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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended: September 30, 2013

 

[  ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from:

 

Commission file number: 000-51688

 

BITZIO, INC.
(Exact name of registrant as specified in its charter)

 

Nevada   16-1734022
(State or other jurisdiction of incorporation or organization)   (I.R.S. Employer Identification No.
     
548 Market Street, Suite 18224 San Francisco, CA   94104
(Address of principal executive offices)   (Zip Code)

 

Issuer’s telephone number (866) 824-7881

 

 ________________________________________________________________
(Former name, former address and former fiscal year, if changed since last report)

 

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

 

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 than the registrant was required to submit and post such files). Yes [X] 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. See the definitions of “large accelerated filed,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer [  ]   Accelerated filer [  ]
         
Non-accelerated filer [  ]   Smaller reporting company [X]
(Do not check if a smaller reporting company)        

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes [  ] No [X]

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. As of November __, 2013 the number of shares of the registrant’s classes of common stock outstanding was 162,829,883.

 

 

 

 
 

 

 TABLE OF CONTENTS

 

Part I - Financial Information   Page
Numbers
       
Item 1. Financial Statements (Unaudited)    3
  Condensed Consolidated Balance Sheets    F-1
  Condensed Consolidated Statements of Operations    F-2
  Condensed Consolidated Statements of Cash Flows    F-3
  Notes to Condensed Consolidated Financial Statements    F-4
  Forward-Looking Statements    
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. Controls and Procedures    7
       
Part II – Other Information    
       
Item 1. Legal Proceedings    8
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds    8
Item 3. Defaults Upon Senior Securities    8
Item 4. Mine Safety Disclosures    8
Item 5. Other Information    8
Item 6. Exhibits    9
       
  Signatures    10

 

2
 

 

PART I – FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

This Quarterly Report includes forward-looking statements within the meaning of the Securities Exchange Act of 1934 (the “Exchange Act”). These statements are based on management’s beliefs and assumptions, and on information currently available to management. Forward-looking statements include the information concerning our possible or assumed future results of operations set forth under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Forward-looking statements also include statements in which words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “estimate,” “consider” or similar expressions are used.

 

Forward-looking statements are not guarantees of future performance. They involve risks, uncertainties and assumptions. Our future results and shareholder values may differ materially from those expressed in these forward-looking statements. Readers are cautioned not to put undue reliance on any forward-looking statements.

 

The results for the period ended September 30, 2013 are not necessarily indicative of the results of operations for the full year. These financial statements and related footnotes should be read in conjunction with the financial statements and footnotes thereto included in the Company’s Form 10-K filed with the Securities and Exchange Commission on April 11, 2013.

 

3
 

 

BITZIO, INC

Condensed Consolidated Balance Sheets

 

   September 30, 2013   December 31, 2012 
Assets   (Unaudited)      
Current Assets          
Cash and cash equivalents  $6,137   $39,868 
Accounts receivable, net   -    14,807 
Prepaid expenses and other current assets   6,316    62,839 
Total Current Assets   12,453    117,514 
           
Other Assets          
Intangible assets, net   -    58,604 
Other receivable   10,000    - 
Note Receivable   90,000    - 
Interest Receivable   2,545    - 
Goodwill   -    133,435 
Total Other Assets   102,545    192,039 
           
Total Assets  $114,998   $309,553 
           
Liabilities and Stockholders’ Deficit          
Current Liabilities:          
Accounts payable and accrued liabilities  $634,916   $386,554 
Related party payable   365,146    552,140 
Notes payable   288,630    592,690 
Convertible notes, net of discount   765,849    268,290 
Derivative liability   54,899    224,372 
Total Current Liabilities   2,109,440    2,024,046 
           
Stockholders’ Deficit:          
Preferred stock, $0.001 par value; 25,000,000 shares authorized; 2,043,120 shares issued and outstanding  $2,043   $2,043 
Common stock, $0.001 par value; 250,000,000 shares authorized; 162,829,883 and 69,923,970 shares issued and outstanding, respectively   162,830    69,924 
Additional paid in capital   19,337,916    18,236,567 
Stock subscriptions payable   177,581    252,605 
Accumulated deficit   (21,674,812)   (20,275,632)
Total stockholders’ deficit   (1,994,442)   (1,714,493)
Total Liabilities and Stockholders’ Deficit  $114,998   $309,553 

 

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

 

F-1
 

 

BITZIO, INC

Condensed Consolidated Statements of Operations

(Unaudited)

 

  

Three Months Ended September 30,

  

Nine Months Ended September 30,

 
   2013   2012   2013   2012 
Revenues  $9,990   $154,384   $9,990   $519,591 
                     
Operating Expenses                    
Professional fees   47,917    1,296,105    1,066,650    3,329,505 
Executive compensation   -    -    -    127,500 
General and administrative   12,576    120,593    129,587    418,151 
Impairment of goodwill   -    -    -    3,981,508 
Total operating expenses   60,493    1,416,698    1,196,237    7,856,664 
                     
Loss from Operations   (50,503)   (1,262,314)   (1,186,247)   (7,337,073)
                     
Other Income (Expense)                    
Interest expense   (185,122)   (320,983)   (640,019)   (478,837)
Gain (Loss) on derivative liability   4,025    185,118    138,457    185,118 
Loss on default   (38,667)   -    (38,667)   - 
Total other income (expense)   (219,764)   (135,865)   (540,229)   (293,719)
                     
Loss Before Income Taxes  $(270,267)  $(1,398,179)   (1,726,476)   (7,630,792)
                     
