Thinspace Technology, Inc. - FORM 10-Q

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EX-32.2 - EXHIBIT 32.2 - Thinspace Technology, Inc.	ex322.htm
EX-31.1 - EXHIBIT 31.1 - Thinspace Technology, Inc.	ex311.htm
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EX-31.2 - EXHIBIT 31.2 - Thinspace Technology, Inc.	ex312.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 quarterly period ended March 31, 2013

TRANSITIONAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transitional period from ______ to ______

Commission File No. 0-52524

VANITY EVENTS HOLDING, INC.

(Exact name of registrant as specified in its charter)

Delaware		43-2114545
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

1111 Kane Concourse, Suite 306

Bay Harbor Islands, FL 33154

(Address of principal executive offices) (zip code)

(786) 763-3830

(Registrant's telephone number)

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 website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 229.405 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, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

	Large accelerated filer o	Accelerated filer o	Non-accelerated filer o
		Smaller Reporting Company x

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act) Yes o No x

Number of shares of common stock issued and outstanding as of May 2, 2013 was 3,685,526.

VANITY EVENTS HOLDING, INC.

QUARTERLY REPORT ON FORM 10-Q

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION

Item 1.	Unaudited Financial Statements	3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	11
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	14
Item 4.	Controls and Procedures	15

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	16
Item 1A.	Risk Factors	16
Item 1B.	Unresolved Staff Comments	16
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	16
Item 3.	Defaults Upon Senior Securities	16
Item 4.	Mine Safety Disclosures	18
Item 5.	Other Information	18
Item 6.	Exhibits	18

SIGNATURES		19

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Item 1. Unaudited Financial Statements

VANITY EVENTS HOLDING, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

MARCH 31, 2013 AND DECEMBER 31, 2012

(Unaudited)

	March 31,			December 31,
	2013			2012


Assets

Current assets:
Cash and cash equivalents	$	9,886		$	85,580

Total current assets		9,886			85,580

Prepaid consulting fee		325,000			406,250
Intangible assets		55,400			55,400

Total assets	$	390,286		$	547,230

Liabilities and stockholders' deficit

Current liabilities:
Accounts payable and accrued expenses	$	506,114		$	452,488
Notes payable, net of discount of $178,953 and $263,613, respectively		849,787			861,446
Accrued payroll liabilities and sales tax liabilities		296,113			296,566
Other liabilities		37,169			37,169
Derivative liabilities		15,735,363			15,069,135
Total current liabilities		17,424,546			16,716,804


Stockholders' deficit

Preferred stock, undesignated, authorized 49,925,000 shares, $0.001 par value,
no shares issued and outstanding, respectively		-			-
Preferred stock, Series B, authorized 75,000 shares, $0.001 par value,
75,000 shares issued and outstanding, respectively		75			75
Common stock authorized 500,000,000 shares, $0.001 par value,
3,685,526 and 2,970,864 shares issued and outstanding, respectively		3,686			2,971
Additional paid in capital		3,385,579			1,624,767
Accumulated deficit		(20,423,600	)		(17,797,387	)
Total stockholders' deficit		(17,034,260	)		(16,169,574	)

Total liabilities and stockholders' deficit	$	390,286		$	547,230

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

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VANITY EVENTS HOLDING, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE MONTHS ENDED MARCH 31, 2013 AND 2012

(Unaudited)

	Three Months Ended March 31,
	2013			2012


Revenues	$	-		$	424

General and administrative expense		596,787			90,843

Loss from operations		(596,787	)		(90,419	)


Loss on change in fair value of derivative liability		(1,790,287	)		(11,305,883	)
Gain on conversion of debt		4,214			-
Interest expense		(243,353	)		(5,763,998	)

Loss before provision for income taxes		(2,626,213	)		(17,160,300	)

Provision for income taxes		-			-

Net loss		(2,626,213	)		(17,160,300	)
Preferred dividend		(1,875	)		(5,400	)

Net loss attributable to common shareholders	$	(2,628,088	)	$	(17,165,700	)

Basic and diluted loss per share	$	(0.85	)	$	(57.76	)

Weighted average shares outstanding,
Basic and diluted		3,079,630			297,166

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

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VANITY EVENTS HOLDING, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31, 2013 AND 2012

(Unaudited)

	Three Months Ended March 31,
	2013			2012

Cash flows from operating activities:
Net loss	$	(2,626,213	)	$	(17,160,300	)
Adjustments to reconcile net loss to net
cash used in operating activities:
Stock based compensation		493,750			-
Gain on conversion of debt		(4,214	)		-
Change in fair value of derivative liability		1,790,287			11,305,883
Amortization of debt discount		219,398			5,748,658
Changes in operating assets and liabilities:
Accounts payable and other current liabilities		51,298			23,640

Net cash used in operating activities		(75,694	)		(82,119	)

Cash flows from financing activities:
Proceeds from notes payable - other		-			100,000

