Interest expense for the three months ended March 31, 2014 and 2013 was $846 and $-0- for the year ended December 31, 2013.

NOTE 12.  CONTINGENT LIABILITY

On September 13, 2013, the Company entered into a purchase agreement for domain name (gameplan.com) with a third party. In consideration, the Company issued 150,000 shares of restricted common stock fair valued at $99,000. Under terms of the agreement, if certain criteria are not met 18 months after this purchase agreement, the Company is obligated to repurchase the stock at a given price of $1 per share.

Under ASC 480-10, the stock repurchase obligation should be recorded as a liability at the discounted settlement amount and reduction of equity at the fair value of the shares at issuance. The liability of the stock repurchase obligation should be adjusted to the final settlement amount of $150,000, net of the unamortized discount of $51,000, which the discount will be amortized at an implicit rate throughout the 18 months after the purchase agreement.

The Company has a stock repurchase liability net of the unamortized discount of $116,000 and $107,500 as of March 31, 2014 and December 31, 2013 respectively, and recorded a total interest expense of $8,500 related to the stock repurchase liability for the period three months ended March 31, 2014.

NOTE 13.  STOCKHOLDERS’ EQUITY

The stockholders’ equity of the Company comprises the following classes of capital stock as of March 31, 2014 and December 31, 2013:  

Common stock, par value of $0.001 per share; 100,000,000 shares authorized; 35,148,456 shares issued and outstanding at March 31, 2014 and December 31, 2013, respectively.

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On or around February 19, 2014, the Company received $50,000 from an accredited investor for the purchase of 416,667 shares of common stock at a price of $0.12 per share, which has been recorded as stock payable as of March 31, 2014.

NOTE 14.  STOCK OPTIONS  

On February 27, 2013, the Board of Directors of the Company ratified, approved, and adopted a Stock Option Plan for the Company allowing for the grant of up to 2,600,000 options to acquire common shares with terms of up to 5 years.  The Board has the authority to determine the rate at which options vest. Each option must be exercised within 3 years commencing upon the option’s last date of vesting. Each option granted under the plan automatically terminates and may no longer be exercised if the optionee ceases for any reason to be an employee of, or consultant to, the Company, subject to certain exceptions in the event of death and disability. If options granted under the 2013 Stock Option Plan expire or are cancelled, new options may thereafter be granted covering such shares. In the event the Company commences an initial public offering, sells substantially all of its assets, or sells at least 75% of its common stock in a single transaction (a “Change in Control Event”), then the option shall immediately vest and become exercisable in its entirety. The 2013 Stock Option Plan terminates and no further options can be granted thereunder on February 28, 2018.

During the year ended December 31, 2013, the Company granted a total of 1,600,000 stock options as part of the Company’s 2013 Stock Option Plan. The total fair value of 1,100,000 of these options at the grant date was estimated to be $357,860 and was determined using the Black- Scholes option pricing model with an expected life of 5 years, a range of risk free interest rate from 0.40% to 1.75%, a dividend yield of 0%, and expected volatility of 122.20%.  

On December 4, 2013, the Company granted 500,000 stock options to consultant under the 2013 Stock Option Plan at $0.40 per option for a term of 3 years.  The Option shall vest in six equal parts at the end of each fiscal quarter beginning on December 31, 2013, and with the final portion of the option vesting on March 31, 2015. The total fair value of these options at the date of grant was estimated at $219,550 and determined using the Black-Scholes option pricing model with the following assumptions; a term of 3 years, a risk free interest rate of 1.75%, a dividend yield of 0%, and an expected volatility of 120.71%.  As of December 31, 2013, $36,592 was recorded as a stock-based compensation expense for the portion vested as of December 31, 2013.

However, under the terms of the 2013 Stock Option Plan, the option terminates and may no longer be exercised by the consultant if the consultant ceases to be a consultant to the Company. On December 31, 2013, the consultant was terminated from the Company as the consultant ceased to provide consulting services to the Company. The consultant had thirty (30) days from the date of termination to exercise the option. On January 31, 2014, the option expired, and the consultant did not exercise the option within the requisite timeframe. Thus, this option was cancelled by the Company.

