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EXCEL - IDEA: XBRL DOCUMENT - Max Sound CorpFinancial_Report.xls
EX-31.1 - CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT - Max Sound Corpf10q0611ex31i_maxsound.htm
EX-32.2 - CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT - Max Sound Corpf10q0611ex32ii_maxsound.htm
EX-31.2 - CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT - Max Sound Corpf10q0611ex31ii_maxsound.htm
EX-32.1 - CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT - Max Sound Corpf10q0611ex32i_maxsound.htm


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________
 
FORM 10-Q
_______________
 
(Mark One)
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended June 30, 2011
 
or
 
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______to______.
 
MAX SOUND CORPORATION
 (Exact name of registrant as specified in charter)
 
DELAWARE
 
000-51886
 
26-3534190
(State or other jurisdiction of
incorporation or organization)
 
(Commission File Number)
 
(I.R.S Employer Identification No.)

10685-B Hazelhurst Drive #6572
Houston, Texas 77043
 (Address of principal executive offices)
 _______________
 
210-401-7667
(Registrant’s telephone number, including area code)
_______________
 
Not applicable
 
(Former name, former address and former fiscal year, if changed since last report)
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes x No o
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes x No o
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer
¨
Accelerated filer
¨
Non-accelerated filer
¨
Smaller reporting company
x
(Do not check if a smaller reporting company)
     
       
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o No x
 
Indicate the number of shares outstanding of each of the issuer’s classes of common stock. As of August 15, 2011 there were 256,803,365 shares, par value $.0001, of Common Stock issued and outstanding.
 
 

 
 
MAX SOUND CORPORATION

FORM 10-Q
June 30, 2011
 
INDEX
 
 
PART I-- FINANCIAL INFORMATION
 
Item 1.
Financial Statements
1
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
31
Item 3
Quantitative and Qualitative Disclosures About Market Risk
37
Item 4.
Controls and Procedures
37
 
PART II-- OTHER INFORMATION
 
Item 1
Legal Proceedings
38
Item 1A
Risk Factors
38
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
38
Item 3.
Defaults Upon Senior Securities
39
Item 4.
Removed and Reserved
39
Item 5.
Other Information
39
Item 6.
Exhibits
39
 
SIGNATURES
 

 
i

 
 
PART I – FINANCIAL INFORMATION

Item 1. Financial Statements
 
MAX SOUND CORPORATION
(f/k/a SO ACT NETWORK, INC.)
(A DEVELOPMENT STAGE COMPANY)


CONTENTS

     
     
PAGE
1
CONDENSED BALANCE SHEETS AS OF JUNE 30, 2011 (UNAUDITED) AND AS OF DECEMBER 31, 2010 (AUDITED).
     
PAGE
2
CONDENSED STATEMENTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2011 AND 2010 AND FOR THE PERIOD DECEMBER 9, 2005 (INCEPTION) TO JUNE 30, 2011 (UNAUDITED).
     
PAGE
3
CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY FOR THE PERIOD FROM DECEMBER 9, 2005 (INCEPTION) TO JUNE 30, 2011 (UNAUDITED).
     
PAGE
4
CONDENSED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 2011 AND 2010 AND FOR THE PERIOD DECEMBER 9, 2005 (INCEPTION) TO JUNE 30, 2011 (UNAUDITED).
     
PAGES
5 - 31
NOTES TO FINANCIAL STATEMENTS (UNAUDITED).
  
 
 

 
 
Max Sound Corporation
f/k/a So Act Network, Inc.
(A Development Stage Company)
Condensed Balance Sheets
             
             
ASSETS
 
             
             
   
June 30, 2011
   
December 31, 2010
 
   
UNAUDITED
     
Current Assets
           
Cash
  $ 125,973     $ 297  
Prepaid expenses
    855       5,799  
     Total  Current Assets
    126,828       6,096  
                 
Property and equipment, net
    46,234       65,370  
                 
Other Assets
               
Security deposit
    4,010       3,710  
Intangible assets
    7,800,275       7,500,275  
     Total  Other Assets
    7,804,285       7,503,985  
                 
                 
Total  Assets
  $ 7,977,347     $ 7,575,451  
                 
                 
                 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
                 
Current Liabilities
               
Accounts payable
  $ 131,850     $ 159,527  
Accrued expenses
    242,379       258,152  
Derivative liability
    54,870       13,262  
Warrant liability
    162,746       -  
Convertible note payable - net of debt discount
    34,712       44,864  
Loan payable - related party
    135,630       239,480  
Total Current Liabilities
    762,187       715,285  
                 
Commitments and Contingencies
               
                 
Stockholders' Equity
               
Preferred stock, $0.0001 par value; 10,000,000 shares authorized,
         
No shares issued and outstanding
    -       -  
Common stock, $0.0001 par value; 400,000,000 shares authorized,
         
242,554,733 and 221,055,221 shares issued and outstanding, respectively
    24,257       22,106  
Deferred compensation
    (754,000 )     (1,803,285 )
Additional paid-in capital
    20,703,426       17,509,682  
Subscription receivable
    (397,000 )     -  
Deficit accumulated during the development stage
    (12,361,523 )     (8,868,337 )
Total Stockholders' Equity
    7,215,160       6,860,166  
                 
Total Liabilities and Stockholders' Equity
  $ 7,977,347     $ 7,575,451  
                 
 
See accompanying notes to condensed unaudited financial statements
 
 

 
 
Max Sound Corporation
 
f/k/a So Act Network, Inc.
 
(A Development Stage Company)
 
Statements of Operations
 
UNAUDITED
 
                               
                               
                               
                               
   
For the Three Months Ended,
   
For the Six Months Ended,
   
For the Period From December 9, 2005 (Inception) to
 
   
June 30, 2011
   
June 30, 2010
   
June 30, 2011
   
June 30, 2010
   
June 30, 2011
 
                               
                               
Revenue
  $ -     $ 2,358     $ -     $ 2,358     $ 10,826  
                                         
                                         
Operating Expenses
                                       
General and administrative
    32,243       29,694       69,135       68,546       436,914  
Endorsement fees
    411,900       485,804       819,273       915,057       4,188,277  
Consulting
    455,246       1,385,433       2,382,106       2,758,659       6,429,299  
Professional fees
    26,883       20,466       67,559       53,518       286,935  
Website development
    -       30,337       -       159,409       251,263  
Compensation
    54,000       54,000       108,000       108,000       583,549  
Total Operating Expenses
    980,272       2,005,734       3,446,073       4,063,189       12,176,237  
                                         
Loss from Operations
    (980,272 )     (2,003,376 )     (3,446,073 )     (4,060,831 )     (12,165,411 )
                                         
Other Income / (Expense)
                                       
Interest income
    25       -       25       -       25  
Gain on extinguishment of debt
    -       -       -       -       6,643  
Interest expense
    (2,647 )     (2,245 )     (5,682 )     (4,095 )     (16,743 )
Amortization of Debt Discount
    (3,139 )     -       (9,371 )     -       (19,644 )
Change in fair value of embedded derivative liability      17,040               (32,085 )     -       (29,938 )
Total Other Income / (Expense)
    11,279       (2,245 )     (47,113 )     (4,095 )     (59,657 )
                                         
Provision for Income  Taxes
    -       -       -       -       -  
                                         
Net Loss
  $ (968,993 )   $ (2,005,621 )   $ (3,493,186 )   $ (4,064,926 )   $ (12,225,068 )
                                         
Net Loss Per Share  - Basic and Diluted
  $ (0.00 )   $ (0.01 )   $ (0.02 )   $ (0.02 )        
                                         
Weighted average number of shares outstanding
                         
  during the year Basic and Diluted
    234,809,929       207,221,761       231,642,501       197,917,638          
                                         
 
See accompanying notes to condensed unaudited financial statements
 
 

 
 
Max Sound Corporation
 
f/k/a So Act Network, Inc.
 
(A Development Stage Company)
 
Condensed Statement of Changes in Stockholders' Equity
 
For the Period from December 9, 2005 (Inception) to June 30, 2011
 
                                                       
                                                       
   
Preferred stock
   
Common stock
   
Additional
                     
Total
 
                           
paid-in
   
Accumulated
   
Subscription
   
Deferred
   
Stockholder's
 
   
Shares
   
Amount
   
Shares
   
Amount
   
capital
   
Deficit
   
Receivable
   
Compensation
   
Equity
 
                                                       
                                                       
Balance, December 9, 2005 (Inception)
    -     $ -       -     $ -     $ -     $ -     $ -     $ -     $ -  
                                                                         
Stock issued on acceptance of incorporation expenses
    -       -       100,000       10       90       -       -       -       100  
                                                                         
Net loss for the period December 9, 2005 (Inception) to December 31, 2005
    -       -       -       -       -       (400 )     -       -       (400 )
                                                                         
Balance, December 31, 2005
    -       -       100,000       10       90       (400 )     -       -       (300 )
                                                                         
Net loss for the year ended December 31, 2006
    -       -       -       -       -       (1,450 )     -       -       (1,450 )
                                                                         
Balance, December 31, 2006
    -       -       100,000       10       90       (1,850 )     -       -       (1,750 )
                                                                         
Net loss for the year ended December 31, 2007
    -       -       -       -       -       (1,400 )     -               (1,400 )
                                                                         
Balance, December 31, 2007
    -       -       100,000       10       90       (3,250 )     -       -       (3,150 )
                                                                         
Common stock issued for services to founder ($0.001/sh)
    -       -       44,900,000       4,490       40,410       -       -       -       44,900  
                                                                         
Common stock issued for cash ($0.25/sh)
    -       -       473,000       47       118,203       -       (67,750 )     -       50,500  
                                                                         
Common stock issued for services ($0.25/sh)
    -       -       12,000       1       2,999       -       -       -       3,000  
                                                                         
Shares issued in connection with stock dividend
    -       -       136,455,000       13,646       122,809       (136,455 )     -       -       -  
                                                                         
In kind contribution of rent - related party
    -       -       -       -       2,913       -       -       -       2,913  
                                                                         
Accrued expenses payment made by a former shareholder
    -       -       -       -       4,400       -       -       -       4,400  
                                                                         
Net loss for the year ended December 31, 2008
    -       -       -       -       -       (117,115 )     -       -       (117,115 )
                                                                         
Balance, December 31, 2008
    -       -       181,940,000       18,194       291,824       (256,820 )     (67,750 )     -       (14,552 )
                                                                         
Common stock issued for cash ($0.25/sh)
    -       -       62,000       6       15,494       -       -       -       15,500  
                                                                         
Common stock issued for services ($0.25/sh)
    -       -       24,000       2       5,998       -       -       -       6,000  
                                                                         
Common stock issued for services ($0.35/sh)
    -       -       1,700,000       170       594,830       -       -       (499,333 )     95,667  
                                                                         
Common stock issued for services ($0.0625/sh)
    -       -       935,714       94       58,388       -       -       -       58,482  
                                                                         
Warrants issued for services
    -       -       -       -       823,077       -       -       -       823,077  
                                                                         
Common stock issued for services ($1.50/sh)
    -       -       30,000       3       44,997       -       -       (39,699 )     5,301  
                                                                         
Common stock issued for services ($1.77/sh)
    -       -       30,000       3       53,097       -       -       (53,100 )     -  
                                                                         
Common stock issued for services ($1.78/sh)
    -       -       100,000       10       177,990       -       -       (166,052 )     11,948  
                                                                         
Common stock issued for services ($1.80/sh)
    -       -       100,000       10       179,990       -       -       (168,904 )     11,096  
                                                                         
Common stock issued for services ($1.93/sh)
    -       -       2,830,000       283       5,461,617       -       -       (5,459,098 )     2,802  
                                                                         
Common stock issued for services ($1.94/sh)
    -       -       30,000       3       58,197       -       -       (58,200 )     -  
                                                                         
Common stock issued for services ($1.95/sh)
    -       -       920,000       92       1,793,908       -       -       (1,135,808 )     658,192  
                                                                         
Common stock issued for services ($2.00/sh)
    -       -       300,000       30       599,970       -       -       (506,423 )     93,577  
                                                                         
Return of common stock issued for services ($0.35/sh)
    -       -       (1,100,000 )     (110 )     (384,890 )     -       -       385,000       -  
                                                                         
Shares issued in connection with stock dividend
    -       -       258,000       26       (26 )     -       -       -       -  
                                                                         
Stock offering costs
    -       -       -       -       (850 )     -       -       -       (850 )
                                                                         
Collection of subscription receivable
    -       -       -       -       -       -       67,750       -       67,750  
                                                                         
In kind contribution of rent - related party
    -       -       -       -       12,600       -       -       -       12,600  
                                                                         
Deferred compensation realized
    -       -       -       -       -       -       -       114,333       114,333  
                                                                         
Net loss for the year ended December 31, 2009
    -       -       -       -       -       (2,298,552 )     -       -       (2,298,552 )
                                                                         
Balance, December 31, 2009
    -       -       188,159,714       18,816       9,786,211       (2,555,372 )     -       (7,587,284 )     (337,629 )
                                                                         
Common stock issued for cash ($0.25/sh)
    -       -       1,200,000       120       299,880       -       -       -       300,000  
                                                                         
Accrued salary conversion into common stock ($0.30/sh)
    -       -       945,507       95       283,557       -       -       -       283,652  
                                                                         
Common stock issued for services ($0.15/sh)
    -       -       250,000       25       37,475       -       -       -       37,500  
                                                                         
Common stock issued for services ($0.18/sh)
    -       -       100,000       10       17,990       -       -       -       18,000  
                                                                         
Common stock issued for services ($0.19/sh)
    -       -       100,000       10       18,990       -       -       -       19,000  
                                                                         
Common stock issued for services ($0.20/sh)
    -       -       210,000       21       41,979       -       -       -       42,000  
                                                                         
Common stock issued for services ($0.25/sh)
    -       -       140,000       14       34,986       -       -       -       35,000  
                                                                         
Common stock issued in exchange for technology rights ($0.25/sh)
    -       -       30,000,000       3,000       7,497,000       -       -       -       7,500,000  
                                                                         
