Bitzio, Inc. - FORM 10-Q - August 16, 2011

Attached files

file	filename
EX-32.1 - EX-32.1 - Bitzio, Inc.	v232303_ex32-1.htm
EX-10.3 - EX-10.3 - Bitzio, Inc.	v232303_ex10-3.htm
EX-31.1 - EX-31.1 - Bitzio, Inc.	v232303_ex31-1.htm
EX-10.1 - EX-10.1 - Bitzio, Inc.	v232303_ex10-1.htm
EX-31.2 - EX-31.2 - Bitzio, Inc.	v232303_ex31-2.htm
EX-10.2 - EX-10.2 - Bitzio, Inc.	v232303_ex10-2.htm
EX-32.2 - EX-32.2 - Bitzio, Inc.	v232303_ex32-2.htm
EX-10.4 - EX-10.4 - Bitzio, Inc.	v232303_ex10-4.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the Quarter Ended June 30, 2011

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 000-51688

BITZIO, INC.

(Exact name of registrant as specified in its charter)

Nevada	16-1734022
(State or other jurisdiction of	(I.R.S. Employer Identification No.)
incorporation or organization)

548 Market Street, Suite 18224, San Francisco, California 94104

(Address of principal executive offices)

(213) 400-0770

(Registrant's telephone number, including area code)

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 past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes ¨ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company

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 ¨ No x

APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date.

Class	Outstanding as of August 15, 2011

Common Stock, $0.001 par value	38,750,000

TABLE OF CONTENTS

Heading		Page

PART I — FINANCIAL INFORMATION

Item 1.	Consolidated Financial Statements	3

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	4

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	7

Item 4(T).	Controls and Procedures	7

PART II — OTHER INFORMATION

Item 1.	Legal Proceedings	7

Item 1A.	Risk Factors	7

Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	7

Item 3.	Defaults Upon Senior Securities	8

Item 4.	Removed and Reserved	8

Item 5.	Other Information	8

Item 6.	Exhibits	8

	Signatures	9

PART I — FINANCIAL INFORMATION

Item 1.

Financial Statements

The accompanying unaudited consolidated balance sheets of Bitzio, Inc. (formerly Rocky Mountain Fudge Company, Inc.) at June 30, 2011 and December 31, 2010 and related unaudited consolidated statements of operations and cash flows for the three months and six months ended June 30, 2011 and 2010, and for the period from January 4, 1990 (date of inception) to June 30, 2011, have been prepared by management in conformity with United States generally accepted accounting principles. In the opinion of management, all adjustments considered necessary for a fair presentation of the results of operations and financial position have been included and all such adjustments are of a normal recurring nature. It is suggested that these consolidated financial statements be read in conjunction with the financial statements and notes thereto included in the Company’s December 31, 2010 audited financial statements. Operating results for the periods ended June 30, 2011, are not necessarily indicative of the results that can be expected for the fiscal year ending December 31, 2011 or any other subsequent period.

BITZIO, INC.

(FKA ROCKY MOUNTAIN FUDGE COMPANY, INC.)

(A Development Stage Company)

CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

June 30, 2011

BITZIO, INC.

(Formerly Rocky Mountain Fudge Company, Inc.)

(A Development Stage Company)

Consolidated Balance Sheets

	June 30,			December 31,
	2011			2010
	(Unaudited)
ASSETS
CURRENT ASSETS

Cash	$	2,731		$	18,068
Prepaid expenses		292,500			108

Total Current Assets		295,231			18,176

FIXED ASSETS

Computer equipment, net		1,365			1,706

TOTAL ASSETS	$	296,596		$	19,882

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES

Accounts payable	$	440		$	146
Accounts payable and accrued expenses - related party		392			-
Note payable - related party		25,000			392

Total Current Liabilities		25,832			538


STOCKHOLDERS' EQUITY

Common stock; 75,000,000 shares authorized, at $0.001 par value, 33,750,000 and 33,000,000 shares issued and outstanding, respectively		33,750			33,000
Additional paid-in capital		501,700			208,450
Deficit accumulated during the development stage		(264,686	)		(222,106	)

Total Stockholders' Equity		270,764			19,344

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	296,596		$	19,882

The accompanying notes are an integral part of these consolidated financial statements.

