Item 1. Financial Statements.
MIND SOLUTIONS, INC.
|
BALANCE SHEETS
(Development Stage Company)
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
(Audited)
|
|
|
|
|
June 30,
|
|
|
|
December 31,
|
|
Assets:
|
|
|
2014
|
|
|
|
2013
|
|
Current Assets
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents
|
|
$
|
150,820
|
|
|
$
|
47,428
|
|
Prepaids
|
|
|
131,397
|
|
|
|
289,550
|
|
Total Current Assets
|
|
|
282,217
|
|
|
|
336,978
|
|
|
|
|
|
|
|
|
|
|
Fixed Assets
|
|
|
|
|
|
|
|
|
Property Plant & Equipment
|
|
|
89,653
|
|
|
|
86,717
|
|
Accumulated Depreciation
|
|
|
(85,465
|
)
|
|
|
(84,299
|
)
|
Total Fixed Assets
|
|
|
4,188
|
|
|
|
2,418
|
|
|
|
|
|
|
|
|
|
|
Other Assets
|
|
|
|
|
|
|
|
|
Marketable securities available-for-sale securities
|
|
|
12,500
|
|
|
|
—
|
|
Total Other Assets
|
|
|
12,500
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
298,905
|
|
|
$
|
339,396
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders' Equity:
|
|
|
|
|
|
|
|
|
Accounts Payable & Accrued Expenses
|
|
$
|
384,869
|
|
|
$
|
394,859
|
|
Accounts Payable to Related Parties
|
|
|
3,500
|
|
|
|
3,500
|
|
Accrued Interest
|
|
|
300,974
|
|
|
|
277,560
|
|
Notes Payable
|
|
|
145,000
|
|
|
|
145,000
|
|
Convertible Notes Payable
|
|
|
454,918
|
|
|
|
248,358
|
|
Derivative Liability
|
|
|
6,915,090
|
|
|
|
19,907,242
|
|
Total Liabilities
|
|
|
8,204,351
|
|
|
|
20,976,519
|
|
|
|
|
|
|
|
|
|
|
Stockholders' Equity:
|
|
|
|
|
|
|
|
|
Preferred Stock, $0.001 par value 10,000,000
|
|
|
|
|
|
|
|
|
shares authorized, 0 shares issued and outstanding
|
|
|
—
|
|
|
|
—
|
|
Common Stock, $0.001 par value 5,000,000,000
|
|
|
|
|
|
|
|
|
shares authorized, 615,166,801 and 36,024,969 shares
|
|
|
|
|
|
|
|
|
issued and outstanding
|
|
|
615,166
|
|
|
|
36,025
|
|
Stock Payable
|
|
|
—
|
|
|
|
235,375
|
|
Additional Paid-In Capital
|
|
|
17,073,410
|
|
|
|
2,807,266
|
|
Accumulated Comprehensive Loss
|
|
|
(367,500
|
)
|
|
|
(330,000
|
)
|
Deficit Accumulated During the Development Stage
|
|
|
(25,226,522
|
)
|
|
|
(23,385,789
|
)
|
Total Stockholders' Equity (Deficit)
|
|
|
(7,905,446
|
)
|
|
|
(20,637,123
|
)
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Stockholders' Equity
|
|
$
|
298,905
|
|
|
$
|
339,396
|
|
The accompanying notes are an integral part of these financial statements.
|
MIND SOLUTIONS, INC.
|
STATEMENTS OF OPERATIONS
|
(Development Stage Company)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
From Inception
|
|
|
For the Three Months Ended
|
|
For the Six Months Ended
|
|
(May 24, 2002) to
|
|
|
June 30,
|
|
June 30,
|
|
June 30,
|
|
June 30,
|
|
June 30,
|
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
|
Product Revenues
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,163
|
|
Service Revenues
|
|
|
18,889
|
|
|
|
|
|
|
|
50,000
|
|
|
|
—
|
|
|
|
50,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of Sales
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
678
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit
|
|
|
18,889
|
|
|
|
—
|
|
|
|
50,000
|
|
|
|
—
|
|
|
|
50,485
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consulting
|
|
|
220,292
|
|
|
|
220,378
|
|
|
|
618,526
|
|
|
|
1,105,492
|
|
|
|
2,590,743
|
|
Professional Fees
|
|
|
51,063
|
|
|
|
30,317
|
|
|
|
92,425
|
|
|
|
90,939
|
|
|
|
321,845
|
|
General and Administration
|
|
|
64,442
|
|
|
|
8,960
|
|
|
|
75,379
|
|
|
|
18,023
|
|
|
|
1,278,984
|
|
Total operating expenses
|
|
|
335,797
|
|
|
|
259,655
|
|
|
|
786,330
|
|
|
|
1,214,454
|
|
|
|
4,191,572
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(316,908
|
)
|
|
|
(259,655
|
)
|
|
|
(736,330
|
)
|
|
|
(1,214,454
|
)
|
|
|
(4,141,087
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Income and (Expenses):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Expense
|
|
|
(16,533
|
)
|
|
|
(13,115
|
)
|
|
|
(34,170
|
)
|
|
|
(22,900
|
)
|
|
|
(89,847
|
)
|
Derivative Interest
|
|
|
(1,070,233
|
)
|
|
|
(93,784
|
)
|
|
|
(1,070,233
|
)
|
|
|
(134,787
|
)
|
|
|
(21,107,198
|
)
|
Forgiveness of Debt
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
111,610
|
|
|
|
111,610
|
|
Total Other Income and (Expenses)
|
|
|
(1,086,766
|
)
|
|
|
(106,899
|
)
|
|
|
(1,104,403
|
)
|
|
|
(46,077
|
)
|
|
|
(21,085,435
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss before taxes
|
|
|
(1,403,674
|
)
|
|
|
(366,554
|
)
|
|
|
(1,840,733
|
)
|
|
|
(1,260,531
|
)
|
|
|
(25,226,522
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax provisions
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss After Taxes
|
|
$
|
(1,403,674
|
)
|
|
$
|
(366,554
|
)
|
|
$
|
(1,840,733
|
)
|
|
$
|
(1,260,531
|
)
|
|
$
|
(25,226,522
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Comprehensive Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (Loss) on Available-for-Sale Securities
|
|
|
(9,167
|
)
|
|
|
—
|
|
|
|
(37,500
|
)
|
|
|
90,000
|
|
|
|
(367,500
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Comprehensive Income (Loss)
|
|
$
|
(1,412,841
|
)
|
|
$
|
(366,554
|
)
|
|
$
|
(1,878,233
|
)
|
|
$
|
(1,170,531
|
)
|
|
$
|
(25,594,022
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic & diluted loss per share
|
|
$
|
(0.00
|
)
|
|
$
|
(1.65
|
)
|
|
$
|
(0.00
|
)
|
|
$
|
(6.79
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding
|
|
|
570,106,350
|
|
|
|
222,292
|
|
|
|
525,648,770
|
|
|
|
185,768
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these financial statements.
|
|
MIND SOLUTIONS, INC.
|
STATEMENTS OF CASH FLOWS
|
(Development Stage Company)
|
(Unaudited)
|
|
|
|
|
|
|
From Inception
|
|
|
For the Six Months Ended
|
|
(May 24, 2002) to
|
|
|
June 30,
|
|
June 30,
|
|
|
2014
|
|
2013
|
|
2014
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss for the period
|
|
$
|
(1,840,733
|
)
|
|
$
|
(1,260,531
|
)
|
|
$
|
(25,226,522
|
)
|
Adjustments to reconcile net loss to net cash
|
|
|
|
|
|
|
|
|
|
|
|
|
provided by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock for services
|
|
|
354,738
|
|
|
|
829,900
|
|
|
|
2,598,541
|
|
Derivative expense from convertible notes
|
|
|
1,070,233
|
|
|
|
103,325
|
|
|
|
20,977,475
|
|
Available-for-sale securities transferred as compensation
|
|
|
—
|
|
|
|
480,000
|
|
|
|
480,000
|
|
Available-for-sale securities received for service revenues
|
|
|
50,000
|
|
|
|
—
|
|
|
|
50,000
|
|
Forgiveness of debt
|
|
|
—
|
|
|
|
(111,610
|
)
|
|
|
(111,610
|
)
|
Depreciation
|
|
|
1,166
|
|
|
|
1,520
|
|
|
|
3,826
|
|
Changes in Operated Assets and Liabilities:
|
|
|
|
|
|
|
|
|
|
|
—
|
|
Accounts payable and accrued expenses
|
|
|
13,424
|
|
|
|
(233,943
|
)
|
|
|
24,590
|
|
Accounts payable to related parties
|
|
|
—
|
|
|
|
17,728
|
|
|
|
115,110
|
|
Net cash used in operating activities
|
|
|
(351,172
|
)
|
|
|
(173,611
|
)
|
|
|
(1,088,590
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOW FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase Equipment
|
|
|
(2,936
|
)
|
|
|
—
|
|
|
|
(3,620
|
)
|
Net cash used by investing activities
|
|
|
(2,936
|
)
|
|
|
—
|
|
|
|
(3,620
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from sale of stock
|
|
|
—
|
|
|
|
—
|
|
|
|
10,000
|
|
Proceeds from officer contributions
|
|
|
—
|
|
|
|
—
|
|
|
|
61,000
|
|
Proceeds from convertible notes
|
|
|
457,500
|
|
|
|
202,000
|
|
|
|
882,845
|
|
Proceed from convertible note to related party
|
|
|
—
|
|
|
|
48,100
|
|
|
|
48,526
|
|
Payments on convertible note to related party
|
|
|
—
|
|
|
|
(32,805
|
)
|
|
|
(38,474
|
)
|
Proceeds from notes payable to related parties
|
|
|
—
|
|
|
|
—
|
|
|
|
418,769
|
|
Payments on notes payable to related parties
|
|
|
—
|
|
|
|
—
|
|
|
|
(139,636
|
)
|
Net cash provided by financing activities
|
|
|
457,500
|
|
|
|
217,295
|
|
|
|
1,243,030
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (Decrease) Increase in Cash
|
|
|
103,392
|
|
|
|
43,684
|
|
|
|
150,820
|
|
Cash at Beginning of Period
|
|
|
47,428
|
|
|
|
208
|
|
|
|
—
|
|
Cash at End of Period
|
|
$
|
150,820
|
|
|
$
|
43,892
|
|
|
$
|
150,820
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Disclosures:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Taxes Paid
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Interest Paid
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NON-CASH INVESTING AND FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock in payment of non related
|
|
|
|
|
|
|
|
|
|
|
|
|
party convertible debt
|
|
$
|
314,050
|
|
|
$
|
—
|
|
|
$
|
777,234
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock in payment of related party debt
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
51,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consulting fees paid with available-for-sale securities
|
|
|
|
|
|
|
|
|
|
|
|
|
asset
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
480,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock issued for assets
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
90,000
|
|
|
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The accompanying notes are an integral part of these financial statements.
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MIND SOLUTIONS, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2014 AND DECEMBER 31, 2013
NOTE 1 -
OR
G
A
NI
Z
ATI
O
N
A
N
D DE
SC
RIPTI
O
N
OF BUS
I
NESS
Mind Solutions, Inc. (the “Company”
or “MSI”) was initially incorporated in the state of Delaware on May 19, 2000 as Medical Records by Net, Inc. On October 17,
2000, the Company changes its name to Lifelink Online, Inc. In January 2001, its name was changed to MedStrong Corporation, and
on March 9, 2001, the Company name was changed to MedStrong International Corporation. On March 30, 2007, the Company’s
name was changed to VOIS Inc and the domicile was changed to the state of Florida. On October 19, 2012, the Company executed a
merger agreement with Mind Solutions, Inc. whereas Mind Solutions, Inc. became a wholly owned subsidiary of the company. Mind Solutions,
Inc. was incorporated under the state laws of Nevada on May 24, 2002 under the name Red Meteor Media Inc. The Company changed its
name to Prize Entertainment Inc. in November of 2003 and then again to Mind Solutions, Inc. in January of 2011. On October 28,
2013 the Company changed its name from VOIS, Inc. to Mind Solutions, Inc. as well as changing its domicile from Florida to Nevada.