Provision For Income Taxes   -    -    -    - 
                     
Net Loss From Continuing Operations   (270,267)   (1,398,179)   (1,726,476)   (7,630,792)
                     
Gain (loss) on disposal of discontinued operations   -    (558,287)   278,937    (558,287)
Income (loss) from discontinued operations   -    (150,681)   48,359    (591,236)
                     
Net Loss   (270,267)   (2,107,147)   (1,399,180)   (8,780,315)
                     
Basic and Diluted Loss Per Share from Continuing Operations  $(0.00)  $(0.02)  $(0.02)  $(0.13)
Basic and Diluted Loss Per Share from Discontinued Operations  $-   $(0.00)  $0.00   $(0.01)
Basic and Diluted Loss Per Share  $(0.01)  $(0.08)  $(0.02)  $(0.13)
Basic and Diluted Weighted Average Common Shares   96,841,520    62,441,151    84,671,670    57,152,841 

 

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

 

F-2
 

 

BITZIO, INC

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 

  

Nine Months Ended September 30,

 
   2013   2012 
Cash Flows from Operating Activities          
Net loss  $(1,399,180)  $(8,780,315)
Adjustments to reconcile net loss to net cash used in operating activities          
Depreciation and amortization   7,477    163,363 
Loss (gain) on sale of subsidiaries   (278,987)   558,287 
Loss on default   38,667    - 
Expenses paid on behalf of the company   207,797      
Amortization of debt discounts on convertible notes   515,487    437,344 
Origination interest on convertible notes payable   5,347    - 
Change in derivative liabilities   (138,457)   (185,118)
Impairment of goodwill   -    3,981,508 
Common stock issued for prepayment of debenture   -    20,272 
Common shares issued for services   370,531    1,442,768 
Stock options issued for services   -    925,685 
Changes in operating assets and liabilities:          
Accounts receivable   14,807    10,866 
Prepaid expenses and other current assets   56,523    12,296 
Interest receivable   (2,545)   - 
Accounts payable and accrued expenses   387,675    (5,663)
Related party payables   71,187    - 
Deferred revenue   -    (77,433)
Net cash provided by continuing operating activities   (143,671)   (1,496,140)
Net Cash Provided by Discontinued Operating Activities        461,746 
Net cash provided by operating activities  $(143,671)   (1,034,394)
           
Cash Flows from Investing Activities          
Cash acquired in acquisition of subsidiary   -    8,129 
Proceeds from disposal of discontinued operations   109,940      
Cash invested in note receivable   (90,000)     
Purchase of equipment   -    (1,041)
Net cash provided by continuing investing activities   19,940    7,088 
Net Cash Provided by Discontinued Investing Activities        - 
Net cash provided by investing activities   19,940    7,088 
           
Cash Flows from Financing Activities          
Repayments on notes payable - related parties   -    (75,000)
Repayments on notes payable   (110,000)   - 
Repayments on convertible debenture   (83,500)   (26,250)
Proceeds from notes payable   110,000      
Proceeds from convertible notes payable   173,500    694,922 
Proceeds from sale of common stock   -    450,000 
Proceeds from sale of preferred stock   -    5,108 
Proceeds from stock subscriptions payable   -      
Net cash provided by continuing financing activities   90,000    1,048,780 
Net Cash Provided by Discontinued Financing Activities   -    - 
Net cash provided by financing activities  $90,000   $1,048,780 
           
Effects of exchange rates on cash   -    (3,440)
           
Net increase in cash   (33,731)   18,034 
Cash, beginning of period   39,868    181,725 
           
Cash and Cash Equivalents, end of period  $6,137   $199,759 
           
Cash Paid For:          
Interest  $44,856   $25,243 
Income taxes  $-   $- 
           
Non-cash Financing and Investing Activities          
Debt discounts on convertible notes payable  $193,500   $- 
Common stock issued for debt  $422,643   $- 
Notes payable and warrants issued for acquisition of subsidiary  $-   $713,150 
Preferred stock for acquisition of subsidiary  $-   $2,084,231 
Common stock for acquisition of subsidiary  $-   $2,145,000 
Common stock issued for intangible assets  $-   $130,000 
Issuance of common stock on debenture conversion  $-   $146,522 
Common stock issued for stock subscriptions payable  $-   $186,000 

 

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

 

F-3
 

 

BITZIO, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2013

(Unaudited)

 

NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Bitzio, Inc. was originally formed as Rocky Mountain Fudge Company, Inc. (“the Company”, “we”, “Bitzio”) on January 4, 1990 as a Utah corporation. On July 28, 1998, the Company converted from a Utah corporation to a Nevada corporation. Effective June 10, 2011, the Company changed its name 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, BTZO. Bitzio is focused primarily on smartphone applications.

 

On July 27, 2011, Bitzio, Inc. and Bitzio, LLC entered into a share exchange agreement wherein Bitzio, Inc. issued 5,000,000 shares of the Company’s common stock in exchange for 100% of the members’ equity of Bitzio, LLC. Through this transaction Bitzio, LLC became a wholly owned subsidiary of Bitzio, Inc.

 

On November 9, 2011, Bitzio, Inc. and Thinking Drone, Inc. entered into a share exchange agreement wherein Bitzio, Inc. acquired all of the issued and outstanding stock of Thinking Drone, Inc. Bitzio, Inc. received all of the outstanding shares of Thinking Drone in exchange for a $500,000 promissory note and 5,000,000 shares of Bitzio, Inc. common stock. Through this transaction Thinking Drone, Inc. became a wholly owned subsidiary of Bitzio, Inc.

