UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

NUDG MEDIA INC.
QUARTERLY REPORT ON FORM 10-Q

TABLE OF CONTENTS

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PART I - FINANCIAL INFORMATION

Item 1.           Financial Statements

These consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the Securities and Exchange Commission’s instructions to Form 10-Q. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the interim period ended June 30, 2014 are not necessarily indicative of the results that can be expected for the full year.

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NUDG MEDIA INC.

Consolidated Financial Statements

For the Period Ended June 30, 2014

(Expressed in US dollars)

(unaudited)

                                                                                                                                                   Index

Consolidated Balance Sheets (unaudited).........................................................................................F-2

Consolidated Statements of Operations (unaudited).......................................................................... F-3

Consolidated Statements of Cash Flows (unaudited)......................................................................... F-4

Notes to the Consolidated Financial Statements (unaudited).............................................................. F-5

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Nudg Media Inc.

Consolidated Balance Sheets

(Expressed in US dollars)

Nudg Media Inc.

Consolidated Statements of Operations

(Expressed in US dollars)

(unaudited)

Nudg Media Inc.  

Consolidated Statements  of Cash Flows

(Expressed in US dollars)

(unaudited)

1.   Nature of Operations and Continuance of Business

Nudg Media Inc. (the “Company”), formerly Auto Home Lock Incorporated and Eclipse Identity Recognition Corporation, was incorporated in the State of Nevada on May 5, 2011 and was incorporated with the intent to develop, produce and distribute an automated home locking system. The Company’s product, when fully developed, was intended to allow the user to lock all the doors in the house and activate the alarm system simply by pressing one button. On January 31, 2014, the Company approved of a name change to Nudg Media Inc., which became effective with the Nevada Secretary of State on March 12, 2014. The Company intends to enter into the social media and e-commerce business. During the period ended June 30, 2014, the Company acquired the license rights to various patents, trademarks, and intellectual property relating to social media technologies. The Company is also in the process of raising additional equity capital to support the completion of its development activities.

The Company’s activities are subject to significant risks and uncertainties, including failing to secure additional funding to operationalize the Company’s current technology before another company develops similar technology.

On January 16, 2013, the Company entered into a share exchange agreement (“Share Exchange Agreement”) with Eclipse Identity Recognition Corporation, a Delaware company (“Eclipse Delaware”) and its shareholders.  Eclipse Delaware is a corporation in the development stage and has not commenced operations. Eclipse Delaware was incorporated under the laws of the State of Delaware on August 3, 2010. Eclipse Delaware designs, develops, and sells video analytics technologies that incorporate advanced facial detection, biometric search, and identity recognition techniques to detect and identify individuals from live and stored video streams. Eclipse Delaware expects to target its technology to law enforcement, public safety, commercial and private security, as well as entertainment and social media.  Pursuant to the terms of the share exchange agreement, the Company agreed to acquire all 93,745,000 of the issued and outstanding shares of Eclipse Delaware’s common stock in exchange for the issuance by our company of 196,000,008 shares of our common stock to the shareholders of Eclipse Delaware.

Effective February 8, 2013, and in connection with the share exchange agreement, the Company entered into a bridge loan agreement with Eclipse Delaware wherein the Company agreed to provide a loan of $35,000 to Eclipse Delaware. The principal amount of the loan was satisfied by the closing of the definitive share exchange agreement between the Company and Eclipse Delaware. The loan was credited against the private placement of 4,000,000 shares of our company for $0.025 described below. Subsequent to the bridge loan, additional funds were advanced such that a total of $58,480 had been provided and was credited against the private placement. On April 4, 2013, the Company closed the share exchange by issuing the required 196,000,008 common shares to the Eclipse Delaware shareholders.  As a result of the share exchange, Eclipse Delaware became a subsidiary of the Company. Concurrently, and as a condition to closing the share exchange agreement, the Company cancelled 5,000,000,000 shares of common stock. The Company concurrently closed a private placement of 4,000,000 shares at $0.025 per share for an aggregate total of $100,000. The Company consequently had 368,000,008 issued and outstanding common shares.

On January 31, 2014, the Company entered into a settlement agreement and general release with Eclipse Delaware, Steven Miller, and the former shareholders of Eclipse Delaware. The agreement and release intends to unwind and rescind the transactions made in connection with in the share exchange agreement dated January 31, 2013 and closed on April 4, 2013 and return the parties to their respective positions prior to the agreement. This resulted in the net liabilities of Eclipse Delaware as at January 31, 2014 being adjusted to additional paid-in capital.