On October 28, 2013, the Company closed an
Agreement and Plan of Merger with Mind Solutions, Inc. For accounting purposes this agreement was treated as a reverse merger.
The operations of the Company became those solely of Mind Solutions, Inc. In connection with the merger agreement, the Company
changed its fiscal year end to coincide with that of Mind Solutions, Inc., which is December 31. Pursuant to the Pan of Merger
with Mind Solutions, Inc., the holders of stock in VOIS, Inc. received one share of common stock, $.0.001 par value per share,
in Mind Solutions, Inc. for every 2,000 shares of common stock in VOIS, Inc. (in effect, a 2,000 for 1 reverse split). As a result,
the current common shareholders of VOIS, Inc. will hold all of the issued and outstanding shares of common stock in the surviving
corporation Mind Solutions, Inc.
MSI has de
v
el
o
ped
s
o
f
tware
a
pplica
t
ions which are compatible with
EEG headsets on the market.
MSI is working with the most advanced electronics manufacturing companies
to develop the most advanced EEG headset on the market. This BCI headset will allow users to operate thought-controlled applications
on their mobile phone devices as well as on traditional PC computers. MSI
has completed a working prototype which has been
successfully tested on several Android devices. EEG headset can re
ad
bra
i
n
w
aves
and all
o
w for i
n
teracti
o
n
wi
t
h a c
o
m
pu
ter.
The Company develops software for thought controlled
technologies, allowing the user to interact with the computer and other machines through the power of the mind. The technology
involves the use of a wireless headset, which detects brainwaves on both the conscious and non-conscious level. This revolutionary
neural processing technology makes it possible for computers to interact
directly with the human brain. The Company has created three applications currently available through the Company's website and
is developing a micro EEG headset that is compatible with mobile smart phones and other devices.
NOTE 2 - PREPARATION OF FINANCIAL S
T
ATEMENTS
Basis of presentation
The Company’s financial statements have
been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).
The accompanying unaudited quarterly financial
statements have been prepared on a basis consistent with generally accepted accounting principles in the United States (“GAAP”)
for interim financial information and pursuant to the rules of the Securities and Exchange Commission (“SEC”). In the
opinion of management, the accompanying unaudited financial statements reflect all adjustments, consisting of only normal and recurring
adjustments, necessary for a fair presentation of the results of operations, financial position and cash flows for the periods
presented. The results of operations for the periods are not necessarily indicative of the results expected for the full year or
any future period. These statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year
ended December 31, 2013 as filed with the SEC on April 14, 2014 (the “2013 Annual Report”).
Development Stage Company
The Company is currently a development stage
enterprise reporting under the provisions of FASB ASC Topic 915
, Development Stage Entity
. The accompanying financial statements
have been prepared in accordance with accounting principles generally accepted in the United States of America.
Restated Financial Statements
Certain amounts in the prior period
financial statements have been adjusted to conform to the 2,000 to 1 reverse stock split on October 15, 2013.
Prior Year Financial Statement Presentation
The prior year financial statements were prepared
to show the effect of the reverse merger and to show the mark to market adjustment as other comprehensive income for comparative
purposes in the prior year financial statements.
NOTE 3 -
SU
M
MA
RY
OF SIG
N
IF
I
C
AN
T
A
C
C
OU
N
T
ING
POL
I
C
I
ES
|
A.
|
C
a
sh
a
nd
e
q
ui
v
a
l
en
t
s
|
T
h
e
C
o
m
p
a
n
y
c
o
nsi
d
ers all cash
o
n
h
a
nd and in
b
a
n
k
s,
i
n
c
l
ud
i
n
g
accou
n
ts in
b
ook
ov
e
rdraft
p
o
siti
o
ns, certificates
o
f
de
p
o
sit a
n
d
other hi
g
h
l
y
-li
q
uid
i
n
vest
m
ents with
m
at
u
rit
i
es
of
t
h
ree
m
onths
or les
s
,
w
h
en
p
u
r
c
has
e
d,
to be ca
s
h a
n
d
eq
uivale
n
ts.
B. Fi
x
ed
Asse
t
s
Fixed assets are recorded at
c
o
st.
M
a
jor r
e
newals and i
m
prove
m
ents
are capitalized, w
h
ile
m
ai
n
te
n
a
n
ce
and re
p
airs are
e
xp
e
ns
e
d
wh
e
n
i
n
c
u
rr
e
d.
Expenditures for major additions and betterments are capitalized in amounts greater or equal to $500. Depreciation of equipment
is computed by the straight-line method (after taking into account their respective estimated residual values) over the assets
estimated useful life of three (3), five (5), or seven (7) years. Upon sale or retirement of equipment, the related cost and accumulated
depreciation are removed from the accounts and any gain or loss is reflected in statements of operations.
C.
A
d
vertising
expenses
A
d
v
e
rtising
an
d
m
arketing
ex
pe
n
ses
are
c
h
a
r
ged
t
o
o
p
e
rati
o
ns
as i
n
c
u
r
r
e
d
.
For
t
h
e six months
ended
June 30, 2014 and year ended December 31, 2013
ad
v
er
tisin
g
a
n
d
m
ar
k
eti
n
g
ex
p
e
n
se
were
$0,
respectively.
D. Revenue rec
o
gniti
o
n
The Company follows paragraph 605-10-S99-1
of the FASB
Accounting Standards Codification
for revenue recognition. The Company will recognize revenue when it is realized
or realizable and earned. The Company considers revenue realized or realizable and earned when all of the following criteria are
met: (i) persuasive evidence of an arrangement exists, (ii) the product has been shipped or the services have been rendered to
the customer, (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured.
E. Sto
c
k
-b
a
s
e
d
co
m
p
e
n
sati
o
n
We record share based payments under the provisions
of FASB ASC Topic 718,
Compensation - Stock Compensation
. Under FASB ASC 718
,
companies are required to measure the
compensation costs of share-based compensation arrangements based on the grant-date fair value and recognize the costs in the financial
statements over the period during which employees are required to provide services. Share-based compensation arrangements include
stock options, restricted share plans, performance-based awards, share appreciation rights and employee share purchase plans. In
March 2005 the SEC issued Staff Accounting Bulletin No. 107, or “SAB 107,” SAB 107 expresses views of the staff regarding
the interaction between FASB ASC 718 and certain SEC rules and regulations and provides the staff's views regarding the valuation
of share-based payment arrangements for public companies. FASB ASC 718 permitted public companies to adopt its requirements using
one of two methods. On April 14, 2005, the SEC adopted a new rule amending the compliance dates for FASB ASC 718. Companies
may elect to apply this statement either prospectively, or on a modified version of retrospective application under which financial
statements for prior periods are adjusted on a basis consistent with the pro forma disclosures required for those periods under
SFAS 123. Effective with its fiscal 2006 year, the Company adopted the provisions of FASB ASC 718 and related interpretations
as provided by SAB 107 prospectively. As such, compensation cost is measured on the date of grant as its fair value.
Such
compensation amounts are amortized over the respective vesting periods of the options granted.
F.
I
nc
o
me
Ta
x
es
The Company adopted FASB ASC Topic 740,
Income Taxes
, at its inception. Under FASB ASC Topic 740, the deferred tax provision is determined under the liability method.
Under this method, deferred tax assets and liabilities are recognized based on the differences between the financial statement
carrying amounts and the tax bases of assets and liabilities using presently enacted tax rates.
G.
E
a
rni
n
gs
(loss) p
e
r s
h
are
The Company adopted FASB ASC Topic 260,
Earnings
Per Share
. Basic earnings per share is based on the weighted effect of all common shares issued and outstanding and is calculated
by dividing net income (loss) available to common stockholders by the weighted average shares outstanding during the period. Diluted
earnings per share is calculated by dividing net income available to common stockholders by the weighted average number of common
shares used in the basic earnings per share calculation plus the number of common shares, if any, that would be issued assuming
conversion of all potentially dilutive securities outstanding. For all periods diluted earnings per share is not presented, as
potentially issuable securities are anti-dilutive.
There are 508,789,982 potentially dilutive post reverse stock-split
shares of common stock outstanding as of June 30, 2014 which are derived from the outstanding convertible promissory notes.
H.
U
se
of
e
stimates
The preparation of financial statements in
conformity with accounting principles generally accepted in the United States of America requires management to make estimates
and assumptions that affect certain reported amounts and disclosures. Significant estimates for the periods reported
include certain assumptions used in deriving the fair value of share-based compensation recognized, the useful life of tangible
assets and the future value of our website development costs. Assumptions and estimates used in these areas are material
to our reported financial condition and results of our operations. Actual results will differ from those estimates.
I. Fair value of financial instruments measured
on a recurring basis
The Company follows paragraph 825-10-50-10
of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and paragraph 820-10-35-37
of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial
instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in accounting principles generally accepted
in the United States of America (U.S. GAAP), and expands disclosures about fair value measurements. To increase consistency and
comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which
prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy
gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority
to unobservable inputs. The three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:
|
|
|
Level 1
|
|
Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.
|
|
|
|
Level 2
|
|
Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.
|
|
|
|
Level 3
|
|
Pricing inputs that are generally observable inputs and not corroborated by market data.
|
I. Fair value of financial instruments measured
on a recurring basis (continued)
Financial assets are considered
Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and
at least one significant model assumption or input is unobservable.
The fair value hierarchy
gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority
to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within more than one level described
above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.
The carrying amount of the Company’s
financial assets and liabilities, such as cash, prepaid expenses and accrued expenses approximate their fair value because of the
short maturity of those instruments. The Company’s line of credit and notes payable approximate the fair value of such instruments
based upon management’s best estimate of interest rates that would be available to the Company for similar financial arrangements
at June 30, 2014 and December 31, 2013.
Transactions involving related parties cannot
be presumed to be carried out on an arm's-length basis, as the requisite conditions of competitive, free-market dealings may not
exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were
consummated on terms equivalent to those that prevail in arm's-length transactions unless such representations can be substantiated.
It is not, however, practical to determine
the fair value of advances from stockholders due to their related party nature.
J. Commitments and contingencies
The Company follows subtopic 450-20 of the
FASB
Accounting Standards Codification
to report accounting for contingencies. Certain conditions may exist as of the date
the consolidated financial statements are issued, which may result in a loss to the Company but which will only be resolved when
one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently
involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company
or un-asserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings
or un-asserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.
If the assessment of a contingency indicates
that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated
liability would be accrued in the Company’s consolidated financial statements. If the assessment indicates that a potential
material loss contingency is not probable but is reasonably possible, or is probable but cannot
be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and
material, would be disclosed.
Loss contingencies considered remote are generally
not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. Management does not believe, based
upon information available at this time, that these matters will have a material adverse effect on the Company’s consolidated
financial position, results of operations or cash flows. However, there is no assurance that such matters will not materially and
adversely affect the Company’s business, financial position, and results of operations or cash flows.
K. Related parties
The Company follows subtopic 850-10 of the
FASB
Accounting Standards Codification
for the identification of related parties and disclosure of related party transactions.
Pursuant to Section 850-10-20 the Related parties
include a. affiliates of the Company; b. Entities for which investments in their equity securities would be required,
absent the election of the fair value option under the Fair Value Option Subsection of Section 825–10–15, to be accounted
for by the equity method by the investing entity; c. trusts for the benefit of employees, such as pension and profit-sharing
trusts that are managed by or under the trusteeship of management; d. principal owners of the Company; e. management of the
Company; f. other parties with which the Company may deal if one party controls or can significantly influence the management
or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its
own separate interests; and g. Other parties that can significantly influence the management or operating policies of the
transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other
to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.