Return of common stock issued for services ($0.35/sh)
    -       -       (150,000 )     (15 )     15       -       -       -       -  
                                                                         
Common stock issued for services ($1.24/Sh)
    -       -       1,000,000       100       1,239,900       -       -       (1,097,315 )     142,685  
                                                                         
Common stock issued for services ($1.70/sh)
    -       -       100,000       10       169,990       -       -       (152,534 )     17,466  
                                                                         
Cancellation of shares held in escrow ($1.93/sh)
    -       -       (1,000,000 )     (100 )     (1,929,900 )     -       -       487,802       (1,442,198 )
                                                                         
Warrants issued for services
    -       -       -       -       10,559       -       -       -       10,559  
                                                                         
Blue sky fees
    -       -       -       -       (400 )     -       -       -       (400 )
                                                                         
Stock and financing offering costs
    -       -       -       -       (8,000 )                             (8,000 )
                                                                         
In kind contribution of rent - related party
    -       -       -       -       9,450       -       -       -       9,450  
                                                                         
Deferred compensation realized
    -       -       -       -       -       -       -       6,546,046       6,546,046  
                                                                         
Net loss for the year ended December 31, 2010
    -       -       -       -       -       (6,312,965 )     -       -       (6,312,965 )
                                                                         
Balance, December 31, 2010
    -       -       221,055,221       22,106       17,509,682       (8,868,337 )     -       (1,803,285 )     6,860,166  
                                                                         
Common stock issued in exchange for assets ($0.10/sh)
    -       -       3,000,000       300       299,700       -       -       -       300,000  
                                                                         
Common stock issued for services ($0.07/sh)
    -       -       2,000,000       200       139,800       -       -       -       140,000  
                                                                         
Common stock issued for services ($0.08/sh)
    -       -       1,000,000       100       79,900       -       -       -       80,000  
                                                                         
Common stock issued for services ($0.10/sh)
    -       -       3,015,980       302       301,296       -       -       -       301,598  
                                                                         
Common stock issued for services ($0.11/sh)
    -       -       500,000       50       54,950       -       -       -       55,000  
                                                                         
Common stock issued for services ($0.25/sh)
    -       -       300,000       30       74,970       -       -       -       75,000  
                                                                         
Convertible debt conversion into common stock ($0.0295/sh)
    -       -       271,186       27       7,973       -       -       -       8,000  
                                                                         
Convertible debt conversion into common stock ($0.0315/sh)
    -       -       587,382       59       18,444       -       -       -       18,503  
                                                                         
Convertible debt conversion into common stock ($0.032/sh)
    -       -       109,375       11       3,489       -       -       -       3,500  
                                                                         
Convertible debt conversion into common stock ($0.0336/sh)
    -       -       357,143       36       11,964       -       -       -       12,000  
                                                                         
Convertible debt conversion into common stock ($0.0454/sh)
    -       -       220,264       22       9,978       -       -       -       10,000  
                                                                         
Accrued salary conversion into common stock ($0.11/sh)
    -       -       1,309,091       131       143,869       -       -       -       144,000  
                                                                         
Line of credit conversion into common stock ($0.11/sh)
    -       -       909,091       91       99,909       -       -       -       100,000  
                                                                         
Common stock issued for cash ($0.10/sh)
    -       -       7,920,000       792       791,208       -       (397,000 )     -       395,000  
                                                                         
Stock offering costs
    -       -       -       -       (43,500 )     -       -       -       (43,500 )
                                                                         
Amortization of stock options
    -       -       -       -       1,199,794       -       -       -       1,199,794  
                                                                         
Deferred compensation realized
    -       -       -       -       -       -       -       1,049,285       1,049,285  
                                                                         
Net loss for the six months ended June 30, 2011
    -       -       -       -       -       (3,493,186 )     -       -       (3,493,186 )
                                                                         
Balance, June 30, 2011 (UNAUDITED)
    -     $ -       242,554,733     $ 24,257     $ 20,703,426     $ (12,361,523 )   $ (397,000 )   $ (754,000 )   $ 7,215,160  
                                                                         
 
 
See accompanying notes to condensed unaudited financial statements
 

 
 
Max Sound Corporation
 
f/k/a So Act Network, Inc.
 
(A Development Stage Company)
 
Statements of Cash Flows
 
UNAUDITED
 
                   
                   
                   
                   
   
For the Six Months Ended
   
For the Period From
 
   
June 30, 2011
   
June 30, 2010
   
December 9, 2005 (Inception) to June 30, 2011
 
                   
Cash Flows From Operating Activities:
             
Net Loss
  $ (3,493,186 )   $ (4,064,926 )   $ (12,225,068 )
Adjustments to reconcile net loss to net cash used in operations
         
   Depreciation/Amortization
    19,136       18,826       70,573  
   In kind contribution of rent - related party
    -       6,300       24,963  
   Stock issued for services
    651,598       170,151       1,954,314  
   Warrants issued for services
    -       26,790       833,636  
   Amortization of stock options
    1,199,794       -       1,199,794  
   Bluesky Fees
    -       (2,500 )     (1,250 )
   Amortization of stock based compensation
    1,049,285       3,469,078       6,267,466  
   Security deposit
    (300 )     -       (4,010 )
   Amortization of debt discount
    9,371       -       19,644  
   Change in fair value of derivative liability
    32,085       -       29,938  
Changes in operating assets and liabilities:
                 
      (Increase)/Decrease in prepaid expenses
    4,944       6,243       (855 )
      Increase/(Decrease) accounts payable
    (27,677 )     107,588       131,850  
      Increase(Decrease) in warrant liabilities
    162,746       -       162,746  
      Increase/(Decrease) in accrued expenses
    130,230       120,301       672,034  
Net Cash Used In Operating Activities
    (261,974 )     (142,149 )     (864,225 )
                         
Cash Flows From Investing Activities:
                       
  Register of trademark
    -       -       (275 )
  Purchase of property equipment
    -       (1,500 )     (116,807 )
Net Cash Used In Investing Activities
    -       (1,500 )     (117,082 )
                         
Cash Flows From Financing Activities:
                       
  Proceeds from stockholder loans
    81,150       136,550       483,683  
  Repayment of stockholder loans
    (85,000 )     (21,700 )     (248,053 )
  Accrued expenses payment made by a former shareholder
    -       -       4,400  
  Proceeds from issuance of convertible note, net of offering costs
    37,500       -       84,500  
  Proceeds from issuance of stock, net of subscriptions receivable and net of offering costs
    354,000       25,000       715,000  
  Proceeds from collection of stock subscription receivable
    -       -       67,750  
Net Cash Provided by Financing Activities
    387,650       139,850       1,107,280  
                         
Net Increase / (Decrease) in Cash
    125,676       (3,799 )     125,973  
                         
Cash at Beginning of Period
    297       5,390       -  
                         
Cash at End of Period
  $ 125,973     $ 1,591     $ 125,973  
                         
Supplemental disclosure of cash flow information:
                 
                         
Cash paid for interest
  $ -     $ -     $ -  
Cash paid for taxes
  $ -     $ -     $ -  
                         
Supplemental disclosure of non-cash investing and financing activities:
         
Shares issued in connection with intellectual property
  $ 300,000     $ -     $ 7,800,000  
Shares issued in conversion of related party accrued compensation
  $ 144,000     $ -     $ 427,652  
Shares issued in conversion of related party line of credit
  $ 100,000     $ -     $ 100,000  
Shares issued in conversion of convertible debt and accrued interest
  $ 52,003     $ -     $ 52,003  
Shares issued in connection with stock dividend
  $ -     $ -     $ 136,713  
Stock sold for subscription
  $ 397,000     $ -     $ 464,750  
                         
 
See accompanying notes to condensed unaudited financial statements
 
 

 
 
NOTE 1       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION

(A)  Organization and Basis of Presentation

Max Sound Corporation (f/k/a So Act Network, Inc.) (the "Company") was incorporated in Delaware on December 9, 2005.  The Company is currently in the development stage, and on or around February 2011, the Company changed its business operations to focus primarily on developing and launching audio technology software.

Prior to February 2011, the Company's business operations were focused on creating search technologies within an online networking platform.

The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in The United States of America and the rules and regulations of the Securities and Exchange Commission for interim financial information. Accordingly, they do not include all the information necessary for a comprehensive presentation of financial position and results of operations.

It is management's opinion, however, that all material adjustments (consisting of normal and recurring adjustments) have been made which are necessary for a fair financial statements presentation.  The results for the interim period are not necessarily indicative of the results to be expected for the year.

Activities during the development stage include developing the online networking platform and raising capital.
 
Effective March 1, 2011, the Company filed with the State of Delaware a Certificate of Amendment of Certificate of Incorporation changing our name from So Act Network, Inc. to Max Sound Corporation.
 
(B) Use of Estimates

In preparing financial statements in conformity with generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reported period.  Actual results could differ from those estimates.

(C) Cash and Cash Equivalents

For purposes of the cash flow statements, the Company considers all highly liquid investments with original maturities of three months or less at the time of purchase to be cash equivalents.  As of June 30, 2011 and December 31, 2010, the Company had no cash equivalents.
 
 
5

 
 
(D) Property and Equipment

Property and equipment are stated at cost, less accumulated depreciation.  Expenditures for maintenance and repairs are charged to expense as incurred.  Depreciation is provided using the straight-line method over the estimated useful life of three to five years.

(E) Research and Development

The Company has adopted the provisions of FASB Accounting Standards Codification No. 350, Intangibles – Goodwill & Other.  Costs incurred in the planning stage of a website are expensed as research and development while costs incurred in the development stage are capitalized and amortized over the life of the asset, estimated to be three years.  Expenses subsequent to the launch have been expensed as website development expenses.

(F) Revenue Recognition

The Company recognized revenue on arrangements in accordance with FASB Codification Topic 605, “Revenue Recognition” (“ASC Topic 605”).  Under ASC Topic 605, revenue is recognized only when the price is fixed and determinable, persuasive evidence of an arrangement exists, the service is performed and collectability of the resulting receivable is reasonably assured.  We had revenue of $0 and $2,358 for the six months ended June 30, 2011 and 2010, respectively.

(G) Advertising Costs

Advertising costs are expensed as incurred and include the costs of public relations activities.  These costs are included in consulting and general and administrative expenses and totaled $14,120 and $0 for the six months ended June 30, 2011 and 2010, respectively.

(H) Identifiable Intangible Assets

As of June 30, 2011 and 2010, $7,800,275 and $7,500,275, respectively of costs related to registering a trademark and acquiring technology rights have been capitalized.  It has been determined that the trademark and technology rights have an indefinite useful life and are not subject to amortization.  However, the trademark and technology rights will be reviewed for impairment annually or more frequently if impairment indicators arise.
 
 
6

 
 
(I) Loss Per Share

In accordance with accounting guidance now codified as FASB ASC Topic 260, “Earnings per Share,”  Basic earnings per share (“EPS”) is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding during the period, excluding the effects of any potentially dilutive securities. Diluted EPS gives effect to all dilutive potential of shares of common stock outstanding during the period including stock options or warrants, using the treasury stock method (by using the average stock price for the period to determine the number of shares assumed to be purchased from the exercise of stock options or warrants), and convertible debt or convertible preferred stock, using the if-converted method. Diluted EPS excludes all dilutive potential of shares of common stock if their effect is anti-dilutive.   Because of the Company’s net losses, the effects of stock warrants and convertible debt would be anti-dilutive and accordingly, is excluded from the computation of earnings per share.  The number of such shares excluded from the computations of diluted loss per share totaled 1,760,000 and 650,000 for stock warrants, 12,000,000 and 0 for stock options, and 282,532 and 0 shares issuable upon the conversion of convertible debt, for the six months ended June 30, 2011 and 2010, respectively.

(J) Income Taxes

The Company accounts for income taxes under FASB Codification Topic 740-10-25 (“ASC 740-10-25”) Income Taxes.  Under ASC 740-10-25, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.  Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.  Under ASC 740-10-25, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

(K) Business Segments

The Company operates in one segment and therefore segment information is not presented.

(L) Recent Accounting Pronouncements

ASU No. 2011-02; Receivables.  In April, 2011, the FASB issued ASU No. 2011-02, to provide additional guidance to assist creditors in determining whether a restructuring of a receivable meets the criteria to be considered a troubled debt restructuring.  The amendments in this ASU are effective for the first interim or annual period beginning on or after June 15, 2011, and are to be applied retrospectively to the beginning of the annual period of adoption.  As a result of applying these amendments, an entity may identify receivables that are newly considered impaired. Early adoption is permitted.  The Company intends to adopt the methodologies prescribed by this ASU by the date required, and does not anticipate that the ASU will have a material effect on its financial position or results of operation. 
 
ASU No. 2011-03; Reconsideration of Effective Control for Repurchase Agreements.  In April, 2011, the FASB issued ASU No. 2011-03.  The amendments in this ASU remove from the assessment of effective control the criterion relating to the transferor’s ability to repurchase or redeem financial assets on substantially the agreed terms, even in the event of default by the transferee.  The amendments in this ASU also eliminate the requirement to demonstrate that the transferor possesses adequate collateral to fund substantially all the cost of purchasing replacement financial assets.
 
 
7

 
 
The guidance in this ASU is effective for the first interim or annual period beginning on or after December 15, 2011. The guidance should be applied prospectively to transactions or modifications of existing transactions that occur on or after the effective date. Early adoption is not permitted. The Company will adopt the methodologies prescribed by this ASU by the date required, and does not anticipate that the ASU will have a material effect on its financial position or results of operations.

ASU No. 2011-04; Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs.  In May 2011, the FASB issued ASU No. 2011-04. The amendments in this ASU generally represent clarifications of Topic ASC 820, but also include some instances where a particular principle or requirement for measuring fair value or disclosing information about fair value measurements has changed.  This ASU results in common principles and requirements for measuring fair value and for disclosing information about fair value measurements in accordance with U.S. GAAP and IFRSs.  The amendments in this ASU are to be applied prospectively.  For public entities, the amendments are effective during interim and annual periods beginning after December 15, 2011.  Early application by public entities is not permitted.