1.     Nature of Operations and Continuance of Business (continued)

These consolidated financial statements have been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities in the normal course of business. As at June 30, 2014, the Company has a working capital deficiency of $327,525 and an accumulated deficit of $2,249,689. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability of the Company to obtain necessary equity financing to continue to develop its business and ultimately on the attainment of profitable operations. These factors continue to raise substantial doubt regarding the Company’s ability to continue as a going concern. These consolidated financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

2.     Summary of Significant Accounting Policies

(a)   Basic of Presentation and Consolidation

These consolidated financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States (“US GAAP”), and are expressed in US dollars. These consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Eclipse Delaware. All inter-company balances and transactions have been eliminated on consolidation. On January 31, 2014, the Company and Eclipse Delaware entered into a settlement and release agreement whereby both parties have agreed to unwind the transactions relating to the January 31, 2013 share exchange agreement resulting in the accounts of Eclipse Delaware being removed as of January 31, 2014 with the net liabilities being adjusted to additional paid-in capital. The Company’s fiscal year-end is December 31.

(b)   Interim Financial Statements

These interim consolidated financial statements have been prepared on the same basis as the annual financial statements and in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company’s financial position, results of operations and cash flows for the periods shown. The results of operations for such periods are not necessarily indicative of the results expected for a full year or for any future period.

(c)   Use of Estimates

The preparation of these consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The Company regularly evaluates estimates and assumptions related to the useful life and recoverability of equipment and intangible assets, fair value of convertible notes payable, fair value of stock-based compensation, and deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.

Nudg Media Inc.
Notes to the Consolidated Financial Statements
June 30, 2014
(Expressed in US dollars)
(unaudited)

2.   Summary of Significant Accounting Policies (continued)

(d)   Cash and Cash Equivalents

The Company considers all highly liquid instruments with maturity of three months or less at the time of issuance to be cash equivalents. As of June 30, 2014 and December 31, 2013, the Company had no cash equivalents.

(e)   Intangible Assets

Intangible assets are stated at cost less accumulated amortization and are comprised of license rights to patents, trademarks and other technical information. The license rights are amortized straight-line over ten years over the estimated useful life.

(f)    Impairment of Long-lived Assets

The Company reviews long-lived assets such as property and equipment and intangible assets with finite useful lives for impairment whenever events or changes in circumstance indicate that the carrying amount may not be recoverable. If the total of the expected undiscounted future cash flows is less than the carrying amount of the asset, a loss is recognized for the excess of the carrying amount over the fair value of the asset. No events or circumstances occurred for which an evaluation of the recoverability of long-lived assets was required.

(g)   Lease Obligations

All non-cancellable leases with an initial term greater than one year are categorized as either capital leases or operating leases. Assets recorded under capital leases are amortized according to the methods employed for property and equipment or over the term of the related lease, if shorter. For the periods ended June 30, 2014 and December 31, 2013, no capital lease obligations were incurred; therefore, no amortization of lease expense was required. The Company had a month to month lease.  Rent expense for period ended June 30, 2014 was $300 (December 31, 2013 - $3,600).

(h)   Revenue Recognition

The Company is in the development stage and has yet to realize significant revenues from operations. Once the Company has commenced operations, it will recognize revenues when delivery of goods or completion of services has occurred provided there is persuasive evidence of an agreement, acceptable has been approved by its customers, the fee is fixed or determinable based on the completion of stated terms and conditions, and collection of any related receivable is probable. Software licenses fees will be recognized over the term of the agreement on a straight-line basis.

(i)     Share-based Compensation

The Company follows the provisions of FASB Accounting Standards Codification ("ASC") 718, “Share-Based Payment.” which requires all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values.

Equity instruments issued to non-employees for goods or services are accounted for at either the fair market value of the goods and services rendered or on the instruments issued in exchange for such services, whichever is more readily determinable, using the measurement date guidelines enumerated in ASC 505-50-30.  

Nudg Media Inc.
Notes to the Consolidated Financial Statements
June 30, 2014
(Expressed in US dollars)
(unaudited)

2.   Summary of Significant Accounting Policies (continued)

(j)     Financial Instruments and Fair Value Measures

ASC 820, “Fair Value Measurements and Disclosures” (“ASC 820”), requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure fair value:

Level 1

Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

Level 2

Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

Level 3

Level 3 applies to assets or liabilities for which there are no observable inputs to the valuation methodology that are relevant to the measurement of the fair value of the assets or liabilities.

The Company’s financial instruments consist principally of cash, amounts receivable, promissory note receivable, accounts payable and accrued liabilities, loans payable, and amounts due to related parties. Pursuant to ASC 820, the fair value of cash is determined based on “Level 1” inputs. The recorded values of all other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.