F-1

BITZIO, INC.

(Formerly Rocky Mountain Fudge Company, Inc.)

(A Development Stage Company)

Consolidated Statements of Operations

(Unaudited)

													From Inception
													on January 4,
	For the Three Months Ended						For the Six Months Ended						1990 through
	June 30,						June 30,						June 30,
	2011			2010			2011			2010			2011

REVENUES	$	-		$	-		$	-		$	-		$	157,702

COST OF SALES		-			-			-			-			58,459

GROSS PROFIT		-			-			-			-			99,243

OPERATING EXPENSES

General and administrative		19,342			12,768			22,865			17,203			268,776
Professional fees		13,888			2,475			19,128			4,475			95,631
Depreciation		170			-			341			-			682

Total Operating Expenses		33,400			15,243			42,334			21,678			365,089

OPERATING LOSS		(33,400	)		(15,243	)		(42,334	)		(21,678	)		(265,846	)

OTHER INCOME (EXPENSES)

Interest income		-			-			-			-			4,437
Interest expense		(246	)		(197	)		(246	)		(644	)		(3,277	)

Total Other Income (Expense)		(246	)		(197	)		(246	)		(644	)		1,160

LOSS BEFORE INCOME TAXES		(33,646	)		(15,440	)		(42,580	)		(22,322	)		(264,686	)
PROVISION FOR INCOME TAXES		-			-			-			-			-

NET LOSS	$	(33,646	)	$	(15,440	)	$	(42,580	)	$	(22,322	)	$	(264,686	)

BASIC AND DILUTED LOSS PER SHARE	$	(0.00	)	$	(0.00	)	$	(0.00	)	$	(0.00	)

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING		33,090,659			22,450,548			33,045,580			15,762,432

The accompanying notes are an integral part of these consolidated financial statements.

F-2

BITZIO, INC.

(Formerly Rocky Mountain Fudge Company, Inc.)

(A Development Stage Company)

Consolidated Statements of Stockholders' Equity (Deficit)

										Deficit
										Accumulated
							Additional			During the			Total
	Common Stock						Paid-In			Development			Stockholders'
	Shares			Amount			Capital			Stage			Equity
Balance at inception of development stage on January 4, 1990		-		$	-		$	-		$	-		$	-

Common stock issued for cash at $0.001 per share on August 10, 1990		4,800,000			4,800			(3,600	)		-			1,200

Services contributed by shareholders		-			-			2,400			-			2,400

Shares cancelled as contributed capital by shareholders		(2,000,000	)		(2,000	)		2,000			-			-

Common stock issued for cash at $0.0003 per share on December 15, 1998		2,000,000			2,000			(1,400	)		-			600

Common stock issued for cash at $0.25 per share		200,000			200			49,800			-			50,000

Stock offering costs		-			-			(10,000	)		-			(10,000	)

Net loss from inception of development stage through December 31, 2004		-			-			-			(44,200	)		(44,200	)

Balance, December 31, 2004		5,000,000			5,000			39,200			(44,200	)		-

Capital contributed by shareholder		-			-			50,000			-			50,000

Net loss for the year ended December 31, 2005		-			-			-			(19,545	)		(19,545	)

Balance, December 31, 2005		5,000,000			5,000			89,200			(63,745	)		30,455

Services contributed by shareholders		-			-			5,000			-			5,000

Net loss for the year ended December 31, 2006		-			-			-			(23,234	)		(23,234	)

Balance, December 31, 2006		5,000,000		$	5,000		$	94,200		$	(86,979	)	$	12,221

The accompanying notes are an integral part of these consolidated financial statements.

F-3

BITZIO, INC.

(Formerly Rocky Mountain Fudge Company, Inc.)