Net cash provided by financing activities		-			100,000

Net (decrease) increase in cash		(75,694	)		17,881
Cash, beginning of period		85,580			16,324
Cash, end of period	$	9,886		$	34,205

Supplemental Schedule of Cash Flow Information:
Cash paid for interest	$	-		$	-

Non-cash investing and financing activities:
Fair value of common stock issued upon conversion of notes	$	1,350,902		$	-
Note payable converted to common stock		96,319			-
Derivative liability reclassified to equity upon conversion of debt		1,262,932			-
Common stock issued for purchase of assets		-			2,600,000
Common stock issued as payment of prepaid consulting fees		-			650,000

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

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VANITY EVENTS HOLDING, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2013 AND 2012

(Unaudited)

NOTE 1 - ORGANIZATION AND LINE OF BUSINESS

COMPANY OVERVIEW

Nature of Operations

VANITY EVENTS HOLDING, INC. (the “Company” or “Vanity” or “we” or “our”), was organized as a Delaware Corporation on August 25, 2004, and is a holding company. The primary focus of the company is the development of e-commerce sites in the collaborative consumption market place. Management is also active in reviewing potential acquisitions that they believe will enhance the value of the company.

At March 31, 2013, the Company’s wholly-owned subsidiaries include Vanity Events, Inc.; America’s Cleaning Company; and Vanity Licensing, Inc.

Beginning in 2012, management decided to evolve its business strategy from a licensing and marketing company to an e-commerce transactional business where the Company’s management felt it had the relevant core competency and experience to successfully build value for the Company’s shareholders.

On February 29, 2012, the Company entered into a domain name assignment agreement with Greg Pippo, the Company’s former chief financial officer ( “Pippo”), pursuant to which Pippo assigned all of his rights, title and interest and goodwill in or associated with the domain names www.buyborroworsell.com and www.buyborroworsell.net (the “Domain Names”), together with any unregistered or registered trademarks, service marks, copyrights or other intellectual property or property rights based on or in any way related to the Domain Names.

On April 4, 2012, the Company entered into an asset purchase agreement (the “Aegis Agreement”) with Aegis Worldwide, LLC, an entity controlled by Pippo ( “Aegis”), pursuant to which Aegis agreed to sell, transfer, convey, and deliver to the Company, all of Aegis’s right, title and interest and goodwill in or associated with certain domain names (the “Aegis Domain Names”) along with any information or materials proprietary to Aegis that relate to the business or affairs associated with the Aegis Domain Names which is of a confidential nature, including, but not limited to, trade secrets, information or materials relating to existing or proposed products (in all and various stages of development), “know-how”, marketing techniques and materials, marketing and development plans and pricing policies (the “Assets").

Simultaneously with the execution of the Aegis Agreement, on April 4, 2012, the parties entered into an option agreement, pursuant to which Aegis shall have the option to purchase the Assets and all enhancements to the Assets from the Company in consideration for (i) an amount in cash equal to the net proceeds used by the Company for the enhancement of the Assets on or after April 4, 2012 and (ii) the cancellation of the shares issued to Aegis in connection with the Aegis Agreement. The option is exercisable beginning on the twelve month anniversary of the Closing Date and terminating on the 24 month anniversary of the Closing Date.

At this time the company is focusing on the development of e-commerce sites in the collaborative consumption marketplace. In these challenging economic times, we believe that consumers need access to many different types of goods leveraging the economies that come with shared consumption, along with a convenient and user friendly way to sell or monetize the goods that they currently own.

Our web properties will house several stand-alone sites specifically addressing areas management has identified as attractive in the world of collaborative consumption. What that in turn means is that the consumer will not own the goods unless they are purchased outright, instead they will enjoy the use of them through the access that their membership fees allow. The Company plans to offer strong mobile applications to support these sites, as well as leveraging both social and traditional media to build consumer awareness.

Management plans on developing an engaging community experience filled with user feedback and industry specific content that will further enhance the attractiveness of each stand-alone site. At this time these sites are in the planning and development stages. It is currently planned that the first site to be launched will be watchlender.com. This site will offer the consumer a range of luxury watches for rent or for purchase. Using this experience it is planned to launch additional sites utilizing the website domains that the Company has purchased including ToysLender.com, SneakerLender.com, FineArtLender.com, Shoelender.com, ElectronicsLender.com and CoutureLender.com. Management plans to utilize existing relationships with various suppliers to source product to be offered on the sites. The company is working closely with outsourced third party developers to launch the first of these web and mobile platforms.

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Going Concern

We have incurred a net loss of $2,626,213 for the three months ended March 31, 2013; of this loss, $1,790,287 was the result of a net, non-cash expense from the change in value of derivative instruments and $219,398 was the result of a non-cash expense for debt discount and financing expense related to the issuance of derivative instruments. As of March 31, 2013 we have negative working capital of $17,414,660 and a stockholders’ deficit of $17,034,260. As a result, there is substantial doubt about the Company’s ability to continue as a going concern at March 31, 2013.

