Global Future City Holding Inc. - FORM 10-K

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EXCEL - IDEA: XBRL DOCUMENT - Global Future City Holding Inc.	Financial_Report.xls
EX-32.1 - CERTIFICATION - Global Future City Holding Inc.	globalfuture_10k-ex3201.htm
EX-31.1 - CERTIFICATION - Global Future City Holding Inc.	globalfuture_10k-ex3101.htm
EX-31.2 - CERTIFICATION - Global Future City Holding Inc.	globalfuture_10k-ex3102.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

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

For the fiscal year ended December 31, 2014

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

For the transition period from to

Commission file number: 0-33519

GLOBAL FUTURE CITY HOLDING INC.

(formerly FITT HIGHWAY PRODUCTS, INC.)

(Exact name of registrant as specified in its Charter)

Nevada		98-0360989
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

26381 Crown Valley Parkway, Suite 230, Mission Viejo, CA 92691

(Address of principal executive offices)

Registrant’s telephone number, including area code: (949) 582-5933

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $0.001 par value

(Title of Class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. o Yes x No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. o Yes x No

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

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained herein, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-k or any amendment to this Form 10-k. o

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

Large accelerated filer	o	Accelerated filer	o
Non-accelerated filer	o	Smaller reporting company	x

Indicate by check mark whether the registrant is a shell company. o Yes x No

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant on June 30, 2014: $728,938

The registrant had 38,063,410 shares of common stock outstanding as of March 30, 2015.

DOCUMENTS INCORPORATED BY REFERENCE

The following documents are incorporated herein by reference in Part IV, Item 15: (i) Registration Statement on Form 10SB, filed on January 18, 2002, (ii) Current Report on Form 8-K, filed on April 7, 2005, (iii) Schedule 14C Definitive Information Statement, filed June 28, 2005, (iv) Current Report on Form 8-K, filed August 26, 2009, (v) Current Report on Form 8-K, filed January 22, 2010, (vi) Current Report on Form 8-K, filed April 6, 2010, (vii) Schedule 14C Definitive Information Statement, filed June 21, 2010, (viii) Current Report on Form 8-K, filed July 21, 2010, (ix) Form S-8 Registration Statement, filed March 28, 2011, (x) Form S-8 Registration Statement, filed May 18, 2011, (xi) Form S-8 Registration Statement, filed November 4, 2011, (xii) Schedule 14C Definitive Information Statement, filed January 10, 2013, (xiii) Schedule 14C Definitive Information Statement, filed October 1, 2013and (xiv) Current Report on Form 8-K, filed on January 13, 2014 and amended on April 3, 2014.

TABLE OF CONTENTS

		Page
PART I

ITEM 1	BUSINESS	1

ITEM 1A	RISK FACTORS	4

ITEM 1B	UNRESOLVED STAFF COMMENTS	4

ITEM 2	PROPERTIES	5

ITEM 3	LEGAL PROCEEDINGS	5

ITEM 4	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	5

PART II

ITEM 5	MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	5

ITEM 6	SELECTED FINANCIAL DATA	6

ITEM 7	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	6

ITEM 7A	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	10

ITEM 8	CONSOLIDATED FINANCIAL STATEMENTS	11

ITEM 9	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	31

ITEM 9A	CONTROLS AND PROCEDURES	31

ITEM 9A(T)	CONTROLS AND PROCEDURES	31

ITEM 9B	OTHER INFORMATION	31

PART III

ITEM 10	DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE	32

ITEM 11	EXECUTIVE COMPENSATION	33

ITEM 12	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	35

ITEM 13	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE	35

ITEM 14	PRINCIPAL ACCOUNTING FEES AND SERVICES	36

PART IV

ITEM 15	EXHIBITS, FINANCIAL STATEMENT SCHEDULES	37

SIGNATURES		38

PART I

ITEM 1. BUSINESS

Description of Business

Global Future City Holding Inc., formerly FITT Highway Products, Inc. (the “Company”), is in the business of manufacturing (on an outsource basis), distribution and sale of energy drinks. We market three two-ounce energy shots named “F.I.T.T. Energy for Life” (the “FITT Energy Shot”), “F.I.T.T. Energy Extreme” and "F.I.T.T. Energy Rx". We have significant debt and our profitability and cash flow have been dependent upon our success in marketing our three energy shot products. As discussed in Note 14 to the accompanying consolidated financial statements, we have agreed to sell 80% of our common stock to Sky Rover Holdings Ltd. (“Sky Rover”). If we are successful in closing this transaction, our business will also include the marketing and promotion of an E-Gold coin (the “EGD”), a type of cryptoasset created by Sky Rover, to merchants and consumers.

If the Sky Rover transaction closes, we will continue to market and sell our FITT brand of energy shots while considering additional business alternatives, including among other things, a proposed business model where the Company shall establish four subsidiaries. The first subsidiary will market a mobile application (“IP Technology”). Because the price of EGD continuously fluctuates, the IP Technology provides merchants with proprietary software that enables these merchants to calculate how much Rewarded EGD (as defined below) a consumer is eligible to receive. The second subsidiary will operate an online store and various merchants that sell goods and services to consumers, and gives consumers a certain percentage for completing the task or for the purchased goods/services back in the form of EGD (“Rewarded EGD”) as part of a loyalty program. The third subsidiary will be a foreign company that will sell 4,000,000 EGD to foreign individuals and entities. The fourth subsidiary will continue to sell the Company’s current energy drinks while participating in giving away Rewarded EGD as well. The Company itself will provide marketing services to merchants that want to establish loyalty program(s) with its customers (collectively, the “Proposed Business Model”).

The Securities and Exchange Commission (“SEC”) has not deemed whether a form of digital currency or crypto asset itself is a security, Due to this uncertainty, the Company has submitted a Request for No-Action Relief (the “No-Action Letter) on February 10, 2015 to the SEC to obtain clarification that the SEC will not recommend enforcement action against the Company and its related subsidiaries regarding the Proposed Business Model if they conduct themselves as described in the No-Action Letter.

Name Change

On October 16, 2014, our Board of Directors approved an agreement and plan to merge with our newly formed and wholly-owned subsidiary, Global Future City Holding Inc., a Nevada corporation, to effectuate a name change from FITT Highway Products, Inc. to Global Future City Holding Inc. Global was formed solely for the purpose of this name change and our Company would be the surviving entity following the merger. The Articles of Merger effectuating the merger and name change were filed with the Nevada Secretary of State on October 16, 2014 and became effective October 29, 2014. In connection with the name change, our ticker symbol was changed from FHWY to FTCY.

Merger with FITT

In 2012, F.I.T.T Energy Products, Inc. (“FITT”) proposed negotiating a business combination with us and, on November 5, 2012, our Board of Directors approved commencing formal negotiations with FITT in this regard. On June 12, 2013, the Board, by unanimous written consent, recommended that our stockholders approve the Company entering into a Merger and Reorganization Agreement (the “Merger Agreement”) with FITT and on June 12, 2013, holders of a majority of the voting power of all shares of our common and preferred stock entitled to vote, by written consent in lieu of a special meeting of our stockholders, approved the following action: entry into the Merger Agreement with FITT whereby FITT would be merged into the Company, with the Company being the surviving entity (the “Merger”). The Merger Agreement, which was entered into on June 18, 2013, required that FITT obtain an independent valuation which would serve as the basis for a share exchange once all necessary approvals were obtained. A Definitive Information Statement on Schedule 14C (“DEF 14C”) was mailed to our shareholders on October 8, 2013 and the Merger became effective on October 29, 2013. On October 29, 2013, we issued 33,000,000 shares of common stock to the shareholders of FITT in the manner set out in the Merger Agreement. As such, the FITT shareholders owned approximately 89% of the post merged company as of the transaction date. Global Future City Holding Inc. and FITT are hereafter known collectively as the “Company.”

Corporate History

Our Company was incorporated in the State of Nevada on October 12, 2000 under the name Cogen Systems, Inc. We changed our name to Snocone Systems, Inc. on December 6, 2001. On April 1, 2005, Snocone Systems, Inc. and its wholly-owned subsidiary, WYD Acquisition Corp., a California corporation (the “Merger Sub”), completed and closed an Agreement and Plan of Merger with Who’s Your Daddy, Inc. (“WYD”), an unrelated, privately held California corporation, whereby the Merger Sub merged with and into WYD. After the merger, the separate existence of the Merger Sub ceased and, as such, WYD continued its corporate existence as a direct, wholly-owned subsidiary of Snocone Systems, Inc. under the laws of the State of California.

On April 13, 2005, the shareholders of Snocone Systems, Inc. voted to change its name to Who’s Your Daddy, Inc. and effective June 1, 2010, the shareholders of Who’s Your Daddy, Inc. voted to change the name to FITT Highway Products, Inc. As stated under Name Change above, effective October 29, 2014 the name of our Company was changed to Global Future City Holding Inc. and our trading symbol changed from FHWY to FTCY.

Products

We are marketing three two-ounce energy shots, which are F.I.T.T. Energy for Life, F.I.T.T. Energy Extreme and F.I.T.T. Energy Rx. All three energy shots were designed in collaboration with Dr. Rand Scott, a Board Certified Anesthesiologist and Pain Management Specialist. Dr. Scott incorporated a number of unique ingredients into the products which allows for the use of lower levels of caffeine. We believe that higher levels of caffeine may be unhealthy and potentially dangerous for our consumers, especially for adolescents or people with blood pressure issues. Dr. Scott is a well-known medical/legal expert witness in his areas of medical expertise and has significant experience with the use of herbal products. In addition, Dr. Scott is one of our shareholders and has no rights to our energy shots beyond the payment of a royalty of $0.02 per bottle of each energy shot sold. Dr. Scott worked under a Product Development & Marketing Agreement with FITT (the “Scott Agreement”). According its terms, the Scott Agreement was transferred to us after the Merger and continues in full force and effect. The Scott Agreement is dated March 1, 2012 and has an initial term of 24 months. After the initial term, unless sooner terminated, the Scott Agreement automatically renews for successive one-year periods.

Ingredients:

The energy shot formulae contain ingredients selected to not only provide energy, but to also enhance mental focus, muscle strength and endurance, and promote cardiovascular health. The energy shots feature Resveratrol, a substance found naturally in grapes. While there is no scientific consensus regarding the health benefits of Resveratrol, it has the scientific world fascinated by its potential to affect age related declines and is being widely studied for that as well as its potential to cause the body to act as if it is already on a diet, and to change the distribution of fat tissue in the body. It should be noted that neither the Food and Drug Administration (“FDA”) nor any comparable regulatory agency has approved resveratrol or resveratrol-based products for the treatment of any illness, injury or condition. Our energy shots also contain L-Arginine, an amino acid in dairy, brown rice and nuts which is essential for optimum growth, and regulation of protein metabolism. L-Arginine can make blood vessels wider, as opposed to the narrowing effect of caffeine. Further, L-Arginine may benefit in the treatment of sports related injuries, as well in building lean muscle and burning fat, since it facilitates the natural release of growth hormone (HGH) and is a building block for creatine. Additionally, the drink features L-Arginine AKG. L-Arginine AKG has been shown in a University study to help build additional strength when used during training. Beyond this, the FITT Energy Shot features antioxidant Green Tea extract, and Chromium. These ingredients have good safety profiles and have support as weight-loss aides. More than just a caffeine drink, our FITT Energy Shot adds natural energy boosters including Taurine & Guarana, as well as essential Vitamins B3, B5, B6, and B12. To optimize workouts, the FITT Energy Shot has a touch of Fructose, an easily absorbed fuel for the body and brain. All this is built on a base of healthy pomegranate and orange.

Operations

Since 2005, when we completed a merger with Snocone Systems, Inc., we have been unable to generate operating income and have become burdened with substantial debt. Due to a number of factors, including our substantial debt, we have had significant difficulty attracting the necessary investment dollars to produce and market our products. In addition, third parties performing marketing, production and fulfillment services have been unwilling to enter into agreements directly with us due to our poor financial condition, among other reasons. If the Sky Rover transaction closes, we are reasonably certain that we will be able to attract sufficient capital to sustain our operations as we perform our new business plan.