(A Development Stage Company)

Consolidated Statements of Stockholders' Equity (Deficit)

							Deficit
							Accumulated
					Additional		During the			Total
	Common Stock				Paid-in		Exploration			Stockholders'
	Shares		Amount		Capital		Stage			Equity

Balance, December 31, 2006		5,000,000	$	5,000	$	94,200	$	(86,979	)	$	12,221

Common shares issued for debt		4,000,000		4,000		22,300		-			26,300

Services contributed by shareholders		-		-		5,000		-			5,000

Net loss for the year ended December 31, 2007		-		-		-		(36,752	)		(36,752	)

Balance, December 31, 2007		9,000,000		9,000		121,500		(123,731	)		6,769

Services contributed by shareholders		-		-		7,200		-			7,200

Capital contributed by shareholder		-		-		25,750		-			25,750

Net loss for the year ended December 31, 2008		-		-		-		(33,876	)		(33,876	)

Balance, December 31, 2008		9,000,000		9,000		154,450		(157,607	)		5,843

Services contributed by shareholders		-		-		1,000		-			1,000

Net loss for the year ended December 31, 2009		-		-		-		(26,287	)		(26,287	)

Balance, December 31, 2009		9,000,000		9,000		155,450		(183,894	)		(19,444	)

Common shares issued for cash		16,000,000		16,000		34,000		-			50,000

Common shares issued for debt		8,000,000		8,000		17,000		-			25,000

Services contributed by shareholders		-		-		2,000		-			2,000

Net loss for the year ended December 31, 2010		-		-		-		(38,212	)		(38,212	)

Balance, December 31, 2010		33,000,000		33,000		208,450		(222,106	)		19,344

Services contributed by shareholders (unaudited)		-		-		1,500		-			1,500

Common shares issued for services (unaudited)		750,000		750		291,750		-			292,500

Net loss for the six months ended June 30, 2011 (unaudited)		-		-		-		(42,580	)		(42,580	)

Balance, June 30, 2011 (unaudited)		33,750,000	$	33,750	$	501,700	$	(264,686	)	$	270,764

The accompanying notes are an integral part of these consolidated financial statements

F-4

BITZIO, INC.

(Formerly Rocky Mountain Fudge Company, Inc.)

(A Development Stage Company)

Consolidated Statements of Cash Flows

(Unaudited)

							From Inception
							on January 4,
	For the Six Months Ended						1990 through
	June 30,						June 30,
	2011			2010			2011

CASH FLOWS FROM OPERATING ACTIVITIES

Net loss	$	(42,580	)	$	(22,322	)	$	(264,686	)
Adjustments to reconcile net loss to net cash used by operating activities:
Services contributed by officers and shareholders		1,500			1,000			16,700
Depreciation and amortization		341			-			683
Loss on settlement of debt		-			-			936
Changes in operating assets and liabilities:
Prepaid expenses		108			-			-
Accounts payable and accrued expenses		294			1,559			440
Due to related parties		-			644			1,651

Net Cash Used in Operating Activities		(40,337	)		(19,119	)		(244,276	)

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of computer equipment		-			(2,048	)		(2,048	)

Net Cash Used in Investing Activities		-			(2,048	)		(2,048	)

CASH FLOWS FROM FINANCING ACTIVITIES

Note payable - related party		25,000			-			74,105
Contributed capital		-			-			83,150
Sale of common stock for cash		-			50,000			91,800

Net Cash Provided by Financing Activities		25,000			50,000			249,055

NET INCREASE (DECREASE) IN CASH		(15,337	)		28,833			2,731

CASH AT BEGINNING OF PERIOD		18,068			5,476			-

CASH AT END OF PERIOD	$	2,731		$	34,309		$	2,731

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

CASH PAID FOR:

Interest	$	-		$	-		$	79
Income Taxes	$	-		$	-		$	-

NON CASH FINANCING ACTIVITIES

Common stock issued for debt	$	-		$	24,064		$	50,364
Common stock issued for prepaid expenses	$	292,500		$	-		$	292,500

The accompanying notes are an integral part of these consolidated financial statements.