The Company will adopt the methodologies prescribed by this ASU by the date required, and does not anticipate that the ASU will have a material effect on its financial position or results of operations.

ASU No. 2011-05; Amendments to Topic 220, Comprehensive Income.  In June 2011, the FASB issued ASU No. 2011-05. Under the amendments in this ASU, an entity has the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements.  In both choices, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income.  This ASU eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders' equity.  The amendments in this ASU do not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income.
 
 
8

 
 
The amendments in this ASU should be applied retrospectively.  For public entities, the amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011.  Early adoption is permitted, because compliance with the amendments is already permitted.  The amendments do not require any transition disclosures.

The Company will adopt the methodologies prescribed by this ASU by the date required, and does not anticipate that the ASU will have a material effect on its financial position or results of operations.

(M) Fair Value of Financial Instruments

The carrying amounts on the Company’s financial instruments including accounts payable, accrued expenses, derivative liability, convertible note payable, and loan payable-related party, approximate fair value due to the relatively short period to maturity for these instruments.

(N) Stock-Based Compensation

In December 2004, the FASB issued FASB Accounting Standards Codification No. 718, Compensation – Stock Compensation.  Under FASB Accounting Standards Codification No. 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.  As such, compensation cost is measured on the date of grant at their fair value.  Such compensation amounts, if any, are amortized over the respective vesting periods of the option grant.  The Company applies this statement prospectively.
 
Equity instruments (“instruments”) issued to other than employees are recorded on the basis of the fair value of the instruments, as required by FASB Accounting Standards Codification No. 718.  FASB Accounting Standards Codification No. 505, Equity Based Payments to Non-Employees defines the measurement date and recognition period for such instruments.  In general, the measurement date is when either a (a) performance commitment, as defined, is reached or (b) the earlier of (i) the non-employee performance is complete or (ii) the instruments are vested. The measured value related to the instruments is recognized over a period based on the facts and circumstances of each particular grant as defined in the FASB Accounting Standards Codification.
 
 
9

 
 
(O) Reclassification

Certain amounts from prior periods have been reclassified to conform to the current period presentation.  These reclassifications had no impact on the Company's net loss or cash flows.

(P) Derivative Financial Instruments

Fair value accounting requires bifurcation of embedded derivative instruments such as conversion features in convertible debt or equity instruments, and measurement of their fair value for accounting purposes.  In determining the appropriate fair value, the Company uses the Black-Scholes option-pricing model.  In assessing the convertible debt instruments, management determines if the convertible debt host instrument is conventional convertible debt and further if there is a beneficial conversion feature requiring measurement.  If the instrument is not considered conventional convertible debt, the Company will continue its evaluation process of these instruments as derivative financial instruments.
 
Once determined, derivative liabilities are adjusted to reflect fair value at each reporting period end, with any increase or decrease in the fair value being recorded in results of operations as an adjustment to fair value of derivatives.  In addition, the fair value of freestanding derivative instruments such as warrants, are also valued using the Black-Scholes option-pricing model.

NOTE 2       GOING CONCERN

As reflected in the accompanying financial statements, the Company is in the development stage with minimal operations, has an accumulated deficit of $12,361,523 for the period from December 9, 2005 (inception) to June 30, 2011, and has negative cash flow from operations of $864,225 from inception.  This raises substantial doubt about its ability to continue as a going concern.  The ability of the Company to continue as a going concern is dependent on the Company’s ability to raise additional capital and implement its business plan.  The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

Management believes that actions presently being taken to obtain additional funding and implement its strategic plans provide the opportunity for the Company to continue as a going concern.

NOTE 3       NOTE PAYABLE – PRINCIPAL STOCKHOLDER

During the year ended December 31, 2008, the Company received $18,803 from the principal stockholder.  Pursuant to the terms of the loan, the loan is bearing an annual interest rate of 3.25% and due on demand.  In 2008, the Company repaid $15,000 in principal to the principal stockholder.  In 2009, the Company repaid $3,803 in principal to the principal stockholder.  As of December 31, 2010, the principal portion of this principal stockholder loan balance has been repaid (See Note 9).
 
 
10

 

 
On May 11, 2009, the Company received $9,500 from the principal stockholder.  During the year ended December 31, 2009, the Company repaid $1,500 in principal to the principal stockholder.  Pursuant to the terms of the loan, the loan is bearing an annual interest rate of 3.25% and is due on demand (See Note 9).

On May 22, 2009 the Company received $15,000 from the principal stockholder.  In January of 2010, the Company repaid $3,000 in principal to the principal stockholder under the terms of the loan.  In June of 2010, the Company repaid $3,000 in principal to the principal stockholder under the terms of the loan.  Pursuant to the terms of the loan, the loan is bearing an annual interest rate of 3.25% and is due on demand (See Note 9).

On May 26, 2009 the Company received $16,700 from the principal stockholder.  In May of 2010, the Company repaid $15,700 in principal to the principal stockholder under the term of this loan.  Pursuant to the terms of the loan, the loan is bearing an annual interest rate of 3.25% and is due on demand (See Note 9).

As of June 30, 2011, the Company owes $18,000 in principal and $1,925 of accrued interest to the principal stockholder related to these principal stockholder loans (See Note 9).

NOTE 4       LINE OF CREDIT – PRINCIPAL STOCKHOLDER

On May 28, 2009, the Company entered into a two year line of credit agreement with the principal stockholder in the amount of $100,000.  The line of credit carries an interest rate of 3.25%.  As of June 30, 2011, the principal stockholder has advanced the Company $100,000 and was repaid $100,000 under the terms of this line of credit agreement (See Note 9).

On November 10, 2009, the Company entered into a two year line of credit agreement with the principal stockholder in the amount of $100,000.  The line of credit carries an interest rate of 3.25%.  As of June 30, 2011, the principal stockholder has advanced $100,000 to the Company and was repaid $100,000 under the terms of this line of credit agreement (See Note 9).

On March 25, 2010, the Company entered into a two year line of credit agreement with the principal stockholder in the amount of $500,000.  The line of credit carries an interest rate of 3.25%.  On February 17, 2011, the principal stockholder converted $100,000 of the line of credit owed into 909,091 shares of common stock at $0.11 per share.  As of June 30, 2011, the principal stockholder has advanced $223,680 to the Company and was repaid $6,050 under the terms of this line of credit agreement. (See Note 7(G) and Note 9).

As of June 30, 2011, the Company owes $117,630 in principal and $10,816 of accrued interest to the principal stockholder related to these lines of credit (See Note 9).
 
 
11

 
 
NOTE 5       PROPERTY AND EQUIPMENT

At June 30, 2011, respectively, property and equipment is as follows:

   
June 30, 2011
   
December 31, 2010
 
             
Website Development
  $ 112,722     $ 112,722  
Software
    400       400  
Office Equipment  
    2,185       2,185  
Domain Name      1,500       1,500  
Less accumulated depreciation and amortization
    (70,573 )     (51,437 )
                 
    $ 46,234     $ 65,370  

Depreciation/amortization expense for the six months ended June 30, 2011 and 2010, was $19,136 and $18,826, respectively.

NOTE 6       CONVERTIBLE DEBT

On July 6, 2010, the Company entered into an agreement whereby the Company will issue up to $50,000 in a convertible note.  The note matured on March 30, 2011, and bears an interest rate of 8%.  Any unpaid amount as of the maturity date bears an interest rate of 22%.  The holder of the note has a right to convert all or any part of the outstanding an unpaid principal amount into shares of common stock.  The conversion prices equals the "Variable Conversion Price", which is 59% of the "Market Price", which is the average of the lowest six trading prices for the Common Stock during the ten trading day period prior to the conversion.  In July of 2010, the Company received $50,000 proceeds less the $3,000 finder’s fee pursuant to the terms of this convertible note.  During the six months ended June 30, 2011, the note holder converted $52,003 of the note payable and accrued interest into 1,545,350 shares of the company stock.  As of June 30, 2011, the Company owed $772 in accrued interest on this note.  (See Note 7 (G)).

The Company computed the fair value of the conversion feature at the commitment date, based on the following management assumptions:

Exercise price
Expected dividends
$0.1377
0%
Expected volatility
172.27%
Expected term: conversion feature
267 days
Risk free interest rate
0.32%
 
 
12

 
 
The fair value of the embedded conversion option on the commitment date was $15,409.  The Company recorded a related debt discount of $15,409, which was amortized over the life of the debt.  For the year ended December 31, 2010, the Company amortized $10,273 of debt discount.  For the six months ended June 30, 2011, the Company amortized $5,136 of debt discount.

At June 30, 2011 the Company remeasured the derivative liability and recorded a fair value of $949.  As a result of the remeasurement, the Company recorded a change in fair value associated with this derivative liability as a decrease in the expense totaling $20,051 for the six months ended June 30, 2011. The following management assumptions were considered:

Exercise price
$0.0393
Expected dividends
0%
Expected volatility
471.81%
Risk fee interest rate
0.30%
Expected life of warrant in days
0

On February 17, 2011, the Company entered into an agreement whereby the Company will issue up to $40,000 in a convertible note.  The note matures on November 17, 2011, and bears an interest rate of 8%.  The holder of the note has a right to convert all or any part of the outstanding an unpaid principal amount into shares of common stock.  The conversion prices equals the "Variable Conversion Price", which is 59% of the "Market Price", which is the average of the lowest six trading prices for the Common Stock during the ten trading day period prior to the conversion.  In February of 2011, the Company received $40,000 proceeds less the $2,500 finder’s fee pursuant to the terms of this convertible note.  As of June 30, 2011, the Company owed $40,000 in principal and $1,184 in accrued interest on this note.
 
The Company computed the fair value of the conversion feature at the commitment date, based on the following management assumptions:

Exercise price
Expected dividends
$0.0738
0%
Expected volatility
456.63%
Expected term: conversion feature
365 days
Risk free interest rate
0.27%

The fair value of the embedded conversion option on the commitment date was $9,523.  The Company recorded a related debt discount of $9,523, which is amortized over the life of the debt.  For the six months ended June 30, 2011, the Company amortized $4,235 of debt discount.
 
 
13

 
 
At June 30, 2011 the Company remeasured the derivative liability and recorded a fair value of $53,921.  As a result of the remeasurement, the Company recorded a change in fair value associated with this derivative liability as an expense totaling $3,011 for the six months ended June 30, 2011. The following management assumptions were considered:

Exercise price
$0.035
Expected dividends
0%
Expected volatility
514.06%
Risk fee interest rate
0.19%
Expected life of warrant in days
140

NOTE 7       STOCKHOLDERS’ EQUITY

(A) Common Stock Issued for Cash

On December 31, 2005, the Company issued 100,000 shares of common stock for cash of $100 in exchange for acceptance of the incorporation expenses for the Company ($0.001/share).   As a result of the forward split, the 100,000 shares were increased to 400,000 shares ($0.00025/share) (See Note 7(D)).

For the year ended December 31, 2008, the Company issued 473,000 shares of common stock for cash of $118,250 ($0.25/share), of which $67,750 was a subscription receivable.   During the month of January 2009, $67,750 of stock subscription receivable was collected.  As a result of the forward split, the 473,000 shares were increased to 1,892,000 shares ($0.0625/share). (See Note 7(D)).

On January 2, 2009, the Company entered into stock purchase agreements to issue 20,000 shares of common stock for cash of $5,000 ($0.25/share).   As a result of the forward split, the 20,000 shares were increased to 80,000 shares ($0.0625/share) (See Note 7(D)).

On January 3, 2009, the Company entered into stock purchase agreements to issue 2,000 shares of common stock for cash of $500 ($0.25/share).  As a result of the forward split, the 2,000 shares were increased to 8,000 shares ($0.0625/share) (See Note 7(D)).
 
On January 3, 2009, the Company entered into stock purchase agreements to issue 2,000 shares of common stock for cash of $500 ($0.25/share).  As a result of the forward split, the 2,000 shares were increased to 8,000 shares ($0.0625/share) (See Note 7(D)).

On January 11, 2009, the Company entered into stock purchase agreements to issue 32,000 shares of common stock for cash of $8,000 ($0.25/share).  As a result of the forward split, the 32,000 shares were increased to 128,000 shares ($0.0625/share) (See Note 7(D)).
 
 
14

 
 
On January 12, 2009, the Company entered into stock purchase agreements to issue 2,000 shares of common stock for cash of $500 ($0.25/share).   As a result of the forward split, the 2,000 shares were increased to 8,000 shares ($0.0625/share) (See Note 7(D)).

On January 15, 2009, the Company entered into stock purchase agreements to issue 4,000 shares of common stock for cash of $1,000 ($0.25/share).  As a result of the forward split, the 4,000 shares were increased to 16,000 shares ($0.0625/share) (See Note 7(D)).
 
In February of 2009, the Company paid direct offering costs of $850 related to the securities sold.

On May 27, 2010 the Company issued one unit; each unit consisted of 100,000 shares of common stock and 100,000 warrants to purchase common stock, for cash of $22,500 net of the $2,500 finder’s fee ($0.25/share).  Each warrant is exercisable for a three year period and has an exercise price of $0.50 per share (See Note 7(C)).

On July 23, 2010, the Company issued one unit; each unit consisted of 100,000 share of common stock and 100,000 warrants to purchase common stock, for cash of $25,000 ($0.25/share).  Each warrant is exercisable for a three year period and has an exercise price of $0.50 per share (See Note 7(C).

On August 5, 2010, the Company issued 10 units; each unit consisted of 100,000 shares of common stock and 100,000 warrants to purchase common stock, for cash of $250,000 ($0.25/share).  Each warrant is exercisable for a three year period and has an exercise price of $0.50 per share (See Note 7(C).

During the year ended December 31, 2010, the Company paid direct offering costs of $2,900 related to the securities sold.

On January 24, 2011, the Company issued 10,000 shares of common stock for cash of $1,000 ($0.10/share).

On February 23, 2011, the Company issued 300,000 shares of common stock for cash of $30,000 ($0.10/share).

On March 21, 2011, the Company issued 150,000 shares of common stock for cash of $15,000 ($0.10/share).

On May 2, 2011, the Company issued 2,000,000 shares of common stock for cash of $200,000 ($0.10/share).