Marketing

Marketing functions have been directed mainly to the retail market segment. The retail market space for our product includes convenience stores, grocery chains, drug stores, and health and fitness centers to name a few. We believe sales into the retail market will provide the most stable method for marketing our energy shots. However, significant funds are required in order to conduct a sustained and supported rollout of our products. The Company has estimated that approximately $5.0 million would be needed to conduct a proper rollout, but to date such funds have not been obtained.

In October 2011, we entered into an exclusive Master Marketing Agreement with GRIPS Marketing Corporation (“GRIPS”), a corporation managed by an individual with over 40 years’ experience marketing a variety of products to convenience stores and other retail outlets. In April 2012, with the assistance of GRIPS, we received a letter from Core-Mark International, a major national distributor, in which Core-Mark agreed to team up with the Company to distribute our energy shot products. The terms of the agreement with GRIPS were negotiated with the Company’s understanding that the sales personnel of large distributors like Core-Mark would be a significant factor in the sales and servicing of their retail customers. The Company was unable to acquire the penetration required to expand the initial rollout model with Core Mark due to the inability to finance the support marketing which resulted in poor sell-through at the store levels.

Distribution

As noted above, in April 2012, with the assistance of GRIPS, we received a letter from Core-Mark International, a major national distributor, in which Core-Mark agreed to team up with the Company to distribute our energy shot products to Core-Mark’s customer base. Core-Mark is one of the largest broad-line, full-service marketers and distributors of packaged consumer products in North America. Founded in 1888, Core-Mark provides distribution and logistics services as well as marketing programs to over 29,000 retail locations across the United States and Canada through its 28 distribution centers. Core-Mark services traditional convenience retailers, grocers, mass merchandisers, drug, liquor and specialty stores, and other stores that carry consumer packaged goods. Core-Mark’s plan was to launch our products in California, Nevada and Arizona, then move across the country to other divisions. During the second quarter of 2012, the Company began shipping our energy shots to Core-Mark who then shipped the products to certain of its convenience store customers. The Company’s marketing program for sales into this market included in-store display racks and signage, and also included support by field sales reps and by various forms of media designed to drive the consumer to purchase the product at the retail outlets. However, without sufficient financing, we were initially unable to support programs necessary to make our distribution program successful.

Production

Our energy shots are produced at Wellington Foods Incorporated, a contract manufacturer of liquid and powder nutritional supplements since 1974. In addition to its manufacturing facilities, Wellington has the in-house capabilities to develop products from concept for flavoring ingredient content to production, or to take an existing formula and extend the product line with new flavors or innovative ingredients. Dr. Rand Scott, one of our medical experts and a shareholder, researched and recommended the ingredients and their quantities for our energy shots, and Wellington provided the final flavoring and formulations. Wellington owns the formulae for our energy shots and is under no obligation to provide us with these products for commercial sale. We are a party to a non-disclosure agreement (“NDA”) with Wellington which precludes either party from divulging information provided, which in our view includes the ingredient components of our energy shots. However, the NDA also acknowledges that Wellington provides products to many other clients and that some of these products may be similar in formulation content or manufacturing procedures.

The principal raw materials used to manufacture the energy shot are plastic bottles, nutritional supplements, flavoring agents, and concentrates as well as other ingredients from independent suppliers. These raw materials are readily available from any number of sources in the United States.

The Industry

Energy drinks, including two-ounce shots and canned drinks, are beverages with legal stimulants, vitamins, and minerals that give users a lift of energy. It should be noted that neither the FDA nor any comparable regulatory agency reviews or pre-approves the sale of energy drinks, including ours, since they are marketed as dietary supplements rather than drugs. Common ingredients are caffeine, taurine, ginseng, sugars, and various amounts of vitamins and minerals. The products are consumed by individuals who are explicitly looking for the extra boost in energy. While canned energy drinks are most commonly consumed by individuals in the 18-to-34 age group, energy shots have been appealing to a more expanded demographic. In an article discussing energy drinks published in the August 2011 issue of Beverage Industry, Garima Goel-lal, beverage analyst with Mintel International, a global leading market research company, states that “a lot of adults in the older age [group] who don’t want sugar in their beverages, but want the same benefit of an energy boost, are going toward energy shots”. In the same article, Jared Koerten, U.S. research associate for Euromonitor International, states “The appeal and benefits that energy shots offer consumers has driven sales in recent years. These products have capitalized on many consumer demands in the fast-paced global economy of today. First, these products offer extended energy to consumers who need to stay alert for long work hours. In addition, by promising ‘no crash later’, energy shots can provide a boost of energy without the accompanying loss in productivity that often stems from drinking coffee or other sugary drinks”.

In its June 2012 Executive Summary Report on energy drinks and energy shots, Mintel reports that sales of energy shots were nearly $1.6 billion in 2011, an increase of nearly $330 million over 2010 sales. Mintel also forecasts continued growth in energy shot sales to in excess of $3.4 billion by 2016. In this report, Ms. Goel-lal states “Energy drinks and shots continue to grow unabated, especially after the recession. In order to enjoy uninterrupted growth, the category needs to add new customers, engage in innovation, broaden its functional platform, and allay product safety concerns.” Mintel also reports that Living Essential’s 5-Hour Energy “continues to account for the lion’s share in the segment.”

Competition

The energy drink industry is intensely competitive and significantly affected by new product introductions and other market activities of industry participants. The principal areas of competition are pricing, packaging, development of new products and flavors, and marketing campaigns. Our energy shots compete with a number of other energy shots produced by a relatively few number of manufacturers, most of which have substantially greater financial, marketing and distribution resources than we do. The principal competitors include 5 Hour Energy®, Red Bull®, and Monster Energy® among many others. Management believes our products’ unique formulae and affiliation with qualified medical experts as well as renowned athletes will give us a vastly different entry into a rapidly expanding market.

Intellectual Property

We currently have the trademarks “F.I.T.T. Energy” and “Throw A F.I.T.T”. We also own the F.I.T.T. Energy logo.

Employees

As of the date of this Report, we employ one person who is full-time. We retain independent contractors as needed. Our employee is not represented by a labor union and we believe that our employee relations are satisfactory.

ITEM 1A. RISK FACTORS

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

ITEM 1B. UNRESOLVED STAFF COMMENTS

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

ITEM 2. PROPERTIES

We do not own any real property. Our principal executive offices are located at 26381 Crown Valley Parkway, Suite 230, Mission Viejo, CA 92691 where we are leasing approximately 900 square feet under a month-to-month agreement that commenced in June 2009. Monthly payments under the lease are currently $2,000. As we have out-sourced manufacturing and product fulfillment, including product storage, we consider our leased office space adequate for the operation of our business.

ITEM 3. LEGAL PROCEEDINGS

None

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

PART II

ITEM 5. MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

Our common stock is currently quoted under the symbol “FTCY” on the OTCQB marketplace. The following table reflects on a per share basis the reported high and low bid prices of our Common Stock for each quarter for the period indicated as reported by the OTCQB. Such prices are inter-dealer prices without retail mark-up, mark-down, or commission and may not represent actual transactions.

YEAR ENDED DECEMBER 31, 2014

QUARTER ENDED		HIGH		LOW
March 31, 2014	$	1.20	$	0.15
June 30, 2014	$	0.25	$	0.06
September 30, 2014	$	1.10	$	0.15
December 31, 2014	$	1.10	$	0.20

YEAR ENDED DECEMBER 31, 2013

QUARTER ENDED		HIGH		LOW
March 31, 2013	$	0.40	$	0.18
June 30, 2013	$	0.51	$	0.06
September 30, 2013	$	1.19	$	0.07
December 31, 2013	$	1.35	$	0.85

On March 30, 2015, the closing per share price for our common stock was $0.83.

Holders of Common Stock

On October 9, 2013 we mailed a notice to our shareholders notifying them of the finalization of the Merger. According to the records from that mailing, we had 1,224 shareholders, which number changes from day to day based on market activity.

Dividends

We have never paid dividends on our stock and have no plans to pay dividends in the near future. We intend to reinvest earnings, when and if obtained, in the continued development and operation of our business.

Equity Compensation Plan Information

The following table gives information about our common stock that may be issued upon the exercise of options under all of our equity compensation plans as of December 31, 2013.

Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights	Weighted-average exercise price of outstanding options, warrants and rights		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
	(a)	(b)		(c)

Equity compensation plans approved by security holders	0	$0.00		13,889
TOTAL	0		$0.00	13,889

Sales of Unregistered Securities

None

ITEM 6. SELECTED FINANCIAL DATA

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

Forward Looking Statements

Our Management’s Discussion and Analysis contains not only statements that are historical facts, but also statements that are forward-looking (within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934). Forward-looking statements are, by their very nature, uncertain and risky. These risks and uncertainties include international, national and local general economic and market conditions; demographic changes; our ability to sustain, manage, or forecast growth; our ability to successfully make and integrate acquisitions; raw material costs and availability; new product development and introduction; existing government regulations and changes in, or the failure to comply with, government regulations; adverse publicity; competition; the loss of significant customers or suppliers; fluctuations and difficulty in forecasting operating results; changes in business strategy or development plans; business disruptions; the ability to attract and retain qualified personnel; the ability to protect technology; and other risks that might be detailed from time to time in our filings with the Securities and Exchange Commission.

Although the forward-looking statements in this report reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by them. Consequently, and because forward-looking statements are inherently subject to risks and uncertainties, the actual results and outcomes may differ materially from the results and outcomes discussed in the forward-looking statements. You are urged to carefully review and consider the various disclosures made by us in this report and in our other reports as we attempt to advise interested parties of the risks and factors that may affect our business, financial condition, and results of operations and prospects.

Summary of Business

Our business is the manufacturing (on an outsource basis), distribution and sale of energy drinks. We market three two-ounce energy shots named “F.I.T.T. Energy for Life” (the “FITT Energy Shot”), “F.I.T.T. Energy Extreme” and "F.I.T.T. Energy Rx". We have significant debt and our profitability and cash flow have been dependent upon our success in marketing our three energy shot products. We agreed to transfer 80% of our common stock to Sky Rover Holdings Ltd. (“Sky Rover”). If we are successful in closing this transaction, our business will also include the marketing and promotion of EGD.

If the Sky Rover transaction closes, we will continue to market and sell our FITT brand of energy shots while considering additional business alternatives, including among other things, a proposed business model where the Company shall establish four subsidiaries. Accordingly, future operations, if the transaction closes, may be substantially different than pas operations. The first subsidiary will market a mobile application (“IP Technology”). Because the price of EGD continuously fluctuates, the IP Technology provides merchants with proprietary software that enables these merchants to calculate how much Rewarded EGD (as defined below) a consumer is eligible to receive. The second subsidiary will operate an online store and various merchants that sell goods and services to consumers, and gives consumers a certain percentage for completing the task or for the purchased goods/services back in the form of EGD (“Rewarded EGD”) as part of a loyalty program. The third subsidiary will be a foreign company that will sell 4,000,000 EGD to foreign individuals and entities. The fourth subsidiary will continue to sell the Company’s current energy drinks while participating in giving away Rewarded EGD as well. The Company itself will provide marketing services to merchants that want to establish loyalty program(s) with its customers (collectively, the “Proposed Business Model”).

Critical Accounting Policies

Our financial statements are prepared in accordance with accounting principles generally accepted in the United States, which requires us to make estimates and assumptions in certain circumstances that affect amounts reported. In preparing these financial statements, management has made its best estimates and judgments of certain amounts, giving due consideration to materiality. We believe that of our significant accounting policies (more fully described in notes to the consolidated financial statements), the following are particularly important to the portrayal of our results of operations and financial position and may require the application of a higher level of judgment by our management, and as a result are subject to an inherent degree of uncertainty.

Estimates

Our discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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. By their nature, these estimates and judgments are subject to an inherent degree of uncertainty. We review our estimates on an on-going basis, including those related to long-lived assets, contingencies related to pending or threatened litigation, and the valuation of stock grants, options and warrants to purchase common stock. We base our estimates on our historical experience, knowledge of current conditions and our beliefs of what could occur in the future considering available information. Actual results may differ from these estimates, and material effects on our operating results and financial position may result. We believe the following critical accounting policies involve our more significant judgments and estimates used in the preparation of our financial statements.

