UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

 [x] Quarterly Report Pursuant to Section 13 or 15(d) Securities Exchange Act of 1934 for Quarterly Period Ended June 30, 2014

-OR-

[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from _________ to________

Commission File Number:   333-190831

DMC Beverage Corp.

(Exact name of Registrant in its charter)

Indicate by check mark whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [x] No [ ]

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 (section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   Yes [ ]   No [X]

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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerate filer, or a small reporting company as defined by Rule 12b-2 of the Exchange Act):

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

The number of outstanding shares of the registrant's common stock, August 19, 2014:  Common Stock – 13,642,391

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DMC BEVERAGE CORP.

Form 10-Q

JUNE 30, 2014

TABLE OF CONTENTS

PART 1 – FINANCIAL INFORMATION

PART II – OTHER INFORMATION

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DMC Beverage Corp.

Balance Sheets

See accompanying notes to financial statements

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DMC Beverage Corp.

Statements of Operations

(Unaudited)

See accompanying notes to financial statements

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DMC Beverage Corp.

Statements of Cash Flows

(Unaudited)

Continued on next page

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DMC Beverage Corp.

Statements of Cash Flows (Continued)

(Unaudited)

See accompanying notes to financial statements

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DMC Beverage Corp.

Notes to Financial Statements

June 30, 2014

(Unaudited)

Note 1 – Organization, Presentation and Going Concern

Organization

DMC Beverage Corp. (the “Company”) was incorporated in Delaware on November 1, 2002 as Destiny Media Corp. (“Destiny”).

On July 1, 2012, GBX Companies, Inc. (“GBX”) and Destiny entered into a Merger Agreement pursuant to which Destiny issued 11,092,320 shares of its restricted Common Stock in exchange for 100% of the outstanding shares of GBX common stock. Each GBX shareholder received 15 shares of Destiny common stock for each share of GBX stock held on the merger date. As a result of the Merger Agreement, former shareholders of GBX owned 86% of the Company and our principal business became the business of GBX, the juice beverage manufacture and sales industry.  After the merger, the Company changed its name to DMC Beverage Corp (“DMC”), to reflect the Company’s focus on juice.   

The merger has been accounted for as a reverse acquisition with GBX as the accounting acquirer.

Basis of Presentation

The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial statement presentation and in accordance with Form 10-Q.  Accordingly, they do not include all of the information and footnotes required in annual financial statements.  In the opinion of management, the unaudited financial statements contain all adjustments (consisting only of normal recurring accruals) necessary to present fairly the financial position and results of operations and cash flows.  The results of operations presented are not necessarily indicative of the results to be expected for any other interim period or for the entire year.

These unaudited financial statements should be read in conjunction with the 2013 audited annual financial statements included in the amended Annual Report on Form 10 K/A, filed with the U.S. Securities and Exchange Commission (“SEC”) on May 5, 2014.

Going Concern

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.  The Company has incurred a net loss of $196,177 and $194,548 for the six months ended June 30, 2014 and 2013.  The Company has a stockholders’ deficit of $1,665,626 at June 30, 2014.  These factors raise substantial doubt about the ability of the Company to continue as a going concern.  The Company’s continuation as a going concern is dependent upon its ability to generate revenues, its ability to continue to raise investment capital, and implement its business plan.  No assurance can be given that the Company will be successful in these efforts.

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These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.  Management believes that actions presently being taken to obtain additional funding and implement its strategic plans provide the opportunity for the Company to continue as a going concern.

Note 2 – Property and Equipment, net

Property and equipment at June 30, 2014 and December 31, 2013 consisted of the following:

Depreciation expense was $1,584 and $1,552 for the six months ended June 30, 2014 and 2013, respectively.

Management periodically reviews the valuation of long-lived assets for potential impairments.  Management has not recognized an impairment of these assets to date, and does not anticipate any negative impact from known current business developments.