 

On May 23, 2012, Bitzio, Inc. and Motion Pixel Corporation Holdings (“MPC”) entered into a share purchase agreement wherein Bitzio, Inc. acquired all of the issued and outstanding member’s equity in exchange for 6,500,000 shares of the Company’s common stock. Pursuant to a Termination Agreement executed on February 14, 2013, Bitzio agreed to return 100% ownership of MPC stock purchased on May 23, 2012. Other terms of the agreement include: neither party shall have any further obligations to the other; all stock options granted to all employees, consultants of MPC and the original vendor shall be deemed void; and in full settlement of any other claims, we agreed to allow the 6,500,000 shares of the company from the initial agreement to remain in possession of the holders subject to resale restrictions.

 

On June 4, 2012, Bitzio, Inc. and ACT entered into a share purchase agreement wherein Bitzio acquired all of the issued and outstanding member’s equity in exchange for 3,300,000 Series A Convertible Redeemable Preferred shares of the Company. On February 22, 2013, the two parties agreed to unwind the transaction by Bitzio returning the ACT shares acquired and ACT returning the Bitzio preferred share consideration for cancellation. In addition, Bitzio agreed to pay an aggregate of 147,000 Euros ($194,447 USD) to ACT.

 

On August 31, 2012, Bitzio entered into a sale agreement wherein Bitzio disposed of the assets and liabilities related to its information productions division.

 

On April 4, 2013 the Company completed the sale of its wholly owned subsidiary, Thinking Drone LLC to a third party. The transferred business and assets of Thinking Drone LLC have been presented as discontinued operations in these financial statements, with a gain shown on disposal of discontinued operations. After the sale of this subsidiary, the Company shifted its business strategy toward a fashion incubation model. This strategy was led and has been maintained by Gord McDougall of Tezi Advisory, Inc. and by Hubert Blanchette the company's CEO.  

 

On May 14, 2013, Bitzio signed a Letter of Intent regarding the Company’s proposed acquisition of Tech Hollywood. Bitzio intends to acquire Tech Hollywood for a purchase price consisting of approximately 80% of the Company’s fully diluted common stock. The closing of the proposed Acquisition will be conditional upon, among other things, the Company’s ability to secure certain financing arrangements and completion of a capital restructuring—including converting certain of its outstanding securities and obligations and the authorization of additional shares and divestiture of certain operating divisions—as well as Tech Hollywood’s acquisition of Looking Hollywood Corp. 

 

On July 25, 2013, the Company determined that it was going to be unable to obtain the necessary financing to complete this proposed transaction and has cancelled its agreement with Tech Hollywood.

 

On July 25, 2013, Bitzio, Inc. appointed Hubert J. Blanchette to its Board of Directors. From 2006 to present, Mr. Blanchette has held the position of Director of Skipjack Dive & Dancewear Inc., and from 2003 to present has held the position of Director Chronic Car Audio Inc. Mr. Blanchette was added to the Board of Directors because of his experience with turn around management.

 

On July 25, 2013, and subsequent to the appointment of Mr. Blanchette to the Board of Directors, Peter Henricsson resigned as the Company’s President, Chief Executive Officer, Principal Executive Officer and Chairman of its Board of Directors. There was no dispute between Mr. Henricsson and the Company’s management.

 

On July 25, 2013, Gordon McDougall, as a member of its Board of Directors, nominated Mr. Blanchette for the positions of President, Chief Executive Officer, Secretary, Chief Financial Officer and Chairman of the Board. The board approved the nominations and Mr. Blanchette accepted to acting as the Chief Executive Officer, President, Secretary, Chief Financial Officer and Chairman of the Board for Bitzio.

 

On July 25, 2013, and subsequent to the appointment of Mr. Blanchette as Chairman of the Board of Directors, Gordon McDougall resigned as the Company’s Principal Accounting and Financial Officer, and from its Board of Directors. There was no dispute between Mr. McDougall and the Company’s management.

 

F-4
 

 

NOTE 2 – GOING CONCERN

 

The Company’s financial statements are prepared using generally accepted accounting principles 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.

 

In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management’s plan is to obtain such resources for the Company by seeking equity and/or debt financing. 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 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

In the opinion of management, the accompanying unaudited condensed consolidated balance sheets and related condensed consolidated statements of operations, and cash flows include all adjustments, consisting only of normal recurring items, necessary for their fair presentation in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Interim results are not necessarily indicative of results for a full year. The information included in this Form 10-Q should be read in conjunction with information included in the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2012 filed with the U.S. Securities and Exchange Commission (the “Commission”) on April 11, 2013.

 

Basis of Presentation

 

The consolidated financial statements include the accounts of the Company and our wholly owned subsidiaries. Intercompany balances and transactions have been eliminated upon consolidation.

 

In June 2011, we effected a four-for-one forward split of the shares of our 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.

 

Use of Estimates

 

The preparation of consolidated financial statements in conformity with the generally accepted accounting principles in the United States (“U.S. GAAP”) requires management to make estimates and assumptions in certain circumstances that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The more significant estimates include, but are not limited to, the recognition of certain, valuation of intangible assets, goodwill and long-lived asset impairment charges, stock based compensation, loss contingencies and the allowance for doubtful accounts receivable. Actual results could differ from those estimates.