During the month  of June 2011, the Company issued 5,460,000 shares of common stock for cash of $546,000 ($0.10/share) of which $397,000 was a subscription receivable.  The Company accrued $41,000 in finder’s fees and are obligated to issue 465,000 warrants within thirty (30) days of the stock issuance pursuant to the consulting agreements with certain individuals.  However, as of June 30, 2011, the Company has not issued any of these warrants (See Note 7(C)).
 
 
15

 
 
(B) Stock Issued for Services

On October 14, 2008, the Company issued 44,900,000 shares of common stock to its founder having a fair value of $44,900 ($0.001/share) in exchange for services provided.  As a result of the forward split, the 44,900,000 shares were increased to 179,600,000 shares and its purchase price was similarly adjusted to $0.00025((See Note 7(D) and Note 9).

On November 24, 2008, the Company issued 4,000 shares of common stock having a fair value of $1,000 ($0.25/share) in exchange for consulting services.  As a result of the forward split, the 4,000 shares were increased to 16,000 shares and its purchase price was similarly adjusted to $0.0625/share (See Note 7(D)).

On December 5, 2008, the Company issued 4,000 shares of common stock having a fair value of $1,000 ($0.25/share) in exchange for consulting services.  As a result of the forward split, the 4,000 shares were increased to 16,000 shares and its purchase price was similarly adjusted to $0.0625/share (See Note 7(D)).

On December 20, 2008, the Company issued 4,000 shares of common stock having a fair value of $1,000 ($0.25/share) in exchange for consulting services.  As a result of the forward split, the 4,000 shares were increased to 16,000 shares and its purchase price was similarly adjusted to $0.0625/share (See Note 7(D)).

On January 12, 2009, the Company issued 4,000 shares of common stock having a fair value of $1,000 ($0.25/share) in exchange for consulting services.  As a result of the forward split, the 4,000 shares were increased to 16,000 shares and its purchase price was similarly adjusted to $0.0625/share (See Note 7(D)).

On January 14, 2009, the Company issued 20,000 shares of common stock having a fair value of $5,000 ($0.25/share) in exchange for services related to a development services agreement entered on January 19, 2009.  As a result of the forward split, the 20,000 shares were increased to 80,000 shares and its purchase price was similarly adjusted to $0.0625/share (See Note 7(D) and Note 8(B)).

On August 25, 2009, the Company issued 50,000 shares of common stock having a fair value of $3,125 ($0.0625/share), based upon the fair value on the date of grant, in exchange for professional services.

On August 31, 2009, the Company issued 885,714 shares of common stock in exchange for services valued at $62,000 related to the development services agreement entered into on January 19, 2009.  Based on the most recent fair market value at that time, the shares were valued at $55,357 ($0.0625/share), resulting in the recognition of a gain on the extinguishment of debt of $6,643 (See Note 8(B)).
 
 
16

 
 
On September 18, 2009, the Company issued 500,000 shares of common stock as compensation pursuant to the terms of a consulting agreement, having a fair value of $175,000 ($0.35/share) based upon fair value on the date of grant.  On November 11, 2009, the Company cancelled the agreement and 300,000 shares of common stock were returned to the Company. As of December 31, 2009, $70,000 is recorded as consulting expense and $105,000 of deferred compensation was reclassified to $0 (See Note 8(B)).

On September 18, 2009, the Company issued 600,000 shares of common stock as compensation pursuant to the terms of a consulting agreement, having a fair value of $210,000 ($0.35/share) based upon fair value on the date of grant.  On November 18, 2009, the Company cancelled the agreement and 400,000 shares of common stock were returned to the Company.  As of December 31, 2009, $70,000 is recorded as consulting expense and $140,000 of deferred compensation was reclassified to $0.  During the year ended December 31, 2010, the consultant returned an additional 150,000 shares of common stock to the Company (See Note 8(B)).

On September 21, 2009, the Company issued 600,000 shares of common stock as compensation pursuant to the terms of a consulting agreement, having a fair value of $210,000 ($0.35/share) based upon fair value on the date of grant.  On December 18, 2009, the Company terminated the consulting agreement and 400,000 shares were returned to the Company.  As of December 31, 2009, $70,000 is recorded as consulting expense and $140,000 of deferred compensation was reclassified to $0 (See Note 8(B)).

On November 12, 2009, the Company issued 100,000 shares of common stock as compensation pursuant to the terms of the consulting agreement, having a fair value of $178,000 ($1.78/share) based upon fair value on the date of grant.  During 2009 and 2010, $11,948 and $89,000 was recorded as consulting expense, respectively.  For the six months ended June 30, 2011, $44,134 is recorded as consulting expense and $32,918 is recorded as deferred compensation (See Note 8(B)).

On November 12, 2009, the Company issued 200,000 shares of common stock as compensation pursuant to the terms of the consulting agreement, having a fair value of $400,000 ($2.00/share) based upon fair value on the date of grant.  During 2009 and 2010, $22,466 and $200,000 was recorded as consulting expense, respectively.  For the six months ended June 30, 2011, $99,178 is recorded as consulting expense and $78,356 is recorded as deferred compensation (See Note 8(B)).

On November 16, 2009, the Company issued 100,000 shares of common stock as compensation pursuant to the terms of the consulting agreements, having a fair value of $180,000 ($1.80/share) based upon fair value on the date of grant.  During 2009 and 2010, $11,096 and $90,000 was recorded as consulting expense, respectively.  For the six months ended June 30, 2011, $44,631 is recorded as consulting expense and $34,273 is recorded as deferred compensation (See Note 8(B)).
 
 
17

 
 
On November 18, 2009, the Company issued 30,000 shares of common stock as compensation pursuant to the terms of the consulting agreement, having a fair value of $45,000 ($1.50/share) based upon fair value on the date of grant.  During 2009, $5,301 was recorded as consulting expense.  For the year ended December 31, 2010, $39,699 was recorded as consulting expense. (See Note 8(B)).

On November 21, 2009, the Company issued 30,000 shares of common stock as compensation pursuant to the terms of the marketing agreement, having a fair value of $53,100 ($1.77/share) based upon fair value on the date of grant.  For the year ended December 31, 2010, $53,100 was recorded as consulting expense (See Note 8(B)).

On December 3, 2009, the Company issued 240,000 shares of common stock as compensation pursuant to the terms of the consulting agreement, having a fair value of $468,000 ($1.95/share) based upon fair value on the date of grant.  As of December 31, 2009, $468,000 was recorded as consulting expense (See Note 8(B)).

On December 3, 2009, the Company issued 35,000 shares of common stock as compensation pursuant to the terms of the commission agreement, having a fair value of $68,250 ($1.95/share) based upon fair value on the date of grant.  As of December 31, 2009, $68,250 was recorded as consulting expense (See Note 8(B)).

On December 3, 2009, the Company issued 35,000 shares of common stock as compensation pursuant to the terms of the consulting agreement, having a fair value of $68,250 ($1.95/share) based upon fair value on the date of grant.  As of December 31, 2009, $68,250 was recorded as consulting expense (Note 8(B)).

On December 3, 2009, the Company issued 10,000 shares of common stock as compensation pursuant to the terms of the commission agreement, having a fair value of $19,500 ($1.95/share) based upon fair value on the date of grant.  As of December 31, 2009, $19,500 is recorded as consulting expense (See Note 8(B)).

On December 15, 2009, the Company issued 100,000 shares of common stock as compensation pursuant to the terms of the consulting agreement, having a fair value of $200,000 ($2.00/share) based upon fair value on the date of grant.  During 2009, $71,111 was recorded as consulting expense.  For the year ended December 31, 2010, $128,889 was recorded as consulting expense (See Note 8(B)).

On December 27, 2009, the Company issued 10,000 shares of common stock as compensation pursuant to the terms of the consulting agreement, having a fair value of $19,400 ($1.94/share) based upon fair value on the date of grant.  For the year ended December 31, 2010, $19,400 was recorded as consulting expense (See Note 8(B)).
 
 
18

 
 
On December 27, 2009, the Company issued 10,000 shares of common stock as compensation pursuant to the terms of the consulting agreement, having a fair value of $19,400 ($1.94/share) based upon fair value on the date of grant.  For the year ended December 31, 2010, $19,400 was recorded as consulting expense (See Note 8(B)).

On December 27, 2009, the Company issued 10,000 shares of common stock as compensation pursuant to the terms of the consulting agreement, having a fair value of $19,400 ($1.94/share) based upon fair value on the date of grant.  For the year ended December 31, 2010, $19,400 was recorded as consulting expense (See Note 8(B)).

On December 30, 2009, the Company issued 1,500,000 shares of common stock as compensation pursuant to the terms of the advertising agreement, having a fair value of $2,895,000 ($1.93/share) based upon fair value on the date of grant.  In 2010, the Company cancelled a portion of the agreement and as a result, 1,000,000 shares of common stock were returned to the Company.  For the year ended December 31, 2010, $965,000 was recorded as consulting expense (See Note 8(B)).

On December 31, 2009, the Company issued 75,000 shares of common stock as compensation pursuant to the terms of the consulting agreement, having a fair value of $144,750 ($1.93/share) based upon fair value on the date of grant.  For the year ended December 31, 2010, $116,374 was recorded as consulting expense.  For the six months ended June 30, 2011, $28,376 is recorded as consulting expense (See Note 8(B)).

On December 31, 2009, the Company issued 75,000 shares of common stock as compensation pursuant to the terms of the consulting agreement, having a fair value of $144,750 ($1.93/share) based upon fair value on the date of grant.  For the year ended December 31, 2010, $116,374 was recorded as consulting expense.  For the six months ended June 30, 2011, $28,376 is recorded as consulting expense (See Note 8(B)).

On December 31, 2009, the Company issued 500,000 shares of common stock as compensation pursuant to the terms of the consulting agreement, having a fair value of $965,000 ($1.93/share) based upon fair value on the date of grant.  For the year ended December 31, 2010, $965,000 was recorded as consulting expense (See Note 8(B)).

During December of 2009, the Company issued 680,000 shares of common stock as compensation pursuant to the terms of the consulting agreements, having a fair value of $1,312,400 ($1.93/share) based upon fair value on the date of grant.  During 2009 and 2010, $2,802 and $709,116 was recorded as consulting expense, respectively.  For the six months ended June 30, 2011, $299,084 is recorded as consulting expense and $301,398 is recorded as deferred compensation (See Note 8(B)).

During December of 2009, the Company issued 600,000 shares of common stock as compensation pursuant to the terms of the consulting agreements, having a fair value of $1,170,000 ($1.95/share) based upon fair value on the date of grant.  During 2009 and 2010, $34,192 and $585,000 was recorded as consulting expense, respectively.  For the six months ended June 30, 2011, $290,095 is recorded as consulting expense and $260,713 is recorded as deferred compensation (See Note 8(B)).
 
 
19

 
 
On January 15, 2010, the Company issued 100,000 shares of common stock as compensation pursuant to the terms of the consulting agreement, having a fair value of $170,000 ($1.70/share) based upon fair value on the date of grant.  For the year ended December 31, 2010, $81,507 was recorded as consulting expense.  For the six months ended June 30, 2011, $42,151 is recorded as consulting expense and $46,342 is recorded as deferred compensation (See Note 8(B)).

On February 17, 2010, the Company entered into a twelve month consulting agreement with an unrelated third party effective February 17, 2010.  In exchange for the services provided, the Company issued 1,000,000 shares of common stock having a fair value of $1,240,000 ($1.24/share) based upon fair value on the date of grant.  For the year ended December 31, 2010, $1,066,740 was recorded as consulting expense.  For the six months ended June 30, 2011, $173,260 is recorded as consulting expense (See Note 8(B)).

On June 1, 2010, the Company entered into a twelve month consulting agreement for consulting and business services.  As part of the agreement, the Company issued 40,000 shares as a nonrefundable retainer fee having a value of $10,000 ($0.25/share) based upon fair value on the date of the agreement.  (See Note 8(B)).

On July 23, 2010, the Company issued 10,000 shares of common stock pursuant to a consulting agreement for consulting services having a fair value of $2,000 ($0.20/share) based upon fair value on the grant date (See Note 8(B)).

On August 1, 2010, the Company issued 200,000 shares of common stock pursuant to a consulting agreement for consulting services having a fair value of $40,000 ($0.20/share) based upon fair value on the grant date (See Note 8(B)).

On September 1, 2010, the Company issued 100,000 shares of common stock pursuant to a consulting agreement for consulting services having a fair value of $19,000 ($0.19/share) based upon fair value on the grant date (See Note 8(B)).

On October 1, 2010, the Company issued 100,000 shares of common stock pursuant to a consulting agreement for consulting services having a fair value of $18,000 ($0.18/share) based upon fair value on the grant date (See Note 8(B)).

On November 1, 2010, the Company issued 100,000 shares of common stock pursuant to a consulting agreement for consulting services having a fair value of $25,000 ($0.25/share) based upon fair value on the grant date (See Note 8(B)).
 
 
20

 
 
On December 14, 2010, the Company issued 250,000 shares of common stock pursuant to a consulting agreement for consulting services having a fair value of $37,500 ($0.15/share) based upon fair value on the grant date (See Note 8(B)).

On January 17, 2011, the Company issued 3,000,000 shares of common stock to its' new CEO pursuant to an employment agreement having a fair value of $300,000 ($0.10/share) based upon fair value on the grant date.  (See Note 8(A)).

On February 17, 2011, the Company issued 500,000 shares of common stock pursuant to a consulting agreement for consulting services having a fair value of $55,000 ($0.11/share) based upon fair value on the grant date (See Note 8(B)).

On March 3, 2011, the Company issued 1,000,000 shares of common stock pursuant to a consulting agreement for consulting services having a fair value of $80,000 ($0.08/share) based upon fair value on the grant date (See Note 8(B)).

On May 17, 2011, the Company issued 2,000,000 shares of common stock pursuant to an employment agreement having a fair value of $140,000 ($0.07/share) based upon fair value on the grant date.  (See Note 8(A)).

During June 2011, the Company issued 300,000 shares of common stock pursuant to  consulting agreements for consulting services having a fair value of $75,000 ($0.25/share) based upon fair value on the grant date (See Note 8(B)).