(k)   Loss Per Share

The Company computes net loss per share in accordance with ASC 260, Earnings Per Share, which requires presentation of both basic and diluted earnings per share (EPS) on the face of the income statement. Basic EPS is computed by dividing net loss available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing Diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options, warrants or convertible loans. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. At June 30, 2014, the Company had 1,200,000 (December 31, 2013 – 50,000) potentially dilutive shares from outstanding stock options and convertible loans.

(l)     Comprehensive Loss

ASC 220, “Comprehensive Income”, establishes standards for the reporting and presentation of comprehensive income (loss) and its components in the financial statements. As at June 30, 2014 and December 31, 2013, the Company had no items representing comprehensive income or loss.

Nudg Media Inc.
Notes to the Consolidated Financial Statements
June 30, 2014
(Expressed in US dollars)
(unaudited)

2.   Summary of Significant Accounting Policies (continued)

(m)  Income Taxes

The Company accounts for income taxes pursuant to ASC 740. Deferred tax assets and liabilities are determined based on temporary differences between the bases of certain assets and liabilities for income tax and financial reporting purposes. The deferred tax assets and liabilities are classified according to the financial statement classification of the assets and liabilities generating the differences.

The Company maintains a valuation allowance with respect to deferred tax assets. The Company establishes a valuation allowance based upon the potential likelihood of realizing the deferred tax asset and taking into consideration the Company’s financial position and results of operations for the current year. Future realization of the deferred tax benefit depends on the existence of sufficient taxable income within the carry forward year under the Federal tax laws.

Changes in circumstances, such as the Company generating taxable income, could cause a change in judgment about the realization of the related deferred tax asset. Any change in the valuation allowance will be included in income in the year of the change in estimate.

(m)  Recent Accounting Pronouncements

The Company has limited operations and is considered to be in the development stage. During the period ended June 30, 2014, the Company has elected to early adopt Accounting Standards Update No. 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements. The adoption of this ASU allows the Company to remove the inception to date information and all references to development stage.

The Company has implemented all new accounting pronouncements that are in effect.  These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

3.   Promissory Note Receivable

On January 31, 2014, the Company received a promissory note receivable for $66,000. The note is unsecured, matures on January 31, 2018, and bears interest at the minimum rate imputed by the IRS.

4.      Intangible Assets

On April 24, 2014, the Company acquired license rights to certain patents, trademarks and technical information relating to an internet portal coupled with a next-generation social media website that incorporates voice and text messaging, video email and mobile technologies. Refer to Note 7.

5.      Accounts Payable

6.     Related Party Transactions

As at June 30, 2014, a total of $44,284 (December 31, 2013 - $82,325) is owed to officers and shareholders of the Company, which is non-interest bearing, unsecured, and due on demand.

7.    Loans Payable

(a)   On September 19, 2012, the Company entered into a loan agreement for $15,000 with a non-related party.  The loan is unsecured, non-interest bearing, and due in six months from the date of the loan. The due date was extended to March 19, 2014 by mutual consent of the parties. The Company granted the lender an option to purchase 30,000 shares of the Company’s common stock at par value. This loan was unwound pursuant to the settlement agreement and general release dated January 31, 2014. Refer to Note 1.

(b)   On November 20, 2012, the Company entered into a loan agreement for $20,000 with an non-related party. The loan is unsecured, bears interest of 10% per annum, and due at the point where the Company receives $100,000 in funding. This loan was unwound pursuant to the settlement agreement and general release dated January 31, 2014. Refer to Note 1.

(c)   On April 29, 2013, the Company entered into a loan agreement for $10,000 with an non-related party.  The loan is unsecured, non-interest bearing, and due in six months from the date of the loan. The due date was extended to March 11, 2014 by mutual consent of the parties. The Company granted the lender an option to purchase 20,000 shares of the Company’s common stock at par value. This loan was unwound pursuant to the settlement agreement and general release dated January 31, 2014. Refer to Note 1.

(d)   During the period ended June 30, 2014, the Company received funds totaling $71,210 from a non-related party. The amount owing is unsecured, non-interest bearing and due on demand.

(e)   On April 24, 2014, the Company entered into license agreement for the exclusive right to use certain patents, technical information and trademarks. Refer to Note 4. Pursuant to the agreement, the Company will pay a 5% royalty on all net sales derived from the use of the patents, technical information and trademarks, to be paid quarterly on the 15^th day following the quarter. The Company has also agreed to pay a total of $1,200,000 over a 60 month period in cash or the equivalent value of restricted common shares of the Company as follows:

·         $200,000 on or before October 24, 2014;

·         $200,000 on or before April 24, 2015;

·         $200,000 on or before April 24, 2016;

·         $200,000 on or before April 24, 2017;

·         $200,000 on or before April 24, 2018; and

·         $200,000 on or before April 24, 2019.