During fiscal year 2013, terms of non-qualified stock options held by certain optionees were amended so that they vested immediately.  Upon amendment, 320,000 of a possible 350,000 options of shares were exercised for a total of $80,000.

The Company did not grant any options during the three months ended March 31, 2014. No options were exercised during that period.   

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The Company’s stock option activity for the three months ended March 31, 2014 is summarized as follows:

Warrants

On September 22, 2011, the Company issued 300,000 warrants for services valued at $53,160.  Each warrant is convertible into one share of common stock at an exercise price of $0.45.  All warrants are fully vested and are exercisable at any time up to and including January 1, 2015. The fair value of these warrants was estimated at the grant date using Black-Scholes Option Pricing Model with current value of the stock at $0.37; dividend yield of 0%; risk-free interest rate of 0.34% (3 year Treasury note rate at the issue date); volatility rate of 78.94%; and expiration date of 3.25 years. As of September 30, 2013, no warrants have been exercised.  

During fiscal year 2013, the Company granted 6,000,000 warrants in conjunction with the sales of the equity units.  Each warrant entitles the holder to purchase one share of the Company’s common stock at a price of $0.25 per share for a period of three years from the date of issuance. 2,870,000 warrants were exercised during fiscal year 2013.

During the three months ended March 31, 2014, no warrants were exercised, granted, or cancelled.   

NOTE 15.  OPERATING LEASES

During the period January 1, 2013 through March 31, 2013 the Company’s office space was rented for $2,000 per month.  

The Company leased new office space in Boston, Massachusetts that commenced on September 15, 2013 and runs through August 31, 2017. Payment terms include a base rent of $5,486 per month plus other costs of maintaining the property.   There was an initial cash outlay for a security deposit.

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The Company leased warehouse space in New Jersey that commenced on April 11, 2013 that commenced on June 1, 2013 and runs through May 31, 2016. The lease contains an option for an additional three year term. Payment terms include a base rent of $1,813 per month plus other costs of maintaining the property. The initial cash outlay for the lease included a security deposit and a prepayment of July rent.  

Rent expense for the years three months ended March 31, 2014 and 2013 were $25,533 and $6,000 respectively.

Upon commencement, the aggregate minimum annual lease payments under the new operating leases, including amounts characterized as deemed landlord financing payments are as follows:

NOTE 16.  SUBSEQUENT EVENTS

New Officers and Directors

On May 1, 2014, Mr. Alexander Karsos accepted appointment as the Company’s Chief Financial Officer and Secretary. Mr. Karsos’ employment agreement with the Company that sets out compensation terms is incorporated by reference that was previously filed in the Company’s 10K as Exhibit 10.4.

Mr. Zach Allia accepted appointment as the Company’s Chief Technology Officer and a member of the Board of Directors on May 5, 2014. The Company and Mr. Allia have entered into an Employment Agreement with a two and a half year term. Mr. Allia is entitled to a base salary of $120,000 annually and will receive an option to purchase 2,500,000 shares of the Company’s common stock. The option will vest over three years. The exercise price of this option will be set by the Board of Directors after the Company files this Form 10-K for the fiscal year ended December 31, 2013. The Employment Agreement also provides that Mr. Allia may receive a discretionary bonus to be determined by the Board.

The Company’s new Chief Sales Officer, Brett Maloley, accepted appointment on May 5, 2014. Mr. Maloley simultaneously accepted appointment as a director. The Company and Mr. Maloley have entered into an Employment Agreement with a 20 month employment term. Mr. Maloley is entitled to a base salary of $60,000 per year, plus he will receive monthly payments equal to 2% of the Company’s monthly sales. Mr. Maloley is also entitled to an option to purchase 2,000,000 shares of the Company’s common stock, which will vest over the employment term. The exercise price of this option will be set by the Board after the Company files its Form 10-K for the fiscal year ended December 31, 2013. The Employment Agreement also provides that Mr. Maloley may receive a discretionary bonus to be determined by the Board.