The financial statements shall include disclosures
of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the
ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated or combined
financial statements is not required in those statements. The disclosures shall include: a. the nature of the relationship(s)
involved; . a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed,
for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding
of the effects of the transactions on the financial statements; c. the dollar amounts of transactions for each of the periods
for which income statements are presented and the effects of any change in the method of establishing the terms from that used
in the preceding period; and d. amounts due from or to related parties as of the date of each balance sheet presented and,
if not otherwise apparent, the terms and manner of settlement.
L. Cash flows reporting
The Company adopted paragraph 230-10-45-24
of the FASB
Accounting Standards Codification
for cash flows reporting, classifies cash receipts and payments according
to whether they stem from operating, investing, or financing activities and provides definitions of each category, and uses the
indirect or reconciliation method (“Indirect method”) as defined by paragraph 230-10-45-25 of the FASB Accounting Standards
Codification to report net cash flow from operating activities by adjusting net income to reconcile it to net cash flow from operating
activities by removing the effects of (a) all deferrals of past operating cash receipts and payments and all accruals of expected
future operating cash receipts and payments and (b) all items that are included in net income that do not affect operating cash
receipts and payments. The Company reports the reporting currency equivalent of foreign currency cash flows, using the
current exchange rate at the time of the cash flows and the effect of exchange rate changes on cash held in foreign currencies
is reported as a separate item in the reconciliation of beginning and ending balances of cash and cash equivalents and separately
provides information about investing and financing activities not resulting in cash receipts or payments in the period pursuant
to paragraph 830-230-45-1 of the FASB Accounting Standards Codification.
M. Subsequent events
The Company follows the guidance in Section
855-10-50 of the FASB
Accounting Standards Codification
for the disclosure of subsequent events. The Company will evaluate
subsequent events through the date when the financial statements were issued. Pursuant to ASU 2010-09 of the FASB
Accounting Standards Codification, the Company as an SEC filer considers its financial statements
issued when they are widely distributed to users, such as through filing them on EDGAR.
Recently Issued Accounting Standards
The Company has adopted all accounting pronouncements
issued since December 31, 2007, none of which had a material impact on the Company’s financial statements.
NOTE 4 –GOING CONCERN
The accompanying financial statements have
been prepared assuming that the Company will continue as a going concern, which contemplates continuity of operations, realization
of assets, and liquidation of liabilities in the normal course of business.
As of June 30, 2014, the Company had an accumulated
deficit during development stage of $25,226,522 which included a net loss of $1,840,733 reported for the six months ended June
30, 2014. Also, during the six months ended June 30, 2014 the Company used net cash of $351,172 for operating activities. These
factors raise substantial doubt about the Company’s ability to continue as a going concern.
While the Company is attempting to commence
operations and generate revenues, the Company’s cash position may not be significant enough to support the Company’s
daily operations. Management intends to raise additional funds by way of a public or private offering. Management believes that
the actions presently being taken to further implement its business plan and generate revenues provide the opportunity for the
Company to continue as a going concern. While the Company believes in the viability of its strategy to generate revenues and in
its ability to raise additional funds, there can be no assurances to that effect. The ability of the Company to continue as a going
concern is dependent upon the Company’s ability to further implement its business plan and generate revenues.
The financial statements do not include any
adjustments that might be necessary if the Company is unable to continue as a going concern.
NOTE 5– PREPAIDS
The prepaid asset recorded at June 30, 2014
was the result of the Company executing a one year consulting contract with its chief executive officer on December 25, 2013 whereby
the Company issued 120,000,000 post reverse-split shares of common stock for one year of executive services. The 120,000,000 shares
were valued at the closing price of $.0022 on the date of the agreement which will result in the Company recording officer compensation
of $264,000 over the life of the contract.
As of June 30, 2014 and December 31, 2013,
the Company had a prepaid balance of $131,397 and $289,550 which are derived from the uncompleted portion of the consulting agreements
with the Company’s chief executive officer.
NOTE 6– PROPERTY PLANT
&
EQUIPMENT
Furniture a
n
d
E
qu
i
p
m
ent
cons
i
sted of
t
h
e
fol
l
ow
i
ng:
|
|
June 30,
2014
|
|
December 31,
2013
|
|
|
|
|
|
|
|
|
|
Equipment
|
|
$
|
85,467
|
|
|
$
|
82,531
|
|
Furniture
|
|
|
4,186
|
|
|
|
4,186
|
|
Total
|
|
|
89,653
|
|
|
|
86,717
|
|
Less accumulated Depreciation
|
|
|
(85,465
|
)
|
|
|
(84,299
|
)
|
Property and equipment, net
|
|
$
|
4,188
|
|
|
$
|
2,418
|
|
On April 30, 2013 the Company acquired all the assets of Mind Technologies,
Inc. through an executed Asset Purchase Agreement (Described in Note 9).
Depreciati
o
n
ex
p
ense f
o
r t
h
e
six months ended June 30, 2014 and June 30, 2013 was $1,166 and $1,520.
NOTE
7
– RELATED PARTY TRANSACTIONS
Convertible note payable to related party
On January 2, 2014, the Company entered into a convertible promissory
note with Brent Fouch, in the amount of $61,096, bearing no interest, convertible at the closing market price on the date of conversion.
On January 5, 2014, Brent Fouch entered into an assignment agreement with Magna Group, LLC, whereby Brent Fouch assigned his convertible
promissory note dated January 2, 2014 in the amount of $61,096.3
Consulting agreement with CEO
The Company executed a consulting agreement
on December 25, 2013 with its current Chief Executive Officer whereby the Company issued 120,000,000 post reverse-split shares
of common stock for one year of executive services. The 120,000,000 shares were valued at the closing price of $.0022 on the date
of the agreement which will result in the Company recording officer compensation of $264,000 over the life of the contract.
Accounts Payable- Related Party
The Company was advanced money from Iceweb
Storage Corporation Inc, at zero percent interest, for working capital commitments. Mark Lucky is the former chief operating officer
of the Company and is a current officer of Iceweb Storage Corporations. At June 30, 2014 and December 31, 2013, the balance due
to Iceweb Storage Corporation Inc., was $3,500.
In total the Company had accounts payable to
related parties balances at June 30, 2014 and December 31, 2013 of $3,500, respectively.
Asset
Purchase Agreement
On April
30, 2013 the Company executed an asset purchase agreement with Mind Technologies, Inc., (MTEK), whereby the Company purchased all
the assets of MTEK for 15,000 post reverse-split common shares. The assets purchased include those previously licensed from MTEK,
described in Note 9.
Free office space provided by chief executive
officer
The Company has been provided office space
by its chief executive officer Kerry Driscoll at no cost. Management has determined that such cost is nominal and did not recognize
the rent expense in its financial statements.
NOTE
8– AVAILABLE-FOR-SALE SECURITIES
Other Comprehensive Income/Loss
On February 12, 2014, the Company entered into a consulting agreement
with Monster Arts, Inc. (“Monster”), whereby the Company will provide Monster with thought controlled software development
services over a one year term. The Company will be paid four quarterly payments of $50,000 in restricted common stock of Monster.
The Company received its first payment of 8,333,333 common shares of Monster Arts Inc. worth approximately $50,000, based on the
closing stock price of $.006 on February 12, 2014, which was recorded as an available-for-sale security asset with the credit to
deferred revenues. The Company revalued the 8,333,333 shares on June 30, 2014 which resulted in an unrealized loss on available-for-sale
securities of $37,500 as the stock price of Monster decreased to $.0015.
As of June 30, 2014 and December 31, 2013 the Company had available
for sale securities balance of $12,500 and $0.
NOTE
9
– LICENSED PRODUCTS & ASSET PURCHASE
On December
18, 2012, the Company signed a licensing agreement with Mind Technologies, Inc., (MTEK), for the right to use, develop, improve,
manufacture, and sale the licensed software application
which uses wireless hea
ds
ets
to re
ad
bra
i
n
w
aves
and all
o
w i
n
teracti
o
n
wi
t
h a c
o
m
pu
ter
.
The Company issued
3,500 post reverse-split common shares to MTEK as consideration for
the licensing agreement. The shares were valued at the amortized holding cost of the related party. The amortized holding cost
was $-0- at June 30, 2013 and December 31, 2012, respectively.
On April
30, 2013 the Company executed an asset purchase agreement with MTEK, whereby the Company purchased all the assets of MTEK for 15,000
post reverse-split common shares. The assets purchased were previously licensed from MTEK as described previously. The cost basis
of the assets acquired is $86,033, with accumulated depreciation of $81,638, which resulted in a net asset balance of $4,395. The
Company recorded the excess consideration as additional paid in capital inasmuch as it was a related party transaction. The former
CEO of Mind Solutions, Inc. is also the former CEO of Mind Technologies, Inc. The Company acquired all the assets involved with
the former operations of MTEK which include
three thought-controlled software applications named Mind Mouse, Master Mind
and Think-Tac-Toe. These purchased assets constitute neural processing software for thought-controlled technologies, allowing the
user to interact with computers, gaming devices, and other machines through the power of the mind. Included in the purchase are
all Mind Technologies’ inventory, fixed assets, intellectual property, and an assignment of rights and assumption of obligations
under Mind Technologies’ existing contracts.
NOTE
10
– CONVERTIBLE NOTES PAYABLE
In the six months ended June 30, 2014, the
Company entered into six
convertible note agreements. As of June 30, 2014 and December 31, 2013,
the Company has $454,918 and $248,358 in outstanding convertible notes payable with six non-related entities.
On January 2, 2014, the Company entered into a convertible promissory
note with Brent Fouch, a related party to the Company, in the amount of $61,096, bearing no interest, convertible at the closing
market price on the date of conversion. On January 5, 2014, Brent Fouch entered into an assignment agreement with Magna Group,
LLC, whereby Brent Fouch assigned his convertible promissory note dated January 2, 2014 in the amount of $61,096.
On February 4, 2014, the Company entered into
a Convertible Note Agreement with Gel Properties LLC. The Company issued a $25,000 convertible note with interest of 10% per annum,
unsecured, and due February 4, 2015. The note is convertible into common shares of the Company at any time from the date of issuance
at a conversion rate of 55% of the market price, calculated as the lowest trading price in the previous 10 days leading up to the
date of conversion.
On February 4, 2014, the Company entered into
a Convertible Note Agreement with LG Capital Funding LLC. The Company issued a $25,000 convertible note with interest of 10% per
annum, unsecured, and due February 4, 2015. The note is convertible into common shares of the Company at any time from the date
of issuance at a conversion rate of 55% of the market price, calculated as the lowest trading price in the previous 10 days leading
up to the date of conversion.
On February 6, 2014, the Company entered into
a Securities Purchase Agreement with Asher Enterprises Inc. for a $37,500 convertible note payable due interest at 8% per annum,
unsecured, and due November 10, 2014. The note is convertible into common shares of the Company at any time from the date of issuance
at a conversion rate of 58% of the market price, calculated as the average of the three lowest trading prices in the previous 30
days leading up to the date of conversion.
On February 25, 2014, the Company entered into
a Convertible Note Agreement with LG Capital Funding LLC. The Company issued a $40,000 convertible note with interest of 10% per
annum, unsecured, and due February 25, 2015. The note is convertible into common shares of the Company at any time from the date
of issuance at a conversion rate of 55% of the market price, calculated
as the lowest trading price in the previous 10 days leading up to the date of conversion.