F-9

7.   Loans Payable (continued)

Pursuant to the agreement, any overdue payments will bear interest at a rate of 1.5% per month until such payment is received. The Company will also have the right to sublicense the patents, technical information and trademarks.

The loan payable has been discounted at a market rate of 20% to arrive at the net present value of $798,123.  As at June 30, 2014, the Company has recorded $818,256 (December 31, 2013 - $nil) for the present value of the note payable. During the period ended June 30, 2014, the Company has recorded $20,133 (2013 - $nil) which has been included in interest expense.

7.   Common Stock

On January 31, 2014, the Company closed the settlement agreement and general release with Eclipse Delaware whereby the two companies mutually agreed to unwind the transactions related to the share exchange agreement dated January 31, 2013. This settlement agreement resulted in the Company cancelling the 196,000,008 common shares previously issued to the Eclipse Delaware shareholders and returning them to the treasury.  As a result of this transaction, the Company had 172,000,000 issued and outstanding common shares.

8.   Stock Options

As at June 30, 2014, the aggregate intrinsic value of stock options outstanding is $nil (December 31, 2013 - $4,950).

9.  Subsequent Events

In accordance with ASC 855, we have evaluated subsequent events through the date of issuance of the financial statements, and did not have any material recognizable subsequent events.

F-10

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

Forward-Looking Statements

This quarterly report contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may", "should", "expects", "plans", "anticipates", "believes", "estimates", "predicts", "potential" or "continue" or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors that may cause our or our industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

Our unaudited financial statements are stated in United States Dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles. The following discussion should be read in conjunction with our financial statements and the related notes that appear elsewhere in this quarterly report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed below and elsewhere in this quarterly report.

In this quarterly report, unless otherwise specified, all dollar amounts are expressed in United States dollars. All references to "US$" refer to United States dollars and all references to "common stock" refer to the common shares in our capital stock.

As used in this quarterly report, the terms "we", "us", "our", "our company" and “Nudg” mean Nudg Media Inc., unless otherwise indicated.

Company Overview

We were incorporated in the State of Nevada as a for-profit company on May 5, 2011 and established a then fiscal year end of May 31. We were incorporated with the intent to develop, produce and distribute an automated home locking system. Our product, when fully developed, was intended to allow the user to lock all the doors in the house and activate the alarm system simply by pressing one button. Unfortunately, we were not able to raise sufficient capital to fund our business development and consequently our management began considering alternative strategies, such as business combinations or acquisitions to create value for our shareholders.

On January 16, 2013, we entered into a share exchange agreement with Eclipse Identity Recognition Corp., a Delaware company, and its shareholders. Pursuant to the terms of the share exchange agreement, we agreed to acquire all 93,745,000 of the issued and outstanding shares of Eclipse Delaware’s common stock in exchange for the issuance by our company of 196,000,008 shares of our common stock to the shareholders of Eclipse Delaware.

Effective December 10, 2012, the Nevada Secretary of State accepted for filing of a Certificate of Amendment to our company’s Articles of Incorporation to change our name from Auto Home Lock, Inc. to Eclipse Identity Recognition Corporation and to increase our authorized capital from 75,000,000 to 5,200,000,000 shares of common stock, par value of $0.001.

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Effective January 17, 2013, in accordance with approval from the Financial Industry Regulatory Authority (“FINRA”), we changed our name from Auto Home Lock, Inc. to Eclipse Identity Recognition Corporation and increased our authorized capital from 75,000,000 to 5,200,000,000 shares of common stock, par value, $0.001. In addition, our company’s issued and outstanding shares of common stock increased from 5,168,000 to 5,168,000,000 common shares, par value of $0.001, on the basis of a 1,000:1 forward split of our company’s issued and outstanding shares of common stock.

The name change and forward split became effective with the Over-the-Counter Bulletin Board at the opening of trading on January 17, 2013.

On April 4, 2013, we closed the share exchange with Eclipse Delaware by issuing the required 196,000,008 common shares to the Eclipse Delaware shareholders. As a result of the share exchange, Eclipse Delaware became a subsidiary of our company. Concurrently, and as a condition to closing the share exchange agreement, we cancelled 5,000,000,000 shares of our common stock. Further, in connection with the closing of the share exchange agreement, we concurrently closed a private placement of 4,000,000 shares at $0.025 per share for an aggregate total of $100,000. As a result of these transactions, we had 368,000,008 issued and outstanding common shares.

Additionally, effective April 4, 2013, we changed our fiscal year end to December 31.

As a result of the closing of the share exchange agreement with Eclipse Delaware, Eclipse Delaware became our wholly owned subsidiary and we intended to carry on business in the creation of facial recognition identity software. Our company is in the development stage and has generated only nominal /insignificant revenues.