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Mr. Jamie Dingman became the Company’s Chief Executive Officer and Chairman of the Board of Directors on June 3, 2014. Mr. Dingman and the Company entered into an Executive Employment Agreement dated June 3, 2014. The agreement is for a term of two and a half years. Mr. Dingman is entitled to a base salary of $120,000 annually, which may be deferred by mutual written consent. Additionally, Mr. Dingman will receive an option to purchase 2,500,000 shares of the Company’s common stock. The option will vest over three years. 625,000 shares underlying the option shall vest and become exercisable upon formal grant of this option by the Board of Directors. The exercise price of this option will be set by the Board of Directors after the Company files this Form 10-K. Under his employment agreement, Mr. Dingman is eligible for a discretionary bonus. Both Mr. Dingman and the Company may negotiate more detailed bonus parameters and performance thresholds at a later date.

On June 3, 2014, the Board also appointed Mr. Ralph Anderson to the Company’s Board of Directors.

Unregistered Sales of Securities

On April 11, 2014, the Company agreed to sell a total of 1,200,000 shares of its common stock to three separate accredited investors in separate transactions. The Company received a total of $120,000 as a result of these three sales. The offers and sales of these shares were exempt from registration pursuant to Rule 506 of Regulation D as promulgated under the Securities Act of 1933.

On April 16, 2014, the Company agreed to sell a total of 415,000 shares of its common stock to two separate accredited investors in separate transactions. The Company received a total of $41,500 as a result of the two sales. The offers and sales of these shares were exempt from registration pursuant to Rule 506 of Regulation D as promulgated under the Securities Act of 1933.

On April 22, 2014, the Company agreed to sell a total of 262,728 shares of its common stock to four separate accredited investors in separate transactions. The Company received a total of $50,400 as result of the sales. The sales were accomplished at per share prices ranging from $0.10 to $0.11. The offers and sales of these shares were exempt from registration pursuant to Rule 506 of Regulation D as promulgated under the Securities Act of 1933.

During the year ended December 31, 2013, the Company recorded a stock payable of 20,000 shares fair valued in the amount of $13,800 for compensation owed under a Sponsorship Agreement dated July 14, 2013. The Company’s Board of Directors authorized this issuance during 2013 after the individual in question provided the consideration, but the shares were not issued by the Company until fiscal year 2014. The offer and sale of these securities were exempt from registration pursuant to Section 4(2) of the Securities Act of 1933.

On or around April 29, 2014, the Company issued a total of 70,000 shares of common stock between two stockholders. The Company did not receive cash consideration in exchange for these shares. Although no litigation was initiated or threatened, the Company issued these shares in an effort to resolve certain matters outstanding between the parties. The offers and sales of these shares were exempt from registration pursuant to Rule 506 of Regulation D as promulgated under the Securities Act of 1933.

Gatehouse Consulting Agreement Termination

The Company and Gatehouse have ended their relationship and the Consulting Agreement is set to terminate on July 13, 2014, which is prior to the Agreement’s stated termination date. Appropriate written notice of the termination has been provided consistent with the Consulting Agreement’s terms.  

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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 our financial statements and related notes. Some of the information contained in this Management’s Discussion and Analysis of Financial Condition and Results of Operations, and elsewhere in this report, include forward-looking statements based on our current management’s expectations. There can be no assurance that actual results, outcomes or business conditions will not differ materially from those projected or suggested in such forward-looking statements as a result of various factors, including, among others, our limited operating history, unpredictability of future program dispositions and operating results, competitive pressures and the other potential risks and uncertainties discussed in the “Risk Factors” as discussed in the “Risk Factor” section in our Annual Report on Form 10-K filed with the SEC for the year ended December 31, 2013.