F-5

BITZIO, INC.

(Formerly Rocky Mountain Fudge Company, Inc.)

(A Development Stage Company)

Notes to the Unaudited Condensed Consolidated Financial Statements

June 30, 2011 and December 31, 2010

NOTE 1 - CONDENSED FINANCIAL STATEMENTS

The accompanying financial statements have been prepared by the Company without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows at June 30, 2011 and 2010 and for all periods presented have been made.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. It is suggested that these condensed financial statements be read in conjunction with the financial statements and notes thereto included in the Company's December 31, 2010 audited financial statements. The results of operations for the periods ended June 30, 2011 and 2010 are not necessarily indicative of the operating results for the full years.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Reclassification

Certain balances in previously issued financial statements have been reclassified to be consistent with the current period presentation.

Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates

Recent Accounting Pronouncements

The Company has evaluated recent accounting pronouncements and their adoption has not had or is not expected to have a material impact on the Company’s financial position or statements.

NOTE 3 - RELATED PARTY TRANSACTIONS

During the period ended June 30, 2011, a shareholder of the Company loaned the Company $25,000. Previously, the Company’s president paid $392 of expenses on behalf of the Company, which was added to the terms of the note. The note accrues interest at a rate of 8.0% per annum, and is due on demand. As of June 30, 2011, accrued interest payable pursuant to the note totaled $247.

During the six months ended June 30, 2011, the Company’s president performed services valued at $1,500 which have been recorded as a contribution to capital.

NOTE 4 - GOING CONCERN

The Company's financial statements are prepared using accounting principles generally accepted in the United States of America applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and allow it to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations.

F-6

BITZIO, INC.

(Formerly Rocky Mountain Fudge Company, Inc.)

(A Development Stage Company)

Notes to the Unaudited Condensed Consolidated Financial Statements

June 30, 2011 and December 31, 2010

NOTE 4 - GOING CONCERN (CONTINUED)

In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management's plans to obtain such resources for the Company include (1) obtaining capital from management and significant shareholders sufficient to meet its minimal operating expenses, and (2) seeking out and completing mergers with existing operating companies. However, management cannot provide any assurances that the Company will be successful in accomplishing any of its plans.

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

NOTE 5 – SIGNIFICANT EVENTS

Formation of Subsidiary

On May 28, 2010 the Company formed Eveps International, Inc. (“Eveps”), a Nevada company, as a wholly-owned subsidiary. Eveps was formed with the intent to be utilized as a vehicle to facilitate any potential future merger transactions with existing operating entities. On September 24, 2010 the Company changed the corporate name of this entity from Eveps International, Inc. to Wireless Power Controls, Inc. (“Wireless”), which is a wholly-owned subsidiary of the Company. All intercompany transactions between the Company and Wireless have been eliminated in the preparation of these consolidated financial statements.

Corporate Name Change

Effective May 31, 2011, a Certificate of Amendment to Articles of Incorporation was filed with the Nevada Secretary of State changing the name of the Registrant from Rocky Mountain Fudge Company, Inc. to Bitzio, Inc. Pursuant to this transaction, shares of the Company’s common stock are now trading under the Company’s new trading symbol, BTZOD.

Stock-Split

Effective May 19, 2011, the Registrant effected a four-for-one forward-split of the shares of its common stock. All references to common stock activity in these financial statements have been retroactively restated so as to incorporate the effects of this stock-split.

Equity Transactions

On June 20, 2011, the Company issued 750,000 to various consultants for services to be performed over the succeeding 12 months. The shares were valued at the trading price on the issuance date of $0.39 per share, for a total value of $292,500, and are being amortized over the 12-month service period.

NOTE 6 – SUBSEQUENT EVENTS

Acquisition of Empire Group, LLC

On July 11, 2011, the Company’s wholly-owned subsidiary, Empire Holding, Inc., entered into an agreement (the “Agreement”) with two individuals (collectively, the “Sellers”) to acquire all of their interests in The Empire Group LLC. There is no material relationship between the Company and the Sellers, other than the Agreement.