Effective January 31, 2014, we entered into an agreement with Eclipse Delaware, our wholly-owned subsidiary, and the former shareholders of Eclipse Delaware. Pursuant to this agreement, we agreed to unwind the share exchange transactions which were made in connection with a share exchange agreement dated January 16, 2013 among the same parties. The decision to unwind and rescind the transaction was in large part as a result of an inability to provide the financing required pursuant to the terms of the share exchange agreement with Eclipse Delaware. As a result, the parties mutually concluded that rescinding the transaction was warranted in the circumstances.

As a result of unwinding the transactions, Eclipse Delaware is no longer our subsidiary as we agreed to return an aggregate of 93,745,000 common shares of Eclipse Delaware to the former shareholders of Eclipse Delaware. Further, the former shareholders of Eclipse Delaware will return to us an aggregate of 196,000,008 of our common shares for cancellation and Eclipse Delaware will retain all assets necessary to effectuate its business and operations as currently conducted. Finally, Eclipse Delaware has issued a promissory note to our company in the amount of $66,000, due four years from the date of issuance, in consideration for the financing proceeds that we had provided to Eclipse Delaware.

In connection with the unwinding transactions above, we also entered into a settlement agreement and general release dated January 31, 2014 with Eclipse Delaware and the former shareholders of Eclipse Delaware. Pursuant to this agreement, all parties agreed to release each other from any liabilities that may arise from the unwinding the share exchange agreement.

On February 26, 2014, we received written consent from our board of directors and a holder of 94.74% of our company’s voting securities, to change the name of our company to “Nudg Media Inc.”. A Certificate of Amendment to effect the change of name was filed on March 3, 2014 and became effective with the Nevada Secretary of State on March 12, 2014. The amendment was approved by the Financial Industry Regulatory Authority (FINRA) with an effective date of March 14, 2014 under the ticker symbol "NDDG". Our CUSIP number is 67035V 109.

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Business Overview

Our company is an emerging technology company focused on establishing an innovative business model intended to bridge cutting-edge social media and e-commerce into a marketplace that connects friends, family, consumers, and vendors in new and exciting ways. Our website will be designed to be a centralized Internet portal and next-generation social media website that incorporates voice/text messaging, video email, video calling, voip calling and mobile technologies to allow consumers to access real-time information about various products and services through augmented proximity reality search features.

Our company strives for simplicity and ease of use in our website and mobile application and we feel these features are going to set us apart from traditional social media sites. For example if a person was to activate a colleague zone that person could socialize with people with the same occupation/profession. Or when someone uploads content they can easily choose the zone that sees their post. The feedback from users regarding the zone functionality has been very positive. The uniqueness of the zone functions allows Nudg to deploy a targeted marketing campaign which will build our member base. As an example they could target waitresses to socialize with other waitresses to network and share content.  

Nudg.com will offer augmented reality coupons that feature proximity alerts for specific merchants. It is these unique attributes of the Nudg platform that will attract a wide audience of consumers who are actively seeking and redeeming coupons. The new self-serve coupon feature will also appeal to both small and large businesses looking to reach local customers through their Nudg Business Pages. Nudg members will receive alerts via push notification on their smartphones when they are within proximity to a business offering a coupon. Members can easily redeem an offer by displaying the mobile coupon at the point of purchase. Ultimately, our company may branch into the rapidly growing group-buying segment, as popularized by Groupon and LivingSocial. Nudg will generate revenue by selling banner space that will be viewed by people who are within the advertiser's relevant geographic location and who display the appropriate interest criteria. Nudg will gather this specific user information by tracking accessed content, 'liked' items, and profile information. This kind of targeted market intelligence allows Nudg the ability to charge a premium for ad space. Nudg will also incorporate a bidding strategy on all banner inventories to ensure maximum revenues.

Further to certain ongoing negotiations, and our previously stated intentions of entering into the social media and e-commerce business, on April 24, 2014, we entered into a license agreement with Nudg Media Inc., a Delaware corporation (“Nudg Delaware”) for the exclusive right to use certain patents, technical information and trademarks globally, held by Nudg Delaware.

Pursuant to the license agreement, our company will pay a 5% royalty on all net sales derived from the use of the patents, technical information and trademarks, such royalty to be paid quarterly on the 15^th day of the month for the preceding three month’s sales.

Our company will also pay a total of $1,200,000 over a 60 month period in money or equal value of restricted common shares of our company scheduled as follows:

1. $200,000 within 6 months of the date of the license agreement;
2. $200,000 within 12 months of the date of the license agreement;
3. $200,000 within 24 months of the date of the license agreement;
4. $200,000 within 36 months of the date of the license agreement;
5. $200,000 within 48 months of the date of the license agreement;
6. $200,000 within 60 months of the date of the license agreement.