Note 3 – Contractor Liabilities

At June 30, 2014 and December 31, 2013 contractor liabilities totaled $-0- and $214,000, respectively. These amounts are accrued under consulting agreements as deferred contract labor and employment agreement entered into during 2012. During the six months ended June 30, 2014, $214,000 of contractor liabilities were converted into 535,000 shares of the Company’s restricted common stock, which remains issuable at June 30, 2014.  As of June 30, 2014 and December 31, 2013, amounts recorded in the amount of, $-0- and $205,194, respectively were due to related parties.

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Note 4 – Coupon Reimbursement Liabilities

Amounts included in the account were coupon redemptions received by third party coupon clearing houses and submitted to the Company for payment. Upon being unpaid by the Company, the third party coupon clearing houses charged redemption amounts back to the customers of the Company. The customers then billed the Company for the coupon amounts not honored.  During the six months ended June 30, 2104, $99,392 were deemed to be expired and credited to operating expenses.

Note 5 – Line-of-Credit and Notes Payable – Related Parties

At June 30, 2014 and December 31, 2013, a line-of-credit and notes payable to related parties consisted of the following:

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Note 6 – Notes Payable

At June 30, 2014 and December 31, 2013, notes payable to unrelated parties consisted of the following:

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Note 7 – Related Party Transactions

As of December 31, 2012, the Company had advanced $13,450 to Donald Mack, its Chief Executive Officer and a Director, for amounts that will be applied to expenses in future periods or will be applied against payables due to Mr. Mack. During the six months ended June 30, 2014 and the year ended December 31, 2013, the Company advanced an additional $8,493 and $29,280, respectively, to the Officer and Director.  At June 30, 2014 and December 31, 2013, the total amount of the advances, including accrued interest, of $51,697 and $42,730, respectively, was applied against accrued salaries owed to the Officer and Director.

At December 31, 2013, the Company had contractor liability amounts due to shareholders of the Company, including George Gamble, a founder of the company, shareholder and former officer, Rob Paladino, our Chief Revenue Officer, and Donald Slater, our former Chief Operating Officer, and Teresa Poletz, a shareholder, of $236,694.  Also as of December 31, 2013, there were balances outstanding pursuant to a contract labor agreement from George Gamble in the amount of $31,500.  Upon evaluation of performance goals, it was determined that $31,500 was due back to the Company. This amount has been offset against contractor liabilities for Mr. Gamble.  During the six months ending June 30, 2014, the total amount outstanding of $236,694 were converted into 535,000 shares of the Company’s restricted common stock which remain issuable at June 30, 2014.  

At December 31, 2013, the Company had amounts due to related parties of $19,218 which are due to Rob Paladino and George Gamble.  During the six months ended June 30, 2014, this amount has been converted into 48,046 shares of the Company’s restricted common stock which remain issuable at June 30, 2014.

Note 8 – Stockholders’ Equity

Authorized Capital

The Company has 2,000,000,000 authorized shares of Common Stock at $0.0001 par value and 50,000,000 authorized shares of Preferred Stock at a par value of $0.0001.

Common Stock

During the six months ended June 30, 2014, the Company agreed to issue an aggregate of 75,000 shares of its restricted common stock valued at $18,750 to two lenders as inducements to make the loans, to issue 190,000 shares to its chief financial officer per an employment contract valued at $58,750, to convert $386,838 of notes payable and accrued interest into 967,095 shares of its restricted common stock, $233,218 of contractor liabilities and other amounts due to related parties into 583,046 shares of its restricted common stock, and 18,344 shares of its common stock as payment for services from outside third parties valued at $5,000.  The total of 1,833,485 shares valued at $702,556 remains unissued at June 30, 2014 and in included in the equity section of the balance sheet as common stock issuable.

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Stock Options

The following summarizes options outstanding at December 31, 2012 and option activity for the year ended December 31, 2013 and the six months ended June 30, 2014:

The following table summarizes information with respect to stock options outstanding and exercisable by employees and directors at June 30, 2014:

Vested amount of the options of $1,200 and $1,200 was expensed as stock-based compensation for the six months ended June 30, 2014 and 2013, respectively.