F-7

BITZIO, INC.

(Formerly Rocky Mountain Fudge Company, Inc.)

(A Development Stage Company)

Notes to the Unaudited Condensed Consolidated Financial Statements

June 30, 2011 and December 31, 2010

NOTE 6 – SUBSEQUENT EVENTS (Continued)

The Company, through its subsidiary Empire Holding, Inc. will pay the Sellers a total of $600,000 in three monthly installments of $200,000 each, commencing on the July 31, 2011 closing date of the Agreement.

The Empire Group LLC is an established developer of entertainment-based mobile applications for smartphones.

Acquisition of Bitzio Corp.

On July 13, 2011, the Company’s wholly owned subsidiary, Bitzio Holdings, Inc., entered into an agreement (the “Agreement”) with an individual (the “Seller”) to acquire all of the shares of Bitzio Corp. There is no material relationship between the Company and the Seller, other than the Agreement.

Bitzio Corp. is a company that focuses on developing niche mobile applications for consumers and organizations.

As consideration for the acquisition, the Company, through its subsidiary Bitzio Holdings, Inc., will grant to the Seller 5,000,000 shares of the Company’s common stock. These shares were issued on August 8, 2011.

Acquisition of Digispace Solutions, LLC

On August 3, 2011, the Company’s wholly-owned subsidiary, Digispace Holdings, Inc., entered into an agreement (the “Digispace Agreement”) with two individuals (collectively, the “Sellers”) to acquire all of their interests in Digispace Solutions, LLC. As consideration for the acquisition, Digispace Holdings, Inc. will pay to the Sellers $200,000 cash in 12 monthly installments commencing on the closing date and will assume approximately $575,000 of Digispace Solutions, LLC debt. The Company will grant options to the Sellers to purchase up to 1,000,000 shares of the Company’s common stock at a price of $0.45 per share for five years following the closing date. The closing date for the acquisition is contracted to be or before August 22, 2011.

There is no material relationship between the Company and the Sellers, other than the Digispace Agreement and the Bitzio Corp. Agreement described below.

Digispace Solutions, LLC is an online performance-based advertising company offering a variety of services to assist in the development of a company’s online presence, marketing, tracking and customer management. It provides proprietary web technologies to power online strategies and solutions.

Stock Option Grants

On July 1, 2011, the Company granted options to purchase 5,000,000 shares of common stock to an officer of the Company. These options have a strike price of $0.25 per share, and expire after a period of five years.

Other Events

In accordance with ASC 855-10, Company management reviewed all material events through the date of this report and there are no material subsequent events to report.

F-8

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

The following information should be read in conjunction with the financial statements and notes thereto appearing elsewhere in this Form 10-Q.

Going Concern

Our independent auditors have indicated in a footnote to our financial statements that we have not yet established an ongoing source of revenues sufficient to cover operating costs and to allow us to continue as a going concern. Our ability to continue as a going concern is dependent on us securing and maintaining adequate capital to fund operating losses until we become profitable. If we are unable to increase revenues or secure adequate financing in the near future, allowing us to fully implement our business plan, our ability to continue as a going concern may be compromised, and we could be forced to cease operations.

Plan of Operation

During 2010, we began to explore potential merger candidates – existing operating entities or start-ups, likely in the technology industry. Any such mergers would be facilitated with the issuance of common stock, and would play a key role in diversifying our business interests.

On May 21, 2010 we formed Eveps International, Inc., a Nevada company, as a wholly-owned subsidiary. We created the subsidiary to help facilitate any future acquisition or merger transactions with which we may become involved. On September 24, 2010, we changed the name of the subsidiary to Wireless Power Controls, Inc. (“Wireless”) in connection with a prospective business opportunity in the energy management industry that management has been investigating. As of June 30, 2011 Wireless had no assets or liabilities, and had not earned any revenues. Effective June 10, 2011, a Certificate of Amendment to Articles of Incorporation was filed with the Nevada Secretary of State changing the name of the Company from Rocky Mountain Fudge Company, Inc. to Bitzio, Inc. Pursuant to this transaction, shares of the Company’s common stock are now trading under the Company’s new trading symbol, BTZOD.