On June 15, 2011, the Company issued 15,980 shares of common stock pursuant to a consulting agreement for consulting services having a fair value of $1,598 ($0.10/share) based upon the terms of the consulting agreement (See Note 8(B)).

(C) Common Stock Warrants

On December 30, 2009, the Company issued 500,000 warrants under a consulting agreement. The Company recognized an expense of $823,077 for the year ended December 31, 2009.  The Company recorded the fair value of the warrants  based on the fair value of each warrant grant estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions used for grants in 2009, dividend yield of zero, expected volatility of 112.80%; risk-free interest rates of 1.65%, expected life of three years. The warrants vested immediately.   The warrants expire in three years from the date of issuance and have an exercise price of $0.52 per share.

On May 27, 2010, the Company issued 10,000 warrants under a consulting agreement. The Company recognized an expense of $1,782 for the year ended December 31, 2010.  The Company recorded the fair value of the warrants  based on the fair value of each warrant grant estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions used for grants in 2010, dividend yield of zero, expected volatility of 152.80%; risk-free interest rates of 1.35%, expected life of three years. The warrants vested immediately.   The warrants expire in three years from the date of issuance and have an exercise price of $0.50 per share (See Note 8(B)).
 
 
21

 
 
On June 1, 2010, the Company issued 40,000 warrants under a consulting agreement. The Company recognized an expense of $7,184 for the year ended December 31, 2010.  The Company recorded the fair value of the warrants  based on the fair value of each warrant grant estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions used for grants in 2010, dividend yield of zero, expected volatility of 145.70%; risk-free interest rates of 1.26%, expected life of three years.  The warrants vested immediately.  The warrants expire in three years from the date of issuance and have an exercise price of $0.50 per share (See Note 8(B)).

On July 23, 2010, the Company issued 10,000 warrants under a consulting agreement. The Company recognized an expense of $1,593 for the year ended December 31, 2010.  The Company recorded the fair value of the warrants  based on the fair value of each warrant grant estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions used for grants in 2010, dividend yield of zero, expected volatility of 172.90%; risk-free interest rates of 0.94%, expected life of three years. The warrants vested immediately.   The warrants expire in three years from the date of issuance and have an exercise price of $0.50 per share (See Note 8(B)).

The following tables summarize all warrant grants as of June 30, 2011 and 2010, and the related changes during these periods are presented below:
 
   
Number of Options
   
Weighted Average Exercise Price
 
Stock Warrants
           
Balance at December 31, 2010
    1,760,000     $ 0.51  
Granted
    -     $    
Exercised
    -          
Forfeited
    -          
Balance at June 30, 2011
    1,760,000     $ 0.51  
Options Exercisable at June 30, 2011
    1,760,000     $ 0.51  
Weighted Average Fair Value of Options Granted
          $ 0.51  
 
 
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Warrants Outstanding
   
Warrants Exercisable
 
Range of Exercise Price
   
Number
Outstanding at
June 30, 2011
   
Weighted Average Remaining Contractual Life
   
Weighted Average Exercise Price
   
Number
Exercisable at
June 30, 2011
   
Weighted Average Exercise Price
 
$
0.52
     
500,000
     
1.50
   
$
0.52
     
500,000
   
$
0.52
 
$
0.50
     
1,260,000
     
1.99
   
$
0.50
     
1,260,000
   
$
0.50
 

In connection with the warrants issued for cash and services, the Company has an aggregate of 1,760,000 and 650,000 warrants outstanding as June 30, 2011 and 2010, respectively.  As of June 30, 2011, the Company has reserved 1,760,000 shares of common stock for the future exercise of the warrants.

The Company has recorded a warrant liability of $162,746 related to the 465,000 warrants the Company is obligated to issue in connection with the share issued during the month of June 2011, however the warrants have not been granted as of June 30, 2011 (See Note 7(A)).

(D) Stock Split Effected in the Form of a Stock Dividend

On January 16, 2009, the Company's Board of Directors declared a four-for-one stock split to be effected in the form of a stock dividend.  The stock split was distributed on January 16, 2009 to shareholders of record.  A total of 136,713,000 shares of common stock were issued.  All basic and diluted loss per share and average shares outstanding information has been adjusted to reflect the aforementioned stock dividend.

(E) Amendment to Articles of Incorporation

On January 27, 2009, the Company amended its Articles of Incorporation to provide for an increase in its authorized share capital. The authorized capital stock increased to 250,000,000 common shares at a par value of $0.001 per share, and 10,000,000 preferred shares at a par value of $0.001 with class and series designations, voting rights, and relative rights and preferences to be determined by the Board of Directors of the Company from time to time.

On June 2, 2010, the Company amended its Articles of Incorporation to provide for an increase in its authorized share capital. The authorized capital stock increased to 295,000,000 common shares at a par value of $0.001 per share.

On September 20, 2010, the Company amended its Articles of Incorporation to provide for an increase in its authorized share capital and a change in the par value per share. The authorized capital stock increased to 400,000,000 common shares at a par value of $0.0001 per share.

Effective March 1, 2011, the Company filed with the State of Delaware a Certificate of Amendment of Certificate of Incorporation changing our name from So Act Network, Inc. to Max Sound Corporation.
 
 
23

 
 
(F) In Kind Contribution

During the fourth quarter of 2008, a former stockholder of the Company paid $4,400 of operating expenses on behalf of the Company.

During the fourth quarter of 2008, the principal stockholder contributed office space with a fair market value of $2,913 (See Note 9).

For the year ended December 31, 2009, the principal stockholder contributed office space with a fair market value of $12,600 (See Note 9).

For the year ended December 31, 2010, the principal stockholder contributed office space with a fair value of $9,450 (See Note 9).

(G) Share Conversion

On June 2, 2010, a principal stockholder converted $283,652 of accrued compensation into 945,507 shares of common stock at $0.30 per share (See Note 9).

On February 17, 2011, a principal stockholder converted $144,000 of accrued compensation into 1,309,091 shares of common stock at $0.11 per share (See Note 9).

On February 17, 2011, a principal stockholder converted $100,000 of a line of credit owed into 909,091 shares of common stock at $.011 per share (See Note 4 and Note 9).

On January 18, 2011, the Company entered into a conversion agreement executed by a note holder for 109,375 shares based on a conversion price of $0.032 per share (See Note 6).

On February 9, 2011, the Company entered into a conversion agreement executed by a note holder for 271,186 shares based on a conversion price of $0.0295 per share (See Note 6).

On February 15, 2011, the Company entered into a conversion agreement executed by a note holder for 357,143 shares based on a conversion price of $0.0336 per share (See Note 6).

On February 23, 2011, the Company entered into a conversion agreement executed by a note holder for 220,264 shares based on a conversion price of $0.0454 per share (See Note 6).

On April 11, 2011, the Company entered into a conversion agreement executed by a note holder for 587,382 shares based on a conversion price of $0.0315 per share (See Note 6).

 
24

 

(H) Share Exchange

On May 11, 2010, the Company acquired the rights to an audio technology known as Max Audio Technology (Max) through a share exchange, whereby the Company issued 30,000,000 shares of common stock to two individuals in exchange for their rights in Max having a value of $7,500,000 based upon recent market value ($0.25/share) (See Note 8(B)).

On January 17, 2011, the Company acquired the rights to software technology known as Blog Software, Social Media Vault, Social Media Bar and Trending Topix (BSST) through a share exchange, whereby the Company issued 3,000,000 shares of common stock to two individuals in exchange for their rights to BSST having a value of $300,000 based upon recent market value ($0.10/share).

(I) Stock Options

On January 17, 2011, the Company issued 12,000,000 options to buy common shares of the Company's stock at $0.12 per share, good for three years, to its' new CEO pursuant to an employment agreement.  The Company recognized an expense of $1,199,794 for the six months ended June 30, 2011.  The Company recorded the fair value of the options  based on the fair value of each option grant estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions used for grants in 2010; dividend yield of zero, expected volatility of 436.04%, risk-free interest rates of 1.00%, expected life of three years.  The options vest immediately (See Note 8 (A)).

NOTE 8       COMMITMENTS
 
(A)  Employment Agreement

On October 13, 2008, the Company executed an employment agreement with its President and CEO.  The term of the agreement is for ten years.  As compensation for services, the President will receive a monthly compensation of $18,000 beginning October 13, 2008.  In addition, to the base salary, the employee is entitled to receive a 10% commission of all sales of the Corporation.  The agreement also calls for the employee to receive health benefits.  For the six months ended June 30, 2011, the Company has recorded $108,000 in compensation expense (See Note 9).

On January 17, 2011, the Company executed an employment agreement with an executive to be CEO for five years.  As compensation for services, the executive will receive a monthly compensation of $8,000 beginning after the completion of at least one million dollars of new funding to the Corporation or can be paid as commissions from sales brought to the Company, whichever comes first. In addition to the base salary, the employee is entitled to receive a 20% commission of all sales the executive is directly responsible for bringing to the Company.  The agreement also calls for the executive to receive, upon execution of the agreement, three million shares of Rule 144 common stock and twelve million options, which are good for three years, to buy shares of Rule 144 common stock at $0.12/share.  As a supplement to the agreement, on February 4, 2011, the executive shall receive an additional twenty million common shares directly from the President of the Company. The agreement also calls for the employee to receive health benefits (See Note 7(B) and 7(I)).
 
 
25

 
 
On May 17, 2011, the Company executed an employment agreement with its Chief Internet Officer (“CIO”).  The term of the agreement is for five years.  As compensation for services, the CIO will receive a monthly compensation of $9,000 beginning at the completion of at least one million dollars of new funding.  In addition to the base salary, the employee is entitled to receive health benefits.  The agreement also calls for the CIO to receive two million shares of Rule 144 common stock upon the execution of the agreement.  For the six months ended June 30, 2011, the Company has recorded $149,000 in compensation expense.  (See Note 7(B)).

(B)  Consulting Agreement
 
On January 19, 2009, the Company entered into a development services agreement to construct social network software for a fee of $150 and $375 an hour.  The contract will remain in place until either party desires to cancel.  A retainer fee of $20,000 has been paid upon the execution of the agreement and will be used towards the services provided.  In addition, on January 14, 2009 the Company issued 20,000 shares in exchange for services valued at $5,000 ($0.25/share).  As a result of the forward split, the 20,000 shares were increased to 80,000 shares and its purchase price was similarly adjusted to $0.0625 (See Note 7(B) and Note 7(D)).  On May 29, 2009 the Company amended the consulting agreement by reducing the hourly rate to $75 an hour and reducing the outstanding balance due by $17,163. On August 31, 2009, the Company issued 885,714 shares of common stock in exchange for services valued at $62,000 related to the development services agreement entered into on January 19, 2009.  Based on the most recent fair market value at that time, the shares were valued at $55,357 ($0.0625/share), resulting in the recognition of a gain on the extinguishment of debt of $6,643 (See Note 7(B)).

On January 20, 2009, the Company entered into a service agreement with a transfer agent to become the Company's transfer agent for the purpose of maintaining stock ownership and transfer records for the Company.

On September 17, 2009, the Company entered into a six month consulting agreement with an unrelated third party to provide public relations services.  In exchange for the services provided, on September 18, 2009 the Company issued 500,000 shares of common stock having a fair value of $175,000 ($0.35/share) based upon fair value on the date of grant.  The Company has an option to cancel the contract during the first ninety days of the agreement and 200,000 shares will be returned back to the Company.  On November 11, 2009, the Company cancelled the agreement and 300,000 shares of common stock were returned to the Company.   As of December 31, 2009, $70,000 is recorded as consulting expense and $105,000 of deferred compensation was reclassified to $0 (See Note 7(B)).
 
 
26

 
 
On September 18, 2009, the Company entered into a six month consulting agreement with an unrelated third party to provide public relations services.  In exchange for the services provided the Company issued 600,000 shares of common stock having a fair value of $210,000 ($0.35/share) based upon fair value on the date of grant.  Shares will be issued on or before December 18, 2009 in six 100,000 increments.  The Company has an option to cancel the contract at any time, in such event; the consultant will return a prorated amount of shares based on the months remaining in the consulting agreement.   On November 18, 2009, the Company cancelled the agreement and 400,000 shares of common stock were returned to the Company.  As of December 31, 2009 $70,000 is recorded as consulting expense and $140,000 of deferred compensation was reclassified to $0.  During the year ended December 31, 2010, the consultant returned an additional 150,000 shares of common stock to the Company (See Note 7(B)).

On September 21, 2009, the Company entered into an eight month consulting agreement with an unrelated third party to provide public relations services.  In exchange for the services provided, the Company issued 600,000 shares of common stock having a fair value of $210,000 ($0.35/share) based upon fair value on the date of grant.  Shares will be issued on or before September 18, 2009, December 18, 2009, and March 18, 2010, in 200,000 increments.  The Company has an option to cancel the contract at any time and no additional stock issuances will be due.  On December 18, 2009, the Company cancelled the agreement and 400,000 shares of common stock were returned to the Company.  As of December 31, 2009, $70,000 is recorded as consulting expense and $140,000 of deferred compensation was reclassified to $0 (See Note 7(B)).

On October 20, 2009, the Company entered into a marketing agreement with an unrelated third party.  In exchange for the services provided, on November 21, 2009, the Company issued 30,000 shares of common stock having a fair value $53,100 ($1.77/share) based upon fair value on the date of grant, and compensation of $5,000, of which $2,500 was paid in 2009 upon the execution of the agreement and the remaining $2,500 was paid in 2010 upon completion (See Note 7(B)).

During the months of November and December 2009, the Company entered into celebrity endorsement agreements for a period of one to two years of service.  In total, 1,710,000 shares of common stock were issued having a fair value of $3,285,400 based upon fair value on the respective date of grant.  During 2009 and 2010, $87,805 and $1,712,815 was recorded as consulting expense, respectively.  For the six months ended June 30, 2011, $777,112 is recorded as consulting expense, and $707,658 is recorded as deferred compensation (See Note 7(B)).
 