As of June 30, 2014, there was unrecognized compensation costs of $7,200 related to these stock options. The Company expects to recognize those costs over a weighted average period of 1.5 years as of June 30, 2014. Future option grants will increase the amount of compensation expense to be recorded in these periods.

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The following table summarizes information with respect to stock options outstanding and exercisable by non-employees at June 30, 2014:

Warrants

The following table summarizes warrant activity for the six months ended June 30, 2014:

Note 9 – Commitments and Contingencies

Operating Lease Commitments

The Company leases executive office space for its corporate office on a month to month basis and can be terminated with a thirty day notice.  Base rent is $225 per month.  The Company believes this office space is satisfactory for its current needs.  Rent expense for the six months ended June 30, 2014 and 2013 was $1,875 and $-0-, respectively.

Security Interests in Common Stock

As of June 30, 2014 and December 31, 2013, related party note holders held security interests in 20,000 and 269,091 shares of the Company’s common stock as collateral to notes payable totaling $5,000 and $171,000, respectively.

Legal Matters

During the course of business, litigation commonly occurs.  From time to time the Company may be a party to litigation matters involving claims against the Company.  The Company operates in a highly regulated industry and employs personnel which may inherently lend itself to legal matters.  Management is aware that litigation has associated costs and that results of adverse

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litigation verdicts could have a material effect on the Company’s financial position or results of operations. Management, in consultation with legal counsel, has addressed known assertions and predicted unasserted claims below.

At June 30, 2014 and December 31, 2013, included in accounts payable there were balances due to C.H. Robinson Worldwide, Inc., Echo Global Logistics and Golden 100/Jouge Inc. of $154,390, $64,699 and $96,147, respectively. These entities have initiated legal proceedings. The debt to C.H. Robinson is transportation debt of 60+ days under which the payable was uncovered when funding diminished.  The debt to Echo Global is a disputed transportation debt regarding their failure to perform under the contract.  Golden 100/Jouge is a disputed debt regarding their failure to share expenses under the contract.  The current liability has been recorded in full, but no estimation of final outcome for accrued interest, legal costs or other judgment costs resulting from the legal proceedings has been evaluated or accrued. The Company is unaware of any other current or pending lawsuits; however, given the number of overdue balances it is at least reasonably possible that other lawsuits may follow.

Note 10 – Subsequent Events

On July 28, 2014, the Company formed CoolJuice Beverage Company, a Colorado corporation, as a wholly-owned subsidiary.

The Company has evaluated subsequent events through the date the financial statements were issued and filed with the SEC. The Company has determined that there are no events that warrant disclosure or recognition in the consolidated financial statements.

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

SPECIAL NOTE CONCERNING FORWARD-LOOKING STATEMENTS

Certain statements made in this Form 10-Q are "forward-looking statements" (within the meaning of the Private Securities Litigation Reform Act of 1995) regarding the plans and objectives of management for future operations. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The forward-looking statements included herein are based on current expectations that involve numerous risks and uncertainties. The Company's plans and objectives are based, in part, on assumptions involving the continued expansion of business. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of the Company. Although the Company believes its assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove to be inaccurate and, therefore, there can be no assurance the forward-looking statements included in this report will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by the Company or any other person that the objectives and plans of the Company will be achieved.

The forward-looking statements included in this Form 10-Q and referred to elsewhere are related to future events or our strategies or future financial performance.  In some cases, you can identify forward-looking statements by terminology such as "may," "should," "believe," "anticipate," "future," "potential," "estimate," "encourage," "opportunity," "growth," "leader," "expect," "intend," "plan," "expand," "focus," "through," "strategy," "provide," "offer," "allow," commitment," "implement," "result," "increase," "establish," "perform," "make," "continue," "can," "ongoing," "include" or the negative of such terms or comparable terminology.  All forward-looking statements included in this Form 10-Q are based on information available to us as of the filing date of this report, and the Company assumes no obligation to update any such forward-looking statements, except as required by law.  Our actual results could differ materially from the forward-looking statements.

