes that the increase in loss from operations is due to being sold out of the Bk4-4 transducer in mid-February, a key component in our best-selling home theater kit, as mentioned above.

Interest expense decreased $1,634 or 3.0%, to $52,200 for the three months ended March 31, 2014, compared to interest expense of $53,834 for the three months ended March 31, 2013. The decrease was due primarily to the conversion of debt to equity, as illustrated in Notes to the Financial Statements, Note number 7, and the refinancing of the Ohio innovation loan in December of 2012.

Our net loss increased $79,200 for the three months ended March 31, 2014. We had net a loss of $354,937 (or basic and diluted net loss per share of $0.005) for the three months ended March 31, 2014, compared to net loss of $275,737 (or basic and diluted net loss per share of $0.004) for the three months ended March 31, 2013. The decrease was caused primarily by the decrease in gross profit and by the increase in research and development expense, partially offset by the decrease in interest expense and general and administrative expense.

The following table sets forth EBITDA for the Company, which is a non-GAAP measurement. EBITDA is defined as earnings (loss) before net interest expense, taxes, depreciation and amortization. Although EBITDA is not a measure of performance calculated in accordance with generally accepted accounting principles (“GAAP”), management believes that these non-GAAP measures will allow for a better evaluation of the operating performance of the business and facilitate meaningful comparison of the results in the current period to those in prior periods and future periods. However, investors should not consider this measure in isolation or as a substitute for net income, operating income, or any other measure for determining the Company’s operating performance that is calculated in accordance with GAAP. A reconciliation of EBITDA to the most comparable GAAP financial measure, net loss, follows: For the three months ended:

	March 31,			March 31,
	2014			2013
Net loss	$	(354,937	)	$	(275,737	)
Adjustments
Interest expense		52,200			53,834
Depreciation and patent amortization		12,762			2,938
Taxes		-			-
EBITDA		(289,975	)		(218,965	)

EBITDA decreased $71,010 or 32.4% to $(289,975) for the three months ended March 31, 2014, compared to EBITDA of $(218,965) for the three months ended March 31, 2013. The decrease in 2014 EBITDA was caused by the decrease in gross margin and the increase in research and development expense, offset partially by the decrease in interest expense and general and administrative expense.

Liquidity and Capital Resources

Total current assets were $590,502 as of March 31, 2014, consisting of cash of $34,815, net accounts receivable of $130,780, inventory of $419,936 and prepaid and other current assets of $4,971. Current assets decreased by $62,136 or 9.5% compared to current assets of $652,638 as of December 31, 2013 mainly due to the decrease in cash which resulted from the decrease in revenue as noted above.

Total current liabilities were $2,292,445 as of March 31, 2014, consisting of accounts payable of $647,522, accrued expenses of $383,119, current maturities of long-term debt of $1,165,997, deferred revenue of $56,284 and other current liabilities of $39,523. Current liabilities increased by $130,134 or 6.0% compared to current liabilities of $2,162,311 as of December 31, 2013 mainly due to the increase in Accounts payable.

The working capital deficit increased by $192,270 or 12.7% to $(1,701,943) for the three months ending March 31, 2014 compared to the working capital deficit of $(1,509,673) at December 31, 2013.

Cash Flows during the three Months Ended March 31, 2014

During the three months ended March 31, 2014 we had a net decrease in cash and cash equivalents of $105,416 primarily consisting of net cash used in operating activities of $203,380 partially offset by net cash provided by financing activities of $98,397.

Net cash used in operating activities was $203,380 for the three months ended March 31, 2014, consisting of an increase in: accounts receivable of $68,275, accounts payable and accrued expenses of 152,245 and decreases in: inventory of $23,825, prepaid expenses of $1,170, and deferred revenue of $12,539. These changes were reduced by net loss of $354,937 which had adjustments for depreciation and patent amortization of $12,762, amortization of deferred financing fees of $6,683, amortization of debt discount of $1,672 employee stock options of $35,868, stock and warrants issued for services of $29,375, and the decrease in fair value of warrant liability of $11,050.

Net Cash used in investing activities was $433 for the three months ended March 31, 2014 for the purchases of property and equipment.

Net cash provided by financing activities was $78,218 for the three months ended March 31, 2014, consisting of net proceeds from debt of $100,000 and the payment of debt of $21,782.

In order to meet current consumer product backlog and anticipated orders, the Company also expects to need approximately $2,000,000 of cash to purchase inventory in the next 12 months. The Company expects to generate these funds from operations with any deficit to be funded through capital raises. We estimate that for the next 12 months we will also need approximately $405,000 for debt service.