 

Revenue Recognition

 

We derive our revenues from the sale of software and mobile applications through various platforms. We recognize revenue when all of the following conditions are satisfied: (i) there is persuasive evidence of an arrangement; (ii) delivery of the product or provision of the service has occurred; (iii) the fee is fixed or determinable; and (iv) collectability of the fee is reasonably assured.

 

Mobile Phone Applications

 

Mobile phone applications are sold using multiple platforms. Each platform handles the sale, distribution or download, as well as the collection and remittance of payment for the Company. We recognize mobile application revenue net of the amounts retained by the platform companies. There is no warranty or money back guarantee related to the sale of mobile phone applications, therefore no deferred revenue or allowance for sales returns has been recorded.

 

Cash and Cash Equivalents

 

We consider all highly liquid investments with remaining maturities of three months or less at the date of purchase to be cash and cash equivalents. Cash and cash equivalents consist primarily of money market funds and other short-term investments with original maturities of not more than three months stated at cost, which approximates market value.

 

F-5
 

 

Accounts Receivable and Allowance for Doubtful Accounts

 

Accounts receivable are presented at their face amount, less an allowance for doubtful accounts, on the consolidated balance sheets. Accounts receivable consist of revenue earned and currently due from customers. We evaluate the collectability of accounts receivable based on a combination of factors. We recognize reserves for bad debts based on estimates developed using standard quantitative measures that incorporate historical write-offs and current economic conditions.

 

Long-lived Assets

 

Long-lived assets include equipment and intangible assets other than those with indefinite lives. We assess the carrying value of our long-lived asset groups when indicators of impairment exist and recognize an impairment loss when the carrying amount of a long-lived asset is not recoverable from the undiscounted cash flows expected to result from the use and eventual disposition of the asset.

 

Indicators of impairment include significant underperformance relative to historical or projected future operating results, significant changes in our use of the assets or in our business strategy, loss of or changes in customer relationships and significant negative industry or economic trends. When indications of impairment arise for a particular asset or group of assets, we assess the future recoverability of the carrying value of the asset (or asset group) based on an undiscounted cash flow analysis. If carrying value exceeds projected, net, undiscounted cash flows, an additional analysis is performed to determine the fair value of the asset (or asset group), typically a discounted cash flow analysis, and an impairment charge is recorded for the excess of carrying value over fair value.

 

Property and equipment are recorded at historical cost less accumulated depreciation, unless impaired. Depreciation is charged to operations over the estimated useful lives of the assets using the straight-line.

 

Upon retirement or sale, the historical cost of assets disposed of and the related accumulated depreciation are removed from the accounts and any resulting gain or loss is recognized.

 

Expenditures for repairs and maintenance are charged to expense as incurred.

 

Goodwill

 

Goodwill represents the excess of the purchase price of an acquired enterprise or assets over the fair value of the identifiable net assets acquired. We test goodwill for impairment annually and whenever events or changes in circumstances arise during the year that indicate the carrying amount of goodwill may not be recoverable. In evaluating whether an impairment of goodwill exists, we first compare the estimated fair value of a reporting unit against its carrying value. If the estimated fair value is lower than the carrying value, then a more detailed assessment is performed comparing the fair value of the reporting unit to the fair value of the assets and liabilities plus the goodwill carrying value of the reporting unit. If the fair value of the reporting unit is less than the fair value of its assets and liabilities plus goodwill, then an impairment charge is recognized to reduce the carrying value of goodwill by the difference.

 

Software Development Costs

 

We capitalize costs incurred during the application development stage relating to the development of our mobile applications. Costs related to preliminary project activities and post implementation activities are expensed as incurred.

 

Business Acquisitions

 

Business acquisitions are accounted for under the purchase method of accounting. Under that method, assets and liabilities of the business acquired are recorded at their estimated fair values as of the date of the acquisition, with any excess of the cost of the acquisition over the estimated fair value of the net tangible and intangible assets acquired recorded as goodwill. We make significant judgments and assumptions in determining the fair value of acquired assets and assumed liabilities, especially with respect to acquired intangibles. Using different assumptions in determining fair value could materially impact the purchase price allocation and our financial position and results of operations. Results of operations for acquired businesses are included in the consolidated financial statements from the date of acquisition.

 

Accumulated Other Comprehensive Income

 

Comprehensive loss includes net loss as currently reported under U.S. GAAP and other comprehensive loss. Other comprehensive loss considers the effects of additional economic events, such as foreign currency translation adjustments, that are not required to be recorded in determining net loss, but rather are reported as a separate component of stockholders’ equity (deficit).

 

Stock Based Compensation

 

We measure and recognize stock based compensation expense using a fair value based method for all share based awards made to employees and nonemployee directors, including grants of stock options and other stock based awards. The application of this standard requires significant judgment and the use of estimates, particularly with regard to Black Scholes assumptions such as stock price volatility and expected option lives to value equity based compensation. We recognize stock compensation expense using a straight-line method over the vesting period of the individual grants.

 

F-6
 

 

Income Taxes

 

We utilize the balance sheet method of accounting for income taxes. Accordingly, we are required to estimate our income taxes in each of the jurisdictions in which we operate as part of the process of preparing our consolidated financial statements. This process involves estimating our actual current tax exposure, including assessing the risks associated with tax audits, together with assessing temporary differences resulting from the different treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities. Due to the evolving nature and complexity of tax rules, it is possible that our estimates of our tax liability could change in the future, which may result in additional tax liabilities and adversely affect our results of operations, financial condition and cash flows.