 
27

 
 
On December 3, 2009, the Company entered into a commission agreement with an unrelated third party.  The company will pay a 10% commission in shares of common stock for every passive endorsement.  In exchange for the services provided the Company issued 35,000 shares of common stock having a fair value $68,250 ($1.95/share) based upon fair value on the date of grant (See Note 7(B)).

On December 3, 2009, the Company entered into a commission agreement with an unrelated third party.  The company will pay a 10% commission in shares of common stock for every passive endorsement.  In exchange for the services provided the Company issued 240,000 shares of common stock having a fair value $468,000 ($1.95/share) based upon fair value on the date of grant (See Note 7(B)).

On December 3, 2009, the Company entered into a commission agreement with an unrelated third party.  The company will pay a 10% commission in shares of common stock for every passive endorsement.  In exchange for the services provided the Company issued 35,000 shares of common stock having a fair value $68,250 ($1.95/share) based upon fair value on the date of grant (See Note 7(B)).

On December 3, 2009, the Company entered into a commission agreement with an unrelated third party.  The company will pay a 10% commission in shares of common stock for every passive endorsement.  In exchange for the services provided the Company issued 10,000 shares of common stock having a fair value $19,500 ($1.95/share) based upon fair value on the date of grant (See Note 7(B)).

On December 15, 2009, the Company entered into a consulting agreement with an unrelated third party to provide investor services.  The Company will receive a 10% of the gross receipts from the investor relations revenue for a two year period.  In exchange for the satisfactory services provided, on December 15, 2009, the Company issued 100,000 shares of common stock having a fair value of $200,000 ($2/share) based upon fair value on the date of grant (See Note 7(B)).

On December 27, 2009, the Company entered into a consulting agreement with an unrelated third party to provide film work.  In exchange for the services provided the Company issued 10,000 shares of common stock having a fair value $19,400 ($1.94/share) based upon fair value on the date of grant (See Note 7(B)).

On December 27, 2009, the Company entered into an endorsement agreement with an unrelated third party to provide film work.  In exchange for the services provided the Company issued 10,000 shares of common stock having a fair value $19,400 ($1.94/share) based upon fair value on the date of grant (See Note 7(B)).

On December 27, 2009, the Company entered into a consulting agreement with an unrelated third party to provide film scripting, editing and production work.  In exchange for the services provided the Company issued 10,000 shares of common stock having a fair value $19,400 ($1.94/share) based upon fair value on the date of grant (See Note 7(B)).
 
 
28

 
 
On December 30, 2009, the Company entered into a marketing agreement with an unrelated third party for a period from January 2010 to December 2010.  In exchange for the services provided, the Company issued 500,000 shares of common stock having a fair value of $965,000 ($1.93/share) based upon fair value on the date of grant.  An additional 1,000,000 shares of common stock having a fair value of $1,930,000 ($1.93/share) based upon fair value on the date of grant, were issued for an additional sponsorship commitment. The additional 1,000,000 shares were to be held in escrow until June 30, 2010, at which point the unrelated party would have 15 days to accept or decline the additional shares. As of December 31, 2010, the shares were returned back to the Company’s treasury due to non-performance of services and no additional shares will be issued (See Note 7(B)).

On December 31, 2009, the Company entered into a consulting agreement with an unrelated third party for a period from December 31, 2009 through March 30, 2011.  In exchange for the services provided, the Company issued 75,000 shares of common stock having a fair value of $144,750 ($1.93/share) based upon fair value on the date of grant, and deliverable in three increments of 25,000 shares of common stock each. The first 25,000 shares will be delivered upon the execution of the agreement and the other two increments will be delivered in six and twelve months upon the successful fulfillment of the agreement (See Note 7(B)).

On December 31, 2009, the Company entered into a consulting agreement with an unrelated third party for a period from December 31, 2009 through March 30, 2011.  In exchange for the services provided, the Company issued 75,000 shares of common stock having a fair value of $144,750 ($1.93/share) based upon fair value on the date of grant, and deliverable in three increments of 25,000 each. The first 25,000 shares will be delivered upon the execution of the agreement and the other two will be delivered in six and twelve months upon the successful fulfillment of the agreement (See Note 7(B)).

On December 31, 2009, the Company entered into a consulting agreement with an unrelated third party for a period from December 31, 2009 through December 31, 2010.  In exchange for the services provided, the Company issued 500,000 shares of common stock having a fair value of $965,000 ($1.93/share) based upon fair value on the date of grant (See Note 7(B)).

On January 11, 2010, the Company entered into a twelve month agreement with an unrelated third party for investor relations press release service for an annual fee of $14,250 and an initial onetime fee of $250.

On January 15, 2010, the Company entered into a two year celebrity endorsement agreement.  In total, 100,000 shares of common stock were issued having a fair value of $170,000($1.70/share) based upon fair value on the date of grant (See Note 7(B)).
 
 
29

 
 
On February 1, 2010, the Company entered into a twelve month consulting agreement effective February 5, 2010, with an unrelated third party to produce music compositions for a fee of $500.  The agreement can be renewed for up to two additional years for a fee of $500 for the first renewal year and $750 for the second renewal year.

On February 17, 2010, the Company entered into a twelve month consulting agreement with an unrelated third party effective February 17, 2010.  In exchange for the services provided, the Company issued 1,000,000 shares of common stock having a fair value of $1,240,000 ($1.24/share) based upon fair value on the date of grant (See Note 7(B)).

On June 1, 2010, the Company entered into a twelve month consulting agreement to provide for consulting and business services in raising capital.  The Company agrees to pay a finder’s fee on all capital raised in stock and warrants.  The Company paid an initial nonrefundable retainer fee by issuing 40,000 shares of stock having a value of $10,000 ($0.25/share) based upon fair value on the date of the agreement.  In conjunction with the stock payment, the Company also issued one warrant attached to each share of stock exercisable at $0.50 per warrant.  Based upon the number of shares (40,000 shares) of stock issued, the Company issued 40,000 warrants (See Note 7(B) and (C).

On May 11, 2010, the Company acquired the rights to an audio technology known as Max Audio Technology (Max) through a share exchange, whereby the Company issued 30,000,000 shares of common stock to two individuals in exchange for their rights in Max having a value of $7,500,000 based upon recent market value ($0.25/share).  (See Note 7(H)).

In accordance with the share exchange, the former owners to the rights of Max became Executives of the Company.  The two new executives individually entered into employment agreements with the Company on May 11, 2010.  The term of the employment agreements are for ten years of service at a monthly compensation of $8,500 for each executive.  In addition, the Executives are entitled to receive 5% of all revenues derived from the sale of all products and services related to the Max Audio Technology.  On January 2, 2011, the agreement was cancelled.

On April 15, 2010, the Company entered into a finder’s fee agreement.  For each qualified investor introduced to the Company by the consultant, the Company will pay a 10% fee in cash equal to 10% of the dollar amount of securities purchased,  In addition, the Company will pay a 10% fee in warrants equal to 10% of the number of shares of stock purchased (See Note 7(C)).

On August 8, 2010, the Company entered into a consulting agreement with an unrelated third party to provide consulting services.  Upon the execution of the agreement the consultant received 100,000 shares of common stock.  A monthly issuance of 100,000 shares of common stock will be issued as a compensation of services provided.  The term of the agreement is for three months and will continue to renew for three month intervals unless cancelled by either party.  The agreement was cancelled on November 1, 2010 (See Note 7(B)).
 
 
30

 
 
On August 17, 2010, the Company entered into a consulting agreement.  The agreement shall remain in effect until terminated.  In exchange for the services provided, the consultant will receive a $500 a month allowance for general expenses.  In addition, for all the new business brought to the Company the consultant will receive a 10% compensation for each gross dollar received by the Company.  On February 15, 2011, the Company terminated the agreement.

On December 14, 2010, the Company entered into to a consulting agreement for consulting and advertising services.  Upon the execution of the agreement, the consultant received 250,000 shares with an additional 750,000 shares to be issued upon consultant obtaining sponsorship rights in the year 2011.  The sponsorship rights were not obtained and the agreement was cancelled in 2011 and the additional 750,000 shares were never issued (See Note 7(B)).

On February 17, 2011, the Company entered into a consulting agreement for public relations and communications services.  In exchange for the services provided, the consultant received 500,000 shares of common stock. The term of the agreement is for one year.

On March 3, 2011, the Company entered into a consulting agreement for public relations and communications services.  In exchange for the services provided, the consultant received 1,000,000 shares of common stock. The term of the agreement is for one year.

On June 10, 2011, the Company entered into a five year advisory board consulting agreement with three persons to provide for consulting and business services.  In exchange for the services provided, the consultants received 100,000 shares of common stock each.  (See Note 7(B)).

On June 15, 2011, the Company entered into a consulting agreement with an unrelated third party for software and computer technology services.  In exchange for the services provided, the consultant will be paid $70 per hour with $50 per hour paid in cash and $20 per hour paid in Company stock at $0.10 per share.  The term of the agreement is for one year. (See Note 7(B)).

(C) Operating Lease Agreements

On September 1, 2010 the Company executed a three-year non-cancelable operating lease for its new corporate office space. The lease began on October 1, 2010 and expires on September 30, 2013.  Total base rent due during the term of the lease is $134,880.

 
31

 
 
NOTE 9       RELATED PARTY TRANSACTIONS

During the year ended December 31, 2008, the Company received $18,803 from the principal stockholder.  Pursuant to the terms of the loan, the loan is bearing an annual interest rate of 3.25% and due on demand.  In 2008, the Company repaid $15,000 in principal to the principal stockholder.  In 2009, the Company repaid $3,803 in principal to the principal stockholder.  As of December 31, 2010, the principal portion of this principal stockholder loan balance has been repaid (See Note 3).

On May 11, 2009, the Company received $9,500 from a principal stockholder. During the year ended December 31, 2009, the Company repaid $1,500 in principal to the principal stockholder.  Pursuant to the terms of the loan, the loan is bearing an annual interest rate of 3.25% and is due on demand (See Note 3).

On May 22, 2009, the Company received $15,000 from a principal stockholder.  In January of 2010, the Company repaid $3,000 in principal to a principal stockholder under the terms of the loan.  In June of 2010, the Company repaid $3,000 in principal to the principal stockholder under the terms of the loan.  Pursuant to the terms of the loan, the loan is bearing an annual interest rate of 3.25% and is due on demand (See Note 3).

On May 26, 2009, the Company received $16,700 from a principal stockholder.  In May of 2010, the Company repaid $15,700 in principal to the principal stockholder under the terms of this loan.  Pursuant to the terms of the loan, the loan is bearing an annual interest rate of 3.25% and is due on demand (See Note 3).

As of June 30, 2011, the Company owes $18,000 in principal and $1,925 of accrued interest to the principal stockholder related to these principal loans (See Note 3).

On May 28, 2009, the Company entered into a two year line of credit agreement with a principal stockholder in the amount of $100,000.  The line of credit carries an interest rate at 3.25%.  As of June 30, 2011, the principal shareholder has advanced the Company $100,000 and was repaid $100,000 under the terms of this line of credit agreement (See Note 4).

On November 10, 2009, the Company entered into a two year line of credit agreement with a principal stockholder in the amount of $100,000.  The line of credit carries an interest rate at 3.25%.  As of June 30, 2011, the principal shareholder has advanced $100,000 to the Company and was repaid $100,000 under the terms of this line of credit agreement (See Note 4).

On March 25, 2010, the Company entered into a two year line of credit agreement with the principal stockholder in the amount of $500,000.  The line of credit carries an interest rate of 3.25%.  On February 17, 2011, the principal stockholder converted $100,000 of the line of credit owed into 909,091 shares of common stock at $0.11 per share.  As of June 30, 2011, the principal stockholder has advanced $223,680 to the Company and was repaid $6,050 under this line of credit agreement (See Note 4 and Note 7(G)).
 
 
32

 
 
As of June 30, 2011, the Company owes $117,630 in principal and $10,816 of accrued interest to the principal stockholder related to these lines of credit (See Note 4).

On October 14, 2008, the Company issued 44,900,000 shares of common stock to its founder having a fair value of $44,900 ($0.001/share) in exchange for services provided.  As a result of the forward split, the 44,900,000 shares were increased to 179,600,000 shares and its purchase price was similarly adjusted to $0.00025 (See Note 7(B) and Note 7(D)).

On October 13, 2008, the Company executed an employment agreement with its President and CEO.  The term of the agreement is ten years.  As compensation for services, the President will receive a monthly compensation of $18,000 beginning October 13, 2008.  In addition, to the base salary, the employee is entitled to receive a 10% commission of all sales of the Corporation.  The agreement also calls for the employee to receive health benefits (See Note 8(A)).

On June 2, 2010, a principal stockholder converted $283,652 of accrued compensation into 945,507 shares of common stock at $0.30 per share.  (See Note 7(G)).

On February 17, 2011, a principal stockholder converted $144,000 of accrued compensation into 1,309,091 shares of common stock at $.0.11 per share. (See Note 7(G)).

During the fourth quarter of 2008, the principal stockholder contributed office space with a fair market value of $2,913 (See Note 7(F)).

For the year ended December 31, 2009, the principal stockholder contributed office space with a fair market value of $12,600 (See Note 7(F)).

For the year ended December 31, 2010, the principal stockholder contributed office space with a fair value of $9,450 (See Note 7(F)).

NOTE 10     SUBSEQUENT EVENTS

In preparing these financial statements, the Company has evaluated events and transactions for potential recognition or disclosure as follows:

For the period July 1 to August 8, 2011, the Company issued 10,927,000 shares of common stock for cash of $1,092,700 ($0.10/share).  In connection with these issuances, the Company incurred $74,510 in finder’s fees and reserved 745,100 warrants pursuant to the agreements with certain individuals.

During the month of July 2011, $397,000 of the stock subscription receivable was collected (See Note 7(A)).

During the month of July 2011, the principal stockholder was repaid $55,000 under the line of credit agreement dated March 25, 2010 (See Note 4 and 9),
 
 
33

 
 
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
The following plan of operation provides information which management believes is relevant to an assessment and understanding of our results of operations and financial condition. The discussion should be read along with our financial statements and notes thereto. This section includes a number of forward-looking statements that reflect our current views with respect to future events and financial performance. Forward-looking statements are often identified by words like believe, expect, estimate, anticipate, intend, project and similar expressions, or words which, by their nature, refer to future events. You should not place undue certainty on these forward-looking statements. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our predictions.
 