The Company historically has incurred net losses, negative cash flows from operating activities, and has an accumulated deficit of approximately $9,562,000 at March 31, 2014. In addition, at March 31, 2014 the Company had a cash balance of approximately $35,000 and working capital deficiency of approximately $1,702,000. Although the working capital deficiency has improved by approximately $1,625,000 since December 31, 2011, in both the near and long term, without additional financing, the Company is and will be in an illiquid position. The Company received cash through the sales of Common Stock and warrants to purchase Common Stock in the amount of $150,000 in the third quarter of 2011, $250,000 in the fourth quarter of 2011, $375,000 in the first quarter of 2012, $770,000 in the second quarter of 2012, $540,000 in the third quarter of 2012, $250,000 in the first quarter of 2013, $675,000 in the second quarter of 2013, and an additional $175,000 in the third quarter of 2013. The Company believes that the receipt of additional equity will enable it to purchase adequate inventory to meet its existing sales demand and to be able to increase sales through advertising and marketing related activities. There is no assurance that the Company will have any additional sales of stock or that the Company will be able to become operationally cash flow positive.

If the Company is successful in raising significant additional capital (of which there is no assurance), the Company intends to increase its budgets for advertising and marketing, targeting consumers who have shown an interest in the Company’s or similar products. Additionally, the Company intends to increase its advertising and marketing expenses by advertising directly to customers who experience its products in ButtKicker equipped cinemas. The Company also intends to hire one or more sales people to sell the Company’s products to key markets including the home theater, commercial cinema and international markets.

We believe the combination of the Company’s recent success in tactically enhancing the NHRA on ESPN2, increased advertising and marketing spending and the addition of one or more sales people will drive demand for our products and will increase revenue and cash flow.

At this time, we have not secured additional financing. We do not have any commitments for additional capital from third parties or from our officers or directors or any of our shareholders to supplement our operations or provide us with financing in the future. There can be no assurance that additional capital will be available to us, or that, if available, it will be on terms satisfactory to us. If we are unable to increase revenues from operations, to raise additional capital from conventional sources and/or additional sales of stock by June of 2014, we may be forced to curtail or cease our operations. These factors raise doubt in our ability to continue as a going concern. Our financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty. There is substantial doubt that we can continue as a going concern for the next 12 months unless additional funding is secured by the Company.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our Company is a smaller reporting company, as defined by Rule 12b-2 of the Exchange Act and, as such, is not required to provide the information required under this item.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports filed or submitted under the Securities Exchange Act of 1934 (the "Exchange Act") is recorded, processed, summarized and reported, within the time period specified in the SEC's rules and forms and is accumulated and communicated to the Company's management, as appropriate, in order to allow timely decisions in connection with required disclosure.

Evaluation of Disclosure Controls and Procedures

Pursuant to Rule 13a-15(b) under the Exchange Act, the Company carried out an evaluation, with the participation of the Company’s management, including Mark Luden, the Company's Chief Executive Officer ("CEO") and Richard Conn, the Company's Chief Financial Officer ("CFO") (the Company’s principal financial and accounting officer), of the effectiveness of the Company’s disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act as of the end of the period covered by this report. Based upon that evaluation, the Company’s CEO and CFO concluded that the Company’s disclosure controls and procedures were not effective as of March 31, 2014 to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including the Company’s CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure, due to the material weaknesses described below.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company's annual or interim financial statements will not be prevented or detected on a timely basis. The Company believes its weaknesses in internal controls and procedures is due in part to the Company's lack of sufficient personnel with expertise in the area of SEC, generally accepted accounting principles (GAAP) and tax accounting procedures. In addition, the Company lacks the personnel structure, size and complexity to segregate duties sufficiently for proper controls.

Until such time as additional personnel are hired, the Company believes that it will continue to recognize a weakness in its internal controls and procedures. The Company’s plan is to hire additional personnel to properly implement a control structure when the appropriate funds become available. In the meantime, the Chief Executive Officer and Chief Financial Officer will continue to perform or supervise the performance of additional accounting and financial analyses and other post-closing procedures including detailed validation work with regard to balance sheet account balances, additional analysis on income statement amounts and managerial review of all significant account balances and disclosures, to ensure that the Company's Quarterly Report and the financial statements forming part thereof are in accordance with accounting principles generally accepted in the United States of America.