 

Basic and Diluted Net Loss per Common Share

 

Basic and diluted net loss per share attributable to common stockholders is computed by dividing net loss attributable to common stockholders by the weighted average number of common shares outstanding during the period. Our potentially dilutive shares, which include outstanding common stock options, common stock warrants and convertible debentures, have not been included in the computation of diluted net loss per share attributable to common stockholders for all periods presented, as the results would be antidilutive. Such potentially dilutive shares are excluded when the effect would be to reduce net loss per share. There were 22,830,880 such potentially dilutive shares excluded as of September 30, 2013.

 

Concentration of Credit Risk

 

Financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash and cash equivalents, to the extent balances exceed limits that are insured by the Federal Deposit Insurance Corporation, and accounts receivable.

 

Recent Accounting Pronouncements

 

The Company has evaluated recent pronouncements and does not expect their adoption to have a material impact on the Company’s financial position, or statements.

 

Reclassification of Financial Statement Accounts

 

Certain amounts in the December 31, 2012 and September 30, 2013 consolidated financial statements have been reclassified to conform to the presentation in the September 30, 2013 consolidated financial statements.

 

NOTE 4 – DISPOSAL OF DIVISION

 

Disposal of Assets

 

Pursuant to a termination agreement executed on February 14, 2013, Bitzio agreed to return 100% ownership of MPC stock purchased on May 23, 2012. As the terms of this agreement were substantially agreed to and that all operations with MPC were terminated prior to the close of the 2012 fiscal year, the Company recorded a loss on disposal of assets of $24,730 and a gain on forgiveness of debt in connection with the termination agreement of $311,479.

 

On April 4, 2013 the Company completed the sale of its wholly owned subsidiary, Thinking Drone LLC to a third party. The transferred business and assets of Thinking Drone LLC have been presented as discontinued operations in these financial statements, with a gain shown on disposal of discontinued operations.

 

NOTE 5 – CONVERTIBLE NOTES PAYABLE

 

On June 27, 2012, the Company executed a convertible promissory note in the amount of $73,500. The note bears interest at a rate of 8% per annum and has a maturity date of March 29, 2013, but has not yet been paid. Any amount of principal or interest not paid in full at maturity will bear an interest rate of 22%. The convertible promissory note may be converted in whole or in part, at the option of the holder, to shares of common stock at any time following 180 days after the issuance date of the note. The conversion price under the note is 59% multiplied by the market price that is the average of the lowest three trading prices for the common stock during the ten trading day period prior to the conversion date. The total initial beneficial conversion feature recorded was $44,909. As of September 30, 2013, the Company has repaid the outstanding debt, and fully amortized the debt discount.

 

On September 6, 2012, for aggregate gross proceeds of $598,000, the Company issued secured convertible promissory notes and warrants to purchase common stock of the Company. Of the gross proceeds, $300,000 was received from a related party. The convertible notes are secured by cash, intangibles, intellectual property, and future revenue from such assets. The convertible notes accrue interest at a rate of 10% per annum and have a maturity date of September 6, 2013. The notes contain a conversion feature wherein the notes may be converted to shares of the Company’s common stock at a price of $0.15 per common share. The conversion feature also contains a price protection feature wherein if the Company sells shares of common stock at a price per share that is less than the conversion price of the note, the conversion price is reduced to the lower issuance price.

 

F-7
 

 

The warrants are exercisable by the holder at any time prior to two years from the date of issuance at an exercise price of $0.30 per share. The Company has issued warrants to purchase an aggregate of 7,979,333 shares of common stock of the Company in connection with the convertible notes. The Company determined the notes qualified for derivative liability treatment under ASC 815. The Company recorded an initial derivative liability of $459,072 and a debt discount of $598,000 on the origination date of the notes. As of September 30, 2013, the Company has amortized $420,340 of the total outstanding debt discount leaving an unamortized balance of $177,660.

 

On September 7, 2012, as consideration for amounts owed of $23,422, the Company issued an unsecured convertible promissory note bearing interest at a rate of 10% per annum and having a maturity date of September 7, 2013. The conversion price is equal to 75% of the closing bid price for the Company’s common stock on the trading day immediately preceding the conversion. The intrinsic value of the beneficial conversion feature and the debt discount associated with the equity issued in connection with the convertible debts were recorded based on the relative fair value of the equity in relation to the debt in accordance with ASC 470. The total initial beneficial conversion feature recorded was $7,807. As of December 31, 2012, the Company has amortized $2,460 of the total outstanding debt discount leaving an unamortized debt discount of $5,347. On December 13, 2012, the note was assigned to another party and amended to change the conversion price to $0.05 per share, and to increase the principal from $23,422 to $28,000. During the nine months ended September 30, 2013, $28,000 of principal was converted into 582,331 common shares.

 

On December 6, 2012, for aggregate gross proceeds of $75,000, the Company issued an unsecured convertible promissory note. The convertible note accrues interest at a rate of 10% per annum and has a maturity date of December 6, 2013. The note also carried an original issue discount of $8,333 that was recorded as interest expense. The conversion price is the lesser of $0.16 or 70% of the lowest trade price in the 25 trading days prior to the conversion. The Company determined the notes qualified for derivative liability treatment under ASC 815. The Company recorded an initial derivative liability of $81,906 and a debt discount of $81,906 on the origination date of the note. As of September 30, 2013, the Company has amortized $66,871 of the total outstanding debt discount leaving an unamortized debt discount of $15,035. During the nine months ended September 30, 2013, $21,210 of principal was converted into 14,800,000 common shares.