On March 25, 2014, the Company entered into
a Convertible Note Agreement with LG Capital Funding LLC. The Company issued a $40,000 convertible note with interest of 10% per
annum, unsecured, and due March 25, 2015. The note is convertible into common shares of the Company at any time from the date of
issuance at a conversion rate of 55% of the market price, calculated as the lowest trading price in the previous 10 days leading
up to the date of conversion.
On April 15, 2014, the Company entered into
a Convertible Note Agreement with Ceasar Capital Group, LLC. The Company issued a $50,000 convertible note with interest of 8%
per annum, unsecured, and due April 15, 2015. The note is convertible into common shares of the Company at any time from the date
of issuance at a conversion rate of 55% of the market price, calculated as the lowest trading price in the previous 10 days leading
up to the date of conversion.
On April 30, 2014, the Company entered into
a Convertible Note Agreement with ARRG, Corp. The Company issued a $50,000 convertible note with interest of 8% per annum, unsecured,
and due April 30, 2015. The note is convertible into common shares of the Company at any time from the date of issuance at a conversion
rate of 55% of the market price, calculated as the lowest trading price in the previous 10 days leading up to the date of conversion.
On May 8, 2014, the Company entered into a
Securities Purchase Agreement with KBM Worldwide, Inc. for a $42,500 convertible note payable due interest at 8% per annum, unsecured,
and due February 12, 2014. The note is convertible into common shares of the Company at any time from the date of issuance at a
conversion rate of 51% of the market price, calculated as the average of the three lowest trading prices in the previous 30 days
leading up to the date of conversion.
On May 30, 2014, the Company entered into a
Convertible Note Agreement with WHC Capital, LLC. The Company issued a $60,000 convertible note with interest of 12% per annum,
unsecured, and due May 30, 2015. The note is convertible into common shares of the Company at any time from the date of issuance
at a conversion rate of 50% of the market price, calculated as the lowest trading price in the previous 10 days leading up to the
date of conversion.
On May 15, 2013, the Company executed a convertible promissory note
with JMJ Financial in an amount up to $250,000 bearing interest on the unpaid balance at the rate of 12 percent. While the note
was in the original principal amount up to $250,000, it was only partially funded. On April 16, 2014, the Company received $40,000
pursuant to this convertible promissory note with JMJ Financial. On June 23, 2014, the Company received $60,000 pursuant to this
convertible promissory note with JMJ Financial. The note is interest free for the first 180 days after which it accrues interest
of 12% per annum. The note is convertible after 180 days into common shares of the Company at a conversion rate of 60% of the market
price, calculated as the lowest trade price in the 25 days previous to conversion.
Conversion of convertible debt
In the six months ended June 30, 2014, Asher
Enterprises converted 47,700 of convertible debt and $3,000 of accrued interest into 53,506,517 post reverse-split shares of common
stock, Magna Group, LLC converted $37,000 of convertible debt into 4,510,292 post reverse-split shares of common stock, Hanover
Holdings converted $94,500 of convertible debt into 106,789,630 post reverse-split shares of common stock, JMJ Financial converted
$71,750 into 104,563,704 post reverse-split shares of commons stock and IBC Funds LLC converted $61,085 of convertible debt and
$2,030 of accrued interest into 73,876,000 post reverse-split shares of common stock.
The following table summarizes the total outstanding
principle on convertible notes payable:
|
|
June 30,
2014
|
|
December 31,
2013
|
|
|
|
|
|
|
|
|
|
Convertible Notes Payable- Asher Enterprises, Inc.
|
|
$
|
37,500
|
|
|
$
|
47,700
|
|
Convertible Notes Payable- Magna Group, LLC
|
|
|
—
|
|
|
|
37,000
|
|
Convertible Notes payable - Hanover Holdings, LLC
|
|
|
—
|
|
|
|
33,404
|
|
Convertible Notes Payable - JMJ Financial, LLC
|
|
|
97,418
|
|
|
|
69,168
|
|
Convertible Notes Payable - IBC Funds LLC
|
|
|
—
|
|
|
|
61,086
|
|
Convertible Notes Payable - LG Capital Funding LLC
|
|
|
65,000
|
|
|
|
—
|
|
Convertible Notes Payable - Iconic Holdings
|
|
|
27,500
|
|
|
|
—
|
|
Convertible Notes Payable - Gel Properties LLC
|
|
|
25,000
|
|
|
|
—
|
|
Convertible Notes Payable - KBM Worldwide, Inc.
|
|
|
42,500
|
|
|
|
—
|
|
Convertible Notes Payable - Ceasar Capital Group, LLC
|
|
|
50,000
|
|
|
|
—
|
|
Convertible Notes Payable - WHC Capital, LLC
|
|
|
60,000
|
|
|
|
—
|
|
Convertible Notes Payable - ARRG Corp.
|
|
|
50,000
|
|
|
|
—
|
|
Total
|
|
$
|
454,918
|
|
|
$
|
248,358
|
|
In the six months ended June 30, 2014
and 2013, the Company recorded interest expense relating to the outstanding convertible notes payable in the amounts of $23,414
and $941.
Derivative liability
At June 30, 2014 and December 31, 2013, the
Company had $6,915,090 and $19,907,242 in derivative liability. We calculate the derivative liability using the Black Scholes Model
which factors in the Company’s stock price volatility as well as the convertible terms applicable to the outstanding convertible
notes.
NOTE
11
– NOTES PAYABLE
The total amount due on notes payable and
related interest and penalty is as follows:
|
|
June
30,
2014
|
|
December 31,
2013
|
|
|
|
|
|
Notes Payable
|
|
$
|
145,000
|
|
|
$
|
145,000
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
145,000
|
|
|
$
|
145,000
|
|
The Company has outstanding notes due to a
former director in the aggregate amount of $145,000. The notes are unsecured and accrue interest and penalty of 15% inasmuch as
they are past due. The former director elected not to participate with the holders of other promissory notes, including
our then executive officers, in the exchange of those notes for equity which occurred during January 2009. At June 30,
2014 and December 31, 2013 total accrued interest and penalty pertaining to the outstanding $145,000 in notes payable is $258,271
and $251,019.
NOTE
12
–
REVERSE STOCK SPLIT
On October 15, 2013, the Company executed a
Plan of Merger with Mind Solutions, Inc. whereby the holders of stock in VOIS, Inc. received one share of common stock, $.0.001
par value per share, in Mind Solutions, Inc. for every 2,000 shares of common stock in VOIS, Inc. (in effect, a 2,000 for 1 reverse
split). As a result, the current common shareholders of VOIS, Inc. will hold all of the issued and outstanding shares of common
stock in the surviving corporation Mind Solutions, Inc. The Company has adjusted the equity statement and equity portion of the
balance sheet to retroactively account for the reverse stock split as if it occurred at inception.
NOTE
13
–
S
T
OC
K
HO
L
DERS’
E
Q
UITY
On May 17, 2013 the Company’s
board voted to authorize an amendment to the Company’s articles of incorporation to increase its authorized shares of common
stock from 1,000,000,000 to 3,000,000,000. On August 23, 2013, the Company’s board authorized an amendment to the Company’s
articles of incorporation to increase its authorized shares of common stock from 3,000,000,000 to 5,000,000,000. The Company is
authorized to issue 10,000,000 shares of preferred stock.
On October 19, 2012, the Company entered into
an Agreement and Plan of Merger with Mind Solutions, Inc. The Company issued 98,000 post reverse-split shares of common stock for
all the outstanding stock of Mind Solutions, Inc. Following the Merger and recapitalization of the Company, there were 121,516
post reverse-split shares of the Company’s common stock outstanding, of which 98,000, approximately 81%, are held by the
former shareholders of MSI.
From October 19, 2012 to December
31, 2012 the Company issued 5,200 post reverse-split shares of common stock to consultants for services rendered. The Company valued
these shares at market on the date of issuance which resulted in an expense of $776,000. The Company also issued 250 share for
$10,000 cash and 3,500 shares to Mind Technologies, Inc. as consideration for a licensing agreement.
In the year ended December 31, 2012
the chief executive officer Kerry Driscoll contributed $61,000 cash to the Company. The Company recorded this contribution as additional
paid in capital.
In the year ended December 31, 2013,
the Company issued 35,894,503 post reverse-split shares of common stock. Of the 35,894,503 post reverse-split shares issued, 22,088,000
post reverse-split shares were to consultants for services, 15,000 (post reverse-split) shares were issued in an asset purchase
agreement, 10,625 (post reverse-split) shares were issued to a related party for the reduction of $51,000 in related party convertible
debt, and 13,777,673 post reverse-split shares were issued to non-related convertible note holders for the reduction of $469,346
in convertible debt. Of the 22,088,000 shares to consultants, 20,000,000 were issued to our chief executive officer pursuant to
a one year consulting agreement dated December 25, 2013. We recorded the portion of the contract not yet completed as prepaid expense.
The 22,088,000 shares issued for services rendered were valued at the closing price on the dates of their respective agreements
which resulted in the Company recording a consideration of $1,467,703. Of the other 2,088,000 shares for services, 238,000 were
to the Secretary of the Company for consulting services provided over the past 2 years. The other 1,850,000 were to unrelated third
party consultants for investor related services completed by December 31, 2013.
In the six months ended June 30,
2014, the Company issued 579,141,832 post reverse-split shares of common stock of which 92,895689 shares were issued for consulting
services, 386,246,143 shares were issued for the reduction of $314,050 in convertible notes payable debt and $8,740 of accrued
interest, and 100,000,000 shares were issued to the chief executive officer pursuant to a one year consulting contract. The 87,894,703
shares issued for services rendered were valued at the closing price on the dates of their respective agreements which resulted
in the Company recording a consulting expense of $354,738.
NOTE
14
– COMMITMENTS
We were a defendant in two actions, each
entitled
951 Yamato Acquisition Company, LLC versus VOIS Inc.,
both as filed in December 2009 the Circuit Court of the
15th Judicial Circuit in and for Palm Beach County, Florida under case numbers 502010CA040121XXXXMB and
502010CC19027XXXXBBRS, which are related to the lease agreements for our former office space. A combined summary
judgment was entered in April, 2010 against VOIS in the amount of $106,231. At June 30, 2014 and December 31, 2013 our
liabilities as reported in our financial statements contained elsewhere in this report
reflect the principal amount of the judgment together with $41,430 and $39,837 in accrued interest, respectively.
NOTE
15
- SUBSEQUENT EVENTS
Management has evaluated subsequent events
pursuant to the requirements of ASC Topic 855 and has determined that no other material subsequent events exist.
|
1.
|
From July 1, 2014 to the date of this filing, the Company issued 16,407,407 shares of common
stock for the conversion of $15,751 in principle convertible debt to JMJ Financial.
|
|
2.
|
On July 22, 2014, we executed a Securities Purchase Agreement with KBM
Worldwide, Inc., whereby we issued a convertible promissory note dated July 22, 2014, to KBM Worldwide, Inc. bearing interest on
the unpaid balance at the rate of eight percent, in the original principal amount of $27,500.
|
|
3.
|
On August 7, 2014, LG Capital, LLC converted $15,000 of principle convertible debt and $756 of
interest into 23,872,976 common shares of stock in the Company.
|
Item 2. Management’s Discussion and Analysis
of Financial Condition and Results of Operations.
THE FOLLOWING DISCUSSION SHOULD BE READ
TOGETHER WITH THE INFORMATION CONTAINED IN THE FINANCIAL STATEMENTS AND RELATED NOTES INCLUDED ELSEWHERE IN THIS REPORT ON FORM
10-Q.
The following discussion reflects
our plan of operation. This discussion should be read in conjunction with the financial statements which are included in this
Report. This discussion contains forward-looking statements, including statements regarding our expected financial position,
business and financing plans. These statements involve risks and uncertainties. Our actual results could differ materially
from the results described in or implied by these forward-looking statements as a result of various factors, including those
discussed below and elsewhere in this Report.