Changes in Internal Controls

During the three months ended March 31, 2014, there were no significant changes in internal controls of the Company, or other factors that could significantly affect these controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Part II - OTHER INFORMATION

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

The Company claims an exemption from registration afforded by Section 4(2) of the Securities Act of 1933, as amended for the above issuances and debt conversions, since the foregoing did not involve a public offering, the recipients took the securities for investment and not resale and the Company took appropriate measures to restrict transfer.

ITEM 6. EXHIBITS.

a. The following exhibits are filed as part of this report or incorporated herein as indicated.

Exhibit No.	Date of Document	Name of Document
2.0*	May 17, 2011	Agreement and Plan of Reorganization
3.0*	March 3, 1990	Articles of Incorporation of Guitammer-Ohio
3.1*	June 6, 2005	Certificate of Amendment of Guitammer- Ohio
3.2*	June 17, 2005	Certificate of Amendment of Guitammer- Ohio
3.3*		Code of Regulations of Guitammer - Ohio
3.4*	May 17, 2011	Articles of Incorporation of Guitammer- Nevada
3.5*		Bylaws of Guitammer - Nevada
4.0*	Sept. 30, 1999	1999 Non-Qualified Stock Option Plan, as amended
4.1*		Form of Option Agreement
4.2*	June 17, 2005	2005 Amendment to1999 Non-Qualified Stock Option Plan
4.3**	July 14, 2011	Form of Warrant issued to The Walter J. Doyle Trust

4.4**	July 14, 2011	Form of Warrant issued to Standard Energy Company
10. 1*	Nov. 1, 2002	Richard B. Luden $82,000 Note
10.1A#	Dec 21, 2011	Richard Luden Conversion Agreement 82K
10. 2*	May 13, 2005	Note Purchase Agreement—Walter Doyle, John O. Huston and Eric Roy
10. 3*	Sept.1, 2007	First Amendment To Note Purchase Agreement—Walter Doyle, John O. Huston and Eric Roy
10. 4*	May 13, 2005	Walter J. Doyle $150,000 Note
10.4A*	September 1, 2007	Amended and Restated Walter Doyle Note
10.4B###	January 31, 2012	Walter Doyle 150k Jan 31 2012 Note Conversion Agreement
10. 5*	May 13, 2005	Eric Roy $100,000 Note
10.5A*	March 28, 2011	Agreement to Convert An Existing Note—Eric P. Roy
10.5B*	September 1, 2007	Eric Roy 9.4 Stock Options on 100K 0901207note
10.5C*	May 13, 2005	Eric Roy 16 stock options 05132005
10.5D*	May 13, 2006	Eric Roy 16 Stock options 05132006
10.5E*	September 1, 2007	Amended and Restated Eric Roy Note
10.5F###	January 31, 2012	Eric Roy Jan 31 2012 Note Conversion Agreement
10. 6*	May 13, 2005	John O. Huston $50,000 Promissory Note
10.6A*	September 1, 2007	John O. Huston 4.7 Stock options 09012007
10.6B*	May 13, 2005	John O. Huston 8 Stock Options 05132005
10.6C*	May 13, 2006	John O. Huston 8 Stock Options 05132006
10.6D*	September 1, 2007	Amended and Restated John O. Huston Promissory Note
10.6E###	January 31, 2012	John Huston Jan 31 2012 Note Conversion Agreement
10.7*	June 29, 2005	Note Purchase Agreement—Walter Doyle, Andrea L. Levenson and Gust Van Sant
10.8*	September 1, 2007	First Amendment To Note Purchase Agreement—Walter Doyle, Andrea L. Levenson and Gust Van Sant
10.9*	June 29, 2005	Walter J. Doyle $50,000 Promissory Note
10.9A*	September 1, 2007	Amended and Restated Walter Doyle Note