Stock-Based Compensation

We account for stock-based compensation in accordance with Accounting Standards Codification (“ASC”) 718 – Compensation (“ASC 718”). ASC 718 requires that we account for all stock-based compensation transactions using a fair-value method and recognize the fair value of each award as an expense, generally over the service period. The fair value of stock grants is based upon the market price of our common stock at the grant date. We estimate the fair value of stock option awards, as of the grant date, using the Black-Scholes option-pricing model. The use of the Black-Scholes model requires that we make a number of estimates, including the expected option term, the expected volatility in the price of our common stock, the risk-free rate of interest and the dividend yield on our common stock. If our variable volatility assumptions were different, the resulting determination of the fair value of stock option awards could be materially different and our results of operations could be materially impacted.

Accounting for Equity Instruments Issued to Non-Employees

We account for any equity-based payments to non-employees under ASC 505 – Equity. The fair value of the equity instrument issued or committed to be issued is used to measure the transaction, as this is more reliable than the fair value of the services received. The fair value is measured at the value of our common stock on the date the commitment for performance by the counterparty has been reached or the counterparty’s performance is complete. The fair value of the equity instrument is charged directly to the statement of operations and credited to common stock and/or additional paid-in capital as appropriate.

Debt Issued with Common Stock

Debt issued with common stock is accounted for under the guidelines established by ASC 470-20 – Accounting for Debt with Conversion or Other Options. We record the relative fair value of common stock related to the issuance of convertible debt as a debt discount or premium. The discount or premium is subsequently amortized over the expected term of the convertible debt to interest expense.

Recent Accounting Pronouncements

In May 2014, the FASB issued new accounting guidance regarding revenue recognition under GAAP. This new guidance will supersede nearly all existing revenue recognition guidance, and is effective for public entities for annual and interim periods beginning after December 31, 2016. Early adoption is not permitted. The Company is currently evaluating the impact of this new guidance on the Company's consolidated financial statements.

In August 2014, the FASB issued Accounting Standards Update No. 2014-15, "Presentation of Financial Statements—Going Concern", which requires management to evaluate, at each annual and interim reporting period, whether there are conditions or events that raise substantial doubt about the entity's ability to continue as a going concern within one year after the date the financial statements are issued and provide related disclosures. ASU 2014-15 is effective for annual periods ending after December 15, 2016 and interim periods thereafter. Early application is permitted. Management is still in the process of assessing the impact of ASU 2014-15 on the Company’s consolidated financial statements.

The FASB issues Accounting Standards Updates (“ASUs”) to amend the authoritative literature in ASC. There have been a number of ASUs to date, including those above, that amend the original text of ASC. Management believes that those issued to date either (i) provide supplemental guidance, (ii) are technical corrections, (iii) are not applicable to us or (iv) are not expected to have a significant impact our financial statements.

Results of Operations for the Years Ended December 31, 2014 and 2013

Net Sales

Net sales were $51,255 for 2014 versus $39,315 for 2013. Our 2014 sales represented the clearance of a significant part of our remaining inventory at reduced pricing since it was nearing expiration.

Cost of Goods Sold

Cost of goods sold for 2014 was $45,924 resulting in a gross profit of $5,331. Cost of goods sold for the 2013 was $42,858 and contained a charge of $29,200 for product impairment due to expired inventory. Because of the limited amount of sales during the years ended 2014 and 2013, margins indicated may not be indicative of future margins at different sales levels.

Selling and Marketing Expenses

Selling and marketing expenses were $31,620 and $276,444 in 2014 and 2013, respectively. In 2013 we hired a number of employees and incurred payroll expenses totaling $176,422 ($83,250 of which was stock-based) while in 2014 our payroll expense was $17,619. In addition, expenses in 2014 were lower than in 2013 in the following categories: marketing ($22,000 of which $20,000 was stock-based), advertising ($44,000) and commissions and royalties ($11,000).

General and Administrative Expenses

General and administrative expenses for 2014 were $674,157, compared to $336,830 for the comparable period in 2013. In 2014, our payroll related expenses for our CEO and Controller totaled $335,220 while in 2013 we our comparable payroll costs were post-Merger cost totaling $73,975. All payroll costs for our CEO and Controller were accrued and unpaid. Also in 2014, director’s fees, office supplies, office rent and telephone costs amounted to $67,000 while in 2013 the comparable post-Merger costs totaled $31,000. Finally, expenses in 2014 were higher than in 2013 in the following categories: investor relations ($22,500 of which $12,500 was stock-based) and corporation and SEC filing fees ($13,000).

Fair Value of Contributed Services

Fair value of contributed services was $233,616 for 2013 and represented costs of certain shared administrative services and the costs for services provided by our CEO and Controller who did not accrue compensation from our Company prior to October 29, 2013, the effective date of the Merger. There were no such expenses in 2014.

Interest Expense

Interest expense in 2014 was $159,868 compared to $465,532 for the same period in 2013. The 2013 amount includes $272,015 amortization of debt discount and accretion of principal balance relating to notes payable that were repayable at two times principal. There are no similar costs for 2014.

Interest Income

Interest income during 2013 was $33,283 and represented an interest accrual on the advances to shareholder. 2014 contains no similar interest income since the shareholder advances were repaid in prior years.

Gain or Loss on Extinguishment of Debt

See Note 13 to the accompanying consolidated financial statements for a detail of the components for this category.

Liquidity and Capital Resources

As of December 31, 2014, our principal source of liquidity is from the receipt of deposits from Greenome and Sky Rover in accordance with the terms of the May 6, 2014 Share Exchange Agreement, which was subsequently cancelled, and the September 19, 2014 Stock Purchase Agreement. See Note 14 to the accompanying consolidated financial statements. Our principal short-term and long-term liquidity needs have been, and are expected to be, funding operating losses until profitability is achieved and making expenditures for general corporate purposes.

Management continues to seek capital through various sources. At December 31, 2014, our cash and cash equivalents were $155,271 and we had negative working capital of nearly $4.1 million.

Debt

In prior years, we issued a number of notes payable and used the proceeds to fund operations. These notes payable were, in most cases, issued along with common shares of FITT or common shares of FTCY which were owned by FITT prior to the Merger. See Note 8 to the accompanying consolidated financial statements for additional information.

During the first quarter ended March 31, 2014, holders of $55,000 of debt (repayment value) elected to convert the obligations, including the related accrued interest totaling $15,479 into 115,637 common shares of the merged entity. Also during the first quarter of 2014, we entered into a convertible promissory note with a note holder which was assigned to a third party and amended in the third quarter of 2014. During the fourth quarter of 2014, we entered into new note agreements with noteholders of $1,515,000 of debt whereby the maturity dates were extended to August 2015, interest rates were reset at 10%, and a significant amount of accrued interest was forgiven. The new note agreements also contain a forced conversion feature at the option of the Company when certain market conditions are met. See Note 8 to the accompanying consolidated financial statements for further information.

Equity

During 2014, we issued 50,000 common shares (valued at $12,500) to a service provider for various public relations services. In 2013, we issued 526,599 shares of common stock (total value of $27,500) in consideration of entering into agreements with two individuals for services. Also in 2013, we issued 213,300 of our common shares (total value of $83,250) to two employees as incentive for them to begin employment with us.

Cash Flows

The following table sets forth our cash flows for the year ended December 31:

	2014			2013			Change
Operating activities
Net income (loss)	$	190,620		$	(1,666,458	)	$	1,857,078
Change in non-cash items		(1,030,624	)		1,036,381			(2,067,005	)
Change in working capital		481,561			409,523			72,038
Total		(358,443	)		(220,554	)		(137,889	)
Investing activities		(1,871	)		(80,629	)		78,758
Financing activities		515,000			294,500			220,500
Total	$	154,686		$	(6,683	)	$	161,369

Operating Activities

The change in non-cash items includes gain/loss on extinguishment of debt, shares issued for compensation and services, the fair value of contributed services, depreciation, and amortization of debt discount/debt accretion. The change in working capital is primarily related to increases in accounts payable, accrued expenses and accrued compensation.

Investing Activities

Cash used in investing activities consists of capital expenditures, along with cash advances to and repayments from a related party and our major shareholder. For 2013, this category also includes net liabilities assumed in the Merger.

Financing Activities

Cash provided from the issuance of notes payable was $40,000 and $230,000 in the 2014 and 2013 periods, respectively. The 2014 period includes $525,000 in deposits and $50,000 in payments relating to a proposed business combination while the 2013 period included $64,500 in capital contributions from a major shareholder.

Off Balance Sheet Arrangements

We have no off balance sheet arrangements.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

ITEM 8. FINANCIAL STATEMENTS

		Page No.
Audited Consolidated Financial Statements for Global Future City Holding Inc., formerly FITT Highway Products, Inc.

Report of Independent Registered Public Accounting Firm		12

Consolidated Balance Sheets as of December 31, 2014 and 2013		13

Consolidated Statements of Operations for the Years Ended December 31, 2014 and 2013		14

Consolidated Statements of Shareholders’ Deficit for the Years Ended December 31, 2014 and 2013		15

Consolidated Statements of Cash Flows for the Years Ended December 31, 2014 and 2013		16

Notes to Consolidated Financial Statements		17

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders

Global Future City Holding Inc.

We have audited the accompanying consolidated balance sheets of Global Future City Holding Inc. (formerly FITT Highway Products, Inc.) and subsidiary (collectively the “Company”) as of December 31, 2014 and 2013, and the related consolidated statements of operations, shareholders’ deficit, and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform an audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company was not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Global Future City Holding Inc. as of December 31, 2014 and 2013, and the results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

/s/ dbbmckennon

Newport Beach, California
April 1, 2015

GLOBAL FUTURE CITY HOLDING INC.

(formerly FITT HIGHWAY PRODUCTS, INC.)

CONSOLIDATED BALANCE SHEETS

	December 31,
	2014			2013
Assets
Current assets:
Cash and cash equivalents	$	155,271		$	585
Accounts receivable, net of allowance		51,256			–
Inventories		3,426			52,496
Prepaid expenses		10,277			4,232
Total current assets		220,230			57,313
Property and equipment, net		6,059			12,169
Total assets	$	226,289		$	69,482

Liabilities and Shareholders’ Deficit
Current liabilities:
Accounts payable	$	505,602		$	694,003
Accrued expenses and deposits		526,238			324,522
Accrued compensation		1,996,559			1,712,724
Notes payable		1,100,000			1,650,000
Advances from related parties		157,203			159,074
Total current liabilities		4,285,602			4,540,323
Total liabilities		4,285,602			4,540,323

Commitments and contingencies (Note 10)

Shareholders’ deficit:
Preferred stock, $0.001 par value: 20,000,000 shares authorized, no shares issued and outstanding		–			–
Common stock, $0.001 par value: 150,000,000 shares authorized, 37,763,410 and 38,018,748 shares issued and outstanding at December 31, 2014 and 2013, respectively.		37,763			38,019
Additional paid-in capital		435,040			213,876
Accumulated deficit		(4,532,116	)		(4,722,736	)
Total shareholders’ deficit		(4,059,313	)		(4,470,841	)
Total liabilities and shareholders’ deficit	$	226,289		$	69,482

See accompanying Notes to Consolidated Financial Statements.

GLOBAL FUTURE CITY HOLDING INC.

(formerly FITT HIGHWAY PRODUCTS, INC.)

CONSOLIDATED STATEMENTS OF OPERATIONS

	Year Ended December 31,
	2014			2013
Net sales	$	51,255		$	39,315
Cost of goods sold:
Cost of goods		45,924			13,658
Inventory impairment		–			29,200
Total cost of goods sold		45,924			42,858
Gross profit (loss)		5,331			(3,543	)

Operating expenses:
Selling and marketing		31,620			276,444
General and administrative		674,157			570,446
Total operating expenses		705,777			846,890
Operating loss		(700,446	)		(850,433	)

Other (income) expense:
Interest expense		159,868			465,532
Interest income		–			(33,283	)
(Gain) loss on extinguishment of debt		(1,051,734	)		382,976
Income (loss) before income taxes		191,420			(1,665,658	)
Income taxes		800			800
Net income (loss)	$	190,620		$	(1,666,458	)

Basic net income (loss) per common share	$	0.01		$	(0.05	)
Diluted net income (loss) per common share	$	0.01		$	(0.05	)


Weighted average number of common shares used in basic per share calculations		37,609,063			33,627,167
Weighted average number of common shares used in diluted per share calculations		38,955,254			33,627,167

See accompanying Notes to Consolidated Financial Statements.