Organizational History

The Company, then named HJS Technology, Inc. (a Development Stage Company), was incorporated on March 25, 1999 under the laws of the State of Nevada. The Company developed a business plan around a concept entitled www.close2here.com. This concept failed to get off the ground and the business plan was shut down in 2005. On May 31, 2007, HJS Technology, Inc. changed its name to Game Plan Holdings, Inc. (the “Company”). Between 2007 and early 2013, the Company operated various social networking websites, www.hazzsports.com, wwww.totalscout.com, and www.checkinsave.com.   

On February 7, 2013, the Company entered into an intellectual property purchase agreement (the “IP Agreement”) with Sportingblood Nutrition, LLC, a Delaware limited liability company (“Sportingblood”) for the acquisition of all right, title and interest in and to the Sportingblood trademark and certain nutritional supplement product formulations (the “Intellectual Property”). In exchange, the Company issued 11,000,000 shares of common stock to Sportingblood.  After this acquisition, Sportingblood’s principals began working for the Company in February 2013 and started to develop Game Plan’s nutritional supplement business using the acquired Sportingblood product formulations. The IP Agreement and a separate stock transaction between Andrew Bachman, owner of Sportingblood and the Company’s then-CEO and President, and Chuck and Christina Hazzard, resulted in a change in control of the Company. By March 2013, Mr. Bachman was the Chairman, CEO, President, and the Company’s largest shareholder. As of this Annual Report on Form 10-K, Andrew Bachman is no longer an officer and director of the Company.  

During fiscal year 2013, the Company transitioned its business from social networking websites to entry into and competition within the nutritional supplements industry. The Company is now exclusively focused on the marketing and sale of its Game Plan line of nutritional supplements, many of which are specifically designed to be NSF certified to ensure that they do not include banned substances for professional athletes.

Products

Currently, the Company markets and sells products ranging from whey protein to multivitamin and fish oil supplements. The Company’s products are as follows:

·

Whey: $49.99 for 30 servings. Flavors/types: vanilla and chocolate.

·

Pump: $34.99 for 30 servings. Flavors/types: fruit and orange.

·

Recovery: $34.99 for 30 servings. Flavors/types: fruit and orange available.

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·

Focus Food: $33.00 for box of 12 bars. Flavors/types: Chocolate chip cookie.

·

T-Jack: $74.99 for 30 day supply. 120 capsules.

·

Shred: $59.99 for 30 day supply. 120 capsules.

·

Sizzle: $49.99 for 30 day supply. 60 capsules.

·

Life: $54.99 for 30 day supply. 60 packages.

The Company partnered with NSF International, a global public health organization specializing in standards development, product certification, testing, and auditing, to undergo its nutritional supplement certification for various products, NSF for Sport. This certification ensures that certain of the Company’s products are free of adulteration, contaminants, and banned substances. Leading sports organizations, including Major League Baseball, National Football League, Professional Golfers’ Association, Canadian Centre for Ethics in Sport, and World Anti-Doping Agency all recognize this certification. The Company’s manufacturing partners carry all applicable manufacturing licenses and undergo rigorous control procedures to uphold the best manufacturing practices. The manufacturing facilities are certified to be free of banned substances and have a reduced risk of cross-contamination.

Distribution and Plan of Operations

The Company developed an online platform, which went live in beta on September 20, 2013, through which fitness professionals, youth camp coordinators, team coaches, and others sell Game Plan nutritional supplements and earn commissions thereon. Consumers can also visit the Company’s website directly, gameplan.com, to subscribe for nutritional supplement plans designed by Company. Gameplan.com also allows consumers to build their own plan comprised of nutritional supplements offered by the Company and to subscribe to plans endorsed by celebrities and athletes.  As a result of testing in a live environment, management determined that it cannot carry out its business plan with the current website.  Accordingly, management is developing a new website which will go live during 2014.  Until that website is ready, the current one will be used.    

Fitness professionals, camp coordinators, coaches, and celebrity endorsers (“Sellers”) are incentivized to promote and sell the Company’s products through commissions on direct sales ranging from 10% to 20% of gross sales. The Company no longer employs a multi-level marketing approach, which allowed certain Sellers to earn commissions based upon sales completed by individuals they introduced to the Game Plan platform and products. The Company pays commissions on sales monthly and the overall structure is subject to change at any time.