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Company Overview

DMC Beverage Corp. is in the juice beverage manufacture and sales industry, under the brand name “CoolJuice”.

CoolJuice is an all-natural, healthy, vitamin and calcium enhanced, 100% fruit juice targeting kids under 16, their gatekeepers, and young adults.  The demand for healthy beverage products for children and families will be filled through our efforts and distribution of the CoolJuice products. CoolJuice has created a substitute for the mass distributed lessor quality juice and beverage products available on grocery shelves today, both refrigerated and shelf stable.

CoolJuice is an all-natural, gluten-free, vitamin and calcium fortified 100% juice blend family with zero artificial ingredients, sweeteners or preservatives sold in both the chilled juice / dairy case and the ambient juice aisle

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All-natural, gluten-free

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100% fruit juice blends

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Vitamins A, C & D, calcium and iron

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2 servings of fruit in every 8oz glass

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Exceeds national nutrition standards

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No high fructose corn syrup

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No preservatives

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No added sugars or sweeteners

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No artificial colors

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No artificial flavors

Recent federal studies indicate for the first time in history, young people have a lower life expectancy than their parents, primarily due to unhealthy diets and sedentary lifestyles. Many of today's popular beverage drinks, with added sugar, have been linked to childhood obesity and juvenile diabetes, consequently causing a national focus on healthier beverage alternatives.

The market for juice products in the U.S. is a multi-billion dollar industry and continues to be a high-growth product category, especially for all natural products like CoolJuice. The U.S. market for children’s food and drink has grown in value by 50 percent from $16.4B in 2007 to $26.8B in 2010 according to a new report from New Nutrition Business. While the World market for juice products is growing negligibly to $60B, the $1 billion US Food, Drug & Mass natural juices market continues to grow 7% p.a. as nutritional awareness increases.

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Company History

DMC Beverage Corp. was incorporated in Delaware on November 1, 2002 as Destiny Media Corp. (“Destiny”).

On July 1, 2012, GBX Companies, Inc. (“GBX”) and Destiny entered into a Merger Agreement pursuant to which Destiny issued 11,092,320 shares of its restricted Common Stock in exchange for 100% of the outstanding shares of GBX common stock. Each GBX shareholder received 15 shares of Destiny common stock for each share of GBX stock held on the merger date. As a result of the Merger Agreement, former shareholders of GBX owned 86% of the Company and our principal business became the business of GBX, the juice beverage manufacture and sales industry.  After the merger, the Company changed its name to DMC Beverage Corp (“DMC”), to reflect the Company’s focus on juice.   

On July 28, 2014, the Company formed CoolJuice Beverage Company, a Colorado corporation, as a wholly-owned subsidiary.

Plan of Operation

The CoolJuice business plan is to build a profitable business in the all-natural, better-for-you, nutritious arena, with the intent of selling in the next six to five years to a major consumer packaged goods company.

Results of Operations

For the three months ended June 30, 2014 compared to the three months ended June 30, 2013

Revenues

The Company had no revenues for the three months ended June 30, 2014 and 2103.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the six months ended June 30, 2014 were $856 compared to $94,475 for the three months ended June 30, 2013, a decrease of $93,619 or 99%. The decrease in expenses during 2014 was attributable to a recovery of expense for coupons which expired during the three months ended June 30, 2014 of $99,392.  Selling, general and administrative expenses incurred during the six months ended June 30, 2014 consisted of: (i) officers’ salaries of $60,000 (2013: $42,000); (ii) stock based compensation and stock option expenses of $23,600 (2013: $37,600); (iii) audit and legal fees of $9,941 (2013: $-0-); and (iv) other overhead expenses of -$92,685 (2013: $14,875).