 

Pursuant to the agreement to unwind the original acquisition of ACT, the Company agreed to pay the vendors an aggregate of 147,000 Euros or US$194,446 as follows: 45,000 Euros ($59,524 USD) on or before March 31, 2013; 55,000 Euros ($72,752 USD) on or before April 30, 2013; and 47,000 Euros ($62,170 USD) on May 15, 2013. The amounts owing are unsecured and noninterest bearing.

 

On January 15, 2013, the Company executed a convertible promissory note in the amount of $73,500. The note bears interest at a rate of 8% per annum and has a maturity date of September 17, 2013. Any amount of principal or interest not paid in full at maturity will bear an interest rate of 22 percent. The convertible promissory note may be converted in whole or in part, at the option of the holder, to shares of common stock at any time following 180 days after the issuance date of the note. The conversion price under the note is 59% multiplied by the market price that is the average of the lowest three trading prices for the common stock during the ten trading day period prior to the conversion date. The total initial beneficial conversion feature recorded was $73,500. During the nine months ended September 30, 2013, an aggregate of $73,500 of principal and $2,800 of interest was converted into 63,203,463 common shares.

  

On May 24, 2013, the Company entered into a Convertible Promissory Note in the amount of $100,000 with Technor Services, Ltd. (the “Technor Note”), which is an entity who is owned by the Company’s former Chief Executive Officer Peter Henricsson. The Technor Note bears interest at the rate of 10% per year, and which is due and payable at the earlier of 1) September 12, 2103, 2) an event of default, or 3) a change of control of the Company. The Technor Note is convertible into common stock of the Company at the election of Technor at a fixed rate of $0.15 per share.

 

NOTE 6 – DERIVATIVE LIABILITY

 

Effective July 31, 2009, the Company adopted ASC 815 which defines determining whether an instrument (or embedded feature) is solely indexed to an entity’s own stock. The conversion price of these convertible notes are subject to “reset” provisions in the event the Company subsequently issues common stock, stock warrants, stock options or convertible debt with a stock price, exercise price or conversion price lower than conversion price of these notes. If these provisions are triggered, the conversion price of the note will be reduced. As a result, the Company has determined that the conversion feature is not considered to be solely indexed to the Company’s own stock and is therefore not afforded equity treatment. In accordance with ASC 815, the Company has bifurcated the conversion feature of the note and recorded a derivative liability.

 

ASC 815 requires Company management to assess the fair market value of certain derivatives at each reporting period and recognize any change in the fair market value as another income or expense item. The Company’s only asset or liability measured at fair value on a recurring basis is its derivative liability associated with convertible notes payable.

 

At origination, the Company valued the conversion features using the following assumptions: dividend yield of zero, years to maturity of between 1.00 and 2.02 years, risk free rates of between 0.18 and 0.27 percent, and annualized volatility of between 149% and 172%. At December 31, 2012, the Company revalued the conversion features using the following assumptions: dividend yield of zero, years to maturity of between 0.65 and 1.70 years, risk free rates of between 0.16 and 0.31 percent, and annualized volatility of between 159 and 172 percent and determined that, during the year ended December 31, 2012, the Company’s derivative liability decreased by $316,606 to $224,372. The Company recognized a corresponding gain on derivative liability in conjunction with this revaluation.

 

F-8
 

 

At September 30, 2013, the Company revalued the conversion features using the following assumptions: dividend yield of zero, years to maturity of between 0.01 and 0.18 years, risk free rates of between 0.02 and 0.36 percent, and annualized volatility of between 222 and 248 percent and determined that, during nine months ended September 30, 2013, the Company’s derivative liability decreased by $138,457 to $54,889. The Company recognized a corresponding gain on derivative liability in conjunction with this revaluation.

 

NOTE 7 – PREFERRED STOCK

 

The Company is authorized to issue 25,000,000 shares of preferred stock, of which 2,500,000 shares are designated as Series A Convertible Redeemable Preferred Stock, par value of $0.001. As of December 31, 2012 and September 30, 2013, there were 2,043,120 shares of Series A Convertible Redeemable Preferred Stock issued and outstanding, respectively. The shares have the following provisions:

 

Dividends

 

Series A Convertible Redeemable Shares have no dividend rights.

 

Liquidation Preferences

 

In the event of liquidation, following the sale or disposition of all or substantially all of the Company’s assets, the holders of the Series A Convertible Redeemable Preferred Stock shall be entitled to receive, an amount equal to the per share price of the stock ($0.0025 per share) plus all declared and unpaid dividends.

 

Voting Rights

 

Series A Convertible Redeemable shares have no voting rights.

 

Conversion

 

Each share of Series A Convertible Redeemable Preferred Stock is convertible, at the option of the holder, at any time within four years of issue, and upon payment of $0.40 per share, into two fully paid and non-assessable shares of the Company’s common.

 

Redemption

 

At any time after four years of issuance, the Company may redeem, at the discretion of the Board of Directors, any or all of the series A convertible redeemable preferred stock for the per share price of the stock ($0.0025 per share).

 

NOTE 8 – COMMON STOCK

 

The Company has authorized 250,000,000 shares of $0.001 par value per share Common Stock, of which 162,829,883 shares were issued outstanding as of September 30, 2013. The activity surrounding the issuances of the Common Stock is as follows:

 

During the nine months ended September 30, 2013 the Company issued 92,905,913 shares of common stock as payment for accounts. The Company issued 5,164,621 shares of common stock as payment for accounts payables at an average price of $0.08 per share. The Company issued 5,124,498 shares of common stock at an average price of $0.07 per share as payment for services valued at $370.531 and subscriptions payable of $75,024. The Company also issued 82,616,794 shares of common stock in conversion of notes payable of $121,923.