GLOBAL FUTURE CITY HOLDING INC.

(formerly FITT HIGHWAY PRODUCTS, INC.)

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ DEFICIT

	Preferred Stock				Common Stock						Additional Paid-in			Advances to			Accumulated Other Comprehensive			Accumulated
	Shares		Amount		Shares			Amount			Capital			Shareholder			Loss			Deficit			Total
Balance at December 31, 2012		–	$	–		32,231,661		$	32,232		$	1,829,329		$	(544,667	)	$	(111,000	)	$	(2,188,759	)	$	(982,865	)
Stock issued to non-employees for services and operating expenses		–		–		526,599			527			26,973			–			–			–			27,500
Stock issued for compensation		–		–		213,300			213			83,037			–			–			–			83,250
Capital contributions		–		–		–			–			64,500			–			–			–			64,500
Fair value of contributed services		–		–		–			–			233,616			–			–			–			233,616
Stock issued in connection with the issuance of notes payable		–		–		28,440			29			4,971			–			–			–			5,000
Unrealized gain on available for sales securities		–		–		–			–			–			–			28,292			–			28,292
Shares retained in Merger		–		–		4,155,372			4,155			(2,934,232	)		544,667			82,708			(867,519	)		(3,170,221	)
Stock issued for extinguishment of debt		–		–		863,376			863			905,682			–			–			–			906,545
Net loss		–		–		–			–			–			–			–			(1,666,458	)		(1,666,458	)

Balance at December 31, 2013		–		–		38,018,748			38,019			213,876			–			–			(4,722,736	)		(4,470,841	)
Stock issued to non-employees for services		–		–		50,000			50			12,450			–			–			–			12,500
Stock returned for repayment of advances		–		–		(695,736	)		(696	)		(26,855	)		–			–			–			(27,551	)
Stock issued for extinguishment of debt		–		–		390,398			390			235,569			–			–			–			235,959
Net income		–		–		–			–			–			–			–			190,620			190,620
Balance at December 31, 2014		–	$	–		37,763,410		$	37,763		$	435,040		$	–		$	–		$	(4,532,116	)		(4,059,313	)

See accompanying Notes to Consolidated Financial Statements.

GLOBAL FUTURE CITY HOLDING INC.

(formerly FITT HIGHWAY PRODUCTS, INC.)

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Year Ended December 31,
	2014			2013
Cash flows from operating activities:
Net income (loss)	$	190,620		$	(1,666,458	)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
(Gain) loss on extinguishment of debt		(1,051,734	)		382,976
Common stock issued for services and compensation		12,500			110,750
Fair value of contributed services		–			233,616
Depreciation		6,110			5,786
Amortization of debt discount/debt accretion		2,500			303,253
Changes in operating assets and liabilities:
Accounts receivable		(51,256	)		824
Inventories		49,070			(1,825	)
Prepaid expenses		(6,045	)		510
Accounts payable		86,360			131,572
Accrued expenses		147,148			172,361
Accrued compensation		256,284			106,081
Net cash used in operating activities		(358,443	)		(220,554	)

Cash flows from investing activities:
Capital expenditures		–			(3,015	)
Advances (repayments) to/from related party		(1,871	)		69,524
Advances to shareholder		–			(147,138	)
Net cash used in investing activities		(1,871	)		(80,629	)

Cash flows from financing activities:
Proceeds from issuance of notes payable		40,000			230,000
Proceeds from deposit on proposed business combination		525,000			–
Payment to shareholder to facilitate proposed business combination		(50,000	)		–
Proceeds from capital contributions		–			64,500
Net cash provided by financing activities		515,000			294,500

Net increase (decrease) in cash and cash equivalents		154,686			(6,683	)

Cash and cash equivalents at beginning of year		585			7,268
Cash and cash equivalents at end of year	$	155,271		$	585

Supplemental disclosure of cash flow information:
Cash paid for interest	$	562		$	562
Cash paid for income taxes	$	–		$	–

Supplemental disclosure of non-cash investing and financing activities:
Repayment of advances with common stock	$	27,551		$	691,805
Conversion of notes payable and accrued interest	$	70,479		$	906,545
Discount on notes payable	$	2,500		$	128,000
Net liabilities assumed from reverse merger	$	–		$	2,987,791

See accompanying Notes to Consolidated Financial Statements.

GLOBAL FUTURE CITY HOLDING INC.

(formerly FITT HIGHWAY PRODUCTS, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Business and Management’s Plan of Operation

Business

Global Future City Holding Inc., formerly FITT Highway Products, Inc. (the “Company”), is in the business of manufacturing (on an outsource basis), distribution and sale of energy drinks. We market three two-ounce energy shots named “F.I.T.T. Energy for Life” (the “FITT Energy Shot”), “F.I.T.T. Energy Extreme” and "F.I.T.T. Energy Rx". As discussed in Note 14, we have agreed to sell 80% of our common stock to Sky Rover Holdings Ltd. (“Sky Rover”). If we are successful in closing this transaction, our business will also include the marketing and promotion of an E-Gold coin (the “EDG”), a type of cryptoasset created by Sky Rover, to merchants and consumers.

If the Sky Rover transaction closes, we will continue to market and sell our FITT brand of energy shots while considering additional business alternatives, including among other things, a proposed business model where the Company shall establish four subsidiaries. The first subsidiary will market a mobile application (“IP Technology”). Because the price of EGD continuously fluctuates, the IP Technology provides merchants with proprietary software that enables these merchants to calculate how much Rewarded EGD (as defined below) a consumer is eligible to receive. The second subsidiary will operate an online store and various merchants that sell goods and services to consumers, and gives consumers a certain percentage for completing the task or for the purchased goods/services back in the form of EGD (“Rewarded EGD”) as part of a loyalty program. The third subsidiary will be a foreign company that will sell a set amount of EGD to foreign individuals and entities. The fourth subsidiary will continue to sell the Company’s current energy drinks while participating in giving away Rewarded EGD as well. The Company itself will provide marketing services to merchants that want to establish loyalty program(s) with its customers (collectively, the “Proposed Business Model”).

The Securities and Exchange Commission (“SEC”) has not deemed whether a form of digital currency or crypto asset itself is a security, due to this uncertainty, the Company has submitted a Request for No-Action Relief (the “No-Action Letter) on February 10, 2015 to the SEC to obtain clarification that the SEC will not recommend enforcement action against the Company and its related subsidiaries regarding the Proposed Business Model if they conduct themselves as described in the No-Action Letter.

If the Sky Rover transaction fails to close, the Company will continue to market and sell our FITT brand of energy shots.

Name Change

Merger with FITT

For accounting purposes, this merger was treated as a reverse-acquisition since control of our Company passed to the FITT shareholders. As a result of this accounting treatment, subsequent to October 29, 2013, the effective date of the reverse-acquisition, the historical financial statements of FITT, the accounting acquirer, are presented for all periods prior to the acquisition as a change in reporting entity. The financial statements of Global Future City Holding Inc. are included from October 29, 2013. The assets acquired and liabilities assumed of Global Future City Holding Inc. were recorded at fair value, which approximated the carrying value, on the acquisition date and included in the financial information post-merger. The following is pro-forma revenue and earnings information for the year ended December 31, 2013 assuming both our Company and FITT had been combined as of January 1, 2013. Amounts have been rounded to the nearest thousand and are unaudited:

Sales, net	$	39,000

Loss before income taxes	$	(2,338,000	)

Management’s Plan of Operations

During the years ended December 31, 2014 and 2013, the Company has generated minimal revenue and had significant losses from operations. Given the Company’s lack of historical revenue, negative cash flows from operations, operating losses, and lack of significant capital to execute our business and marketing plan for the FITT Energy Drinks, there are factors present that indicate substantial doubt about the Company’s ability to continue as a going concern. Subsequent to year end, the Company has secured $3,000,000 in financing (see Note 14) that is expected to be used for working capital, repayment of certain debts, and investments into projects and/or inventory that Management expects will provide the Company with future revenues and the ability to obtain add-on financing if needed. In addition, the Company has agreements in place, such that if and when the Sky Rover transaction is closed, approximately $1,680,000 in accrued compensation and payroll taxes will be alleviated from the Company’s current liabilities, $845,000 in notes payable, plus the related interest thereon can be forced to convert if market conditions are met, and $400,000 in deposits from Sky Rover will no longer be subject to return, for total reductions in liabilities of $2.9 million before any cash is used to settle additional liabilities. Accordingly, we believe based on historical operating costs and planned future operating costs, that the capital received and resulting debt alleviation subsequent to year end will be sufficient to finance our working capital needs over the next 12 months.

2. Reverse Stock Split

On November 29, 2012, our Board executed a unanimous written consent authorizing and recommending that our stockholders approve a proposal to institute a one-for-sixty (1:60) reverse stock split. On the same day, holders of a majority of the voting power of all shares of our common and preferred stock entitled to vote, by written consent in lieu of a special meeting of our stockholders, approved the Board’s recommendation. The reverse split became effective February 15, 2013. All references to shares and per share information in these consolidated financial statements have been restated to give effect to the Reverse Split.

3. Significant Accounting Policies

Accounting policies refer to specific accounting principles and the methods of applying those principles to fairly present the company's financial position and results of operations in accordance with generally accepted accounting principles. The policies discussed below include those that management has determined to be the most appropriate in preparing the company's consolidated financial statements

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of Global Future City Holding Inc. and its wholly owned subsidiary. All significant intercompany accounts and transactions have been eliminated in consolidation. Management makes estimates and assumptions that affect the amounts reported in the consolidated financial statements and footnotes. Actual results could differ from those estimates.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses during the reporting period. Our significant estimates relate to the assessment of contingent events, the valuation of stock awards, reserves for right of return on revenues, and inventory valuation.

Concentrations of Credit Risks

We will invest any cash balances we may have through high-credit quality financial institutions. From time to time, we may maintain bank account levels in excess of FDIC insurance limits. If the financial institution in which we have our accounts has financial difficulties, any cash balances in excess of the FDIC limits could be at risk.

Accounts receivable at December 31, 2014 was from one customer. There were no accounts receivable at December 31, 2013.

Cash and Cash Equivalents

The Company considers all highly liquid investments with original maturities of 90 or less to be cash equivalents.

Allowances for Doubtful Accounts

The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of the Company’s customers to make required payments. The Company considers the following factors when determining if collection of required payments is reasonably assured: customer credit-worthiness, past transaction history with the customer, and current economic industry trends. As of December 31, 2014 and 2013, there were no allowances for doubtful accounts.

Inventories

Inventories are valued at the lower of first-in, first-out, cost or market value (net realizable value). We regularly review our inventory quantities on hand and record a provision for excess and slow moving inventory based primarily on our estimated forecast of product demand and related product expiration dates.

Property and Equipment

Property and equipment are stated at cost, less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful life of five years. Significant renewals and betterments are capitalized while maintenance and repairs are charged to expense as incurred. Leasehold improvements are amortized on the straight-line basis over the lesser of their estimated useful lives or the term of the related lease.

Fair Value of Financial Instruments

The Company follows the guidance of ASC 820 – Fair Value Measurement and Disclosure. Fair value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. The guidance also establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs market participants would use in valuing the asset or liability and are developed based on market data obtained from sources independent of our Company. Unobservable inputs are inputs that reflect our Company’s assumptions about the factors market participants would use in valuing the asset or liability. The guidance establishes three levels of inputs that may be used to measure fair value:

Level 1. Observable inputs such as quoted prices in active markets;

Level 2. Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and

Level 3. Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

The Company's financial instruments consisted primarily of (level 1) accounts payable, accrued expenses and deposits, and notes payable. The carrying amounts of the Company's financial instruments generally approximate their fair values due to the short term nature of these instruments.