Management has implemented business plans as described above. Our ability to implement our current business plan and continue as a going concern ultimately is dependent upon our ability to obtain additional equity or debt financing, attain further operating efficiencies and to achieve profitable operations.

There can be no assurances that funds will be available to the Company when needed or, if available, that such funds would be available under favorable terms. In the event that the Company is unable to generate adequate revenues to cover expenses and cannot obtain additional funds in the near future, the Company may seek protection under bankruptcy laws. To date, management has not considered this alternative, nor does management view it as a likely occurrence, since the Company is progressing with various potential sources of new capital and we anticipate a successful outcome from these activities. However, capital markets remain difficult and there can be no certainty of a successful outcome from these activities.

The accompanying unaudited condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern. This basis of accounting contemplates the recovery of the Company’s assets and the satisfaction of liabilities in the normal course of business and does not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

General

The unaudited condensed consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. The information furnished herein reflects all adjustments (consisting of normal recurring accruals and adjustments) which are, in the opinion of management, necessary to fairly present the operating results for the respective periods. Certain information and footnote disclosures normally present in annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations. These consolidated financial statements should be read in conjunction with the audited financial statements and footnotes included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2012. The results for the three months ended March 31, 2013 are not necessarily indicative of the results to be expected for the full year ending December 31, 2013.

The condensed consolidated balance sheet as at December 31, 2012 has been derived from the audited financial statements at that date but do not include all disclosures required by the accounting principles generally accepted in the United States of America.

USE OF ESTIMATES

The preparation of financial statements 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 revenue and expenses during the reporting period. Actual results could differ from those estimates.

REVENUE RECOGNITION

We recognize revenue in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 605 “Revenue Recognition”. Revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred and title has transferred or services have been rendered, the price is fixed and determinable and collectability is reasonably assured. Revenue is not recognized on product sales transacted on a test or pilot basis. Instead, receipts from these types of transactions offset marketing expenses.

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FAIR VALUE OF FINANCIAL INSTRUMENTS

Our short-term financial instruments, including cash, accounts receivable and accounts payable and accrued expenses consist primarily of instruments without extended maturities, the fair value of which, based on management’s estimates, reasonably approximate their book value. The fair value of our notes and advances payable is based on management estimates and reasonably approximates their book value based on their current maturity.

Fair value measurements

ASC 820 “Fair Value Measurements and Disclosure” establishes a framework for measuring fair value and expands disclosure about fair value measurements.

ASC 820 defines fair value as the amount that would be received for an asset or paid to transfer a liability (i.e., an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes the following three levels of inputs that may be used:

Level 1 – Quoted prices in active markets for identical assets or liabilities.

Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

In accordance with ASC 820, the following table represents the fair value hierarchy for our financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2012:

	Level 1		Level 2		Level 3		Total
Assets
Cash and cash equivalents	$	9,886	$	-	$	-	$	9,886
Total Assets	$	9,886	$	-	$	-	$	9,886
Liabilities
Notes payable	$	-	$	-	$	849,787	$	849,787
Conversion derivative liabilities		-		-		15,735,363		15,735,363
Total Liabilities	$	-	$	-	$	16,585,150	$	16,585,150

The following is a description of the valuation methodologies used for these items:

Conversion derivative liability — these instruments consist of certain of our notes which are convertible based on a discount to the market value of our common stock. These instruments were valued using pricing models which incorporate the Company’s stock price, volatility, U.S. risk free rate, dividend rate and estimated life.

The table below sets forth a summary of changes in the fair value of the Company’s Level 3 financial liabilities (warrant derivative liability and conversion derivative liability) for the three months ended March 31, 2013.

Balance at beginning of year	$	15,069,135
Additions to derivative instruments		138,873
Change in fair value of derivative liabilities		1,790,287
Reclassification upon conversion of debt		(1,262,932	)
Balance at end of period	$	15,735,363

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LOSS PER SHARE

We utilize ASC 260, “Earnings Per Share” for calculating the basic and diluted loss per share. Basic loss per share is computed by dividing loss available to common shareholders by the weighted-average number of common shares outstanding. Diluted loss per share is computed similar to basic loss per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. Common equivalent shares are excluded from the computation if their effect is anti-dilutive. There were 123,121,119 common share equivalents at March 31, 2013 and 111,107,116 at March 31, 2012, which have been excluded from the computation of the weighted average diluted shares.

INCOME TAXES

We utilize ASC 740 “Income Taxes” which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each year-end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income.

The Company made a comprehensive review of its portfolio of uncertain tax positions in accordance with recognition standards established by the guidance. As a result of this review, the Company concluded that at this time there are no uncertain tax positions that would result in tax liability to the Company. There was no cumulative effect on retained earnings as a result of applying the provisions of this guidance.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

Recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the AICPA, and the SEC did not, or are not believed by management to have a material impact on the Company's present or future consolidated financial statements.