 

NOTE 9 – STOCK OPTIONS AND WARRANTS

 

The following table summarizes all stock option and warrant activity for the nine months ended September 30, 2013:

 

   Shares  

Weighted

Average

Exercise Price

Per Share

 
Outstanding, December 31, 2012   24,361,948   $0.34 
Granted   -    - 
Exercised   -    - 
Forfeited   -    - 
Expired   (1,800,000)   0.50 
Outstanding, September 30, 2013   22,561,948   $0.33 

 

The following table discloses information regarding outstanding and exercisable options and warrants at September 30, 2013:

 

   Outstanding:   Exercisable: 

Range of

Exercise Prices

 

Number of

Option Shares

  

Weighted Average

Exercise

Price

   Remaining
Weighted Average
Contractual Term (Years)
  

Number of

Option Shares

  

Weighted Average

Exercise Price

 
$ 0.20 – $0.29   2,000,000    0.20    3.17    2,000,000    0.20 
$ 0.30 – $0.39   19,747,948    0.34    2.15    19,747,948    0.34 
$ 0.40 – $0.49   814,000    0.40    1.51    814,000    0.40 
$ 0.50 – $0.59   -    -    -    -    - 
    22,561,948    0.33    2.22    22,561,948    0.33 

 

F-9
 

  

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

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

 

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

 

Summary Overview

 

Bitzio is a holding company for various mobile media and app development subsidiaries with existing apps and rights to develop new apps around certain entertainment and fashion properties.

 

Acquisitions

 

On July 27, 2011, we acquired Bitzio Corp., a developer of mobile applications for smartphones, which is now operated as Bitzio Mobile Apps, Inc. Bitzio Mobile Apps has developed over 140 mobile applications with over 650,000 downloads in total and is in the process of developing additional mobile applications.

 

On November 9, 2011, we acquired Thinking Drone, Inc., a developer of iPhone and Android apps under the “Free the Apps” brand. Founded in 2009, Free the Apps has created many highly successful apps, including “Top 10” overall apps featured in iTunes App Store. Their success is not only creating top revenue generating apps but also using that acumen to help other developers get the visibility their apps need in the crowded mobile apps space. Using proven strategies, Free the Apps provides developers with social and online solutions to get their apps in a “top” list and extend their reach to extensive customer base. With almost 40 million downloads and counting, some of Free the Apps highly successful free apps include Convert Units for Free and Crop for Free.

 

On May 23, 2012, Bitzio, Inc. and MPC entered into a share purchase agreement wherein Bitzio, Inc. acquired all of the issued and outstanding member’s equity in exchange for 6,500,000 shares of the Company’s common stock. Pursuant to a Termination Agreement executed on February 14, 2013, Bitzio agreed to return 100% ownership of MPC stock purchased on May 23, 2012. Other terms of the agreement include: neither party shall have any further obligations to the other; all stock options granted to all employees, consultants of MPC and the original vendor shall be deemed void; and in full settlement of any other claims, we agreed to allow the 6,500,000 shares of the company from the initial agreement to remain in possession of the holders subject to resale restrictions.

 

On June 4, 2012, Bitzio, Inc. and ACT entered into a share purchase agreement wherein Bitzio acquired all of the issued and outstanding member’s equity in exchange for 3,300,000 Series A Convertible Redeemable Preferred shares of the Company. On February 22, 2013, the two parties agreed to unwind the transaction by Bitzio returning the ACT shares acquired and ACT returning the Bitzio preferred share consideration for cancellation. In addition, Bitzio agreed to pay an aggregate of 147,000 Euros ($194,447 USD) to ACT.

 

On August 31 2012, Bitzio entered into a sale agreement wherein Bitzio disposed of the assets and liabilities related to its information productions division. The accounting loss on disposal was $585,031.

 

On April 4, 2013 the Company completed the sale of its wholly owned subsidiary, Thinking Drone LLC to a third party. The transferred business and assets of Thinking Drone LLC have been presented as discontinued operations in these financial statements, with a gain shown on disposal of discontinued operations. After the sale of this subsidiary, the Company shifted its business strategy toward a fashion incubation model. This strategy was led and has been maintained by Gord McDougall of Tezi Advisory, Inc.

 

On May 14, 2013 Bitzio signed a Letter of Intent regarding the Company’s proposed acquisition of Tech Hollywood. Bitzio intends to acquire Tech Hollywood for a purchase price consisting of approximately 80% of the Company’s fully diluted common stock. The closing of the proposed Acquisition will be conditional upon, among other things, the Company’s ability to secure certain financing arrangements and completion of a capital restructuring—including converting certain of its outstanding securities and obligations and the authorization of additional shares and divestiture of certain operating divisions—as well as Tech Hollywood’s acquisition of Looking Hollywood Corp.

 

On July 25, 2013 the Company determined that it was going to be unable to obtain the necessary financing to complete this proposed transaction and has cancelled its agreement with Tech Hollywood.

 

On July 25, 2013 the Company appointed Hubert J. Blanchette to its Board of Directors, based on his experience in the fashion and apparel industries. The Company is currently developing its fashion incubation platform and has several candidates interested in acquiring the platform.