As of December 31, 2014 and 2013, we did not have any level 2 or 3 assets or liabilities.

Debt Issued with Common Stock

Debt issued with common stock is accounted for under the guidelines established by ASC 470-20 – Accounting for Debt With Conversion or Other Options. We record the relative fair value of common stock related to the issuance of convertible debt as a debt discount or premium. The discount or premium is subsequently amortized to interest expense over the expected term of the convertible debt.

Convertible Debt

We account for free-standing derivative instruments and hybrid instruments that contain embedded derivative features in accordance with ASC Topic 815, Accounting for Derivative Instruments and Hedging Activities, as well as related interpretations of this topic. In accordance with this topic, derivative instruments and hybrid instruments are recognized as either assets or liabilities in the balance sheet and are measured at fair values with gains or losses recognized in earnings. Embedded derivatives that are not clearly and closely related to the host contract are bifurcated and are recognized at fair value with changes in fair value recognized as either a gain or loss in earnings. We determine the fair value of derivative instruments and hybrid instruments based on available market data using appropriate valuation models, giving consideration to all of the rights and obligations of each instrument. We record all of these liabilities at their fair value at issuance and adjust the liabilities quarterly to reflect changes in their fair value.

Income Taxes

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Due to historical net losses, a valuation allowance has been established to offset the deferred tax assets.

Revenue Recognition

We recognize revenue when persuasive evidence of an arrangement exists, delivery has occurred, the sales price is fixed or determinable and collectability is reasonably assured. Ownership of and title to our products pass to customers upon delivery of the products to customers. Net sales are determined after deducting promotional and other allowances in accordance with ASC 605-50. The Company's promotional and other allowances are calculated based on various programs with its distributors and retail customers, and accruals are established during the year for anticipated liabilities. These accruals are based on agreed upon terms, as well as the Company's historical experience with similar programs and require management's judgment with respect to estimating consumer participation and/or distributor and retail customer performance levels. Differences between such estimated expense and actual expenses for promotional and other allowance costs have historically been insignificant and are recognized in earnings in the period such differences are determined.

Net Income (Loss) per Share

The Company presents basic income (loss) per share (“EPS”) and diluted EPS on the face of the consolidated statement of operations. Basic loss per share is computed as net loss divided by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur from common shares issuable through stock options, warrants, and other convertible securities. At December 31, 2014 and 2013, we had no outstanding options or warrants to purchase any of our common shares, respectively. As of December 31, 2014, the Company had certain debt with conversion features, which was convertible into approximately 1,346,191 shares of common stock. The Company added these dilutive shares to the denominator and added back approximately $18,000 of related interest in the numerator for weighted average diluted earnings per share. As of December 31, 2013, the Company had convertible debt; however, the effects of the convertible debt would have been anti-dilutive due to loss in the period.

Stock-Based Compensation

We account for our stock-based compensation in accordance with ASC 718 – Stock Compensation. We account for all stock-based compensation using a fair-value method on the grant date and recognizes the fair value of each award as an expense over the requisite vesting period.

Accounting for Equity Instruments Issued to Non-Employees

We account for our equity-based payments to non-employees under ASC 505 – Equity. The fair value of the equity instrument issued or committed to be issued is used to measure the transaction, as this is more reliable than the fair value of the services received. The fair value is measured at the value of our common stock on the date the commitment for performance by the counterparty has been reached or the counterparty’s performance is complete. The fair value of the equity instrument is charged directly to the statement of operations and credited to common stock and/or additional paid-in capital as appropriate.

Recent Accounting Pronouncements

4. Inventories

Inventories consist of the following at December 31:

	2014		2013
Finished goods	$	3,426	$	51,905
Raw materials – boxes and labels		–		591
	$	3,426	$	52,496

5. Property and Equipment

Property and equipment consist of the following at December 31:

	2014			2013
Furniture	$	6,536		$	6,536
Computers		11,091			11,091
Software		16,894			16,894
Less accumulated depreciation		(28,462	)		(22,352	)
	$	6,059		$	12,169

Depreciation expense was $6,110 and $5,786 for the years ended December 31, 2014 and 2013, respectively.

6. Accrued Expenses

Accrued expenses consist of the following at December 31:

	2014		2013
Accrued interest	$	38,773	$	312,057
Accrued royalties and commissions		11,666		11,666
Deposit on proposed business combination		475,000		–
Other		799		799
	$	526,238	$	324,522

During the fourth quarter of 2014, we reached settlement agreements with most all of our noteholders and we restructured their notes. The settlements included an agreement by the noteholders to forgo payment of nearly all of the interest which had been accrued but unpaid as of the dates of the each settlement agreement. See Note 8 for further information.

During 2014, we entered into agreements first with Greenome, then with Sky Rover under which we agreed to sell 80% of our outstanding common stock. As part of the agreements, we received advances from Greenome and Sky Rover to be used to mitigate debt, to acquire common stock from a major shareholder on their behalf, and to continue our operations. See Note 14 for further information with respect to these agreements.

7. Accrued Compensation

Accrued compensation consists of the following at December 31:

	2014		2013
Accrued officers compensation – CEO	$	1,053,187	$	912,343
Accrued other compensation – employee		441,462		330,599
Accrued payroll taxes – delinquent		316,044		311,595
Accrued payroll taxes on accrued payroll (not yet due)		185,866		158,187
	$	1,996,559	$	1,712,724

In prior years, we made minimal payments to our employees and accrued most of their compensation. In addition, we have delinquent payroll taxes incurred mainly under previous management. In October 2010, the IRS filed a federal tax lien against us in the amount of $136,678 related to past-due payroll taxes. The Company has accrued estimated interest for non-payment of those past due payroll liabilities.

Accrued Officer’s Compensation - CEO

Settlement Agreement

In order to facilitate the investment by Sky Rover discussed in Note 1, on September 19, 2014 we entered into a Settlement Agreement with our CEO which will become effective once all closing conditions for the Sky Rover SPA have become effective as more fully described in Note 14. Under the Settlement Agreement, our CEO agreed to forgive all accrued but unpaid salary which amounted to $1,053,187 and any additional accrued salary though the closing date of the Stock Purchase Agreement. We did not accrue any compensation for our CEO during the fourth quarter of 2014 based on mutual agreement of the CEO and Sky Rover. In addition, our CEO gave up his right to any severance payment which would be due him under his employment agreement upon the closing of the Stock Purchase Agreement. For our part, we agreed to issue our CEO a promissory note for the amount of unpaid advances made to us by him in the amount of $142,203. The note will bear interest at 8% per annum and becomes due and payable one year from its effective date. Finally, the CEO will be allowed to retain no less than 2,000,000 of his currently held common shares. The terms of the Settlement Agreement with our CEO will only be effective and recorded if and when all closing conditions to the Sky Rover SPA have been met.

Advance Repayment

Prior to the Merger, FITT made advances to our CEO, either personally or to a company he owns, of $691,805, including annual interest of 6%. During the fourth quarter of 2013, our CEO repaid the advances through an agreement to surrender 668,386 shares of common stock of our post-merged company which were beneficially owned by him as part of the Merger. The shares were valued at approximately $1.04, the volume weighted adjusted price of the common stock for the 20 trading days prior to his agreement to surrender the shares. While the advances were formally relieved in fiscal 2013, the shares were surrendered during the first quarter 2014.

Although we believe these advances made to our CEO by FITT have been appropriately accounted for, it is reasonably possible that a future examination by an external party may deem a portion of these advances to be compensatory. If such determination is made, the Company may be liable for employer payroll taxes on advances deemed compensatory. Based on our estimation, if such a determination is made, the corresponding liability could range from approximately $17,000 to approximately $50,000. Such amount could increase if penalties and interests are assessed. As of the date of filing, there are no examinations by eternal parties that would indicate our initial treatment was incorrect.

Accrued Other Compensation – Employee

Settlement Agreement

On November 10, 2014, we entered into a Settlement Agreement with a former employee who served as our Controller. The Settlement Agreement will become effective once all closing conditions for the Sky Rover SPA have become effective. Under the Settlement Agreement,the former employee agreed to forgive all accrued but unpaid salary which amounted to $441,462 and any additional accrued salary though the closing date of the Stock Purchase Agreement. In addition, our employee gave up his right to any severance payment which might be due him under his employment agreement upon the closing of the Stock Purchase Agreement. For our part, we agreed to repay our employee $3,699 for advances he had made to our Company and repay a relative of our former employee $15,984 for employee health insurance premiums she had made on behalf of our Company. Finally, the former employee will be allowed to retain no less than 300,000 shares of our common stock issued to him in the Merger with FITT. The terms of the Settlement Agreement with our employee will only be effective and recorded if and when all closing conditions to the Sky Rover SPA have been met.

Advance Repayment

Effective January 14, 2014 a former employee repaid certain advances made to him in 2013 in the amount of $27,551 through an agreement to surrender 27,350 shares of common stock of our post-merged company which were beneficially owned by him. The shares were valued at the volume weighted adjusted price of the common stock for the 20 trading days prior to his agreement to surrender the shares.

8. Notes Payable

Notes payable consists of the following at December 31:

	2014			2013
Convertible promissory notes – debt acquisition	$	100,000		$	200,000
Notes payable – original bridge		120,000			170,000
Notes payable – bridge loan #1		355,000			405,000
Notes payable – bridge loan #2		200,000			350,000
Notes payable – bridge loan #3		250,000			500,000
Convertible promissory note – Asher/Goldenrise		55,000			–
Convertible promissory notes – service agreement		20,000			20,000
Notes payable – other		–			5,000
Subtotal		1,100,000			1,650,000
Less current portion		(1,100,000	)		(1,650,000	)
Long-term portion	$	–		$	–

Notes Payable Settlement Agreements

During the fourth quarter of 2014, we reached Settlement Agreements with most of our noteholders to restructure their notes. In the restructuring of our notes payable, which is one of our Company’s conditions for closing of the Sky Rover SPA, our noteholders agreed to a) forgo payment of nearly all of the interest which had been accrued but unpaid as of the dates of the each settlement agreement, b) a new interest rate of 10% per annum, c) a new maturity date of August 1, 2015 and d) a Company option to convert into free-trading shares of our common stock at any time our common stock has a closing bid price per share of $1.00 or more for 20 consecutive trading days after the closing of the SPA. Certain of noteholders also agreed to relinquish shares of our common stock they received with their original notes, contingent upon the Sky Rover SPA closing. If the Sky Rover SPA closes, the shares will be transferred to Sky Rover. Because the shares are contingent upon the closing, and until then remain in the name and possession of the note holders, the shares are considered contingent consideration and will be accounted for if and when the shares are transferred. In addition, holders of the convertible promissory notes – debt acquisition, notes payable – bridge loan #2 and notes payable – bridge loan #3 also agreed to forgo any additional principal payable under their notes. As a result of these settlements, we recorded gains on extinguishment of debt totaling $952,400 in 2014. After modification of the notes described above, all notes are now considered convertible.

Convertible Promissory Notes – Debt Acquisition

During the first quarter of 2013 we entered into Debt Acquisition Agreements (“Debt Agreements”) with two parties affiliated with each other (the “Debt Funders”). Under the Debt Agreements, we issued convertible promissory notes totaling $150,000, $50,000 of which was subsequently converted to equity. The notes bore interest at 10% per annum and were repayable at two times the principal amount of the notes. Repayment was to be made by conversion into shares of our common stock based on a 20-day volume weighted average price with the minimum conversion price based on a market valuation for our company of $10 million the maximum based on a market valuation of $20 million. The due date by which the Debt Funders were to convert the notes was December 31, 2013, but such conversion has not yet been made. In December 2014 we entered into Settlement Agreements with the holders of these notes, with the same terms as described under the above caption Notes Payable Settlement Agreements. Accordingly, these notes are no longer convertible at the option of the holder.