Corporate History and Structure
 
We were incorporated in the State of Delaware as of December 9, 2005 as 43010, Inc. to engage in any lawful corporate undertaking, including, but not limited to, locating and negotiating with a business entity for combination in the form of a merger, stock-for-stock exchange or stock-for-assets exchange. On October 7, 2008, pursuant to the terms of a stock purchase agreement, Mr. Greg Halpern purchased a total of 100,000 shares of our common stock from Michael Raleigh for an aggregate of $30,000 in cash. The total of 100,000 shares represented 100% of our issued and outstanding common stock at the time of the transfer. As a result, Mr. Halpern became our sole shareholder. As part of the acquisition, and pursuant to the Stock Purchase Agreement, Michael Raleigh, our then President, CEO, CFO, and Chairman resigned from all the positions he held in the company, and Mr. Halpern was appointed as our President, CEO CFO and Chairman. The original business model was developed by Mr. Halpern in September of 2008 and began when he joined the company on October 7, 2008. In October 2008, we became a development stage company focused on creating an Internet search engine and networking web site. 

In May of 2010, we acquired the worldwide rights to all fields of use for Max Sound HD Audio technology. In November of 2010, we opened our post-production facility for Max Sound HD Audio in Santa Monica California.  On January 17, 2011, Greg Halpern resigned as our CEO and we entered into an employment agreement with John Blaisure to serve as our new CEO.  In February of 2011, after several successful demonstrations of our Max Sound Audio technology to various multi-media industry company executives, we decided to shift the focus of the Company to the Max Sound HD Audio technology and commenced the name change from So Act Network, Inc. to Max Sound Corporation and the symbol from SOAN to MAXD.

The Company is in negotiations with several multi-media companies that will utilize our HD Audio solution in the future.

A new video is currently available on the company website at http://www.maxsound.com. The Max Sound® Technology Highlights Video is 10 minutes long and summarizes the HD Audio™ process including meeting the inventor of the technology and showing the need for high definition audio in several key vertical markets.
 
Plan of Operation
 
We began our operations on October 8, 2008 when we purchased the Form 10 Company from the previous owners.  Since that date, we have completed financing to raise initial start-up money for the building of our internet search engine and social networking and to start our operations.  
 
We have also received three loans from Mr. Greg Halpern, in the amount of $9,500, $15,000 or $16,700 on May 11, May 22, and May 26, 2009, respectively.  Each of the loans bears an interest rate equal to the primate rate as of the date of issuance.  As of June 30, 2011, the Company owes $18,000 in principal and $1,925 in accrued interest on these loans. We have also entered into three Credit Line Agreements with Greg Halpern.  The first two have been a $0 principal balance and expired during the first six months of June 2011.  The third Credit Line Agreement issued by Mr. Halpern in March 2010 is for an additional $500,000 and will mature in 2012.  All three agreements accrue interest at the prime rate as of the date of issuance.  The prime rate of interest is the rate of interest that major banks charge their most creditworthy customers.  For the purposes of these agreements, we shall determine the prime rate by using the prime rate reported by the Wall Street Journal on the date funds are extended to the Company.  Based on the prime rate as of the date of issuance, the prime rate shall be 3.25%. As of June 30, 2011, the Company owes $117,630 in principal and $10,816 in accrued interest related to these lines of credit. Although, we believe that the $117,630 already used and the$382,370 remaining on th third line of credit will be sufficient to cover the additional expense arising from maintenance of our regulatory filings with the SEC, and the development of our technology, the Company believes the funding campaign in the summer of 2011 will allow for the Company to continue building Max Sound HD Audio Technology and aggressively marketing it to Multi-Media Industry Users of Audio and Audio with Video products.
 
 
34

 
 
In 2011, the Company has received from Mr. Halpern additional net advances on the established lines of credit in the amount of $81,150 and forgiveness of amounts owed to Mr. Halpern of $244,000 through conversion of debt notes and accrued salary into shares at $0.11 cents per share.  This further demonstrates our Chairman’s three-year long and ongoing commitment thus far to continue financing the Company’s needs.  While the Company expects to have ongoing needs for additional financing, the amount of those needs are not clearly established as the Company moves forward.

The Company believes that Max Sound HD Audio is a game changer for several vertical markets whose demand will create revenue opportunities in the fall of 2011 that will meet the Company’s needs to eliminate its going concern status in 2012.

We expect our financial requirements to increase with the additional expenses needed to promote the Max Sound® Audio technology.  We plan to fund these additional expenses by loans from Mr. Halpern based on existing lines of credit and we are also considering various private funding opportunities until such time that our revenue stream is adequate enough to provide the necessary funds.

In the event that we are unable to obtain additional funding or Mr. Halpern either fails to extend us more financing, declines to loan additional cash, declines to fund the line of credit, declines to defer his salary payments, or seeks repayment of his existing loans, we will no longer be able to continue to operate and will have to cease operations unless we begin to generate sufficient revenue to cover our costs.

Results of Operations
  
The following tables set forth key components of our results of operations for the periods indicated, in dollars, and key components of our revenue for the period indicated, in dollars.
 
   
For the three months Ended June 30,
 
   
2011
   
2010
 
             
             
Revenue
 
$
0
     
2,358
 
                 
Operating Expenses
               
General and Administrative
   
32,243
     
29,694
 
Endorsement Fees *
   
411,900
     
485,804
 
Consulting Fees *
   
455,246
     
1,385,433
 
Professional Fees
   
26,883
     
20,466
 
Website Development
   
0
     
30,337
 
Compensation
   
54,000
     
54,000
 
Total Operating Expenses
   
980,272
     
2,005,734
 
                 
Loss from Operations
   
(980,272)
     
(2,003,376
                 
Other Income / (Expense)
               
Interest Income
   
25
         
Interest Expense
   
(2,647)
     
(2,245
)
Amortization of Debt Discount
   
(3,139
)
   
-
 
Change in fair value of embedded derivative liability
   
17,040
     
-
 
Total Other Income / (Expense)
   
(11,279
)
   
(2,245
                 
Provision for Income  Taxes
   
0
     
0
 
                 
Net Loss
 
$
(968,993)
     
(2,005,621
                 
Net Loss Per Share  - Basic and Diluted
 
$
(0.00
)
   
(0.01
)
                 
Weighted average number of shares outstanding
               
  during the year Basic and Diluted
   
234,809,929
     
207,221,761
 
 
* The line items Endorsement Fees and Consulting Fees represent mainly non-recurring compensation in the form of stock at the then current market value at the time of entering into the services agreement.
 
 
35

 
 
 
For the three months ended June 30, 2011 and for the three months ended June 30, 2010

General and Administrative Expenses: Our general and administrative expenses were $32,243 for the three months ended June 30, 2011 and $29,694 for the three months ended June 30, 2010, representing an increase of $2,549 or approximately 8.28%, as a result of our expenses on the general operation of the company including increases due to the renting of a sound studio and decreases due to less marketing of our social networking website.
 
Endorsement Fees:  Our endorsement fees were $411,900 for the three months ended June 30, 2011 and $485,804 for the three months ended June 30, 2010, representing a decrease of $73,904 or approximately 15.21% as a result of our decline in the use of having individuals promote and market our social networking website.

Consulting Fees:  Our consulting fees were $455,246 for the three months ended June 30, 2011 and $1,385,433 for the three months ended June 30, 2010, representing a decrease of $930,187 or approximately 67.14% as a result of the decrease in our use of consultants needed for promotional and marketing services related to our social networking website.
 
Professional Fees: Our professional fees were $26,883 for the three months ended June 30, 2011 and $20,466 for the three months ended June 30, 2010, representing an increase of $6,417 or approximately 31.35% as a result of the expenses associated with the preparation of our financial statements and regulatory filings required for publicly traded companies.

Website Development: Our website development expenses were $0 for the three months ended June 30, 2011 and $30,337 for the three months ended June 30, 2010, representing a decrease of $30,337 or 100% due to our discontinuance of the development and hosting services related to our former website.

Compensation: Our compensation expenses were $54,000 for the three months ended June 30, 2011 and $54,000 for the three months ended June 30, 2010, as a result of our expensing of monthly compensation to Mr. Greg Halpern, our President and CFO, pursuant to an employment agreement which we entered into with Mr. Greg Halpern on October 13, 2008. A copy of the employment agreement was attached as Exhibit 10.1 to the Form 8-K filed on October 17, 2008.
 
Net Loss: Our net loss for the three months ended June 30, 2011 and 2011, were $968,993, compared to $2,005,621, respectively. The decrease in net loss was the result of the substantial decrease in our promotional and marketing expenses.
 
 
 
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The following tables set forth key components of our results of operations for the periods indicated, in dollars, and key components of our revenue for the period indicated, in dollars.
 
   
For the six
months Ended June 30,
 
   
2011
   
2010
 
             
             
Revenue
 
$
0
     
2,358
 
                 
Operating Expenses
               
General and Administrative
   
69,135
     
68,546
 
Endorsement Fees *
   
819,273
     
915,057
 
Consulting Fees *
   
2,382,106
     
2,758,659
 
Professional Fees
   
67,559
     
53,518
 
Website Development
   
0
     
159,409
 
Compensation
   
108,000
     
108,000
 
Total Operating Expenses
   
3,446,073
     
4,063,189
 
                 
Loss from Operations
   
(3,446,073)
     
(4,060,831
                 
Other Income/(Expense)
               
Interest Income
   
25
         
Interest Expense
   
(5,682
   
(4,095
)
Amortization of Debt Discount
   
(9,371
)
   
-
 
Change in fair value of embedded derivative liability
   
(32,085)
     
-
 
Total Other Income/(Expense)
   
(47,113
)
   
(4,095
                 
Provision for Income  Taxes
   
0
     
0
 
                 
Net Loss
 
$
(3,493,186
   
(4,064,926
                 
Net Loss Per Share  - Basic and Diluted
 
$
(0.02
)
   
(0.02
)
                 
Weighted average number of shares outstanding
               
  during the year Basic and Diluted
   
231,642,501
     
197,917,638
 
 
* The line items Endorsement Fees and Consulting Fees represent mainly non-recurring compensation in the form of stock at the then current market value at the time of entering into the services agreement.
 
 
 
37

 
 
For the six months ended June 30, 2011 and for the six months ended June 30, 2010

General and Administrative Expenses: Our general and administrative expenses were $69,135 for the six months ended June 30, 2011 and $68,546 for the six months ended June 30, 2010, representing an immaterial increase of $589 or approximately .86%, 
 
Endorsement Fees:  Our endorsement fees were $819,273 for the six months ended June 30, 2011 and $915,057 for the six months ended June 30, 2010, representing a decrease of $95,784 or approximately 10.46% as a result of our decline in the use of having individuals promote and market our social networking website.

Consulting Fees:  Our consulting fees were $2,382,106 for the six months ended June 30, 2011 and $2,758,659 for the six months ended June 30, 2010, representing a decrease of $376,553 or approximately 13.65% as a result of the decrease in our use of consultants needed for promotional and marketing services related to our social networking website.
 
Professional Fees: Our professional fees were $67,559 for the six months ended June 30, 2011 and $53,518 for the six months ended June 30, 2010, representing an increase of $14,041 or approximately 26.24% as a result of the increased expenses associated with the preparation of our financial statements and regulatory filings required for publicly traded companies.

Website Development: Our website development expenses were $0 for the six months ended June 30, 2011 and $159,409 for the six months ended June 30, 2010, representing a decrease of $159,409 or 100% due to our discontinuance of hosting services related to our social networking website.

Compensation: Our compensation expenses were $108,000 for the six months ended June 30, 2011 and $108,000 for the six months ended June 30, 2010, as a result of our expensing of monthly compensation to Mr. Greg Halpern, our President and CFO, pursuant to an employment agreement which we entered into with Mr. Greg Halpern on October 13, 2008. A copy of the employment agreement was attached as Exhibit 10.1 to the Form 8-K filed on October 17, 2008.
 
Net Loss: Our net loss for the six months ended June 30, 2011 and 2011, were $3,493,186, compared to $4,064,926, respectively. The decrease in net loss was the result of the substantial decrease in our promotional and marketing expenses related to our social networking site.
 
 
38

 
 
Liquidity and Capital Resources
 
As reflected in the accompanying financial statements, the Company is in the development stage with minimal operations.  Revenue was $0 and $2,358 for the three months ended June 30, 2011 and 2010, respectively. We have an accumulated deficit of $12,361,523 for the period from December 9, 2005 (inception) to June 30, 2011, and have negative cash flow from operations of $864,225 from inception.  

Our financial statements have been presented on the basis that it is a going concern, which contemplates the realization of revenues from our subscriber base and the satisfaction of liabilities in the normal course of business. We have incurred losses from inception. These factors raise substantial doubt about our ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company's ability to raise additional capital and implement its business plan. The financial statements do not include any adjustments that would be necessary if the Company is unable to continue as a going concern.

Management believes the actions presently being taken to obtain additional funding and implement its strategic plans provide for the Company to continue as a going concern.

From our inception through June 30, 2011, our primary source of funds has been the proceeds of private offerings of our common stock and loans from our principal stockholder. Our need to obtain capital from outside investors is expected to continue until we are able to achieve profitable operations, if ever. There is no assurance that management will be successful in fulfilling all or any elements of its plans.  
 
We have received three loans from Mr. Greg Halpern, in the amount of $9,500, $15,000 or $16,700 on May 11, May 22, and May 26, 2009, respectively. During the six months ended June 30, 2011, the Company repaid $23,200 in principal to the principal stockholder. Each of these loans is due upon demand and accrue interest at the prime rate as of the date of issuance. The prime rate of interest is the rate of interest tht major banks charge their most creditworthy customers. For the purposes of this agreement, we shall determine the prime rate by using the prime rate reported by the Wall Street Journal on the date funds are extended to the Company. Based on the prime rate as of the date of issuance, we have determined that the prime rate shall be 3.25%. As of June 30, 2011, we owed $18,000 in principal and $1,925 in accrued interest.
 