In July 2012, the Financial Accounting Standards Board issued Accounting Standards Update 2012-02 (“ASU 2012-02”), Intangibles — Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment. The purpose of ASU 2012-02, which amends the guidance to Topic 350, Intangibles — Goodwill and Other, is to simplify the guidance for testing the decline in the realizable value (impairment) of indefinite-lived intangible assets other than goodwill. ASU 2012-02 allows an entity to perform a qualitative assessment to determine whether further impairment testing of indefinite-lived intangible assets is necessary, similar in approach to the qualitative goodwill impairment test. The amendments in ASU 2012-02 permit an entity to first assess qualitatively whether it is more likely than not (more than 50%) that an indefinite-lived intangible asset is impaired, thus necessitating that it perform the quantitative impairment test. An entity is not required to calculate the fair value of an indefinite lived intangible asset and perform the quantitative impairment test unless the entity determines that it is more likely than not that the asset is impaired. ASU 2012-02 is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012 and early adoption is permitted. The adoption of this ASU is not expected to have a material impact on the Company’s financial statements.

NOTE 3 – CONVERTIBLE DEBENTURES AND DERIVATIVE LIABILITIES

The Company has identified the embedded derivatives related to its convertible notes, consisting of the conversion feature, its preferred stock, consisting of the conversion feature, and its warrants. Since certain of the notes are convertible into a variable number of shares, the conversion features of those debentures are recorded as derivative liabilities. Since the warrants and the conversion feature of the preferred stock have a price reset feature, they are recorded as derivative liabilities. The accounting treatment of derivative financial instruments requires that the Company record fair value of the derivatives as of the inception date and to adjust to fair value as of each subsequent balance sheet date.

During the three months ended March 31, 2013 we recorded additions to our derivative conversion liabilities related to the conversion feature attributable to interest accrued during the period. These additions aggregated $138,873 which has been charged to interest expense.

During the three months ended March 31, 2013, $96,319 of principal was converted into 714,662 shares of common stock. The Company has recorded expense of $196,695 for the three months ended March 31, 2013 related to the change in fair value of the conversion feature through the date of conversion.

At March 31, 2013, we recalculated the fair value of our embedded conversion features and warrants subject to derivative accounting and have determined that their fair value at March 31, 2013 was $15,735,363. The value of the conversion liabilities and warrant liabilities was determined using the Black-Scholes method based on the following assumptions: (1) risk free interest rate of 0.14% - 0.25%; (2) dividend yield of 0%; (3) volatility factor of the expected market price of our common stock of 140% - 491%; and (4) an expected life of 1 – 1.58 years. We recorded expense of $1,593,592 for the three months ended March 31, 2013.

The Company is in default on nine of its notes, aggregating $542,315 of unpaid principal and $121,832 of unpaid accrued interest. The Company has not repaid principal or accrued but unpaid interest that has become due and payable under the notes. The Company is currently working with the note holders on making arrangements to honor its obligations under the notes, however, there can be no assurance that any such arrangements will ever materialize or be permissible or sufficient to cover any or all of the obligations under the notes.

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NOTE 4 – STOCKHOLDERS’ EQUITY

Preferred Stock

The Company is authorized to issue 50,000,000 shares of preferred stock, with par value of $0.001 per share, of which 75,000 shares have been designated as Series B 10% Convertible preferred stock, with par value of $0.001 per share. There were 75,000 Series B shares issued and outstanding as of March 31, 2013 and December 31, 2012, respectively.

Common Stock

The Company is authorized to issue 500,000,000 shares of common stock, with par value of $0.001 per share. As of March 31, 2013 and December 31, 2012, there were 3,685,526 and 2,970,864 shares of common stock issued and outstanding, respectively.

During the three months ended March 31, 2013 we issued 714,662 shares of common stock upon conversion of notes payable in the amount of $96,319. The shares had a value of $1,350,902 at the dates of conversion.

NOTE 5 – SUBSEQUENT EVENTS

On April 2, 2013, Vanity Events Holding, Inc. (the “Company”) entered into a Securities Purchase Agreement (the “Purchase Agreement”) with Greystone Capital Partners, Inc., an accredited investor (the “Investor”), providing for the sale by the Company to the Investors of 8% convertible debentures in the aggregate principal amount of $52,000 (the “Debenture”). The Debentures mature on the first anniversary of the date of issuance (the “Maturity Date”) and bears interest a rate of 8% per annum, payable on the Maturity Date. The Investor may convert, at any time, the outstanding principal and accrued interest on the Debenture into shares of the Company’s common stock, par value $0.001 per share (“Common Stock”) at a conversion price that is the lesser of (i) ninety percent (90%) discount of the average of the closing bid price of the Common Stock during the five (5) trading days immediately preceding the Conversion Date as quoted by Bloomberg, LP or (ii) the average of the closing bid price per share during the five (5) trading days prior to the date of any such conversion. The Conversion Price may be adjusted pursuant to the other terms of this Debenture “Conversion Price”).

In May 2013, an investor converted a portion of his convertible Note issued in November 2010, which resulted in the issuance of 171,974 shares of the Company’s common stock.