10.9B###	January 31, 2012	Walter Doyle 50K Jan 31 2012 Note Conversion Agreement
10.10*	June 29, 2005	Andrea Lerner Levenson $50,000 Promissory Note
10.10A*	September 1, 2007	Andrea Lerner Levenson 4.7 Stock Options on 50K 09012007 note
10.10B*	June 29, 2006	Andrea Lerner Levenson 8 stock options 62920006
10.10C*	June 29, 2005	Andrea Lerner Levenson 8 stock options 06292005
10.10D*	September 1, 2007	Amended and Restated Andrea L. Levenson Promissory Note
10.10E###	January 31, 2012	Andrea Levenson Jan 31 2012 Note Conversion Agreement
10.11*	June 29, 2005	Gust Van Sant $50,000 Promissory Note
10.11A*	September 1, 2007	Gust Van Sant 4.7 Stock Options on 50K 09012007 note
10.11B*	June 29, 2005	Gust Van Sant 8 Stock Options 06292005
10.11C*	June 29, 2006	Gust Van Sant 8 Stock Options 06292006
10.11D*	September 1, 2007	Amended and Restated Gust Van Sant Promissory Note
10.11E###	January 31, 2012	Gus Van Sant Jan 31 2012 Note Conversion Agreement
10.12*	July 19, 2005	Promissory Note --Opal Private Equity Fund, LP
10.12A*	September 1, 2007	Opal Private Equity Stock Warrants on 100K note
10.12B*	July 19, 2005	Opal 16 Stock Warrants 07192005
10.12C*	July 19, 2006	Opal 16 Stock Warrants 07192006
10.12D*	September 1, 2007	Amended and Restated Opal Promissory Note
10.13*	September 1, 2007	First Amendment To Note Purchase Agreement--Opal Private Equity Fund, LP
10.14*	July 19, 2005	Opal Private Equity Fund, LP $100,000 Note Purchase agreement
10.15*	July 3, 2005	Forest Capital $250,000 Working Capital Loan and Consulting Agreement
10.15A*	January 1, 2010	Forest Capital 214.7 options 01012010
10.15B#	December 21, 2011	Forest Capital Amended loan agreement 150k
10.15C##	February 1, 2012	Addendum to Conversion and Amended Loan Agreement with Forest Capital

10.15D&&	December 21, 2011	Forest Capital Conversion Agreement 250K
10.15E+&+	January 31, 2014	Forest Capital $150,000 Second Restated Promissory Note Rev 01272014
10.16*	May 5, 2003	Thelma Gault $800,000 Loan and Option Agreement
10.17*	January 31, 2008	First Amendment To Thelma Gault $800,000 Loan Agreement
10.18*	February 28, 2009	Second Amendment To Thelma Gault $800,000 Loan Agreement
10.19*	January 31, 2008	Thelma Gault $800,000 Amended and Restated Promissory Note
10.20*	November 18, 2010	Thelma Gault Subordination Agreement 1st Lien carve out
10.21*	March 9, 2009	Credit Facilitation Agreement—Walter J. Doyle Trust and Julie E. Jacobs Trust
10.21A*	February 26, 2009	Merrill Lynch Loan Application and acceptance
10.21B*	March 2009	Merrill Lynch Loan agreement
10.21C*	December 1, 2009	Revised Merrill Lynch Loan agreement
10.21D&&	December 21, 2011	Jacobs Trust Fee conversion agreement on 200k loan
10.21E&&	December 21, 2011	Doyle Trust Fee Conversion Agreement on 200k loan
10.22*	April 25, 2008	Ohio Innovation Loan Agreement
10.23*	April 25, 2008	Ohio Innovation Loan Security Agreement
10.24*	September 11, 2008	Ohio Innovation Loan Modification Agreement
10.24A*	September 17, 2009	Ohio Innovation Loan Modification Agreement 2nd mod
10.24B*	November 24, 2010	Ohio Innovation Loan Modification Agreement 3rd mod
10.24C%%	December 1, 2012	Ohio Innovation Loan Modification Agreement 4th Mod
10.24D%%	December 1, 2012	Ohio Innovation Loan Modification Agreement 5th Mod
10.25*	November 29, 2010	Ohio Innovation Loan Subordination Agreement
10.25A*	April 25, 2008	Ohio Innovation Loan Intercreditor agreement
10.25B*	April 25, 2008	Ohio Innovation Loan Cognovit promissory note
10.26*	April 7, 2010	Julie E. Jacobs Trust $100,000 Loan Agreement
10.26A#	December 21, 2011	Jacobs Trust Interest Conversion Agreement on 100K loan