Any overdue payments will bear interest at the rate of 1.5% per month until such payment is received by Nudg Delaware. Should the license agreement be terminated for any reason, our company will be required to submit a terminal report and pay Nudg Delaware for any remaining unpaid balance through any due date that has not been reached.

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Our company will also have the right to sublicense the patents, technical information and trademarks and will be required to provide Nudg Delaware with copies of all executed sublicense agreements it enters into within 5 business days of execution.

Emerging Growth Company

We are an Emerging Growth Company as defined in the Jumpstart Our Business Startups (JOBS) Act.

We shall continue to be deemed an emerging growth company until the earliest of

a) the last day of the fiscal year of our company during which we had total annual gross revenues of $1,000,000,000 (as such amount is indexed for inflation every 5 years by the Commission to reflect the change in the Consumer Price Index for All Urban Consumers published by the Bureau of Labor Statistics, setting the threshold to the nearest 1,000,000) or more;

b) the last day of the fiscal year of our company following the fifth anniversary of the date of the first sale of common equity securities of our company pursuant to an effective registration statement under this title;

c) the date on which our company has, during the previous 3-year period, issued more than $1,000,000,000 in non-convertible debt; or

d) the date on which our company is deemed to be a ‘large accelerated filer’, as defined in section 240.12b-2 of title 17, Code of Federal Regulations, or any successor thereto.

As an emerging growth company we are exempt from Section 404(b) of Sarbanes Oxley. Section 404(a) requires Issuers to publish information in their annual reports concerning the scope and adequacy of the internal control structure and procedures for financial reporting. This statement shall also assess the effectiveness of such internal controls and procedures.

Section 404(b) requires that the registered accounting firm shall, in the same report, attest to and report on the assessment on the effectiveness of the internal control structure and procedures for financial reporting.

As an emerging growth company we are exempt from Section 14A and B of the Securities Exchange Act of 1934 which require the shareholder approval of executive compensation and golden parachutes.

We have elected not to opt out of the extended transition period for complying with any new or revised accounting standards pursuant to Section 107(b) of the JOBS Act.

Results of Operations for the Three and Six Month Periods Ended June 30, 2014 and 2013.

The following discussion of our results of operations should be read in conjunction with our unaudited financial statements for the three and six month periods ended June 30, 2014 and 2013 which are included herein.

Our operating results for the three and six month periods ended June 30, 2014 and 2013 are summarized as follows:

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Our operating expenses during the three months ended June 30, 2014 were $35,180 compared to $255,764 during the same period ended 2013. Operating expenses for the three month period ended June 30, 2014 consisted of $14,651 for amortization of intangible assets and $20,529 for general and administrative expenses. Operating expenses for the three month period ended June 30, 2013 consisted $250,623 of general and administrative expenses and $5,141 of selling and marketing. We recorded a net loss of $55,160 for the three months ended June 30, 2014, as compared with $255,764 for the period ended June 30, 2013. The net loss for the three months ended June 30, 2014, consisted of the operating loss as discussed above as well as interest expense for the accretion of the long-term portion of the loan payable of $20,133 offset by interest income of $153. The net loss for the three months ended June 30, 2014, consisted of only the operating loss for the period.

Our operating expenses during the six months ended June 30, 2014 were $121,785 compared to $422,343 during the same period ended 2013. Operating expenses for the six month period ended June 30, 2014 consisted of $14,651 for amortization of intangible assets and $107,134 for general and administrative expenses. Operating expenses for the six month period ended June 30, 2013 consisted $411,563 of general and administrative expenses and $10,780 of selling and marketing. We recorded a net loss of $141,584 for the six months ended June 30, 2014, as compared with $422,343 for the period ended June 30, 2013. The net loss for the six months ended June 30, 2014, consisted of the operating loss as discussed above as well as interest expense for the accretion of the long-term portion of the loan payable of $20,133 offset by interest income of $334. The net loss for the six months ended June 30, 2014, consisted of only the operating loss for the period.

We anticipate our operating expenses will increase as we implement our business plan. The increase will be attributable to expenses to implement our business plan, and the professional fees to be incurred in connection with our ongoing operating expenses as a reporting company under the Securities Exchange Act of 1934.

Liquidity and Capital Resources

Working Capital

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As of June 30 2014, we had total current assets of $334and current liabilities of $327,859. We have a working capital deficit of $327,525 as of June 30, 2014.

We used $59,877 in cash for operating activities for the six month period ended June 30, 2014 compared with $118,218 used in operating activities for the same period in 2013. The decrease in use of cash of $58,341 in operating activities is mainly attributed to a decrease in the accounts payable balance at period end offset by a decrease in the net loss for the period.