After the initial subscription to one of the Company’s plans or products, consumers receive automatic monthly refills. Consumers can cancel their subscription at any time by contacting the Company. Customers may return the Company’s products within 45 days of purchase. However, the products must be in their original sealed container and must be in a condition allowing for resale upon receipt by the Company. Refunds will be issued after the Company receives the product and confirms its condition. The Company will provide return shipping labels.

The Company continues to focus upon developing and refining its system for recruiting fitness professionals capable of promoting and selling Game Plan nutritional supplements. The Company also wants drawn attention to the brand by forming relationships with well-known athletes and celebrities that can promote Game Plan through social media outlets. Additionally, the Company continues to seek strategic partners including, fitness centers, gyms, health clinics, sports teams, and other individuals and entities with access to large pools of fitness professionals or fitness-conscious clientele.   

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Off Balance Sheet Arrangements

As of March 31, 2014, there were no off balance sheet arrangements.

Results of Operations for the Three Months Ended March 31, 2014 as Compared to Three Months Ended March 31, 2013

In the three months ended March 31, 2014, the Company had sales in the amount of $41,755. The cost of those sales totaled $17,642. For the three months ended September 30, 2013, the Company had gross profits of $24,113. The Company did not have any sales in the three months ended March 31, 2013.

We incurred operating expenses in the amount of $284,269 for the three months ended March 31, 2014, as compared to $125,985 for the three months ended March 31, 2013 (an increase of $158,285).  The increase can be attributed to wages and payroll expenses and a large increase in general and administrative expenses.

These operating expenses for the three months ended September 30, 2013 consisted of general and administrative expenses in the amount of $130,241 (2013: $29,599), computer and website expenses in the amount of $9,590 (2013: $1,441), stock-based compensation in the amount of $0 (2013: $15,712), professional fees in the amount of $36,664 (2012: $73,233) and wages and payroll expenses in the amount of $107,774 (2013: $6,000).  

Our net loss for the three months ended March 31, 2014 was $269,477 as compared to our net loss of $125,700 for the three months ended March 31, 2013.

The weighted average number of shares outstanding was $35,148,456 and $24,468,889 for the three months ended March 31, 2014 and 2013, respectively.

Liquidity and Capital Resources

As of March 31, 2014, we had cash in the amount of $4,406, as compared to $4,918 as of December 31, 2013. We had restricted cash in the amount of $59,743 for the three months ended March 31, 2014. As of December 31, 2013, we had $173,772 in restricted cash.  As of March 31, 2014, we had working deficient of $434,887, as compared to working deficit of $156,678 as of December 31, 2013.

The Company has not attained profitable operations and is dependent upon obtaining financing to pursue activities beyond those planned for the current fiscal year.  For these reasons, our auditors stated in their report for the year ended December 31, 2013 that they have substantial doubt the Company will be able to continue as a going concern. The Company believes that its present operating capital position is sufficient to finance our operations for at least the next 12 months. This conclusion is based upon our historical cash needs and while we anticipate that our cash needs will increase in the next 12 months, we believe that our present operating capital will be sufficient to finance our operations. In the event we are unable to generate revenues sufficient to finance our operations then we will eventually be required to seek additional outside capital. In the event we are unable to secure such financing, the Company may cease operations and eventually it may be forced to disband its business operations.

The Company anticipates that further development of the Game Plan online platform, recruitment of additional sales personal, trainers, and spokespeople, and competition in the nutritional supplements industry will increase expenditures each subsequent quarter.  

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Item 3.  Quantitative And Qualitative Disclosures About Market Risk.

Not applicable.

Item 4.  Internal Control Over Financial Reporting.