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Our net loss from operations for three months ended June 30, 2014 was $856 as compared to $94,475 for the three months ended June 30, 2013.

Net Loss

Other expenses incurred during the three months ended June 30, 2014 included: interest expense of $34,071 (2013: $35,162); offset by interest income of $249 (2013: $100).

Our net loss for the three months ended June 30, 2014 was $34,678 compared to $129,537 for the three months ended June 30, 2013.

For the six months ended June 30, 2014 compared to the six months ended June 30, 2013

Revenues

The Company had no revenues for the six months ended June 30, 2014 and 2013.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the six months ended June 30, 2014 were $134,773 compared to $131,808 for the six months ended June 30, 2013, an increase of $2,965 or 2%. The increase in expenses during 2014 was attributable to efforts to re-launch the Company’s operations and in becoming a public reporting company, offset by a recovery of expense for coupons which expired during the three months ended June 30, 2014 of $99,392.  Selling, general and administrative expenses incurred during the six months ended June 30, 2014 consisted of: (i) officers’ salaries of $120,000 (2013: $84,000); (ii) stock based compensation and stock option expenses of $64,950 (2013: $38,200); (iii) audit and legal fees of $37,941 (2013: $500); and (iv) other overhead expenses of -$88,118 (2013: $9,108).

Our net loss from operations for the six months ended June 30, 2014 was $134,773 as compared to $131,808 for the six months ended June 30, 2013.

Net Loss

Other expenses incurred during the six months ended June 30, 2014 included: interest expense of $61,879 (2013: $62,953); offset by interest income of $475 (2013: $213).

Our net loss for the six months ended June 30, 2014 was $196,177 compared to $194,548 for the six months ended June 30, 2013.

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Liquidity and Capital Resources

Overview

The Company historically has utilized various credit facilities to fund working capital needs, acquisitions and capital expenditures. Future cash needs for working capital, acquisitions and capital expenditures may require management to seek additional equity or obtain additional credit facilities. The sale of additional equity could result in additional dilution to the Company's shareholders. A portion of the Company's cash may be used to acquire or invest in complementary businesses or products or to obtain the right to use complementary technologies. From time to time, in the ordinary course of business, the Company evaluates potential acquisitions of such businesses, products or technologies.

For the six months ended June 30, 2014, we funded our operations through borrowings from third parties, while for the six months ended June 30, 2013, we funded our operations through sales of our common stock and borrowings from related parties. Our principal use of funds during the six months ended June 30, 2014 has been for general corporate expenses.  Management believes that based on the current level of operations and cash flow from operations, the Company will not have sufficient liquidity to fund anticipated expenses and other commitments for the next twelve months without issuing additional debt or equity securities.

Liquidity and Capital Resources during the Six Months ended June 30, 2014 compared to the Six Months ended June 30, 2013

As of June 30, 2014, we had cash of $358 and a deficit in working capital of $1,665,626.  The Company used cash in operations of $21,518 for the six months ended June 30, 2014 compared to cash used in operations of $5,263 for the six months ended June 30, 2013. The cash used in operating activities for the six months ended June 30, 2014 was primarily attributable to the Company's net loss of $196,177, offset by depreciation of $1,584, stock based compensation of $63,750, stock option expense of $1,200, interest accrued on notes payable of $43,129, accretion of debt discounts as interest of $18,750, and the net changes in operating assets and liabilities of $46,246.  Cash used in operations for the six months ended June 30, 2013 was primarily attributable to the Company's net loss of $194,548, offset by depreciation of $1,552, stock issued as debt discount for loan inducement of $5,001, stock based compensation of $37,000, stock option expense of $1,200, interest accrued on notes payable of $57,952, and net changes in operating assets and liabilities of $76,560.

Cash used in investing activities was $8,393 and $7,885 for the six months ended June 30, 2014 and 2013, respectively, and consisted entirely of advances to related parties.