For the six month period ended June 30, 2014, we used $1,286 in cash flows from investing activities compared with $1,016 generated  in cash flows from investing activities for the same period in 2013.

Cash provided by financing activities for the six month period ended June 30, 2014 was $57,915 compared to $130,597 for the same period in 2013. The increase in cash provided by financing activities was mainly attributed to proceeds in loan payables received in the current period compared to proceeds from loan payables received, loans from related parties, and issuance of common stock in the prior period.  

Cash Requirements

Over the next 12 months we intend to carry on business as an Internet portal and next generation social media website. We anticipate that we will incur the following operating expenses during this period: 

We will require additional funds of approximately $915,000 over the next twelve months to implement our growth strategy. These funds may be raised through equity financing, debt financing, or other sources, which may result in further dilution in the equity ownership of our shares. There is no assurance that we will be able to maintain operations at a level sufficient for an investor to obtain a return on their investment in our common stock. Further, we may continue to be unprofitable.

Purchase of Significant Equipment

We do not anticipate the purchase or sale of any plant or significant equipment during the next 12 months.

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Going Concern

Our company’s financial statements are prepared in accordance with generally accepted accounting principles applicable to a going concern. This contemplates the realization of assets and the liquidation of liabilities in the normal course of business. Currently, our company has a working capital deficit of $327,525 and an accumulated deficit of $2,249,689. Our company does not have a source of revenue sufficient to cover its operation costs giving substantial doubt for it to continue as a going concern. Our company will be dependent upon the raising of additional capital through placement of our common stock in order to implement its business plan, or merge with an operating company. There can be no assurance that our company will be successful in either situation in order to continue as a going concern. Our company is funding its initial operations by way of issuing founder’s shares.

Our officers and directors have committed to advancing certain operating costs of our company, including legal, audit, transfer agency and edgarizing costs.

In order to continue as a going concern, our company will need, among other things, additional capital resources. Management’s plan is to obtain such resources for our company by obtaining capital from management and significant shareholders sufficient to meet its minimal operating expenses and seeking equity and/or debt financing. However management cannot provide any assurances that our company will be successful in accomplishing any of its plans.

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

Contractual Obligations

As a “smaller reporting company”, we are not required to provide tabular disclosure obligations.

Inflation

Inflation and changing prices have not had a material effect on our business and we do not expect that inflation or changing prices will materially affect our business in the foreseeable future.

Off-Balance Sheet Arrangements

We do not have any off balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity or capital expenditures or capital resources that is material to an investor in our securities.

Seasonality

Our operating results and operating cash flows historically have not been subject to seasonal variations. This pattern may change, however, in the event that we succeed in bringing our planned products to market.

Critical Accounting Policies

Basis of Presentation and Principles of Consolidations

The consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”) and present the consolidated financial statements of our company and our wholly-owned subsidiary. All significant intercompany accounts and transactions have been eliminated in the consolidation. On January 31, 2014, the Company and its wholly-owned subsidiary entered into a settlement and

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release agreement whereby both parties have agreed to unwind the transactions relating to the January 31, 2013 share exchange agreement resulting in the accounts of the subsidiary being removed as of January 31, 2014 with the net liabilities being adjusted to additional paid-in capital. The Company’s fiscal year-end is December 31.

Use of Estimates

The preparation of these consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The Company regularly evaluates estimates and assumptions related to the useful life and recoverability of equipment, fair value of loans payable, fair value of stock-based compensation, and deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.

Cash and Cash Equivalents  

For purposes of reporting within the statement of cash flows, our company considers all cash on hand, cash accounts not subject to withdrawal restrictions or penalties, and all highly liquid debt instruments purchased with a maturity of three months or less to be cash and cash equivalents.

Intangible Assets

Intangible assets are stated at cost less accumulated amortization and are comprised of license rights to patents, trademarks and other technical information. The license rights are amortized straight-line over ten years over the estimated useful life

Impairment of Long-lived Assets

The Company reviews long-lived assets such as property and equipment and intangible assets with finite useful lives for impairment whenever events or changes in circumstance indicate that the carrying amount may not be recoverable. If the total of the expected undiscounted future cash flows is less than the carrying amount of the asset, a loss is recognized for the excess of the carrying amount over the fair value of the asset. No events or circumstances occurred for which an evaluation of the recoverability of long-lived assets was required.

Lease Obligations

All non-cancellable leases with an initial term greater than one year are categorized as either capital leases or operating leases. Assets recorded under capital leases are amortized according to the methods employed for property and equipment or over the term of the related lease, if shorter. For the periods ended June 30, 2014 and December 31, 2013, no capital lease obligations were incurred; therefore, no amortization of lease expense was required. The Company had a month to month lease.  Rent expense for period ended June 30, 2014 was $300 (December 31, 2013 - $3,600).