Disclosure Controls and Procedures

Our management, with the participation of the Company’s Principal Executive Officer and Principal Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can only provide reasonable assurance of achieving the desired control objectives and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on such evaluation, the Company’s Principal Executive Officer and Principal Financial Officer have concluded that as of March 31, 2014, the Company’s disclosure controls and procedures were not effective, at the reasonable assurance level, in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act and in ensuring that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including the Principal Executive Officer and Principal Financial Officer, as appropriate to allow timely discussions regarding required disclosure; due to the material weaknesses described below.

In light of the material weaknesses described below, we performed additional analysis and other post-closing procedures to ensure that our financial statements were prepared in accordance with generally accepted accounting principles. Accordingly, we believe that the financial statements included in this report fairly present, in all material respects, our financial condition, results of operations, changes in stockholders’ equity and cash flows for the periods presented.

 Management Report on Internal Control Over Financial Reporting

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Company’s internal control over financial reporting includes those policies and procedures that:

1.

Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;

2.

Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and

3.

Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on our financial statements.

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All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and reporting. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

A material weakness is a control deficiency (within the meaning of Public Company Accounting Oversight Board (“PCAOB”) Auditing Standard No. 5) or combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.

Under the supervision and with the participation of our management, including our Principal Executive Officer and Principal Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of the period covered by this report based on the framework in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).  Based on the results of management’s assessment and evaluation, our Principal Executive Officer and Principal Accounting Officer concluded that our internal control over financial reporting was not effective due to the material weaknesses described below.

During the assessment of internal control over financial reporting, management identified the following material weakness. There was inadequate control consciousness throughout the organization. Recording, processing, and reporting transactions and the attendant supporting documentation that impact financial statements was not done consistently and thoroughly throughout the reporting period. The Company and its management are taking steps to remedy this weakness by educating employees about the importance of organized record keeping and timely processing of material documentation.

Remediation of Material Weaknesses Found in our Quarterly Report on Form 10-Q for the Quarter Ended March 31, 2014 and Material Weaknesses found in our Annual Report on Form 10-K for the Year Ended December 31, 2013

To remediate the material weaknesses identified in our Annual Report filed on Form 10-K for the year ended December 31, 2013 and our Quarterly Report for the quarter ended March 31, 2014, we have taken the following additional steps:

1.

In connection with the ineffective assessment of the Company’s internal control over financial reporting, management implemented additional controls to improve the effectiveness of the Company’s disclosure controls and procedures.

2.

In connection with the reported inadequate review and approval of certain aspects of the accounting process, management has reiterated the Company’s current review and approval processes, to insure that all accounting reconciliations, journal entries and complex transactions are reviewed and approved on a timely basis.

3.

A third party bookkeeping service was engaged to help the Company organize and management its financial information on an ongoing basis.

4.

Management brought on a new director who is a certified public accountant and the managing partner at a financial services firm. This director was appointed, in part, so that he could help the Company design better internal controls and remediate existing weaknesses.  

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In connection with the assessment of the Company’s internal control over financial reporting for the quarter ended March 31, 2014, the Company looked at document management, limiting those individuals capable of signing or making payments on behalf of the company, communication within the organization on matters that impact financial reporting to insure greater accuracy regarding the timing of transactions. While the Company has taken steps to address these weaknesses, the weaknesses remain and will not be considered effectively remediated until additional improvements to the operating of our internal control over financial reporting are in place for a sufficient period of time and tested.

Inherent Limitations on the Effectiveness of Controls

Management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control systems are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in a cost-effective control system, no evaluation of internal control over financial reporting can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been or will be detected.

These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of a simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

Changes in Internal Control over Financial Reporting

There have not been any changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13-15(f) and 15d-15(f) under the Exchange Act) during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1.  Legal Proceedings.

The Company is not currently a named party to any legal proceedings. However, certain Company funds and stock are involved in Andrew Bachman’s litigation with the FTC. As a result of the litigation, 14,703,579 shares of the Company’s common stock owned by Andrew Bachman and a family member were frozen and unable to be sold. A court-appointed receiver for the FTC asserted claims to these shares, as it was alleged that they were acquired with monies Mr. Bachman earned while he worked at Tatto, Inc.  Additionally, when the lawsuit was filed in December 2013, the Company’s bank accounts and credit cards were frozen on account of Mr. Bachman’s connection with, control over, and investments in the Company. By a Court order dated December 19, 2013, all of the Company’s cash, except for approximately $59,743, was released from the asset freeze. As March 31, 2014, $59,743 remained frozen.