Unless the context otherwise suggests,
“we,” “our,” “us,” and similar terms, as well as references to “VOIS” and “Mind
Solutions,” all refer to Mind Solutions as of the date of this report.
Mind Solutions has successfully developed
software applications described below that run on Emotive EEG headsets. We have experienced minimal sales of our software applications.
It was decided by management that to better position Mind Solutions in the market, we should develop our own unique EEG headset
that would allow us to have more market strength. We have invested a significant amount of money and time into developing a prototype
EEG headset. We have completed a prototype which has been successfully tested on several Android devices and tablets.
On August 1, 2012, Dr. Gordon Chiu, our
chief scientific adviser, filed an International Patent Application No. PCT/US2012/049135. Generally, the proprietary technology
we are using consists of a “Portable Brain Activity Monitor.” On February 12, 2011, Mind Technology, Inc., one of our
predecessors, and Dr. Gordon Chiu, our chief science advisor, granted us a license to use the technology covered by his patent
application. Through the series of mergers described in this report, Mind Solutions acquired the license granted to Mind Technology,
Inc. For the period, that Mind Technology, Inc. (now Mind Solutions) exists and funds the development and progress of the covered
invention, Dr. Chiu agreed to license the use of the technology to Mind Solutions. If Mind Solutions fails to support the launch,
progress and/or funding of the production of the invention, then the license may be terminated. The agreement provided that Dr.
Chiu will receive a non-refundable, non-dilatable cash royalty payment equal to 20% of the gross proceeds received by Mind Solutions
from the use of the covered technology. In addition, Brent Fouch, the former president of Mind Technology, and one of our advisors,
will receive a non-refundable, non-dilatable cash royalty payment equal to 5% of the gross proceeds received by Mind Solutions
from the use of the covered technology. See “Business – Patents and Intellectual Property.”
We believe a minimum of $350,000 is still
needed to complete the EEG device, which will cover costs associated with the SDK (operating system), the design work to create
a sleek, consumer-friendly final product and updates on the hardware including Bluetooth wireless updates. We have announced our
desire to partner with a larger technology firm to invest in the completion of the EEG headset in return for a negotiated interest
in the product. If successful, we will not need to raise this capital to complete the project. If we are not successful in attracting
a financial partner to assist in the completion of the EEG headset, we plans to raise funds by means of an equity offering to raise
the necessary capital to complete the project.
Mind Solutions currently has a need of
approximately $20,000 per month to sustain operations until sales of the software and anticipated sales of the EEG headset increase.
Going Concern
As of June 30, 2014, the
Company had an accumulated deficit during development stage of $25,226,522 which included a net loss of $1,403,674 reported for
the six months ended June 30, 2014. Also, during the six months ended June 30, 2014 the Company used net cash of $351,172 for operating
activities. These factors raise substantial doubt about the Company’s ability to continue as a going concern.
While the Company is attempting to commence
operations and generate revenues, the Company’s cash position may not be significant enough to support the Company’s
daily operations. Management intends to raise additional funds by way of a public or private offering. Management believes that
the actions presently being taken to further implement its business plan and generate revenues provide the opportunity for the
Company to continue as a going concern. While the Company believes in the viability of its strategy to generate revenues and in
its ability to raise additional funds, there can be no assurances to that effect. The ability of the Company to continue as a going
concern is dependent upon the Company’s ability to further implement its business plan and generate revenues.
Three Months Ended June 30, 2014 Compared to Three Months
Ended June 30, 2013.
Revenues.
During the three months ended
June 30, 2014 and 2013 the Company recognized $18,889 and $0 of revenues. The $18,889 of service revenues recognized was from the
Company receiving stock in a costumer as payment for consulting services. The customer is a publicly traded company on the OTCQB.
We are aggressively looking for ways to leverage our technology to develop revenue streams.
General and Administrative Expenses.
Consulting Fees
. During the three
months ended June 30, 2014, consulting expense decreased to $220,292 as compared to $220,378 from the prior three months ended
June 30, 2013. The decrease was primarily the result of less stock being issued to consultants for services rendered to the Company.
Professional Fees
. During the
three months ended June 30, 2014, professional fees increased to $51,063 as compared to $30,317 from the prior three months ended
June 30, 2013. Professional fees increased primarily from the legal and accounting services needed to draft a Form S-1 registration
statement.
Selling, General and Administrative
Expense
. During the three months ended June 30, 2014, selling, general and administrative expenses increased to $45,553 as
compared to $8,960 from the prior three months ended June 30, 2013. The increase was due primarily to more travel, meals &
entertainment, and marketing expenses.
Interest Expense
. During the three
months ended June 30, 2014, interest expense increased to $16,533 as compared to $13,115 from the prior three months ended June
30, 2013. The increase was due to additional interest expense accrued pertaining to the outstanding notes payable.
Derivative
interest.
During the three months ended June 30, 2014, derivative interest expense increased to $1,070,233 as compared to $93,784
from the prior three months ended June 30, 2013. The increase was due to additional derivative liability calculated using the Black
Scholes Model regarding the newly issued convertible debentures.
Net Loss.
Our net loss from operations
increased to $1,403,674 for the three months ended June 30, 2014 and $366,554 for the three months ended June 30, 2013.
Six Months Ended June 30, 2014 Compared to Six Months Ended
June 30, 2013.
Revenues.
During the six months ended
June 30, 2014 and 2013 the Company recognized $50,000 and $0 of revenues. The $50,000 of service revenues recognized was from the
Company receiving stock in a costumer as payment for consulting services. The customer is a publically traded company on the OTCQB.
We are aggressively looking for ways to leverage our technology to develop revenue streams.
General and Administrative Expenses.
Consulting Fees
. During the six
months ended June 30, 2014, consulting expense decreased to $618,526 as compared to $1,105,492 from the prior six months ended
June 30, 2013. The decrease was primarily the result of less stock being issued to consultants for services rendered to the Company.
Professional Fees
. During the
six months ended June 30, 2014, professional fees increased to $92,425 as compared to $90,939 from the prior six months ended June
30, 2013. Professional fees increased primarily from the legal and accounting services needed to draft a Form S-1 registration
statement.
Selling, General and Administrative
Expense
. During the six months ended June 30, 2014, selling, general administrative expenses increased to $75,379 as compared
to $18,023 from the prior six months ended June 30, 2013. The increase was due primarily to more travel, meals & entertainment,
and marketing expenses.
Interest Expense
. During the six
months ended June 30, 2014, interest expense increased to $34,170 as compared to $22,900 from the prior six months ended June 30,
2013. The increase was due to additional interest expense accrued pertaining to the outstanding notes payable.
Derivative
interest.
During the six months ended June 30, 2014, derivative interest expense increased to $1,070,233 as compared to $134,787
from the prior six months ended June 30, 2013. The increase was due to additional derivative liability calculated using the Black
Scholes Model regarding the newly issued convertible debentures.
Forgiveness
of debt
. During the six months ended June 30, 2014, forgiveness of debt was $0 as compared to $111,610 for the six months ended
June 30, 2013. The decrease was due to the dissolution of an affiliated entity to the Company’s which was recorded as an
accounts payable to related parties
Net Loss.
Our net loss from operations
increased to $1,840,733 for the six months ended June 30, 2014 and $1,260,531 for the six months ended June 30, 2013.
Liquidity and Capital Resources
Liquidity is the ability of a company
to generate adequate amounts of cash to meet its needs for cash. The following table provides certain selected balance sheet comparisons
between June 30, 2014 and December 31, 2013:
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
December 31,
|
|
$
|
|
%
|
2014
|
2013
|
Change
|
Change
|
|
|
|
|
|
|
|
|
|
Working Capital
|
|
$ (7,922,134)
|
|
$ (20,639,541)
|
|
$ 12,717,407
|
|
61.6%
|
Cash
|
|
150,820
|
|
47,428
|
|
103,392
|
|
Over 100%
|
Total current assets
|
|
282,217
|
|
336,978
|
|
(54,761)
|
|
(16.3)%
|
Total assets
|
|
298,905
|
|
339,396
|
|
(40,491)
|
|
(11.9)%
|
Accounts payable and accrued liabilities
|
|
384,869
|
|
398,359
|
|
13,490
|
|
3.4%
|
Notes payable and accrued interest
|
|
599,918
|
|
670,918
|
|
71,000
|
|
10.6 %
|
Total current liabilities
|
|
8,204,351
|
|
20,976,519
|
|
(12,772,168)
|
|
(60.9) %
|
Total liabilities
|
|
8,204,351
|
|
20,976,519
|
|
(12,772,168)
|
|
(60.9)%
|
At June 30, 2014, our working capital
deficit decreased as compared to December 31, 2013, primarily as a result of a decrease in derivative liability of $12,992,152.
Operating activities
Net cash used for continuing operating
activities during the six months ended June 30, 2014 was $351,172 as compared to $173,611 for the six months ended June 30, 2013.
Non-cash items totaling approximately $1,489,561 contributing to the net cash used in continuing operating activities for the six
months ended June 30, 2014 include:
|
$354,738 representing the value of shares issued to consultants
and officers,
$1,070,233 increase in derivative liability,
$50,000 in service revenues from available-for-sale securities,
|
$1,166 of depreciation,
$13,424 increase in accounts payable and accrued expenses
|
Net cash used for continuing operating
activities for the six months ended June 30, 2013 was $173,611. Non-cash items totaling approximately $1,086,920 contributing to
the net cash used in continuing operating activities for the six months ended June 30, 2013 include:
$829,900 representing the value of shares issued for consulting
services,
$103,325 of derivative expense from outstanding convertible notes
payable
$480,000 in available for sale securities compensation
$111,610 in forgiveness of debt
|
$1,520 of depreciation,
$233,943 in accounts payable and accrued expenses
$17,728 in accounts payable to related parties
|
Investing activities
Net cash used in investing activities
was $2,936 and $0 for both six months ended June 30, 2014 and 2013.
Cash from Financing Activities
Net cash provided by financing activities
was $457,500 for the six months ended June 30, 2014. This included $457,500 from proceeds from convertible notes.
Net cash provided
by financing activities was $217,295 for the six months ended June 30, 2013. During the six months ended June 30, 2013, we generated
$202,000 from the issuance of convertible notes payable, $48,100 in notes to related parties, and paid $32,805 on notes to related
parties. See “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
– Recent Sales of Unregistered Securities.”
IBC Funds, LLC. Financing
On November 21,
2013, IBC Funds, LLC, a Nevada limited liability company, acquired by assignment, debts owed by Mind Solutions to four creditors
in the amount of $82,845.63. Likewise, on November 21, 2013, IBC Funds and Mind Solutions executed that certain Settlement Agreement
and Stipulation, whereby Mind Solutions agreed to settle the debt of $82,845.63, and to pay the debt by the issuance of shares
pursuant to Section 3(a)(10) of the Securities Act, which provides that the issuance of shares are exempt from the registration
requirement of Section 5 of the Securities Act. In relevant part, Section 3(a)(10) of the Securities Act provides an exemption
from the registration requirement for securities: (i) which are issued in exchange for a bona fide claim, (ii) where the terms
of the issuance and exchange are found by a court to be fair to those receiving shares, (iii) notice of the hearing is provided
to those to receive shares and they are afforded the opportunity to be heard, (iv) the issuer must advise the court prior to its
hearing that it intends to rely on the exemption provided in Section 3(a)(10) of the Securities Act, and (v) there cannot be any
impediments to the appearance of interested parties at the hearing.
On November 22,
2013, in a court proceeding styled
IBC Funds, LLC, a Nevada limited Liability Company, Plaintiff vs. Mind Solutions, Inc., a
Nevada corporation, Defendant, bearing Civil Action No. 2013 CA 008370 NC, in the Circuit Court in the Twelfth Judicial Circuit
in and for Sarasota County, Florida
, after due notice, the court entered an order approving the Settlement Agreement and Stipulation.