Subsequent to June 30, 2011 the Company began implementing its business plan of consummating strategic business acquisitions. Below is a brief discussion on the three acquisitions consummated to date:

Acquisition of Empire Group, LLC

The Empire Group LLC is an established developer of entertainment-based mobile applications for smartphones.

Acquisition of Bitzio Corp.

Bitzio Corp. is a company that focuses on developing niche mobile applications for consumers and organizations.

Acquisition of Digispace Solutions, LLC

There is no material relationship between the Company and the Sellers, other than the Digispace Agreement and the Bitzio Corp. Agreement described below.

As of June 30, 2011, we had cash of $2,731, which we believe will satisfy our current cash demands. However, if our ongoing business does not provide sufficient revenues to maintain our business operations, we may need to seek additional financing. Any additional funding would most likely come from current directors or principal stockholders, although they are under no obligation to provide additional funding and there is no assurance outside funding will be available on terms acceptable to us, or at all.

To achieve these goals we intend to exploit our Internet website to the extent possible and create new business by advertising, as funds permit. Management believes that these plans can be successfully implemented.

Results of Operations

For the Three Months Ended June 30, 2011 and 2010

We did not realize any revenues during the three-month periods (“second quarter”) ended June 30, 2011 and 2010. During the first quarter of 2011, we incurred a net loss of $33,646 compared to a $15,440 loss during the second quarter of 2010. The increased loss for the second quarter of 2011 is attributed primarily to the 51% increase in general and administrative for the 2011 period and to an increase of 461% in legal and accounting costs related to the preparation and filing with the SEC and the contemplated acquisition of Bitzio, Inc.

For the Six Months Ended June 30, 2011 and 2010

We did not realize any revenues during the six-month periods (“first half”) ended June 30, 2011 and 2010. During the first half of 2011, we incurred a net loss of $42,580 compared to a $22,322 loss during the first half of 2010. The increased loss for the first half of 2011 is attributed primarily to the 33% increase in general and administrative for the 2011 period and to an increase of 327% in legal and accounting costs related to the preparation and filing with the SEC and the contemplated acquisition of Bitzio, Inc.

In the opinion of management, inflation has not and will not have a material effect on our operations in the immediate future.

Liquidity and Capital Resources

At June 30, 2011, we had cash on hand of $2,731 compared to $18,068 at December 31, 2010. The decrease in cash is attributed primarily the net loss for the first half of 2011, partially offset by an increase of $25,000 in the Company’s related-party note payable.

We estimate cash requirements for the next twelve months to be approximately $50,000. Current cash on hand will not be sufficient and if we do not realize adequate revenues, we will need to seek additional funding. We have no agreements or arrangements for future capital. If management or stockholders are unable to provide additional future funding, if the need arises, we may have to look at alternative sources of funding. We do not have any firm plans as to the source of this alternative funding and there is no assurance that such funds will be available or, that even if they are available, that they will be available on terms that will be acceptable to us. In the event we are unable to secure necessary future funding, we may have to curtail our business or cease operations completely.

At June 30, 2011, we had total assets of $296,596 and stockholders' equity of $270,764 compared to total assets of $19,882 stockholders' equity of $19,344 at December 31, 2010.

Net Operating Loss

We have accumulated approximately $222,106 of net operating loss carryforwards through December 31, 2010, which may be offset against taxable income and income taxes in future years. The use of these losses to reduce future income taxes will depend on the generation of sufficient taxable income prior to the expiration of the net operating loss carryforwards. The carry-forwards expire in the year 2031. In the event of certain changes in control, there will be an annual limitation on the amount of net operating loss carryforwards that can be used. No tax benefit has been reported in the financial statements for the year ended December 31, 2010 or the six months ended June 30, 2011 because there is a 50% or greater chance that the carryforward will not be used. Accordingly, the potential tax benefit of the loss carryforward is offset by a valuation allowance of the same amount.