Please review the Subsequent Events section of this Form 10-Q for the most recent information on the FTC litigation and its impact on the Company.  

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Item 1a.  Risk Factors.

As a smaller reporting company, we are not required to provide the information required by this Item.

Item 2.  Unregistered Sales Of Equity Securities And Use Of Proceeds.

On or around February 19, 2014, the Company received a $50,000 from an accredited investor for the purchase of 416,667 shares of common stock at a price of $0.12 per share. The offer and sales of these shares of common stock were exempt from registration under Section 4(2) and Regulation S of the Securities Act. The shares purchase have not yet been issued by the Company’s transfer agent.

On April 11, 2014, the Company agreed to sell a total of 1,200,000 shares of its common stock to three separate accredited investors in separate transactions. The Company received a total of $120,000 as a result of these three sales. The offers and sales of these shares were exempt from registration pursuant to Rule 506 of Regulation D as promulgated under the Securities Act of 1933.

On April 16, 2014, the Company agreed to sell a total of 415,000 shares of its common stock to two separate accredited investors in separate transactions. The Company received a total of $41,500 as a result of the two sales. The offers and sales of these shares were exempt from registration pursuant to Rule 506 of Regulation D as promulgated under the Securities Act of 1933.

On April 22, 2014, the Company agreed to sell a total of 262,728 shares of its common stock to four separate accredited investors in separate transactions. The Company received a total of $50,400 as result of the sales. The sales were accomplished at per share prices ranging from $0.10 to $0.11. The offers and sales of these shares were exempt from registration pursuant to Rule 506 of Regulation D as promulgated under the Securities Act of 1933.

During the year ended December 31, 2013, the Company recorded a stock payable of 20,000 shares fair valued in the amount of $13,800 for compensation owed under a Sponsorship Agreement dated July 14, 2013. The Company’s Board of Directors authorized this issuance during 2013 after the individual in question provided the consideration, but the shares were not issued by the Company until fiscal year 2014. The offer and sale of these securities were exempt from registration pursuant to Section 4(2) of the Securities Act of 1933.

On or around April 29, 2014, the Company issued a total of 70,000 shares of common stock between two stockholders. The Company did not receive cash consideration in exchange for these shares. Although no litigation was initiated or threatened, the Company issued these shares in an effort to resolve certain matters outstanding between the parties. The offers and sales of these shares were exempt from registration pursuant to Rule 506 of Regulation D as promulgated under the Securities Act of 1933.

Item 3.  Defaults Upon Senior Securities.

None.

Item 4.  Mine Safety Disclosures

Not Applicable.

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Item 5.  Other Information.

Gatehouse Agreement

On March 10, 2014, the Company entered into a Consulting Agreement with Gatehouse Financial Partners GmbH (“Gatehouse”). Under the terms of the agreement, Gatehouse was to provide financial advisory services to the Company. These services were to include consultation on potential debt and equity financing structures. Additionally, Gatehouse was to provide financial public relations services. The Consulting Agreement was for a term of 12 months. In consideration of its services, Gatehouse was to receive (i) an option to purchase 500,000 shares of the Company’s common stock at $0.25 per share, of which 250,000 shares shall vest after 12 months and the balance shall vest after 24 months and (ii) $10,000 per month in restricted shares of the Company’s common stock. The offer and sale of these securities were exempt from registration pursuant to Section 4(2) of the Securities Act of 1933.  

The Company and Gatehouse have ended their relationship and the Consulting Agreement is set to terminate on July 13, 2014, which is prior to its stated termination date. Appropriate prior written notice of the termination has been provided consistent with the Consulting Agreement’s terms.  

Item 6.  Exhibits.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

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