In satisfaction of the debt, we agreed to issue shares of our common stock in one or more tranches to IBC Funds in the manner contemplated
in the Settlement Agreement and Stipulation at a conversion price of $0.0045 per share. In accordance with the terms of the Settlement
Agreement and Stipulation, the court was advised of our intention to rely upon the exception to registration set forth in Section
3(a)(l0) of the Securities Act to support the issuance of the shares.
As set forth in
the order, the court found that the terms and conditions of the exchange were fair to Mind Solutions and IBC Funds within the meaning
of Section 3(a)(10) of the Securities Act, and that the exchange of the debt for our securities was not made under Title 11 of
the United States Code.
As permitted by the court order and
the Settlement Agreement and Stipulation, we issued 77,298,674 post reverse split shares of our common stock to IBC Funds, LLC.
The shares were issued free of any restrictions as permitted by Section 3(a)(10) of the Securities Act.
Hanover Holdings I, LLC Financing
In 2013, we executed various Securities
Purchase Agreements with Hanover Holdings I, LLC, whereby we issued convertible promissory notes to Hanover Holdings I, LLC bearing
interest on the unpaid balance at the rate of 10 percent, as follows:
|
·
|
Convertible promissory note dated February 4, 2013, in the original principal amount of $16,500. As a result of a conversion
of the note, we issued 159,659 shares of our common stock to Hanover Holdings I, LLC. As of the date hereof, the note is paid in
full.
|
|
·
|
Convertible promissory note dated March 7, 2013, in the original principal amount of $16,500. As a result of a conversion of
the note, we issued 304,379 shares of our common stock to Hanover Holdings I, LLC. As of the date hereof, the note is paid in full.
|
|
·
|
Convertible promissory note dated June 5, 2013, in the original principal amount of $41,500. As a result of a conversion of
the note, we issued 58,085,830 shares of our common stock to Hanover Holdings I, LLC. As of the date hereof, the note is paid in
full.
|
|
·
|
Convertible promissory note dated August 7, 2013, in the original principal amount of $26,500. As a result of a conversion
of the note, we issued 17,084,482 shares of our common stock to Hanover Holdings I, LLC. As of the date hereof, the note is paid
in full.
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Convertible promissory note dated November 23, 2013, in the original principal amount of $26,500. As of the date hereof, $26,500
remains unpaid on the note.
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Each of the notes was convertible into
shares of our common stock by dividing the Conversion Amount (as defined below) by the applicable Conversion Price then in effect
on the date specified in the notice of conversion. The term “Conversion Amount” means, with respect to any conversion
of a note, the sum of (1) the principal amount of the note to be converted in such conversion plus (2) at Hanover Holdings I, LLC's
option, accrued and unpaid interest, if any, on such principal amount at the interest rates provided in the note to the Conversion
Date; provided, however, that Mind Solutions shall have the right to pay any or all interest in cash plus (3) at our option, Default
Interest, if any, on the amounts referred to in the immediately preceding clauses (1) and/or (2) plus (4) at Hanover Holdings I,
LLC's option, any amounts owed to Hanover Holdings I, LLC under the note.
The conversion price (the “Conversion
Price”) shall be the Variable Conversion Price (subject to equitable adjustments for stock splits, stock dividends or rights
offerings by Mind Solutions relating to our securities or the securities of any subsidiary of Mind Solutions, combinations, recapitalization,
reclassifications, extraordinary distributions and similar events). The “Variable Conversion Price” shall mean 55%
multiplied by the Market Price (as defined in the note) but in no event shall the Conversion Price be less than $0.00004. “Market
Price” means the lowest Trading Price (as defined below) for our common stock during the ten (10) Trading Day period ending
on the latest complete Trading Day prior to the Conversion Date. “Trading Price” means, for any security as of any
date, the lowest trading price on the Over-the-Counter Bulletin Board, or applicable trading market (the “OTCBB”) as
reported by a reliable reporting service (“Reporting Service”) mutually acceptable to Mind Solutions and Hanover Holdings
I, LLC (
i.e.
, Bloomberg). If the Trading Price cannot be calculated for such security on such date in the manner provided
above, the Trading Price shall be the fair market value as mutually determined by Mind Solutions and the holders of a majority
in interest of the notes being converted for which the calculation of the Trading Price is required in order to determine the Conversion
Price of such notes.
“Trading Day” shall mean
any day on which our common stock is traded for any period on the OTCBB, or on the principal securities exchange or other securities
market on which our common stock is then being traded. If our common stock is chilled for deposit at DTC and/or becomes chilled
at any point while the note remains outstanding, an additional 8% discount will be attributed to the Conversion Price defined in
the note. If Mind Solutions is unable to issue any shares under this provision due to the fact that there is an insufficient number
of authorized and unissued shares available, Hanover Holdings I, LLC promises not to force Mind Solutions to issue these shares
or trigger an Event of Default, provided that Mind Solutions takes immediate steps required to get the appropriate level of approval
from shareholders or the board of directors, where applicable to raise the number of authorized shares to satisfy the Notice of
Conversion.
All shares of our common stock issued
to Hanover Holdings I, LLC were restricted in their transfer, pursuant to the Securities Act. In addition, all shares of our common
stock which were issued to Hanover Holdings I, LLC have been adjusted to take into account the one for 2,000 reverse split of the
shares of our common stock which occurred on October 31, 2013.
The note further provides
for anti-dilution adjustments in favor of Hanover Holdings I, LLC, in the event we offer additional shares of our common stock.
Copies of the Securities
Purchase Agreements and convertible notes in favor of Hanover Holdings I, LLC were filed as exhibits with the SEC.
Asher Enterprises, Inc. Financing
In 2012, 2013, and 2014, we executed
various Securities Purchase Agreements with Asher Enterprises, Inc., whereby we issued convertible promissory notes to Asher Enterprises,
Inc. bearing interest on the unpaid balance at the rate of eight percent, as follows:
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Convertible promissory note dated December 26, 2012, in the original principal amount of $32,500. As a result of a conversion
of the note, we issued 44,402 shares of our common stock to Asher Enterprises, Inc. As of the date hereof, the note is paid in
full.
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Convertible promissory note dated March 1, 2013, in the original principal amount of $32,500. As a result of a conversion of
the note, we issued 583,992 shares of our common stock to Asher Enterprises, Inc. As of the date hereof, the note is paid in full.
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Convertible promissory note dated April 18, 2013, in the original principal amount of $32,500. As a result of a conversion
of the note, we issued 10,836,925 shares of our common stock to Asher Enterprises, Inc. As of the date hereof, the note is paid
in full.
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Convertible promissory note dated November 7, 2013, in the original principal amount of $42,500.
As of the date hereof, the note is paid in full.
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Convertible promissory note dated February 6, 2014, in the original principal amount of $37,500. As of the date hereof, $37,500
remains unpaid.
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Each of the notes was convertible into
shares of our common stock by dividing the Conversion Amount (as defined below) by the applicable Conversion Price then in effect
on the date specified in the notice of conversion. The term “Conversion Amount” means, with respect to any conversion
of a note, the sum of (1) the principal amount of the note to be converted in such conversion plus (2) at Asher Enterprises, Inc.’s
option, accrued and unpaid interest, if any, on such principal amount at the interest rates provided in the note to the Conversion
Date; provided, however, that Mind Solutions shall have the right to pay any or all interest in cash plus (3) at our option, Default
Interest, if any, on the amounts referred to in the immediately preceding clauses (1) and/or (2) plus (4) at Asher Enterprises,
Inc.'s option, any amounts owed to Asher Enterprises, Inc. under the note.
The conversion price (the “Conversion
Price”) shall be the Variable Conversion Price (subject to equitable adjustments for stock splits, stock dividends or rights
offerings by Mind Solutions relating to our securities or the securities of any subsidiary of Mind Solutions, combinations, recapitalization,
reclassifications, extraordinary distributions and similar events). The “Variable Conversion Price” shall mean 55%
multiplied by the Market Price (as defined in the note) but in no event shall the Conversion Price be less than $0.00004. “Market
Price” means the lowest Trading Price (as defined below) for our common stock during the ten (10) Trading Day period ending
on the latest complete Trading Day prior to the Conversion Date. “Trading Price” means, for any security as of any
date, the lowest trading price on the Over-the-Counter Bulletin Board, or applicable trading market (the “OTCBB”) as
reported by a reliable reporting service (“Reporting Service”) mutually acceptable to Mind Solutions and Asher Enterprises,
Inc. (
i.e.
, Bloomberg). If the Trading Price cannot be calculated for such security on such date in the manner provided
above, the Trading Price shall be the fair market value as mutually determined by Mind Solutions and the holders of a majority
in interest of the notes being converted for which the calculation of the Trading Price is required in order to determine the Conversion
Price of such notes.
“Trading Day” shall mean
any day on which our common stock is traded for any period on the OTCBB, or on the principal securities exchange or other securities
market on which our common stock is then being traded. If our common stock is chilled for deposit at DTC and/or becomes chilled
at any point while the note remains outstanding, an additional 8% discount will be attributed to the Conversion Price defined in
the note. If Mind Solutions is unable to issue any shares under this provision due to the fact that there is an insufficient number
of authorized and unissued shares available, Asher Enterprises, Inc. promises not to force Mind Solutions to issue these shares
or trigger an Event of Default, provided that Mind Solutions takes immediate steps required to get the appropriate level of approval
from shareholders or the board of directors, where applicable to raise the number of authorized shares to satisfy the Notice of
Conversion.
All shares of our common stock issued
to Asher Enterprises, Inc. were restricted in their transfer, pursuant to the Securities Act. In addition, all shares of our common
stock which were issued to Asher Enterprises, Inc. have been adjusted to take into account the one for 2,000 reverse split of the
shares of our common stock which occurred on October 31, 2013.
The note further provides for anti-dilution
adjustments in favor of Asher Enterprises, Inc., in the event we offer additional shares of our common stock.
Copies of the Securities
Purchase Agreements and convertible notes in favor of Asher Enterprises, Inc. were filed as exhibits with the SEC.
JMJ Financial Financing
On May 15, 2013, we
issued to JMJ Financial our convertible promissory in the amount up to $250,000. As a result of partial conversions of the note,
we issued 75,022,674 shares of our common stock to JMJ Financial. On May 15, 2013, we executed a convertible promissory note in
favor of JMJ Financial in the amount up to $250,000 bearing interest on the unpaid balance at the rate of 12 percent. While the
note was in the original principal amount of $250,000, it was only
partially funded on May 15, 2013, over six months ago, in the amount of $30,000.00, plus pro-rated original issue discount and
pro-rated interest in the amount of $7,333.33, on August 14, 2013, over six months ago, in the amount of $20,000.00, on December
9, 2013, less than six months ago, in the amount of $25,000.00, on April 16, 2014, less than six months ago, in the amount of $40,000
and on June 23, 2014 in the amount of $60,000. After allowing for conversions, only $97,418 of the notes is convertible on the
date of this report.
The Conversion Price
of the note is 60% of the lowest trade price in the 25 trading days previous to the conversion (In the case that conversion shares
are not deliverable by DWAC an additional 10% discount will apply; and if the shares are ineligible for deposit into the DTC system
and only eligible for)(clearing deposit an additional 5% discount shall apply; in the case of both an additional cumulative 15%
discount shall apply). Unless otherwise agreed in writing by both parties, at no time will JMJ Financial convert any amount of
the note into common stock that would result in JMJ Financial owning more than 4.99% of the common stock outstanding of the registrant.
JMJ Financial has the
right, at any time after 180 days from the effective date of the note, at its election, to convert all or part of the outstanding
and unpaid principal sum and accrued interest (and any other fees) into shares of fully paid and non-assessable shares of common
stock of the registrant as per this conversion formula: Number of shares receivable upon conversion equals the dollar conversion
amount divided by the Conversion Price.