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

This discussion contains forward-looking statements based upon our current expectations and involves risks and uncertainties. To the extent that the information presented in this report discusses financial projections, information or expectations about our business plans, results of operations, products or markets, or otherwise makes statements about future events, such statements are forward-looking. Such forward-looking statements can be identified by the use of words such as “may,” “will,” “should,” “might,” “would,” “intends,” “anticipates,” “believes,” “estimates,” “projects,” “forecasts,” “expects,” “plans,” and “proposes.” Although we believe that the expectations reflected in these forward-looking statements are based on reasonable assumptions, there are a number of risks and uncertainties that could cause actual results to differ materially from such forward-looking statements. These include, among others, the cautionary statements in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of this report. These cautionary statements identify important factors that could cause actual results to differ materially from those described in the forward-looking statements. When considering forward-looking statements in this report, you should keep in mind the cautionary statements in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section below, and other sections of this report.

All forward-looking statements included in this quarterly report are based on information available to us on the date hereof, and we assume no obligation to update any such forward-looking statements, unless required by law. It is important to note that our actual results could differ materially from those included in such forward-looking statements.

The following discussion and analysis of financial condition and results of operations should be read in conjunction with the financial statements and related notes included herein.

Overview

The Company is a holding company. The primary focus of the company is the development of e-commerce sites in the collaborative consumption market place. Management is also active in reviewing potential acquisitions that they believe will enhance the value of the company.

On April 4, 2012, the Company entered into an asset purchase agreement (the “Aegis Agreement”) with Aegis Worldwide, LLC, an entity controlled by Greg Pippo, the Company’s former chief financial officer (the “Aegis”), pursuant to which Aegis agreed to sell, transfer, convey, and deliver to the Company, all of Aegis’s right, title and interest and goodwill in or associated with certain domain names (the “Aegis Domain Names”) along with any information or materials proprietary to Aegis that relate to the business or affairs associated with the Aegis Domain Names which is of a confidential nature, including, but not limited to, trade secrets, information or materials relating to existing or proposed products (in all and various stages of development), “know-how”, marketing techniques and materials, marketing and development plans and pricing policies (the “Assets”). In consideration for the purchase of the Assets, the Company agreed to issue to Aegis 1,000,000 shares of Company’s common stock. On October 12, 2012 the Company received notice of Aegis Worldwide LLC’s intention to return to treasury the 1,000,000 shares of common stock issued in connection with the April 4 2012 Asset Purchase Agreement. The Company accepted the return of the shares without conditions.

Simultaneously with the execution of the Aegis Agreement, on April 4, 2012, the parties entered into an option agreement, pursuant to which Aegis shall have the option to purchase the Assets and all enhancements to the Assets from the Company in consideration for (i) an amount in cash equal to the net proceeds used by the Company for the enhancement of the Assets on or after April 4, 2012 and (ii) the cancellation of the shares issued to Aegis. The option is exercisable beginning on the twelve month anniversary of the Closing Date and terminating on the 24 month anniversary of the Closing Date.

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Using this experience it is planned to launch additional sites utilizing the website domains that the Company has purchased including, ToysLender.com, SneakerLender.com, FineArtLender.com, Shoelender.com, ElectronicsLender.com and CoutureLender.com.

Management plans to utilize existing relationships with various suppliers to source product to be offered on the sites. The company is working closely with outsourced third party developers to launch the first of these web and mobile platforms.

Critical Accounting Policies

The preparation of our financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and judgments that affect our reported assets, liabilities, revenues, and expenses, and the disclosure of contingent assets and liabilities. We base our estimates and judgments on historical experience and on various other assumptions we believe to be reasonable under the circumstances. Future events, however, may differ markedly from our current expectations and assumptions. While there are a number of significant accounting policies affecting our financial statements; we believe the following critical accounting policies involve the most complex, difficult and subjective estimates and judgments:

Use of Estimates - These financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and, accordingly, require management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

Going Concern - The financial statements have been prepared on a going concern basis, and do not reflect any adjustments related to the uncertainty surrounding our recurring losses or accumulated deficit

Revenue Recognition - We recognize revenue in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 605 “Revenue Recognition”. Revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred and title has transferred or services have been rendered, the price is fixed and determinable and collectability is reasonably assured. Revenue is not recognized on product sales transacted on a test or pilot basis. Instead, receipts from these types of transactions offset marketing expenses.

Fair Value of Financial Instruments - Our short-term financial instruments, including cash, accounts payable and other liabilities, consist primarily of instruments without extended maturities, the fair value of which, based on management’s estimates, reasonably approximate their book value. The fair value of the Company’s derivative instruments is determined using option pricing models.

Results of Operations

Three Months ended March 31, 2013 as compared to the Three Months ended March 31, 2012

Revenues:

Net sales were $0 for the three months ended March 31, 2013 compared to net sales of $424 for the 2012 period. Our revenues have been minimal or nonexistent as we implement our current business plan.