Revenue Recognition

Our company is in the development stage and has yet to realize significant revenues from operations. Once our company has commenced operations, it will recognize revenues when delivery of goods or completion of services has occurred provided there is persuasive evidence of an agreement, acceptance has been approved by its customers, the fee is fixed or determinable based on the completion of stated terms and conditions, and collection of any related receivable is probable. Software licenses fees will be recognized over the term of the agreement on a straight line basis.

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Share-based Compensation

Our company follows the provisions of FASB Accounting Standards Codification ("ASC") 718, “Share-Based Payment.” which requires all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values.

Equity instruments issued to non-employees for goods or services are accounted for at either the fair market value of the goods and services rendered or on the instruments issued in exchange for such services, whichever is more readily determinable, using the measurement date guidelines enumerated in ASC 505-50-30.

Loss per Common Share

The Company computes net loss per share in accordance with ASC 260, Earnings Per Share, which requires presentation of both basic and diluted earnings per share (EPS) on the face of the income statement. Basic EPS is computed by dividing net loss available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing Diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options, warrants or convertible loans. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. At June 30, 2014, the Company had 1,200,000 (December 31, 2013 – 50,000) potentially dilutive shares from outstanding stock options and convertible loans.

Fair Value of Financial Instruments

ASC 820, “Fair Value Measurements and Disclosures” (“ASC 820”), requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure fair value:

Level 1

Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

Level 2

Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

Level 3

Level 3 applies to assets or liabilities for which there are no observable inputs to the valuation methodology that are relevant to the measurement of the fair value of the assets or liabilities.

The Company’s financial instruments consist principally of cash, amounts receivable, promissory note receivable, accounts payable and accrued liabilities, loans payable, and amounts due to related parties. Pursuant to ASC 820, the fair value of cash is determined based on “Level 1” inputs. The recorded values of all other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.

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Income Taxes

The Company accounts for income taxes pursuant to ASC 740. Deferred tax assets and liabilities are determined based on temporary differences between the bases of certain assets and liabilities for income tax and financial reporting purposes. The deferred tax assets and liabilities are classified according to the financial statement classification of the assets and liabilities generating the differences.

The Company maintains a valuation allowance with respect to deferred tax assets. The Company establishes a valuation allowance based upon the potential likelihood of realizing the deferred tax asset and taking into consideration the Company’s financial position and results of operations for the current year. Future realization of the deferred tax benefit depends on the existence of sufficient taxable income within the carry forward year under the Federal tax laws.

Changes in circumstances, such as the Company generating taxable income, could cause a change in judgment about the realization of the related deferred tax asset. Any change in the valuation allowance will be included in income in the year of the change in estimate.

Recent Accounting Pronouncements

The Company has limited operations and is considered to be in the development stage. During the period ended June 30, 2014, the Company has elected to early adopt Accounting Standards Update No. 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements. The adoption of this ASU allows the Company to remove the inception to date information and all references to development stage.

The Company has implemented all new accounting pronouncements that are in effect.  These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

Item 3.           Quantitative and Qualitative Disclosures about Market Risk

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

Item 4.           Controls and Procedures

Management’s Report on Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended, 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 our management, including our president and chief financial officer (our principal executive officer, principal financial officer and principal accounting officer), to allow for timely decisions regarding required disclosure.

As the end of the quarter covered by this report, we carried out an evaluation, under the supervision and with the participation of our president and chief financial officer (our principal executive officer, principal financial officer and principal accounting officer), of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, president and chief financial officer (our principal executive officer, principal financial officer and principal accounting officer) concluded that our disclosure controls and procedures were not effective in providing reasonable assurance in the reliability of our reports as of the end of the period covered by this quarterly report.

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Changes in Internal Control over Financial Reporting

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

PART II - OTHER INFORMATION

Item 1.           Legal Proceedings

We know of no material, active or pending legal proceedings against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.

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

None.

Item 3.           Defaults Upon Senior Securities

None.

Item 4.           Mine Safety Disclosures

Not applicable.

Item 5.           Other Information

Effective April 25, 2014, Gregory Rotelli resigned as interim president, chief executive officer, chief financial officer, treasurer, secretary and director of our company. Mr. Rotelli's resignation was not the result of any disagreement with our company regarding our operations, policies, practices or otherwise.

Concurrently on April 25, 2014, Menachem Sofepr was appointed as president, chief executive officer, chief financial officer, treasurer, secretary and director of our company.

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Item 6.           Exhibits

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SIGNATURES

Pursuant to the requirements of the 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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