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Cash from financing activities was $30,000 and $31,289 for the six months ended June 30, 2014 and 2013, respectively.  Cash from in financing activities for the six months ended June 30, 2014 included $30,000 of proceeds from the issuance of notes payable.  Cash from financing activities for the six months ended June 30, 2013 include $11,265 from the sale of common stock, borrowings from related parties of $20,000 and $12 from stock options exercised.  

At June 30, 2014, we had a cash balance of $358. We anticipate cash needs of approximately $75,000 to sustain our current level of operations. On February 14, 2014, we received effectiveness of our Registration Statement on Form S-1.  We had registered up to 8,000,000 shares of our common stock to be sold at a proposed offering price of $.50 per share for an aggregate of $4,000,000.  As we were unable to raise capital from the offering, we terminated the registration statement and deregistered all of the securities that were unsold under the registration statement.  We are currently evaluating alternative sources to raise capital.

Should we be able to raise the necessary capital, we plan to spend approximately $2,500,000 in the next twelve months to carry out our business plan in manufacture and distributing the CoolJuice product. We presently do not have sufficient financing to enable us to complete these activities and will require additional financing to continue our business plan in the future. Our actual expenditures on these activities will depend on the amount of funds we have available as a result of our financing efforts. There is no assurance that we will be able to raise the necessary financing.

On January 20, 2014, the Company issued a $5,000 unsecured convertible promissory note to Gerald Bender. The note bears interest at 12% per annum, is due January 20, 2015, and is convertible at $0.40 per share.  As an inducement to making the loan, the Company has agreed to issue 12,500 shares of its restricted common stock.

On January 21, 2014, the Company issued a $25,000 unsecured convertible promissory note to Kim and John Rodell. The note bears interest at 12% per annum, is due January 21, 2015, and is convertible at $0.40 per share.  As an inducement to making the loan, the Company has agreed to issue 62,500 shares of its restricted common stock.

On January 31 2014, the Company and Rachel Moore entered into a Promissory Note Conversion and Common Stock Purchase Agreement (the “Agreement”).  Under terms of the Agreement, the Company will issue 22,015 shares of its restricted common stock in conversion of the promissory note of $8,806.

On January 31, 2014, the Company and Al Restaino entered into a Promissory Note Conversion and Common Stock Purchase Agreement (the “Agreement”).  Under terms of the Agreement, the Company will issue 21,738 shares of its restricted common stock in conversion of the promissory note and accrued interest aggregating $8,695.

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On February 22, 2014, the Company and Shelimar Investments Ltd. entered into a Promissory Note Conversion and Common Stock Purchase Agreement (the “Agreement”).  Under terms of the Agreement, the Company will issue 473,894 shares of its restricted common stock in conversion of the promissory note and accrued interest aggregating $189,558.

On February 22, 2014, the Company and Juan Carlos Sabillion Davila entered into a Promissory Note Conversion and Common Stock Purchase Agreement (the “Agreement”).  Under terms of the Agreement, the Company will issue 37,500 shares of its restricted common stock in conversion of the promissory note and accrued interest aggregating $15,000.

On March 6, 2014, the Company and George Gamble entered into a Promissory Note Conversion and Common Stock Purchase Agreement (the “Agreement”).  Under terms of the Agreement, the Company will issue 23,835 shares of its restricted common stock in conversion of the promissory note and accrued interest aggregating $9,534.

On March 31 2014, the Company and Robert Paladino entered into a Promissory Note Conversion and Common Stock Purchase Agreement (the “Agreement”).  Under terms of the Agreement, the Company will issue 299,696 shares of its restricted common stock in conversion of the promissory note of $119,878.

On March 31 2014, the Company and Teresa Poletz entered into a Promissory Note Conversion and Common Stock Purchase Agreement (the “Agreement”).  Under terms of the Agreement, the Company will issue 140,000 shares of its restricted common stock in conversion of the promissory note of $56,000.