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Operating expense:

General and administrative expense for the three months ended March 31, 2013 was $596,787, as compared to $90,843 for the three months ended March 31, 2012, an increase of $505,944, or 556%. The increase in expense in 2012 is primarily attributable to increases in stock based compensation of approximately $413,000 (relating to a stock award to our chief executive officer made in late 2012) and consulting fees of approximately $122,000 (approximately $81,000 of which is stock based), partially offset by a decrease in payroll expense of approximately $39,000. Current general and administrative expense consists primarily of payroll, consulting fees and professional fees. Consulting fees are primarily related to financial public relations, strategic planning, business development, administrative operations, financial projections and marketing.

Other income (expense):

We had expense from the change in the fair value of our derivative liabilities of $1,790,287 during the three months ended March 31, 2013 as compared to expense of $11,305,883 in the comparable 2012 period. The change in the fair value of our derivative liabilities resulted primarily from the changes in our stock price and the volatility of our common stock during the reported periods. Refer to Note 3 to the financial statements for further discussion of our derivative liabilities.

We reported gain from the conversion of debt of $4,214 during the three months ended March 31, 2013, with no comparable item in the 2012 period. The gain on debt conversion resulted from the issuance of common shares to pay off debt, based on the fair value of the shares issued as compared to the carrying value of the related debt. The closing price on the date of conversion is used to compute the actual fair market value of our common stock in determining the amount of the gain or loss.

We reported interest expense of $243,353 during the three months ended March 31, 2013 as compared with interest expense of $5,763,998 during the three months ended March 31, 2012. Interest expense during the 2013 period consists primarily of derivative liabilities issued during the period whose fair values exceeded the proceeds of the debt aggregating $138,873. The balance of the expense for the 2013 period relates to the amortization of debt discount and interest accrued on the debt. Interest expense during the 2012 period consists primarily of the expense associated with the price resets of certain of our derivative instruments aggregating $4,208,664 and derivative liabilities issued during the period whose fair values exceeded the proceeds of the debt aggregating $1,459,585. The balance of the expense for the 2012 period relates to the amortization of debt discount and interest accrued on the debt.

Net loss:

We reported net losses of $2,626,213 and $17,160,300 during the three month periods ended March 31, 2013 and 2012, respectively, resulting from the components described above.

Liquidity and Capital Resources

As of March 31, 2013 we had a working capital deficit of $17,414,660. During April 2013 we raised $52,000 in cash proceeds from the sale of a convertible debenture (see below).

Operating Activities - For the three months ended March 31, 2013, net cash used in operating activities was $75,694, primarily attributable to a loss of $126,992 (after adjusting for non-cash items), partially offset by an increase in accounts payable of $51,298. Net cash used in operating activities for the three months ended March 31, 2012 was $82,119, primarily attributable to a loss of $105,759 (after adjusting for non-cash items) partially offset by an increase in accounts payable of $23,640.

Financing Activities - For the three months ended March 31, 2013 and 2012, net cash provided by financing activities was $0 and $100,000, respectively.

Our continuation as a going concern for a period longer than the current fiscal year is dependent upon our ability to obtain necessary additional funds to continue operations and expansion of our business, to determine the existence, discovery and successful exploitation of potential revenue sources that will be financed primarily through available working capital, the sales of securities and convertible debt, issuance of notes payable other debt or a combination thereof, depending upon the transaction size, market conditions and other factors.

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With the exception of the shares that the Company is obligated to issue to previous investors, for as long as the Debenture is outstanding, the Conversion Price of the Debenture shall be subject to adjustment for issuances of Common Stock or securities convertible into common stock or exercisable for shares of Common Stock at a purchase price of less than the then-effective Conversion Price, on any unconverted amounts, such that the then applicable Conversion Price shall be adjusted using full-ratchet anti-dilution on such new issuances subject, to customary carve outs, including restricted shares granted to officers, and directors and consultants.

We presently do not have any other available credit, bank financing or other external sources of liquidity. We will need to obtain additional capital in order to expand operations and become profitable. In order to obtain capital, we may need to sell additional shares of our common stock or borrow funds from private lenders. There can be no assurance that we will be successful in obtaining additional funding.

We will still need additional capital in order to continue operations until we are able to achieve positive operating cash flow. Additional capital is being sought, but we cannot guarantee that we will be able to obtain such investments. Financing transactions may include the issuance of equity or debt securities, obtaining credit facilities, or other financing mechanisms. However, the trading price of our common stock and a downturn in the equity and debt markets could make it more difficult to obtain financing through the issuance of equity or debt securities. Even if we are able to raise the funds required, it is possible that we could incur unexpected costs and expenses, fail to collect significant amounts owed to us, or experience unexpected cash requirements that would force us to seek alternative financing. Furthermore, if we issue additional equity or debt securities, stockholders may experience additional dilution or the new equity securities may have rights, preferences or privileges senior to those of existing holders of our common stock. If additional financing is not available or is not available on acceptable terms, we will have to curtail our operations.