10.26B#	December 21, 2011	Jacobs Trust Amended loan agreement 100K loan
10.26C+&+	January 31, 2014	Jacobs Trust $100,000 Second Restated Promissory Note Rev 01272014
10.27*	October 4, 2010	Amendment To Julie E. Jacobs Trust $100,000 Loan Agreement
10.28*	January 11, 2011	Joseph Albert $100,000 Convertible Promissory Note
10.29*	January 11, 2011	Joseph Albert $100,000 Convertible Promissory Note Extension Agreement
10.29B&&&	June 8, 2012	Joseph Albert Note Conversion Agreement
10.30*		Joseph Albert 50,000 Common Stock Purchase Warrants
10.30A*		Joseph Albert 100,000 Common Stock Purchase Warrants
10.30B&&&	June 8, 2012	Joseph Albert 150,000 Common Stock purchase Warrants
10.31*	October 5, 2010	Standard Energy Company $100,000 Loan Agreement and Promissory Note
10.31A#	December 21, 2011	Standard Energy Note Conversion Agreement
10.31B##	February 1, 2012	Addendum to Note Conversion Agreements with Standard Energy Company
10.32*	October 11, 2010	Doyle Trust $25,000 Promissory Note
10.32A*	October 5, 2010	Doyle Trust $25,000 Loan Agreement
10.32B##	February 1, 2012	Addendum to Note Conversion Agreements with The Walter J. Doyle Trust
10.32C&&	December 21, 2011	Doyle Trust Note Conversion Agreement 25K
10.33*	November 12, 2010	Walter J. Doyle Trust and Julie E. Jacobs Trust Inventory Financing Agreement
10.33A*	November 12, 2010	Jacobs Trust Stock 82.8 Options
10.34*	November 12, 2010	Walter J. Doyle Trust $150,000 Promissory Note
10.34A#	December 21, 2011	Doyle Trust Conversion Agreement 150K
10.34B##	February 1, 2012	Addendum to Note Conversion Agreements with The Walter J. Doyle Trust
10.35*	November 12, 2010	Standard Energy Company $150,000 Promissory Note
10.35A#	December 21, 2011	Standard Energy Note Conversion Agreement 100k
10.35B##	February 1, 2012	Addendum to Note Conversion Agreements with Standard Energy Company
10.36*	February 2, 2011	Robison Note Extension Agreement

10.36A*	July 10, 2010	Robison original promissory note
10.37*	February 2, 2011	Robison $50,000 Convertible Promissory Note
10.37A&&&	June 22, 2012	Robison Note Conversion agreement
10.38*		Robison Common Stock Purchase Warrants for 50,000 shares and 25,000 shares
10.38A&&&	June 22, 2012	Robison Common Stock Purchase Warrants for 75,000 shares
10.39*	February 24, 2011	Carl A. Generes $35,000 Promissory Note
10.40*	July 13, 2009	Lease Modification Agreement
10.40A*	January 18, 2006	Lease Agreement – original
10.40B **	April 10, 2008	First Lease Agreement Amendment
10.40C ***	August 11, 2011	(Second) Lease Modification Agreement
10.41&&	November 16, 2011	Watters Agreement November 2011
10.41A ****	February 9, 2012	Extension to Watters agreement January to March 2012
10.42&&	December 5, 2011	Jeff Paltrow dba Litehouse Capital Contractual Agreement December 2011
10.43&&	December 19, 2012	Cervelle Group marketing Agreement December 2011
10.44****	February 10, 2012	Ertman agreement January to March 2012
10.46+&+	January 31, 2014	Walter Doyle Trust $50,000 Promissory Note 01272014
10.47+&+	January 31, 2014	Julie Jacobs Tust $50,000 Promissory Note 01272014
21.1*		List of Subsidiaries of the Registrant
31.1 %%		Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2 %%		Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1 %%		Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2 %%		Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes- Oxley Act of 2002

_______________

*	Filed with the SEC on July 8, 2011 as Exhibits to Amendment No. 1 to the Company’s Form 10 Registration Statement and are incorporated herein by reference.
**	Filed with the SEC on July 28, 2011 as Exhibits to Amendment No. 2 to the Company’s Form 10 Registration Statement and are incorporated herein by reference.
***	Filed with the SEC on August 12, 2011 as Exhibit to Amendment No. 3 to the Company’s Form 10 Registration Statement and is incorporated herein by reference.
#	Filed with the SEC on December 23, 2011 as Exhibits to Form 8K
##	Filed with the SEC on February 2, 2012 as Exhibits to Form 8K
###	Filed with the SEC on February 6, 2012 as Exhibits to Form 8K
&&	Filed with the SEC on April 6, 2012 as Exhibits to Form 10K
****	Filed with the SEC on May 15, 2012 as Exhibits to Form 10Q
&&&	Filed with the SEC on August 13, 2012.
+&+	Filed with the SEC on January 31, 2014 as Exhibits to Form 8-K.
%%	Filed with the SEC herewith.

Signature

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.

	The Guitammer Company
	(Registrant)

Date: May 14, 2014	By:	/s/ Richard E. Conn
		Richard E. Conn
		Chief Financial Officer
		(principal financial officer)

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