Note Payable – Original Bridge

The notes, which had an original face value totaling $245,000, bore interest from 10% to 12% per annum and were to be repayable from a pool of 10% of gross proceeds from the sales of the FITT Energy Shot. In December 2013, a noteholder converted $75,000 of this debt to equity. In the fourth quarter of 2014 we entered into Settlement Agreements with the holders of $120,000 face value of these notes, with the same terms as described under the above caption Notes Payable Settlement Agreements. In 2014, we facilitated a share purchase agreement between Greenome and a significant shareholder. Per the terms of the agreement (see Note 14), the Company was relieved of $50,000 in debt from the shareholder.

Note Payable – Bridge Loan #1

This debt arose from an offering we initiated in 2010 of up to $1.0 million of units of securities, each unit consisting of a 12% unsecured promissory note and 0.083 shares of common stock of FTCY for every dollar invested. In connection with this offering, we issued notes with face value totaling $580,000. During the three-month periods ended December 31, 2013 and March 31, 2014, respectively, noteholders converted $175,000 and $50,000 into equity, respectively. The notes were repayable 12 months from the date of issue and repayment was to come from a pool of 10% of cash receipts from the sales of the FITT Energy Shot. In the fourth quarter of 2014 we entered into Settlement Agreements with the holders of $345,000 face value of these notes, with the same terms as described under the above caption Notes Payable Settlement Agreements.

Note Payable – Bridge Loan #2

In November 2011, we initiated a Bridge Loan offering of up to $1.0 million of units of securities, each unit consisting of a 10% convertible promissory note (interest rate increasing to 18% upon an event of default) and 5.5 shares of our common stock for every dollar invested with repayment to be made at two times the principal amount of the notes. The notes matured at various dates, all of which are within twelve months of the date of issuance. In connection with this offering, we issued notes with principal amounts totaling $255,000 (repayment amounts totaling $510,000). The additional principal of $255,000 was accreted over the respective term of each of the notes. We also recorded an initial discount on the notes of $11,275 based on the estimated fair market value of our common shares on the date of issuance. In connection with the debt discount and accretion, during the years ended December 31, 2014 and 2013, we charged interest expense with zero and $303,253, respectively. As of December 31, 2013, there was no remaining unamortized discount.

During the three-month period ended December 31, 2013, $160,000 in repayment amounts were converted to equity. In the fourth quarter of 2014 we entered into Settlement Agreements with the holders of $150,000 face value of these notes, with the same terms as described under the above caption Notes Payable Settlement Agreements.

Note Payable – Bridge Loan #3

In December 2012 we initiated a Bridge Loan offering of up to $1.0 million of units of securities, each unit consisting of a 10% convertible promissory note (interest rate increasing to 18% upon an event of default). During the second quarter of 2013, we issued a note with face value totaling $250,000 in connection with the offering and received proceeds of $225,000. The note was repayable at two times the principal amount of the note (repayment amount of $500,000) and matured June 30, 2013. We recorded an initial discount of $25,000 on this note which we amortized through June 30, 2013, the effective maturity date of the note. The additional principal of $250,000 was accreted through the effective maturity date of June 30, 2013.

In the fourth quarter of 2014, we entered into Settlement Agreements with the holder of these notes, with the same terms as described under the above caption Notes Payable Settlement Agreements, with the exception that the modified note does not contain a conversion option.

Convertible Promissory Note – Asher/Goldenrise

On January 6, 2014 we issued a convertible promissory note to Asher Enterprises, Inc. (“Asher”) in the amount of $42,500. The note bore interest at 8% per annum and matured on October 8, 2014. Any amount of principal or interest which was not paid by the maturity date would bear interest at 22% per annum from the maturity date. The note was convertible into common stock beginning 180 days from the date of the note at a conversion price of 58% of the market price of our stock. The note had a ratchet provision, which adjusted the conversion price in the event of a capital raise at a lower amount per share than the conversion price. We recorded an on-issuance discount of $2,500 on this note which we were amortizing through October 8, 2014, the maturity date, and accelerated the amortization due to the note assumption by Goldenrise Development, Inc. (“Goldenrise”) as discussed below. During the year ended December 31, 2014, $2,500 was amortized to expense.

Prior to the date the note became convertible, we began negotiating the repayment of this note to Asher. On July 15, 2014, we formalized and entered into an Assignment Agreement with Asher and Goldenrise under which Asher agreed to assign the note to Goldenrise for consideration of $55,000. Also effective on July 15, 2014 and subsequent to the assignment, we amended the note to revise the principal amount to $55,000 and to modify the conversion feature so that the conversion price cannot be lower than $0.15 per share. The amendment also eliminated the note’s ratchet provision. As such, derivative accounting does not apply under the new terms. During the quarter ended September 30, 2014, we accounted for the July 15, 2014 assignment and amendment as an extinguishment of debt and recorded a loss on extinguishment of debt in the amount of $9,948.

Convertible Promissory Notes – Service Agreement

During the first quarter of 2013, we became obligated to issue convertible promissory notes totaling $20,000 to a company under a Service Agreement. The notes bear no interest and were to be repayable through a conversion into shares of our common stock. We have determined that the service provider has not performed any services under the agreement and the note is in dispute.

Note Payable - Other

On April 3, 2013, we issued a note payable in the amount of $5,000 together with 28,440 shares of our restricted common stock. The note carried an interest rate of 10% per annum and matured on October 3, 2013. During the second quarter of 2013, we recorded an initial discount on this note of $5,000 based on the estimated fair market value of our common shares on the date of issuance. The debt discount was amortized over the 6-month term of the note. In February 2014, this note was converted to equity.

Debt Conversions

In February 2014, a creditor holding notes payable with repayment amounts totaling $55,000 ($50,000 in Notes Payable- Bridge Loan #1 and $5,000 in Notes Payable – Other) converted his notes and related accrued interest into 115,637 shares of common stock of our merged company. Prior to conversion, these notes contained no stated conversion features. We valued the shares at their fair market value on the date of conversion and during the year ended December 31, 2014, we recorded a loss on extinguishment of debt totaling $33,594 in connection with this transaction.

9. Related Parties

Advances from related parties consist of the following at December 31:

	2014		2013
Advances from our CEO	$	142,203	$	144,074
Advances from Shareholder		15,000		15,000
	$	157,203	$	159,074

Also see Note 7 for additional information regarding related parties transactions.

10. Commitments and Contingencies

We lease our current office space in Mission Viejo, California on a month-to-month basis and have no other non-cancellable operating leases. The monthly payment under the lease is $2,000. Rent expense under operating leases amounted to $24,109 and $4,000, respectively, for the years ended December 31, 2014 and 2013.

11. Capital Stock

Preferred Stock

We have authorized the issuance of a total of 20,000,000 shares of our preferred stock, each share having a par value of $0.0001.

Common Stock

We have authorized the issuance of 150,000,000 shares of our common stock, each share having a par value of $0.001.

Common Stock to Consultants and Advisors for Services

During 2014, we issued 50,000 shares of common stock for services relating to investor relations and the development of shareholder awareness. The shares were valued at $12,500 which was our determination of the fair market value of the shares. We recorded general and administrative expense of $12,500 in connection with the share issuance.

During 2013, we issued 526,599 shares of common stock in payment for services relating to retail distribution, product representation and strategic counseling. The shares were valued at $27,500 which was our determination of the fair market value of the shares. We recorded selling and marketing expense of $20,000 and general and administrative expense of $7,500 in connection with the share issuances.

Common Stock Issued for Compensation

During 2013, we hired a Director of Sales and a Retail Business Manager. As part of the employment arrangements, we issued the individuals a total of 214,555 shares of our common stock and recorded selling and marketing expense of $83,250 in connection with the share issuances based on our determination of the fair market value of the shares.

Warrants and Stock Options

During the years ended December 31, 2014 and 2013, there were no warrants or stock options outstanding and there was no expense related to warrants or stock options.

On June 29, 2007, our Board of Directors adopted the 2007 Equity Incentive Plan (the “2007 Plan”). The 2007 Plan provides for the grant of equity awards to our directors, officers, other employees, consultants, independent contractors and agents, including stock options to purchase shares of our common stock, stock appreciation rights (“SARs”), restricted stock, restricted stock units, bonus stock and performance shares. Up to 13,889 shares of our common stock may be issued pursuant to awards granted under the 2007 Plan, subject to adjustment in the event of stock splits and other similar events. The 2007 Plan is administered by our Board of Directors, and expires ten years after adoption, unless terminated earlier by the Board. As of December 31, 2014, there have been no grants made under the 2007 Plan.

12. Income Taxes

Reconciliations of the U.S. federal statutory rate to the actual tax rate are as follows for the years ended December 31:

	2014		2013
Federal tax at statutory rate		34.0%		34.0%
Permanent differences:
State income taxes, net of federal benefit		5.8%		5.8%
Fair value of contributed services		–		-5.6%
Gain/loss on extinguishment of debt		-191.2%		-9.2%
Amortization of debt discount and accretion of debt		0.5%		-7.3%
Interest income on shareholder advances		–		0.8%
Common stock issued for employee services		–		-2.0%
Non-deductible entertainment		0.3%		-0.1%
Temporary differences:
Accrued liabilities and other		0.4%		–
Change in valuation allowance		150.5%		-16.5%
Total provision		0.4%		-0.1%

The major components of the deferred taxes are as follows at December 31:

	Asset (Liability)
	2014			2013
Current:
Reserves and accruals	$	309,724		$	195,880
Noncurrent:
Net operating losses		504,644			330,413
Valuation allowance		(814,368	)		(526,293	)
Net deferred tax asset	$	–		$	–

Based on federal tax returns filed or to be filed through December 31, 2014, we had available approximately $26,749,000 in U.S. tax net operating loss carryforwards, pursuant to the Tax Reform Act of 1986, which assesses the utilization of a Company’s net operating loss carryforwards resulting from retaining continuity of its business operations and changes within its ownership structure. Net operating loss carryforwards expire in 20 years for federal income tax reporting purposes. For Federal income tax purposes, the net operating losses begin to expire in 2026. State net operating loss carryforwards through December 31, 2014 are approximately $24,401,000 and begin to expire in 2013. We have relied on the issuance of common stock to fund certain operating expenses.

With the finalization of the Merger, we have experienced a change in ownership as defined in Section 382 of the Internal Revenue Code. As a result, our net operating loss carryforwards for federal income tax reporting will be significantly limited based on the fair value of our Company on the date of change in ownership. Such change is expected to provide benefit to us only upon the attainment of profitability.

During the years ended December 31, 2014 and 2013, our valuation allowance increased by $288,075 and $275,210, respectively.

The United States Federal return years 2010 through 2013 are still subject to tax examination by the United States Internal Revenue Service, however, we do not currently have any ongoing tax examinations. We are subject to examination by the California Franchise Tax Board for the years 2010 through 2013 and currently does not have any ongoing tax examinations.

13. Gain (Loss) on Extinguishment of Debt

Gain (loss) on extinguishment of debt for the years ended December 31, 2014 and 2013 consist of:

	2014			2013
Notes payable settlement agreements	$	952,400		$	–
Conversions of notes payable		(33,594	)		(382,976	)
Assignment of Asher note payable		(9,948	)		–
Settlement of accounts payable to legal counsel		142,876			–
	$	1,051,734		$	(382,976	)

On December 12 2014, our legal counsel agreed to convert our $274,761 accounts payable balance owed by us into 274,761 shares of our common stock. We valued the shares at the market price of our common stock on December 12, 2014, the date of issuance, and recorded a gain on extinguishment of debt of $142,876 in connection with this transaction.

14. Agreements with Greenome and Sky Rover

Greenome Share Exchange Agreement

On May 6, 2014, we entered into a Share Exchange Agreement (“SEA”) with Greenome under which we agreed to sell to Greenome 80% of our outstanding common stock at a purchase price of $400,000, $175,000 of which was payable at the closing. The SEA required that both Greenome and our Company meet certain conditions in order for a closing to take place. The SEA also required Greenome to make certain advance payments to us prior to the closing which were refundable under certain circumstances. Both parties eventually became aware that the closing conditions would be difficult to meet, and on September 19, 2014, we entered into a Financing Agreement with Greenome which also terminated the SEA.