We have entered into three lines of credit with our principal stockholder, Mr. Greg Halpern, in the amount of $100,000, $100,000, and $500,000, respectively. Pursuant to the lines of credit agreements, the lines of credits bear an annual interest rate of 3.25% and are due on May 29, 2011, November 11, 2011, and March 25, 2012.  As of June 30, 2011, we owe $117,630 in principal and accrued interest of $10,816 related to these lines of credit

On October 13, 2008, the Company entered into an employment agreement with the principal stockholder whereby the principal stockholder would be paid $18,000 per month for a term of ten (10) years for services rendered as the Chief Executive Officer of the Company.
 
On February 17, 2011 the Company’s Board authorized the issuance and conversion of 2,218,182 shares of par value $.0001 common stock at $0.11 per share as payment to the principal stockholder for conversion of $100,000 of the debt outstanding and $144,000 in accrued wages payable. Pursuant to the Board’s authorization and resulting issuance of shares, the principal shareholder has entered into an agreement (the “Conversion Agreement”) with the Company relinquishing the Company from any further obligation to the principal shareholder with respect to $100,000 of the note payable.
 
However, additional expenses may arise from the maintenance of our regulatory filings and responsibilities which include legal, accounting and electronic filing services. It is anticipated that the cost to maintain these activities will be no less than $76,000 and no more than $108,000. We have entered into two Credit Line Agreements and Line of Credit Note with Greg Halpern who has agreed to establish a revolving line of credit for us with a maximum amount of $500,000 that will mature and expire on March 25, 2012. The Credit Line Agreements and Line of Credit Note shall accrue interest at the prime rate as of the date of issuance. The prime rate of interest is the rate of interest that major banks charge their most creditworthy customers. For the purposes of this agreement, we shall determine the prime rate by using the prime rate reported by the Wall Street Journal on the date funds are extended to the Company. Based on the prime rate as of the date of issuance, the prime rate shall be 3.25%.
 
 
39

 
 
Recent Accounting Pronouncements
 
ASU No. 2011-02; Receivables. In April, 2011, the FASB issued ASU No. 2011-02, to provide additional guidance to assist creditors in determining whether a restructuring of a receivable meets the criteria to be considered a troubled debt restructuring. The amendments in this ASU are effective for the first interim or annual period beginning on or after June 15, 2011, and are to be applied retrospectively to the beginning of the annual period of adoption. As a result of applying these amendments, an entity may identify receivables that are newly considered impaired. Early adoption is permitted. The Company intends to adopt the methodologies prescribed by this ASU by the date required, and does not anticipate that the ASU will have a material effect on its financial position or results of operation
 
ASU No. 2011-03; Reconsideration of Effective Control for Repurchase Agreements. In April, 2011, the FASB issued ASU No. 2011-03. The amendments in this ASU remove from the assessment of effective control the criterion relating to the transferor's ability to repurchase or redeem financial assets on substantially the agreed terms, even in the event of default by the transferee. The amendments in this ASU also eliminate the requirement to demonstrate that the transferor possesses adequate collateral to fund substantially all the cost of purchasing replacement financial assets.
 
The guidance in this ASU is effective for the first interim or annual period beginning on or after December 15, 2011. The guidance should be applied prospectively to transactions or modifications of existing transactions that occur on or after the effective date. Early adoption is not permitted. The Company will adopt the methodologies prescribed by this ASU by the date required, and does not anticipate that the ASU will have a material effect on its financial position or results of operations.
 
ASU No. 2011-04; Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. In May 2011, the FASB issued ASU No. 2011-04. The amendments in this ASU generally represent clarifications of Topic ASC 820, but also include some instances where a particular principle or requirement for measuring fair value or disclosing information about fair value measurements has changed. This ASU results in common principles and requirements for measuring fair value and for disclosing information about fair value measurements in accordance with U.S. GAAP and IFRSs. The amendments in this ASU are to be applied prospectively. For public entities, the amendments are effective during interim and annual periods beginning after December 15, 2011. Early application by public entities is not permitted.
 
The Company will adopt the methodologies prescribed by this ASU by the date required, and does not anticipate that the ASU will have a material effect on its financial position or results of operations.
 
ASU No. 2011-05; Amendments to Topic 220, Comprehensive Income. In June 2011, the FASB issued ASU No. 2011-05. Under the amendments in this ASU, an entity has the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In both choices, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income. This ASU eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders' equity. The amendments in this ASU do not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income.
 
The amendments in this ASU should be applied retrospectively. For public entities, the amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. Early adoption is permitted, because compliance with the amendments is already permitted. The amendments do not require any transition disclosures.
 
The Company will adopt the methodologies prescribed by this ASU by the date required, and does not anticipate that the ASU will have a material effect on its financial position or results of operations.
 
Critical Accounting Policies and Estimates

Our financial statements and related public financial information are based on the application of accounting principles generally accepted in the United States (“GAAP”). GAAP requires the use of estimates; assumptions, judgments and subjective interpretations of accounting principles that have an impact on the assets, liabilities, revenues and expense amounts reported. These estimates can also affect supplemental information contained in our external disclosures including information regarding contingencies, risk and financial condition. We believe our use of estimates and underlying accounting assumptions adhere to
 
GAAP and are consistently and conservatively applied. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions or conditions. We continue to monitor significant estimates made during the preparation of our financial statements.

Use of Estimates: In preparing financial statements in conformity with generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reported period.  Actual results could differ from those estimates.

Revenue Recognition:  Revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable and collectability is assured.  We had no revenue for the three months ended June 30, 2011 and 2010, respectively.
 
Stock-Based Compensation:
 
In December 2004, the FASB issued FASB Accounting Standards Codification No. 718, Compensation – Stock Compensation.  Under FASB Accounting Standards Codification No. 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. As such, compensation cost is measured on the date of grant at their fair value. Such compensation amounts, if any, are amortized over the respective vesting periods of the option grant. The Company applies this statement prospectively.
 
Equity instruments (“instruments”) issued to other than employees are recorded on the basis of the fair value of the instruments, as required by FASB Accounting Standards Codification No. 718.  FASB Accounting Standards Codification No. 505, Equity Based Payments to Non-Employees defines the measurement date and recognition period for such instruments.  In general, the measurement date is when either a (a) performance commitment, as defined, is reached or (b) the earlier of (i) the non-employee performance is complete or (ii) the instruments are vested. The measured value related to the instruments is recognized over a period based on the facts and circumstances of each particular grant as defined in the FASB Accounting Standards Codification.
 
 
40

 
 
Derivative Financial Instruments
 
Fair value accounting requires bifurcation of embedded derivative instruments such as conversion features in convertible debt or equity instruments, and measurement of their fair value for accounting purposes. In determining the appropriate fair value, the Company uses the Black-Scholes option-pricing model.  In assessing the convertible debt instruments, management determines if the convertible debt host instrument is conventional convertible debt and further if there is a beneficial conversion feature requiring measurement.  If the instrument is not considered conventional convertible debt, the Company will continue its evaluation process of these instruments as derivative financial instruments.
 
Once determined, derivative liabilities are adjusted to reflect fair value at each reporting period end, with any increase or decrease in the fair value being recorded in results of operations as an adjustment to fair value of derivatives.  In addition, the fair value of freestanding derivative instruments such as warrants, are also valued using the Black-Scholes option-pricing model.  
 
Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements, financings, or other relationships with unconsolidated entities or other persons, also known as “special purpose entities” (SPEs).

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not required for Smaller Reporting Companies.
 
Item 4.  Controls and Procedures

a) Evaluation of disclosure controls and procedures. Pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 (“Exchange Act”), the Company carried out an evaluation, with the participation of the Company’s management, including the Company’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) (the Company’s principal financial and accounting officer), of the effectiveness of the Company’s disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, the Company’s CEO and CFO concluded that the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including the Company’s CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.

(b)   Changes in internal control over financial reporting. There have been no changes in our internal control over financial reporting that occurred during the last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
 
 
 
41

 
 
PART II - OTHER INFORMATION
 
Item 1. Legal Proceedings.
 
We are currently not involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our company or any of our subsidiaries, threatened against or affecting our company, our common stock, any of our subsidiaries or of our companies or our subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.
 
Item 1A. Risk Factors.
 
Not required for smaller reporting companies.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
 
On January 17, 2011, the Company entered into an Asset Sale Agreement (“Asset Agreement”) with Adam Nelson, an Illinois Resident (“Nelson”) and Chris Record, a California Resident (“Record”). Whereas, Nelson and Record own 100% of the intellectual properties known as the Blog Software, Social Media Vault, and Social Media Bar (collectively the “Properties”) and Record owns 100% of the intellectual property known as Trending Topix (collectively with the Properties, the “Intellectual Properties”) and whereby the Company agreed to acquire the Intellectual Properties in a stock-for-asset exchange in accordance with the respective corporation laws in their state, resulting in the ownership of all of the Intellectual Properties by the Company, in exchange for: (i) 1,000,000 unregistered shares of par value $.0001 common shares of the Company to Nelson and (ii) 2,000,000 unregistered shares of par value $.0001 common shares of the Company to Record.
 
On January 18, 2011, the Company entered into a conversion agreement executed by a note holder for 109,375 shares based on a conversion price of $0.032 per share.

On February 9, 2011, the Company entered into a conversion agreement executed by a note holder for 271,186 shares based on a conversion price of $0.0295 per share.

On February 15, 2011, the Company entered into a conversion agreement executed by a note holder for 357,143 shares based on a conversion price of $0.0336 per share.
 
On February 17, 2011 we entered into a consulting agreement with Equiti-Trend Advisors, LLC (“Equiti-Trend”).    In consideration for the agreement, the Company issued to Equiti-Trend 500,000 non-refundable shares of the Company’s restricted common stock having a fair value of $55,000 ($0.11//share) based upon fair value on the grant date, in exchange for Equiti-Trend’s services for a period of 6 months.
 
On February 17, 2011, a principal stockholder converted $144,000 of accrued compensation into 1,309,091 shares of common stock at $0.11 per share.

On February 17, 2011, a principal stockholder converted $100,000 of a line of credit owed into 909,091 shares of common stock at $.011 per share.  

On February 23, 2011, the Company entered into a conversion agreement executed by a note holder for 220,264 shares based on a conversion price of $0.0454 per share.  
 
On March 3, 2011, the Company issued 1,000,000 shares of common stock to Equiti-Trend Advisors, LLC, pursuant to a consulting agreement for consulting services having a fair value of $80,000 ($0.08/share) based upon fair value on the grant date.
 
On January 17, 2011, the Company issued 3,000,000 share of Common Stock to John Blaisure, our new CEO, pursuant to an employment agreement having a fair value of $300,00 ($0.10/share) based upon fair value on the grant date.
 
On April 11, 2011, the Company entered into a conversion agreement executed by a note holder for 587,382 shares based on a conversion price of $0.0315 per share.
 
On May 2, 2011, the Company issued 2,000,000 shares of common stock to Adam Nelson for cash of $200,000 ($0.10/share).
 
On May 17, 2011, the Company issued 2,000,000 shares of common stock to Chris Record pursuant to an employment agreement having a fair value of $140,000 ($0.07/share) based upon fair value on the grant date. 
 
On June 15, 2011, the Company issued 15,980 shares to Sattvik Software & Technology Resource LTD,Co., pursuant to a consulting agreement having a fair value of $1,598 ($0.10/share) based upon the terms of the consulting agreement.
 
 
42

 
 
On June 10, 2011, the Company issued 100,000 shares of common stock to each of Frank Correa and Frank Serafine, pursuant to consulting agreements for consulting services and as members of the Company’s Advisory Board having a fair value of $25,000 ($0.25/share).
 
On June 23, 2011 the Company issued 100,000 shares of common stock to Fred Walecki, pursuant to a consulting agreement and as a member of the Company’s Advisory Board having a fair value of $25,000 ($0.25/share).
 
These shares were issued in reliance on the exemption under Section 4(2) of the Securities Act of 1933, as amended (the 'Act'). These shares of our Common Stock qualified for exemption under Section 4(2) of the Securities Act of 1933 since the issuance shares by us did not involve a public offering. The offering was not a 'public offering' as defined in Section 4(2) due to the insubstantial number of persons involved in the deal, size of the offering, manner of the offering and number of shares offered. We did not undertake an offering in which we sold a high number of shares to a high number of investors. In addition, these shareholders had the necessary investment intent as required by Section 4(2) since they agreed to and received share certificates bearing a legend stating that such shares are restricted pursuant to Rule 144 of the 1933 Securities Act.  This restriction ensures that these shares would not be immediately redistributed into the market and therefore not be part of a 'public offering.' Based on an analysis of the above factors, we have met the requirements to qualify for exemption under Section 4(2) of the Securities Act of 1933 for this transaction.

Item 3. Defaults Upon Senior Securities.
 
None.
 
Item 4. Removed and Reserved.
 
None.
 
Item 5. Other Information.
 
None
 
Item 6. Exhibits
 
              31.1 Certification of Principal Executive Officer of the Registrant pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a) or Rule 15(d)-14(a)).
 
              31.2 Certification of Principal Financial Officer of the Registrant pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a) or 15(d)-14(a)).
             
              32.1 Certification of Principal Executive Officer of the Registrant pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
              32.2 Certification of Principal Financial Officer of the Registrant pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 101  Interactive Data File (Form 10-Q for the quarterly period ended June 30, 2011 furnished in XBRL).

In accordance with SEC Release 33-8238, Exhibits 32.1 and 32.2 are being furnished and not filed.

 
 
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SIGNATURES
 
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 
MAX SOUND CORPORATION
   
Date: August 15, 2011
By:  
/s/John Blaisure
   
John Blaisure
President and Chief Executive Officer
(Duly Authorized Officer and Principal Executive Officer)
 
 
 
MAX SOUND CORPORATION
   
Date: August 15, 2011
By:  
/s/Greg Halpern
   
Greg Halpern
Chief Financial Officer and Chairman of the Board
(Principal Financial Officer)

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