Off-Balance Sheet Arrangements

We have not entered into any transactions with unconsolidated entities in which we have financial guarantees, subordinated retained interests, derivative instruments or other contingent arrangements that expose us to material continuing risks, contingent liabilities or any other obligations under a variable interest in an unconsolidated entity that provides us with financing, liquidity, market risk or credit risk support.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

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ITEM 4. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that material information required to be disclosed in our periodic reports filed under the Securities Exchange Act of 1934, as amended, or 1934 Act, is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and to ensure that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer as appropriate, to allow timely decisions regarding required disclosure. During the quarter ended March 31, 2013 we carried out an evaluation, under the supervision and with the participation of our management, including the principal executive officer and the principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rule 13(a)-15(e) under the 1934 Act. Based on this evaluation, because of the Company’s limited resources and limited number of employees, management concluded that our disclosure controls and procedures were ineffective as of March 31, 2013.

Management has identified control deficiencies regarding the lack of segregation of duties and the need for a stronger internal control environment. Management of the Company believes that these material weaknesses are due to the small size of the Company’s accounting staff. The small size of the Company’s accounting staff may prevent adequate controls in the future, such as segregation of duties, due to the cost/benefit of such remediation.

To mitigate the current limited resources and limited employees, we rely heavily on direct management oversight of transactions, along with the use of external legal and accounting professionals. As we grow, we expect to increase our number of employees, which will enable us to implement adequate segregation of duties within the internal control framework.

These control deficiencies could result in a misstatement of account balances that would result in a reasonable possibility that a material misstatement to our consolidated financial statements may not be prevented or detected on a timely basis. In light of this material weakness, we performed additional analyses and procedures in order to conclude that our consolidated financial statements for the quarter ended March 31, 2013 included in this Quarterly Report on Form 10-Q were fairly stated in accordance with US GAAP. Accordingly, management believes that despite our material weaknesses, our consolidated financial statements for the quarter ended March 31, 2013 are fairly stated, in all material respects, in accordance with US GAAP.

Limitations on Effectiveness of Controls and Procedures

Our management, including our principal executive officer and principal financial officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include, but are not limited to, the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Changes in Internal Controls

During the fiscal quarter ended March 31, 2013, there have been no changes in our internal control over financial reporting that have materially affected or are reasonably likely to materially affect our internal controls over financial reporting.

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PART II

ITEM 1. LEGAL PROCEEDINGS

From time to time, Vanity may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm its business. Vanity is currently not aware of any such legal proceedings or claims that they believe will have, individually or in the aggregate, a material adverse effect on its business, financial condition or operating results.

ITEM 1A. RISK FACTORS

Not applicable.

ITEM 1B. UNRESOLVED STAFF COMMENTS

Not applicable.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

On June 4, 2010, the Company entered into a securities purchase agreement with Greystone Captial Partners LLC (“Greystone”), providing for the sale by the Company to Greystone of a 10% convertible note in the aggregate principal amount of $50,000, due June 4, 2011 (the “Greystone June 2010 Note”). On August 9, 2011, the Company entered into an omnibus waiver and modification agreement with Greystone related to the Greystone June 2010 Note, pursuant to which, among other things, Greystone agreed to (i) extend the maturity date of the note from June 4, 2011 until September 30, 2011 and (ii) Greystone waived any default or breach that may have resulted by way of the Greystone June 2010 Note maturing on June 4, 2011. As of the date hereof, the Company has not repaid any principal or accrued but unpaid interest that has become due and payable under the Greystone June 2010 Note. The Company is currently working with Greystone on making arrangements to honor its obligations under the Greystone June 2010 Note, however, there can be no assurance that any such arrangements will ever materialize or be permissible or sufficient to cover any or all of the obligations under the Greystone June 2010 Note.

On July 29, 2010, the Company entered into a securities purchase agreement with IIG Management LLC (“IIG”), providing for the sale by the Company to IIG of a 10% convertible note in the aggregate principal amount of $120,000, due July 29, 2011 (the “IIG Note”). On August 9, 2011, the Company entered into an omnibus waiver and modification agreement with IIG related to the IIG Note, pursuant to which, among other things, IIG agreed to (i) extend the maturity date of the note from July 29, 2011 until September 30, 2011 and (ii) IIG waived any default or breach that may have resulted by way of the IIG Note maturing on July 29, 2011. As of the date hereof, the Company has not repaid any principal or accrued but unpaid interest that has become due and payable under the IIG Note. The Company is currently working with IIG on making arrangements to honor its obligations under the IIG Note, however, there can be no assurance that any such arrangements will ever materialize or be permissible or sufficient to cover any or all of the obligations under the IIG Note.