Forward-Looking and Cautionary Statements

This report contains forward-looking statements relating to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may,” “will” “should," “expect," "intend," "plan," anticipate," "believe," "estimate," "predict," "potential," "continue," or similar terms, variations of such terms or the negative of such terms. These statements are only predictions and involve known and unknown risks, uncertainties and other factors. Although forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment, actual results could differ materially from those anticipated in such statements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

Item 3.

Quantitative and Qualitative Disclosures About Market Risk.

This item is not required for a smaller reporting company.

Item 4(T).

Controls and Procedures.

Evaluation of Disclosure Controls and Procedures. Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms. Disclosure and control procedures are also designed to ensure that such information is accumulated and communicated to management, including the chief executive officer and principal accounting officer, to allow timely decisions regarding required disclosures.

As of the end of the period covered by this quarterly report, we carried out an evaluation, under the supervision and with the participation of management, including our chief executive officer and principal accounting officer, of the effectiveness of the design and operation of our disclosure controls and procedures. In designing and evaluating the disclosure controls and procedures, management recognizes that there are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their desired control objectives. Additionally, in evaluating and implementing possible controls and procedures, management is required to apply its reasonable judgment. Based on the evaluation described above, our management, including our principal executive officer and principal accounting officer, have concluded that, as of June 30, 2011, our disclosure controls and procedures were not effective due to a lack of adequate segregation of duties and the absence of an audit committee.

Changes in Internal Control Over Financial Reporting. Management has evaluated whether any change in our internal control over financial reporting occurred during the second quarter of fiscal 2011. Based on its evaluation, management, including the chief executive officer and principal accounting officer, concludes that there has been no change in our internal control over financial reporting during the first quarter of fiscal 2011 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

Item 1.

Legal Proceedings

There are no material pending legal proceedings to which we are a party or to which any of our property is subject and, to the best of our knowledge, no such actions against us are contemplated or threatened.

Item 1A.

Risk Factors

This item is not required for a smaller reporting company.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

This item is not applicable.

Item 3.

Defaults Upon Senior Securities

This Item is not applicable.

Item 4.

Removed and Reserved

Item 5.

Other Information

On April 29, 2011, pursuant to action taken by our sole remaining director, Steven D. Moulton, the Board of Directors appointed Gordon McDougall to become and serve as a director of the Company. Mr. McDougall fills a vacancy on the Board created by the resignation of Jacob Colby as a director on April 25, 2011. Mr. Colby resigned for personal reasons.

The Board of Directors also appointed Mr. McDougall as our President and Chief Executive Officer, replacing Moulton in those positions. Mr. Moulton remains as our Secretary / Treasurer. There were no understandings or arrangements with any person regarding Mr. McDougall’s appointment as a director, President and Chief Executive Officer.

On June 23, 2011, the Company issued 750,000 to various consultants for services to be performed over the succeeding 12 months. The shares were valued at the trading price on the issuance date of $0.39 per share, for a total value of $292,500, and are being amortized over the six-month service period.

Item 6.

Exhibits

Exhibit 10.1	Form of Company Acquisition Agreement with The Empire Group, LLC

Exhibit 10.2	Form of Company Acquisition Agreement with The Bitzio Corp.

Exhibit 10.3	Form of Proposed Acquisition Agreement with Digispace Holdings, Inc.

Exhibit 10.3	Form of Option to Purchase Common Stock

Exhibit 31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Exhibit 31.2	Certification of Principal Accounting Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Exhibit 32.1	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Exhibit 32.2	Certification of Principal Accounting Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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.

	BITZIO, INC.

Date: August 15, 2011	By:	/S/ Gordon McDougall
		Gordon McDougall
		President, C.E.O. and Director

	By:	/S/ Steven M. Moulton
		Steven M. Moulton
		Secretary / Treasurer and Director
		(Principal Accounting Officer)

Attached files

Bitzio, Inc. Reports

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