As of the date hereof,
$97,418 of the JMJ Financial note remains unpaid.
All shares of our common stock issued
to JMJ Financial were restricted in their transfer, pursuant to the Securities Act. In addition, all shares of our common stock
which were issued to JMJ Financial have been adjusted to take into account the one for 2,000 reverse split of the shares of our
common stock which occurred on October 31, 2013.
The note further provides for anti-dilution
adjustments in favor of JMJ Financial, in the event we offer additional shares of our common stock.
LG Capital Funding, LLC Financing
On February 4, 2014, we executed a
Securities Purchase Agreement with LG Capital Funding, LLC, whereby we issued convertible promissory notes in an aggregate amount
of $50,000 to LG Capital Funding, LLC bearing interest on the unpaid balance at the rate of 10 percent, as follows:
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Convertible promissory note dated February 4, 2014, in the original principal amount of $25,000. On February 25, 2014, we
issued a $25,000 convertible note with interest of 10 percent per annum, unsecured, and due February 25, 2015. The note is convertible
into shares of our common stock at any time from the date of issuance at a conversion rate of 55 percent of the market price, calculated
as the lowest trading price in the previous 10 days leading up to the date of conversion.
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Convertible promissory note dated February 4, 2014, in the original principal amount of $25,000. On February 25, 2014, we
issued a $25,000 convertible note with interest of 10 percent per annum, unsecured, and due February 25, 2015. The note is convertible
into shares of our common stock at any time from the date of issuance at a conversion rate of 55 percent of the market price, calculated
as the lowest trading price in the previous 10 days leading up to the date of conversion.
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On March 25, 2014, we executed a Securities
Purchase Agreement with LG Capital Funding, LLC, whereby we issued a convertible promissory note in the amount of $40,000 to LG
Capital Funding, LLC bearing interest on the unpaid balance at the rate of 10 percent. On March 25, 2014, we issued a $40,000 convertible
note unsecured and due February 25, 2015. The note is convertible into shares of our common stock at any time from the date of
issuance at a conversion rate of 55 percent of the market price, calculated as the lowest trading price in the previous 10 days
leading up to the date of conversion.
A copy of the Securities
Purchase Agreement and the convertible promissory note in favor of LG Capital Funding, LLC was filed as an exhibit with the SEC.
GEL Properties, LLC Financing
On February 4, 2014, we issued a convertible
promissory note to GEL Properties, LLC bearing interest on the unpaid balance at the rate of 10 percent, in the original principal
amount of $25,000. The note is unsecured, and due February 4, 2015, and is convertible into shares of our common stock at any time
from the date of issuance at a conversion rate of 55 percent of the market price, calculated as the lowest trading price in the
previous 10 days leading up to the date of conversion.
A copy of the convertible
promissory note in favor of GEL Properties, LLC was filed as an exhibit with the SEC.
Premier Venture Partners, LLC.
On March 11, 2013, Mind Solutions and
Premier Venture Partners, LLC, a California Limited Partnership executed that certain Equity Purchase Agreement with respect to
the resale of up to 200,000,000 shares of our common stock by Premier pursuant to a “put right.” The Equity Purchase
Agreement permits us to “put” up to $1,000,000 in shares of our common stock to Premier. Moreover, we also agreed to
register the resale by Premier of an additional 12,765,957 shares of our common stock issued as Initial Commitment Shares in connection
with the Equity Purchase Agreement. We will not receive any proceeds from the sale of the shares of our common stock offered by
Premier. However, we will receive proceeds from the sale of securities pursuant to our exercise of the put right described in the
Equity Purchase Agreement. We will bear all costs associated with the registration.
We have assumed that we will issue not
more than 187,234,043 shares pursuant to the exercise of our put right under the Equity Purchase Agreement, although the number
of shares that we will actually issue pursuant to that put right may be more or less than 187,234,043, depending on the trading
price of our common stock. We currently do not intend to exercise the put right in a manner which would result in our issuance
of more than 187,234,043 shares, but if we were to exercise the put right in that manner, we would be required to file a subsequent
registration statement with the SEC and that registration statement would have to be declared effective prior to the issuance of
any additional shares.
Notwithstanding anything to the contrary
in the Equity Purchase Agreement, in no event shall Premier be entitled to purchase that number of shares our common stock, which
when added to the sum of the number of shares of our common stock beneficially owned (as such term is defined under Section 13(d)
and Rule 13d-3 of the Exchange Act), by Premier, would exceed 4.99 percent of the number of shares of our common stock outstanding
on the a Closing Date under the Equity Purchase Agreement, as determined in accordance with Rule 13d-1(j) of the Exchange Act.
Subject to the terms and
conditions of the transaction documents, as described in the Equity Purchase Agreement, and from time to time during the Open Period,
Mind Solutions may, in its sole discretion, deliver a Put Notice to Premier which states the number of shares of our common stock
that Mind Solutions intends to sell to Premier on a Closing Date (the “Put”). The maximum number of shares of our common
stock that Mind Solutions shall be entitled to Put to Premier per any applicable Put Notice (the “Put Amount”) shall
not exceed the lesser of:
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200% of the average daily trading volume of our common stock on the five Trading Days prior to
the date the Put Notice is received by Premier; and
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120% of any previous Put Amount during the Open Period (or for the first Put Notice, 9,000,000
shares of our common stock).
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Notwithstanding the preceding
sentence, the Put Amount cannot exceed 4.99% of the outstanding shares of our common stock of Mind Solutions. During the Open Period,
Mind Solutions shall not be entitled to submit a Put Notice until after the previous Closing has been completed.
Premier has indicated that it will resell
those shares in the open market, resell our shares to other investors through negotiated transactions, or hold our shares in its
portfolio. The obligations of Premier under the Equity Purchase Agreement are not transferable.
Notwithstanding anything
to the contrary in Equity Purchase Agreement, Mind Solutions shall not be entitled to deliver a Put Notice and Premier shall not
be obligated to purchase any shares of our common stock at a Closing unless each of the following conditions are satisfied:
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A Registration Statement shall have been declared effective and shall remain effective and available
for the resale of all the Registrable Securities (as defined in the Registration Rights Agreement) at all times until the Closing
with respect to the subject Put Notice;
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At all times during the period beginning on the related Put Notice Date and ending on and including
the related Closing Date, the shares of our common stock (i) shall have been listed or quoted for trading on the Principal Market,
(ii) shall not have been suspended from trading thereon, and (iii) Mind Solutions shall not have been notified of any pending or
threatened proceeding or other action to suspend the trading of the shares of our common stock;
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Mind Solutions has complied with its obligations and is otherwise not in breach of or in default
under, Equity Purchase Agreement, the Registration Rights Agreement or any other agreement executed in connection herewith which
has not been cured prior to delivery of Premier’s Put Notice Date;
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No injunction shall have been issued and remain in force, or action commenced by a governmental
authority which has not been stayed or abandoned, prohibiting the purchase or the issuance of the Securities; and
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The issuance of the Securities will not violate any shareholder approval requirements of the
Principal Market.
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If any of the events described
above occurs during a Pricing Period, then Premier shall have no obligation to purchase the Put Amount of Common Stock set forth
in the applicable Put Notice.
The Purchase Price for
the Securities for each Put shall be the Put Amount multiplied by 75% of the lowest individual daily VWAP of the shares of our
common stock during the Pricing Period less $650.
The Equity Purchase Agreement will terminate
when any of the following events occur:
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When Premier has purchased an aggregate of $1,000,000 in the shares of the common stock of Mind
Solutions pursuant to this Agreement;
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On the date which is 36 months after March 11, 2014;
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If no Registration Statement has been declared effective by the SEC within ten months after March
11, 2014;
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If at any time after March 11, 2014, the Registration Statement is no longer in effect;
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The trading of the shares of our common stock is suspended by the SEC, the Principal Market or
FINRA for a period of two consecutive Trading Days during the Open Period; or,
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The shares of our common stock cease to be registered under the Exchange Act or listed or traded
on the Principal Market or the Registration Statement is no longer effective (except as permitted hereunder).. Immediately upon
the occurrence of one of the above-described events, Mind Solutions shall send written notice of such event to Premier.
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Any and all shares, or
penalties, if any, due under the Equity Purchase Agreement shall be immediately payable and due upon termination of the agreement.
As we draw down on the Equity Purchase Agreement,
shares of our common stock will be sold into the market by Premier. The sale of these additional shares could cause our stock price
to decline. In turn, if the stock price declines and we issue more puts, more shares will come into the market, which could cause
a further drop in the stock price. You should be aware that there is an inverse relationship between the market price of our common
stock and the number of shares to be issued under the Equity Purchase Agreement. If our stock price declines, we will be required
to issue a greater number of shares under the Equity Purchase Agreement. We have no obligation to utilize the full amount available
under the Equity Purchase Agreement.
As discussed above, in addition to the shares
to be issued pursuant to the Equity Purchase Agreement, we have issued to Premier $39,574 worth of our common stock, or 12,765,957
shares of our common stock as Initial Commitment Shares in connection with the Equity Purchase Agreement, which amount of shares
represents 3.0% of $1,000,000 divided by the sum equal to the average of the daily VWAP of our common stock on the three most recent
trading days immediately preceding March 11, 2014, multiplied by 75% and with such shares being duly authorized, validly issued,
fully paid and nonassessable. “VWAP” means the volume weighted average price (the aggregate sales price of all trades
of our common stock during a trading day divided by the total number of shares of our common stock traded during such trading day)
of the our common stock during a trading day.
We filed with the SEC
a current report on Form 8-K with respect to the Premier Equity Purchase Agreement on March 26, 2014.
On June 27, 2014, we filed a registration
statement on Form S-1 in connection with the Premier Equity Purchase Agreement. However, on July 17, 2014, pursuant to Rule 477
of Regulation C promulgated under the Securities Act, we withdrew our registration statement, inasmuch as we received notice from
the Securities and Exchange Commission on July 3, 2014, that the Commission’s preliminary review of the registration statement
indicated that we were not entitled to file the registration statement for our equity line financing, inasmuch as the shares of
our common stock are quoted for sale on the OTCPK operated by OTC Market Group, Inc. No securities were sold in connection with
the registration statement. As of the date of this report, we have not yet decided on how we are going to proceed with the Premier
Equity Purchase Agreement.
Ceasar Capital Group LLC Financing
On April 15, 2014, the Company entered into a securities purchase
agreement and convertible promissory note in the amount of $50,000 with Caesar Capital Group LLC with 8% interest per annum, due
April 15, 2015. The note holder has the right to convert the note into common shares of the Company after 6 months from the date
of the executed note at a discount to market of 45% based on the lowest trading price ten days prior to conversion.
A copy of the Securities
Purchase Agreement and the convertible promissory note in favor of Caesar Capital Group LLC was filed as an exhibit with the SEC.
AARG Corp. Fianncing
On April 30, 2014, the Company entered into a securities purchase
agreement and convertible promissory note in the amount of $50,000 with ARRG Corp. with 8% interest per annum, due April 30, 2015.
The note holder has the right to convert the note into common shares of the Company after 6 months from the date of the executed
note at a discount to market of 45% based on the lowest trading price ten days prior to conversion.
A copy of the Securities
Purchase Agreement and the convertible promissory note in favor of ARRG Corp. was filed as an exhibit with the SEC.
Cicero Consulting Group, LLC Financing
On May 12, 2014, we executed a Consulting
Agreement with Cicero Consulting Group, LLC and convertible promissory note in the amount of $200,000 whereby Cicero Consulting
Group, LLC will provide management consulting and business advisory services to Mind Solutions over a one year term. We have compensated
Cicero Consulting Group, LLC with a $200,000 convertible promissory note which is considered earned in full as of May 12, 2014.