On April 1, 2014, the Company and Gerald Bender entered into a Promissory Note Conversion and Common Stock Purchase Agreement (the “Agreement”).  Under terms of the Agreement, the Company will issue 12,787 shares of its restricted common stock in conversion of the promissory note and accrued interest of $5,115.

On April 1, 2014, the Company and Kim Rodell entered into a Promissory Note Conversion and Common Stock Purchase Agreement (the “Agreement”).  Under terms of the Agreement, the Company will issue 63,939 shares of its restricted common stock in conversion of the promissory note and accrued interest of $25,575.

On June 27, 2014, the Company and Donald Slater entered into a Promissory Note Conversion and Common Stock Purchase Agreement (the “Agreement”).  Under terms of the Agreement, the Company will issue 97,500 shares of its restricted common stock in conversion of contractor liabilities of $39,000.

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On June 27, 2014, the Company and Alfred Restaino entered into a Promissory Note Conversion and Common Stock Purchase Agreement (the “Agreement”).  Under terms of the Agreement, the Company will issue 357,237 shares of its restricted common stock in conversion of the promissory note and accrued interest of $142,895.

Going Concern

Our independent auditors included an explanatory paragraph in their report on the accompanying financial statements regarding concerns about our ability to continue as a going concern. Our financial statements contain additional note disclosures describing the circumstances that lead to this disclosure by our independent auditors.

Our financial statements have been prepared on a going concern basis, which assumes the realization of assets and settlement of liabilities in the normal course of business. Our ability to continue as a going concern is dependent upon our ability to generate profitable operations in the future and/ or to obtain the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they become due.

The outcome of these matters cannot be predicted with any certainty at this time and raise substantial doubt that we will be able to continue as a going concern. Our financial statements do not include any adjustments to the amount and classification of assets and liabilities that may be necessary should we be unable to continue as a going concern.

There is no assurance that our operations will be profitable. Our continued existence and plans for future growth depend on our ability to obtain the additional capital necessary to operate either through the generation of revenue or the issuance of additional debt or equity.

Off-Balance Sheet Arrangements

We currently have no off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Critical Accounting Policies

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make a number of estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Such estimates and assumptions affect the reported amounts of revenues and expenses during the reporting period. We base our estimates on historical experiences and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions and

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conditions. We continue to monitor significant estimates made during the preparation of our financial statements. On an ongoing basis, we evaluate estimates and assumptions based upon historical experience and various other factors and circumstances. We believe our estimates and assumptions are reasonable in the circumstances; however, actual results may differ from these estimates under different future conditions.

See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Note 2, “Summary of Significant Accounting Policies” in our audited financial statements as of and for the year ended December 31, 2013, included in our amended Annual Report on Form 10-K/A filed with the U.S. Securities and Exchange Commission (“SEC”) on May 5, 2014.

Item 3.    Quantitative and Qualitative Disclosures About Market Risk

The disclosure required under this item is not required to be reported by smaller reporting companies.

Item 4.    Controls and Procedures

(a)

Evaluation of Disclosure Controls and Procedures

In connection with the preparation of this Quarterly Report on Form 10-Q, an evaluation was carried out by the Company's management, with the participation of the principal executive officer and the principal financial officer, of the effectiveness of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 ("Exchange Act")) as of June 30, 2014. Disclosure controls and procedures are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and that such information is accumulated and communicated to management, including the chief executive officer and the chief financial officer, to allow timely decisions regarding required disclosures.

Based on that evaluation, the Company's management concluded, as of the end of the period covered by this report, that the Company's disclosure controls and procedures were effective in recording, processing, summarizing, and reporting information required to be disclosed, within the time periods specified in the Commission's rules and forms, and that such information was accumulated and communicated to management, including the principal executive officer and the principal financial officer, to allow timely decisions regarding required disclosures.

(b)

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II – OTHER INFORMATION