On May 30, 2014, on behalf of Greenome, we entered into a stock purchase transaction with a significant shareholder for the purchase of 9,669,575 shares of our common stock. Per the agreement, we were to receive funds as indicated above from Greenome, and remit a portion of those funds totaling $125,000 to the shareholder in the following tranches: $25,000 upon the signing of the agreement with the shareholder, $25,000 within ten days of the shares being turned over to an escrow agent, and $75,000 when the Company receives the final payment of $175,000 from Greenome as part of the SEA described above. In turn, the shareholder was to submit to an escrow agent, shares of our common stock totaling 9,669,575 shares.

Greenome Financing Agreement

Under the September 19, 2014 Financing Agreement, we agreed to raise up to $3.0 million through a private placement memorandum (“PPM”) and loan these funds to a subsidiary of Greenome (the “Greenome Sub”) under a promissory note bearing interest at the rate of 10% per annum (the “Greenome Loan”). The promissory note will mature twelve months from its inception and will be secured by the assets of the Greenome Sub.

Greenome has already made $180,000 in advance payments to us under the SEA. The first $150,000 of the Greenome Loan proceeds will count towards the repayment of the amount advanced us by Greenome with the remainder of the advances forgiven. If the private placement is unsuccessful, the $150,000 will be formalized into a note payable. Accordingly, the Company has maintained the advanced amounts in accrued expenses and deposits in the accompanying balance sheets, which also includes advances from Sky Rover as noted below.

Sky Rover Stock Purchase Agreement

On September 19, 2014 we entered into the Sky Rover SPA under which we agreed to sell to Sky Rover 80% of our outstanding common stock at a purchase price of $400,000. Sky Rover is in the business of marketing, promoting, and selling of an E-Gold coin (the “EGD”), a type of cryptoasset created by Sky Rover, which is marketed to consumers and merchants. Under the agreement, Sky Rover will acquire 30,600,000 shares of our common stock, which will equal exactly 80% of the outstanding shares, for a purchase price of $400,000. $345,000 of the purchase price was received as of December 31, 2014 and included in accrued expenses and deposits in the accompanying balance sheet due to the possibility the Company will have to repay such amounts if the Company does not meet specific conditions as part of the SPA which are described below. The remaining purchase price was received subsequent to year end. Our Company’s conditions include the mitigation of certain of our debt and the restructure of our notes payable with the following features:

	·	New interest rates of no greater than 10% per annum
	·	New maturity dates no earlier than August 1, 2015
	·	A forced conversion into free-trading shares of our common stock at any time our common stock has a closing bid price per share of $1.00 or more for 20 consecutive trading days after the closing as defined in the SPA

For their part, Sky Rover’s only condition to close is that they have made the applicable payments required under the SPA. The transaction was to close no later than no later than December 31, 2014; however, the two parties verbally agreed to extend the deadline as needed in order to achieve the responsibilities of each party. On February 17, 2015, the agreement was amended for additional requirements.

The Parties have cooperated and agreed to a proposed business model where if the closing conditions to the Agreement have been met, the Company shall establish four subsidiaries. The first subsidiary will market the IP Technology as defined below. The second subsidiary will operate an Online Store and various merchants that sell goods and services to consumers, and gives Rewarded EGD (as defined below) to consumers as part of a loyalty program. The third subsidiary will be a foreign company that will sell 4,000,000 E-Gold (“EGD”) to foreign individuals and entities. The fourth subsidiary will continue to sell the Company’s current energy drinks while participating in giving away Rewarded EGD as well. The Company itself will provide marketing services to merchants that want to establish loyalty program(s) with its customers (the “Proposed Business Model”). If we do not meet the conditions imposed on us by the agreement, we will be obligated to repay Sky Rover for monies received from them (50% in cash and 50% in common stock valued at $0.20 per share). If Sky Rover does not meet their condition, no monies received from them will need to be repaid.

15. Other Agreements

The Scott Group Agreement

On July 21, 2014, we entered into a Consulting Agreement with The Scott Group. Under the agreement, which has a term of sixty (60) days, The Scott Group will provide a variety of public relations services to assist us in increasing our investor base and shareholder awareness and in obtaining sponsorship from the brokerage community. In addition, The Scott Group will assist us with converting our debt. As compensation for the services, we agreed to pay The Scott Group $2,500 per month for the months of July and August 2014 and to issue them 50,000 shares of our common stock. We also extended the agreement through September 2014 for an additional payment of $2,500. For accounting purposes, we valued the common stock as of July 21, 2014, the date of issuance, and recorded a general and administrative expense of $20,000 ($7,500 cash and $12,500 in stock) during 2014.

Agreement with Andrew Loza

On January 5, 2013, we entered into a Consulting Agreement with Andrew Loza, an individual with significant experience in product representation and strategic alliances. The agreement called for Mr. Loza to provide services in the areas of corporate strategies and retail distribution networks. The agreement has a term of 12 months and is cancelable on 180 days’ notice. In connection with the agreement, we agreed to make monthly payments to Mr. Loza of $5,000 and to issue him 426,599 shares of common stock. The common stock, which was fully vested on January 5, 2013, the date of issuance, was valued at the estimated fair market value of our stock of $0.01 per share. For the year ended December 31, 2013 we recorded general and administrative expenses totaling $67,500 ($60,000 in cash and $7,500 in stock) as a result of this transaction.

Agreement with Anna Rawson

On March 12, 2013, we entered into a Consulting Agreement with Anna Rawson, an individual with extensive experience in the area of product representation, including product endorsement in radio and television interviews as well as public appearances at corporate events. The agreement called for Ms. Rawson to provide a variety of services including a photo and video shoot, a social media campaign, a media interview campaign and public appearances. In connection with the agreement, we issued Ms. Rawson 100,000 shares of our common stock. The common stock, which was fully vested on March 12, 2013, the date of issuance, was valued at the estimated fair market value of our stock of $0.20 per share. For the year ended December 31, 2013 we recorded marketing expense totaling $20,000 as a result of this transaction.

16. Subsequent Events

Consulting Agreements

Subsequent to December 31, 2014, we entered into consulting agreements with five (5) individuals under which the consultants agreed to provide, among other services, business development, executive recruitment, and brand development services for us. As consideration for their services, we issued a total of 300,000 common shares to the consultants, which shares were vested immediately on issuance. During the three months ended March 31, 2015, we will value the shares at the market price of our stock on the dates of issuance and record the appropriate expense.

EB-5 Regional Purchase

On March 27, 2015, the Company purchased Powerdyne Regional Center LLC, a designated EB-5 Regional Center approved by the U.S. Citizen and Immigration Service (“USCIS”). The aggregate purchase price for 100% of the membership interest of Powerdyne Regional Center is $250,000.00, of which $125,000.00 was funded on March 27, 2015. The balance will be paid in five quarterly installments of $25,000.00 with the payments due on April 1, 2015, July 1, 2015, October 1, 2015, January 1, 2016 and April 1, 2016. The Company filed a Current Report on Form 8-K with the Securities and Exchange Commission (“SEC”) on March 30, 2015 which describes the acquisition in detail.

Stock Purchase Agreement for 3 Million Dollars

The Company entered into a Stock Purchase Agreement on March 30, 2015 to purchase 6,000,000 shares of the Company’s common stock at a price of $0.50 per share for a total capital investment of $3,000,000.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our President and Chief Financial Officer (the “Certifying Officer”) has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934) as of the end of period covered by this report. Based upon such evaluation, the Certifying Officer concluded that our disclosure controls and procedures were effective as of December 31, 2014.

Management’s Report on Internal Control over Financial Reporting

Our management, including the Certifying Officer, is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of our financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets, (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that our receipt and expenditures are being made only in accordance with authorizations of management and our Board of Directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

All internal control systems, no matter how well designed, have inherent limitations. A system of internal control may become inadequate over time because of changes in conditions or deterioration in the degree of compliance with the policies or procedures. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

Our management assessed the effectiveness of our internal control over financial reporting as December 31, 2014 using the criteria set forth by the Commission of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework. Based on this assessment, our management concluded that our internal control over financial reporting disclosure controls and procedures were effective as of December 31, 2014.

ITEM 9A(T). CONTROLS AND PROCEDURES

This Item is not applicable to us.

ITEM 9B. OTHER INFORMATION

None.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE

Name	Age	Position(s) and Office(s)
Michael R. Dunn	62	Chief Executive Officer, Chief Financial Officer, Secretary, Director
Derek Jones	76	Director

Michael R. Dunn, our Chief Executive Officer, Chief Financial Officer, and member of our Board of Directors. He joined us on May 28, 2008 at a time when our Company, which was considered a turn-around project, required a significant reduction of our debt, a major capital infusion, a rationalization of our product line, and a more effective product distribution.

Mr. Dunn has recently spearheaded the search for a merger partner and has managed our relationship with Sky Rover and if and when it closes the following are some of the important aspects of the negotiated transaction:

Restructuring of $1,095,000 in notes payable

Mitigated over $1,500,000 in accrued executive salary forgiveness upon Sky Rover closing

Obtaining $580,000 in operating funds from Greenome and Sky Rover

Arranging a $3 million dollar stock placement from Sky Rover

Negotiating the contribution by Sky Rover of 4,000,000 EDG for sale to foreign entities and investors which had a trading value of $25.25 per EGD on March 25, 2015

From December 1995 through 2010, Mr. Dunn was the Chief Executive Officer of Bankers Integration Group, Inc., an e-commerce company serving the automotive finance and insurance industry. Bankers Integration Group, Inc. filed for Chapter 11 bankruptcy protection in October of 2007 and Mr. Dunn acted as the Trustee and coordinated the sale of the assets. The case was closed on November 17, 2010. Mr. Dunn also served as Chairman and Chief Executive Officer of Mountaineer Gaming, a Russell 2000 gaming and Entertainment Company, as well as being the owner, manager, or director of various businesses, both large and small. Mr. Dunn attended La Crosse State University, Wisconsin, in business and has extensive training in business management and leadership.

Derek Jones was appointed to our Board of Directors on April 26, 2005. Mr. Jones is a consultant and telecommunications analyst. Since 2003, he has served as a Director of Native American Studies and Fund Raising Division of the Rio Grande Foundation, a New Mexico free market research and educational organization dedicated to the study of public policy. Along with his background in Business Administration, Mr. Jones brings to us his knowledge and 35 years’ experience in the area of corporate development and finance as well as his background in the areas of International Finance and business affairs.

Compliance with Section 16(a) of the Exchange Act

Section 16(a) of the Securities Exchange Act of 1934 requires our directors, officers and persons who own more than 10% of a registered class of our equity securities to file with the SEC initial reports of ownership and reports of changes in ownership of common stock and other equity securities. Officers, directors and greater than 10% shareholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file.

Code of Ethics

We have adopted a Code of Ethics that applies to our principal executive officer, principal financial officer, and principal accounting officer. Our Code of Ethics was an exhibit to our Annual Report on Form 10-K for the fiscal year ended December 31, 2006 and filed with the SEC on April 16, 2007.

ITEM 11. EXECUTIVE COMPENSATION

Summary Compensation Table

Set forth below is a summary of compensation for our principal executive officer and our two most highly compensated officers other than our principal executive officer (collectively, the “named executive officers”) for our last two fiscal years. There have been no annuity, pension or retirement benefits ever paid to our officers, directors or employees.

With the exception of reimbursement of expenses incurred by our named executive officers during the scope of their employment and unless expressly stated otherwise in a footnote below, none of the named executive officers received other compensation, perquisites and/or personal benefits in excess of $10,000.

Name and Principal Position	Year	Salary ($)		Bonus ($)		Stock Awards ($)		Option Awards ($)		Non-equity Incentive Plan Compensation ($)		All Other Compensation ($)		Total ($)
Michael R. Dunn, CEO, CFO (1)	2014	$	180,913	$	-0-	$	-0-	$	-0-	$	-0-	$	-0-	$	180,913
	2013	$	229,731	$	-0-	$	-0-	$	-0-	$	-0-	$	-0-	$	229,731

(1)

Joined us May 28, 2008. For 2014 and 2013, all of Mr. Dunn’s salary was accrued and none was paid.