The convertible note issued pursuant to the Consulting Agreement may be converted into shares of our common stock after six months
from the date of the executed note at a 10 percent discount to market based on the lowest trading price during the 10 trading days
prior to the conversion date.
A copy of the Consulting
Agreement and the convertible promissory note in favor of Cicero Consulting Group, LLC was filed as an exhibit with the SEC.
KBM Worldwide, Inc. Financing
On May 8, 2014, we executed a Securities
Purchase Agreement with KBM Worldwide, Inc., whereby we issued a convertible promissory note dated May 8, 2014, to KBM Worldwide,
Inc. bearing interest on the unpaid balance at the rate of eight percent, in the original principal amount of $42,500.
The note is convertible into shares
of our common stock by dividing the Conversion Amount (as defined below) by the applicable Conversion Price then in effect on the
date specified in the notice of conversion. The term “Conversion Amount” means, with respect to any conversion of a
note, the sum of (1) the principal amount of the note to be converted in such conversion plus (2) at KBM Worldwide, Inc.’s
option, accrued and unpaid interest, if any, on such principal amount at the interest rates provided in the note to the Conversion
Date; provided, however, that Mind Solutions shall have the right to pay any or all interest in cash plus (3) at our option, Default
Interest, if any, on the amounts referred to in the immediately preceding clauses (1) and/or (2) plus (4) at KBM Worldwide, Inc.’s
option, any amounts owed to KBM Worldwide, Inc. under the note.
The conversion price (the “Conversion
Price”) shall be the Variable Conversion Price (subject to equitable adjustments for stock splits, stock dividends or rights
offerings by Mind Solutions relating to our securities or the securities of any subsidiary of Mind Solutions, combinations, recapitalization,
reclassifications, extraordinary distributions and similar events). The “Variable Conversion Price” shall mean 51 percent
multiplied by the Market Price (as defined in the note). “Market Price" means the average of the lowest three Trading
Prices (as defined below) for our common stock during the 30 Trading Day period ending on the latest complete Trading Day prior
to the Conversion Date. “Trading Price” means, for any security as of any date, the lowest trading price on the Over-the-Counter
Bulletin Board, or applicable trading market (the “OTCBB”) as reported by a reliable reporting service (“Reporting
Service”) mutually acceptable to Mind Solutions and KBM Worldwide, Inc. (
i.e.
, Bloomberg). If the Trading Price cannot
be calculated for such security on such date in the manner provided above, the Trading Price shall be the fair market value as
mutually determined by Mind Solutions and the holders of a majority in interest of the note being converted for which the calculation
of the Trading Price is required in order to determine the Conversion Price of such note.
“Trading Day” shall mean
any day on which shares of our common stock are tradable for any period on the OTC, or on the principal securities exchange or
other securities market on which shares of our common stock are then being traded.
All shares of our common stock to
be issued to KBM Worldwide, Inc. are to be issued free of any restrictions pursuant to Rule 144 under the Securities Act.
The note further provides for anti-dilution
adjustments in favor of KBM Worldwide, Inc., in the event we offer additional shares of our common stock.
Copies of the Securities
Purchase Agreement and convertible note in favor of KBM Worldwide, Inc. were filed as exhibits with the SEC.
Additional KBM Worldwide, Inc. Financing
On July 22, 2014, we executed a Securities
Purchase Agreement with KBM Worldwide, Inc., whereby we issued a convertible promissory note dated July 22, 2014, to KBM Worldwide,
Inc. bearing interest on the unpaid balance at the rate of eight percent, in the original principal amount of $27,500.
The note is convertible into shares
of our common stock by dividing the Conversion Amount (as defined below) by the applicable Conversion Price then in effect on the
date specified in the notice of conversion. The term “Conversion Amount” means, with respect to any conversion of a
note, the sum of (1) the principal amount of the note to be converted in such conversion plus (2) at KBM Worldwide, Inc.’s
option, accrued and unpaid interest, if any, on such principal amount at the interest rates provided in the note to the Conversion
Date; provided, however, that Mind Solutions shall have the right to pay any or all interest in cash plus (3) at our option, Default
Interest, if any, on the amounts referred to in the immediately preceding clauses (1) and/or (2) plus (4) at KBM Worldwide, Inc.’s
option, any amounts owed to KBM Worldwide, Inc. under the note.
The conversion price (the “Conversion
Price”) shall be the Variable Conversion Price (subject to equitable adjustments for stock splits, stock dividends or rights
offerings by Mind Solutions relating to our securities or the securities of any subsidiary of Mind Solutions, combinations, recapitalization,
reclassifications, extraordinary distributions and similar events). The “Variable Conversion Price” shall mean 51 percent
multiplied by the Market Price (as defined in the note). “Market Price" means the average of the lowest three Trading
Prices (as defined below) for our common stock during the 30 Trading Day period ending on the latest complete Trading Day prior
to the Conversion Date. “Trading Price” means, for any security as of any date, the closing bid price on the Over-the-Counter
Bulletin Board, Pink Sheets electronic quotation system or applicable trading market (the “OTC”) as reported by a reliable
reporting service (“Reporting Service”) designated by the Holder (i.e. Bloomberg) or, if the OTC is not the principal
trading market for such security, the closing bid price of such security on the principal securities exchange or trading market
where such security is listed or traded or, if no closing bid price of such security is available in any of the foregoing manners,
the average of the closing bid prices of any market makers for such security that are listed in the “pink sheets.”
If the Trading Price cannot be calculated for such security on such date in the manner provided above, the Trading Price shall
be the fair market value as mutually determined by Mind Solutions and the holders of a majority in interest of the note being converted
for which the calculation of the Trading Price is required in order to determine the Conversion Price of such note.
“Trading Day” shall mean
any day on which shares of our common stock are tradable for any period on the OTC, or on the principal securities exchange or
other securities market on which shares of our common stock are then being traded.
All shares of our common stock to
be issued to KBM Worldwide, Inc. are to be issued free of any restrictions pursuant to Rule 144 under the Securities Act.
The note further provides for anti-dilution
adjustments in favor of KBM Worldwide, Inc., in the event we offer additional shares of our common stock.
As of the date of this report, $27,500
of the note remains unpaid. There have been no conversions of the note.
Copies of the Securities Purchase
Agreement and convertible note in favor of KBM Worldwide, Inc. were filed as exhibits with the SEC.
WHC Capital, LLC Financing
On May 30, 2014, we executed a Securities
Purchase Agreement and convertible promissory note in the amount of $60,000 with WHC Capital, LLC with 12 percent interest per
annum, due May 30, 2015. The note holder has the right to convert the note into shares of our common stock after six months from
the date of the executed note at a discount to market of 50 percent based on the lowest trading price 10 days prior to conversion.
All shares of our common stock to
be issued to WHC Capital, LLC upon conversion of the note will be free of any restrictions pursuant to Rule 144 under the Securities
Act.
As of the date of this
report, $60,000 of the WHC Capital, LLC note remains unpaid.
Copies of the Securities
Purchase Agreement and convertible note in favor of WHC Capital, LLC are filed as exhibits to this report.
Iconic Holdings, LLC Financing
On February 18, 2014, we executed
a Note Purchase Agreement with Iconic Holdings, LLC, whereby we issued a convertible promissory note dated February 18, 2014, to
Iconic Holdings, LLC bearing interest on the unpaid balance at the rate of 10 percent, in the original principal amount of $220,000.
The initial Purchase Price was $27,500
of consideration upon execution of the Note Purchase Agreement and all supporting documentation. The sum of $25,000 was delivered
to Mind Solutions, and $2,500 was retained by Iconic Holdings through an original issue discount for due diligence and legal bills
related to this note.
Iconic reserves the right to pay additional
consideration on the note at any time and in any amount it desires, at its sole discretion. Mind Solutions is not responsible to
repay any unfunded portion of the note. The note may not be prepaid in whole or in part except as otherwise provided therein.
Conversion Right
. Subject
to the terms of the note, Iconic shall have the right, at Iconic's option, at any time to convert the outstanding principal amount
and interest under the note in whole or in part.
Stock Certificates or DWAC
.
Mind Solutions will deliver to Iconic, or Iconic’s authorized designee, no later than two Trading Days after the Conversion
Date, a certificate or certificates (which certificate(s) shall be free of restrictive legends and trading restrictions) representing
the number of shares of common stock being acquired upon the conversion of the note. In lieu of delivering physical certificates
representing the shares of common stock issuable upon conversion of the note, provided Mind Solutions' transfer agent is participating
in the DTC Fast Automated Securities Transfer (“FAST”) program, upon request of Iconic, Mind Solutions shall use commercially
reasonable efforts to cause its transfer agent to electronically transmit such shares issuable upon conversion to Iconic (or its
designee), by crediting the account of Iconic’s (or such designee’s) prime broker with DTC through its Deposits and
Withdrawal at Custodian (DWAC) program (provided that the same time periods herein as for stock certificates shall apply).
Reservation and Issuance of Underlying
Securities
. Mind Solutions covenants that it will at all times reserve and keep available out of its authorized and
unissued common stock solely for the purpose of issuance upon conversion of the note (including repayments in stock), free from
preemptive rights or any other actual contingent purchase rights of persons other than Iconic, not less than three times (3x) the
number of shares of common stock as shall be issuable (taking into account the adjustments under the note but without regard to
any ownership limitations contained therein) upon the conversion of the note into common stock. These shares shall be reserved
in proportion with the Consideration actually received by Mind Solutions and the total reserve will be increased with future payments
of consideration by Iconic. Mind Solutions covenants that all shares of common stock that shall be issuable will, upon issue, be
duly authorized, validly issued, fully-paid, non-assessable and freely-tradable. Mind Solutions agrees that this is a material
term of the note.
Conversion Limitation
.
Iconic will not submit a conversion to Mind Solutions that would result in Iconic owning more than 9.99% of the total outstanding
shares of Mind Solutions.
As of the date of this report, $25,000
of the note remains unpaid. There have been no conversions of the note.
Copies of the Note Purchase
Agreement and convertible note in favor of Iconic Holdings, LLC were filed as exhibits with the SEC.
Seasonality
We do not anticipate that our business will
be affected by seasonal factors. The only expected impact would be increased retail sales of our software applications during the
Christmas season.
Impact of Inflation
General inflation in the economy has
driven the operating expenses of many businesses higher. We will continuously seek methods of reducing costs and streamlining operations
while maximizing efficiency through improved internal operating procedures and controls. While we are subject to inflation as described
above, our management believes that inflation currently does not have a material effect on our operating results. However, inflation
may become a factor in the future.
Critical Accounting Policies
Our financial statements and accompanying
notes are prepared in accordance with generally accepted accounting principles in the United States. Preparing financial statements
requires management to make estimates and assumptions that impact the reported amounts of assets, liabilities, revenue, and expenses.
These estimates and assumptions are affected by management’s application of accounting policies. Critical accounting policies
include revenue recognition and impairment of long-lived assets.
We recognize revenue in accordance with
Staff Accounting Bulletin No. 101, “Revenue Recognition in Financial Statements.” Sales are recorded when products
are shipped to customers. Provisions for discounts and rebates to customers, estimated returns and allowances and other adjustments
are provided for in the same period the related sales are recorded.
We evaluate our long-lived assets for
financial impairment on a regular basis in accordance with Statement of Financial Accounting Standards No. 144, “Accounting
for the Impairment or Disposal of Long-Lived Assets” which evaluates the recoverability of long-lived assets not held for
sale by measuring the carrying amount of the assets against the estimated discounted future cash flows associated with them. At
the time such evaluations indicate that the future discounted cash flows of certain long-lived assets are not sufficient to recover
the carrying value of such assets, the assets are adjusted to their fair values.