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On November 9, 2010, the Company entered into a securities purchase agreement with Greystone providing for the sale by the Company to Greystone of a 10% convertible note in the aggregate principal amount of $50,000, due November 9, 2011 (the “Greystone Nov 2010 Note”). As of the date hereof, the Company has not repaid any principal or accrued but unpaid interest that has become due and payable under the Greystone Nov 2010 Note. The Company is currently working with Greystone on making arrangements to honor its obligations under the Greystone Nov 2010 Note, however, there can be no assurance that any such arrangements will ever materialize or be permissible or sufficient to cover any or all of the obligations under the Greystone Nov 2010 Note.

On April 6, 2011, the Company entered into a securities purchase agreement with IIG providing for the sale by the Company to IIG of a 10% convertible note in the aggregate principal amount of $135,000, due April 9, 2012 (the “IIG April 2011 Note”). As of the date hereof, the Company has not repaid any principal or accrued but unpaid interest that has become due and payable under the IIG April 2011 Note. The Company is currently working with IIG on making arrangements to honor its obligations under the IIG April 2011 Note, however, there can be no assurance that any such arrangements will ever materialize or be permissible or sufficient to cover any or all of the obligations under the IIG April 2011 Note.

On May 10, 2011, the Company entered into a securities purchase agreement with Greystone providing for the sale by the Company to Greystone of a 10% convertible note in the aggregate principal amount of $50,000, due May 10, 2012 (the “Greystone May 2011 Note”). As of the date hereof, the Company has not repaid any principal or accrued but unpaid interest that has become due and payable under the Greystone May 2011 Note. The Company is currently working with Greystone on making arrangements to honor its obligations under the Greystone May 2011 Note, however, there can be no assurance that any such arrangements will ever materialize or be permissible or sufficient to cover any or all of the obligations under the Greystone May 2011 Note.

On June 13, 2011, the Company entered into a securities purchase agreement with Greystone providing for the sale by the Company to Greystone of a 10% convertible note in the aggregate principal amount of $50,000, due June 13, 2012 (the “Greystone June 2011 Note”). As of the date hereof, the Company has not repaid any principal or accrued but unpaid interest that has become due and payable under the Greystone June 2011 Note. The Company is currently working with Greystone on making arrangements to honor its obligations under the Greystone June 2011 Note, however, there can be no assurance that any such arrangements will ever materialize or be permissible or sufficient to cover any or all of the obligations under the Greystone June 2011 Note.

On October 6, 2011, the Company entered into a securities purchase agreement with Greystone providing for the sale by the Company to Greystone of a 10% convertible note in the aggregate principal amount of $50,000, due October 6, 2012 (the “Greystone October 2011 Note”). As of the date hereof, the Company has not repaid any principal or accrued but unpaid interest that has become due and payable under the Greystone October 2011 Note. The Company is currently working with Greystone on making arrangements to honor its obligations under the Greystone October 2011 Note, however, there can be no assurance that any such arrangements will ever materialize or be permissible or sufficient to cover any or all of the obligations under the Greystone October 2011 Note.

On November 10, 2011, the Company entered into a securities purchase agreement with Greystone providing for the sale by the Company to Greystone of a 10% convertible note in the aggregate principal amount of $50,000, due November 10, 2012 (the “Greystone Nov 2011 Note”). As of the date hereof, the Company has not repaid any principal or accrued but unpaid interest that has become due and payable under the Greystone Nov 2011 Note. The Company is currently working with Greystone on making arrangements to honor its obligations under the Greystone Nov 2011 Note, however, there can be no assurance that any such arrangements will ever materialize or be permissible or sufficient to cover any or all of the obligations under the Greystone Nov 2011 Note.

On March 21, 2012, the Company entered into a securities purchase agreement with Greystone providing for the sale by the Company to Greystone of a 8% convertible debenture in the principal amount of up to $100,000 due March 21, 2013 (the “Greystone Mar 2012 note”). On September 21, 2012 Greystone assigned the note to Adam Wasserman. As of the date hereof, the Company has repaid any principal or accrued but unpaid interest that has become due and payable under the Wasserman Mar 2012 Note. The Company is currently working with Wasserman on making arrangements to honor its obligations under the Wasserman Mar 2012 Note, however, there can be no assurance that any such arrangements will ever materialize or be permissible or sufficient to cover any or all of the obligations under the Wasserman Mar 2012 Note.

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ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION.

Not applicable.

ITEM 6. EXHIBITS

EXHIBIT NO.		DESCRIPTION

31.1		Certificate of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act.

31.2		Certificate of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act.

32.1		Certificate of Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act.

32.2		Certificate of Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act.

101.INS		XBRL Instance Document*

101.SCH		XBRL Taxonomy Extension Schema Document*

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document*

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document*

101.LAB		XBRL Taxonomy Extension Label Linkbase Document*

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document*

* The XBRL related information in Exhibit 101 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability of that section and shall not be incorporated by reference into any filing or other document pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing or document.

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SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	VANITY EVENTS HOLDING, INC.

Date: May 14, 2013	By:	/s/ Phil Ellett
		Name: Phil Ellett
		Title: Chief Executive Officer (principal executive officer and principal financial officer) and Principal Accounting Officer

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