Employment Agreements

Michael R. Dunn

On August 24, 2009, we entered into an Employment Agreement with Michael R. Dunn (the “Dunn Agreement”) to serve as our Chief Executive Officer (“CEO”) and Chairman of the Board of Directors (“Chairman”). Mr. Dunn has been serving as our CEO and Chairman since May 28, 2008. The Dunn Agreement supersedes and replaces any prior employment agreement or arrangement between our company and Mr. Dunn. The Dunn Agreement has a term of two years (the “Initial Term”). Unless sooner terminated pursuant to the terms thereof, Mr. Dunn’s employment will automatically renew for additional one-year terms (each a “Renewal Term”). Mr. Dunn will receive an initial annual salary of $189,000 per year, which will be increased by 5 percent on January 1st of each year. He will also receive a monthly home office expense allowance of $2,000 and a monthly car allowance of $750. If we fail to make any regularly scheduled payment of salary amounts owed to Mr. Dunn under the Dunn Agreement within fifteen (15) days of their due date, in lieu of such payment and subject to applicable securities laws, we shall issue, at Mr. Dunn’s option, shares of our common stock with a value of 150% of the payment owing to Mr. Dunn, such shares valued at the price per share in the last reported trade of our common stock on the date such payment should have been made. Mr. Dunn has not exercised this option to date. The Dunn Agreement also states that Mr. Dunn will also be eligible to receive a bonus of $110,000, dependent on certain capital being raised. To date, no bonus has been approved for Mr. Dunn. Mr. Dunn was also granted 233,333 shares of our common stock, vesting immediately, with a minimum of 216,667 shares restricted and subject to a lock-up provision that prohibits Mr. Dunn from selling, transferring or otherwise encumbering the shares for a period of six (6) months. In addition, the shares are subject to forfeiture under certain circumstances in the first 6 months of the Dunn Agreement. Mr. Dunn also is entitled to additional benefits commensurate with the position of Chief Executive Officer, including paid vacation, reimbursement of reasonable and necessary business expenses incurred in the performance of his duties, and eligibility to participate in our employee benefit plans.

If we terminate Mr. Dunn’s employment for any reason other than just cause, Mr. Dunn will be entitled to payment of his annual salary, as in effect on the date of his termination, for either twelve (12) months or through the Initial Term or any applicable Renewal Term, whichever period of time is longer. In addition we will continue to pay for coverage for Mr. Dunn and his dependents under our group insurance plans for a period of twelve (12) months from the effective date of termination. The Dunn Agreement also contains customary non-disclosure/non-solicitation and non-competition provisions.

On November 25, 2009 we entered into Amendment #1 to the Dunn Agreement under which the sections of the Dunn Agreement relating to Prohibited Behavior and Business Opportunities were amended to allow Mr. Dunn to have an interest in and participate in FITT.

Robert E. Crowson, Jr.

On August 24, 2009, we entered into an Employment Agreement with Robert E. Crowson, Jr. (the “Crowson Agreement”) to serve as our Controller, a non-officer position. The Crowson Agreement has a term of two years (the “Initial Term”). Unless sooner terminated pursuant to the terms thereof, Mr. Crowson’s employment will automatically renew for additional one-year terms (each a “Renewal Term”). Mr. Crowson will receive an initial annual salary of $120,000 per year, which will be increased by 5 percent on January 1st of each year. If we fail to make any regularly scheduled payment of salary amounts owed to Mr. Crowson under the Crowson Agreement within fifteen (15) days of their due date, in lieu of such payment and subject to applicable securities laws, we shall issue, at Mr. Crowson’s option, shares of our common stock with a value of 150% of the payment owing to Mr. Crowson, such shares valued at the price per share in the last reported trade of our common stock on the date such payment should have been made. Mr. Crowson has not exercised this option to date. Mr. Crowson was also granted 50,000 shares of our common stock, vesting immediately, with a minimum of 40,000 shares restricted and subject to a lock-up provision that prohibits Mr. Crowson from selling, transferring or otherwise encumbering the shares for a period of six (6) months. In addition, the shares are subject to forfeiture under certain circumstances in the first 6 months of the Crowson Agreement. Mr. Crowson also is entitled to additional benefits commensurate with the position of Controller including paid vacation, reimbursement of reasonable and necessary business expenses incurred in the performance of his duties, and eligibility to participate in our employee benefit plans.

If we terminate Mr. Crowson’s employment for any reason other than just cause, Mr. Crowson will be entitled to payment of his annual salary, as in effect on the date of his termination, for either twelve (12) months or through the Initial Term or any applicable Renewal Term, whichever period of time is longer. In addition we will continue to pay for coverage for Mr. Crowson and his dependents under our group insurance plans for a period of twelve (12) months from the effective date of termination.

On November 25, 2009 we entered into Amendment #1 to the Crowson Agreement under which the sections of the Crowson Agreement relating to Prohibited Behavior and Business Opportunities were amended to allow Mr. Crowson to have an interest in and participate in FITT.

During the fourth quarter of 2014, the employee terminated employment with the Company and settled outstanding balances due him without any additional liability to the Company. See Note 7 to the consolidated financial statements.

Director Compensation

On October 15, 2009 the Board of Directors approved a program to compensate our outside directors at the rate of $3,000 per calendar quarter in cash or in equivalent value of shares of our common stock. All directors are entitled to reimbursement of expenses incurred in the performance of their duties as directors, including their attendance at Board of Directors meetings.

During 2014 and 2013, we accrued director’s fees for Derek Jones in the amount of $12,000 and $2,000, respectively.

Grants of Plan Based Awards

There were no grants of plan-based awards during our last fiscal year.

ITEM 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

As previously discussed, on October 29, 2013, we issued 33,000,000 shares of our common stock to FITT for further distribution to the FITT shareholders, all as set out in the Merger Agreement. As of the date of this report, we are working on finalizing certain ownership and debt mitigation issues which could affect the ownership of certain of our common shares.

The following table sets forth certain information concerning our best estimate of the beneficial stock ownership of our common stock as of the date of this report pending the resolution of the issues note above. The information is presented with respect to: (i) each person who is known to us to beneficially own more than 5% of our common stock; (ii) each officer and director; and (iii) all directors and officers as a group; based upon 38,063,410 shares of outstanding common stock.

	Common Stock		Preferred Stock
Name and Address of Beneficial Owners(1)	Amount and Nature of Beneficial Ownership	Percent Ownership of Class(2)	Amount and Nature of Beneficial Ownership	Percent Ownership of Class
Michael R. Dunn, CEO, CFO, Secretary, and Director	12,109,716	31.8%	-0-	0.0%
Derek Jones, Director	1,667	*	-0-	0.0%
All executive officers and directors as a group (two persons)	12,111,383	31.8%	-0-	0.0%
Sky Rover Holdings Ltd	13,572,088	35.7%	-0-	0.0%
Rand Scott, MD	2,506,561	6.6%	-0-	0.0%

__________

*Less than 1%.

(1) c/o our address, P.O. Box 4709, Mission Viejo, CA 92690, unless otherwise noted.

(2) Except as otherwise indicated, we believe that the beneficial owners of common stock listed above, based on information furnished by such owners, have sole investment and voting power with respect to such shares, subject to community property laws where applicable. Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities. Shares of common stock subject to options or warrants currently exercisable or exercisable within 60 days, are deemed outstanding for purposes of computing the percentage of the person holding such options or warrants, but are not deemed outstanding for purposes of computing the percentage of any other person.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Settlement Agreement

In order to facilitate the investment by Sky Rover discussed in Note 1, on September 19, 2014 we entered into a Settlement Agreement with our CEO, who is also a Director, which will become effective once all closing conditions for the Sky Rover SPA have become effective as more fully described in Note 14 to the accompanying consolidated financial statements. Under the Settlement Agreement, our CEO and Director agreed to forgive all accrued but unpaid salary which amounted to $1,053,187 and any additional accrued salary though the closing date of the Stock Purchase Agreement. We did not accrue any compensation for our CEO during the fourth quarter of 2014 based on mutual agreement of the CEO and Sky Rover. In addition, our CEO gave up his right to any severance payment which would be due him under his employment agreement upon the closing of the Stock Purchase Agreement. For our part, we agreed to issue our CEO a promissory note for the amount of unpaid advances made to us by him in the amount of $142,203. The note will bear interest at 8% per annum and becomes due and payable one year from its effective date. Finally, the CEO will be allowed to retain no less than 2,000,000 of his currently held common shares. The terms of the Settlement Agreement with our CEO will only be effective and recorded once all closing conditions to the Sky Rover SPA have been met.

Advance Repayment

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

dbbmckennon (the “Independent Auditors”) were our Independent Auditors and examined our consolidated financial statements for the years ended December 31, 2014 and 2013, respectively. The Independent Auditors performed the services listed below and were paid the aggregate fees listed below for the years ended December 31, 2014 and 2013.

Audit Fees

The Independent Auditors billed us aggregate fees of approximately $48,000 for the fiscal year ended December 31, 2014 and approximately $38,000 for the fiscal year ended December 31, 2013 for professional services rendered for their audit of our annual financial statements and their reviews of our financial statements included in our quarterly reports on Form 10-Q during these periods.

Audit-Related Fees

The Independent Auditors did not bill us any fees for either of the years ended December 31, 2014 or 2013 for any audit- related professional services.

Tax Fees

The Independent Auditors did not bill us any fees for either of the years ended December 31, 2014 or 2013 for any professional services for tax compliance, tax advice and tax planning during this fiscal year period.

All Other Fees

The Independent Auditors billed us aggregate fees of approximately $15,000 for the fiscal year ended December 31, 2013 for professional services related to their reviews of Form 8-K in connection with our Merger with FITT. The Independent Auditors did not bill us any fees for the year ended December 31, 2014 for any other professional services.

Board of Directors Pre-Approval Policies and Procedures

Our Board of Directors has policies and procedures that require the pre-approval by the Board of all fees paid to, and all services performed by, our independent accounting firms. The fees and services provided as noted above were authorized and approved by the Board in compliance with the pre-approval policies and procedures described herein.

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

2.1		Agreement and Plan of Merger by and among Snocone Systems Inc., WYD Acquisition Corp. and Who’s Your Daddy, Inc., dated April 1, 2005 (1)
3.1		Amended and Restated Articles of Incorporation, dated December 4, 2001 (2)
3.2		Amended and Restated Bylaws, dated December 4, 2001 (2)
3.3		Amended and Restated Articles of Incorporation, dated April 27, 2005 (3)
3.4		Amended and Restated Articles of Incorporation, dated June 1, 2010 (4) (5)
10.1		Employment Agreement with Michael R. Dunn dated August 24, 2009 (6)
10.2		Employment Agreement with Robert E. Crowson, Jr. dated August 24, 2009 (6)
31.1		Certification of Chief Executive Officer Pursuant to the Securities Exchange Act of 1934, Rule 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2		Certification of Chief Financial Officer Pursuant to the Securities Exchange Act of 1934, Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32		Certifications Pursuant to 18 U.S.C., Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS		XBRL Instance Document
101.SCH		XBRL Schema Document
101.CAL		XBRL Calculation Linkbase Document
101.DEF		XBRL Definition Linkbase Document
101.LAB		XBRL Label Linkbase Document
101.PRE		XBRL Presentation Linkbase Document

__________

(1)

Incorporated by reference from our Current Report on Form 8-K filed with the Commission on April 7, 2005.

(2)

Incorporated by reference from our Registration Statement on Form 10SB filed with the Commission on January 18, 2002.

(3)

Incorporated by reference from our Schedule 14C Definitive Information Statement file with the Commission on June 28, 2005.

(4)

Incorporated by reference from our Schedule 14C Definitive Information Statement file with the Commission on June 21, 2010.

(5)

Incorporated by reference from our Current Report on Form 8-K filed with the Commission on July 21, 2010.

(6)

Incorporated by reference from our Current Report on Form 8-K filed with the Commission on August 26, 2009.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	FITT HIGHWAY PRODUCTS, INC.


DATED: April 1, 2015	/s/ Michael R. Dunn
	By: Michael R. Dunn
	Its: Chief Executive Officer and Chief Financial Officer
	(Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer)

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