  

4
 

  

Going Concern

 

As a result of our financial condition, we have indicated in a footnote to our financial statements of September 30, 2013 describing the uncertainty as to our ability to continue as a going concern. In order to continue as a going concern we must effectively balance many factors and begin to generate revenue so that we can fund our operations from our sales and revenues. If we are not able to do this we may not be able to continue as an operating company. At our current revenue and burn rate, our cash on hand will last approximately seven months. However, there is no assurance that our existing cash flow will be adequate to satisfy our existing operating expenses and capital requirements.

 

Results from Continuing Operations

 

Three months ended September 30, 2013 and 2012

 

Revenues

 

For the three months ended September 30, 2013, we had revenues of $9,990 from continuing operations, compared to $154,384 for the three months ended September 30, 2012.

 

Operating Expenses

 

Our operating expenses from operations consisted of professional fees of $47,917, and general and administrative expenses of $12,576, compared to professional fees of $1,296,105, and general and administrative expenses of $120,593 for the three months ended September 30, 2012.

 

Loss from Operations

 

Our loss from operations was $50,503 for the three months ended September 30, 2013, compared to a loss from operations of $1,262,314 for the three months ended September 30, 2012.

 

Other Income

 

We had interest expense of $185,122 for the three months ended September 30, 2013, compared to $320,983 for the three months ended September 30, 2012. We also had gain on derivative liability of $4,025 for the three months ended September 30, 2013, compared to $185,118 for the nine months ended September 30, 2012.

 

Net Loss

 

Our net loss for the three months ended September 30, 2013 was $ $270,267, compared to a net loss of $2,107,147 for the three months ended September 30, 2012.

 

Nine months ended September 30, 2013 and 2012

 

Revenues

 

For the nine months ended September 30, 2013, we had revenues of $ 9,900 from continuing operations, compared to $519,591 for the nine months ended September 30, 2012.

 

Operating Expenses

 

Our operating expenses from operations consisted of professional fees of 1,066,650, and general and administrative expenses of $129,589, compared to professional fees of $3,329,505, and general and administrative expenses of $418,151 for the nine months ended September 30, 2012. We also had an impairment of goodwill in the amount of $3,981,508 for the nine months ended September 30, 2012.

 

Loss from Operations

 

Our loss from operations was $1,186,247 for the nine months ended September 30, 2013, compared to a loss from operations of $7,337,073 for the nine months ended September 30, 2012.

 

Other Expense

 

We had interest expense of $640,019 for the nine months ended September 30, 2013, compared to $478,837 for the nine months ended September 30, 2012. We also had gain on derivative liability of $138,457 for the nine months ended September 30, 2013, compared to $185,118 for the nine months ended September 30, 2012.

 

5
 

 

Gain on Disposal of Discontinued Operations

 

Our gain on disposal of discontinued operations was $278,937 for the nine months ended September 30, 2013, compared to loss on disposal of discontinued operations of $558,287 for the nine months ended September 30, 2012.

 

Net Loss

 

Our net loss for the nine months ended September 30, 2013 was $1,399,180, compared to a net loss of $8,780,315 for the nine months ended September 30, 2012.

 

Liquidity and Capital Resources

 

Our principal needs for liquidity have been to fund operating losses, working capital requirements, acquisitions, and debt service. Our principal source of liquidity as of September 30, 2013 consisted of cash of $6,137. We expect that working capital requirements and acquisitions will continue to be our principal needs for liquidity over the near term. Working capital requirements are expected to increase as a result of our anticipated growth, both organically and through future acquisitions.

 

We have not yet established an ongoing source of revenues sufficient to cover our operating costs and allow us to continue as a going concern. Our ability to continue as a going concern is dependent on obtaining adequate capital to fund operating losses until we become profitable. If we are unable to obtain adequate capital, we could be forced to cease operations. Management’s plan is to obtain such resources from management and significant shareholders sufficient to meet our minimal operating expenses and to seek equity and/or debt financing. However management cannot provide any assurances that we will be successful in accomplishing any of our plans.

 

Operations

 

Our net cash used in continuing operating activities was $ $143,671 for the nine months ended September 30, 2013, compared to $1,034,394 for the nine months ended September 30, 2012.

 

For the nine months ended September 30, 2013, our net cash used in operating activities consisted of our net loss of $ $1,399,180, offset primarily by expenses paid on behalf of the company of $ 207,797, depreciation and amortization of $7,477 stock issued for services of $370,531, change in derivative liability of ($138,457),amortization of debt discounts on convertible notes of $515,487, origination interest on convertible notes payable of $5,347, gain on sale of subsidiaries of $278,987 and change in operating assets and liabilities of $527,647.

 

Investments

 

Our net cash provided by investing activities was $19,940 for the nine months ended September 30, 2013, compared $7,088 for the nine months ended September 30, 2012.

 

Financing

 

Our net cash provided by financing activities was $90,000 for the nine months ended September 30, 2013, compared to $1,048,780 for the nine months ended September 30, 2012.

 

For the nine months ended September 30, 2013, our cash provided by financing activities consisted primarily of proceeds from note payable of $110,000 and proceed from convertible notes payable of $173,500. Our cash used in financing activities for the same period consisted of repayments on notes payable of $110,000 and repayments on convertible debenture of $83,500.

 

Contractual obligations and other commitments

 

We have no commitments under operating leases or rental agreements.

 

Off-balance sheet arrangements

 

As of September 30, 2013, we do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, or capital resources that are material to investors.

 

6
 

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide information required by this Item.

 

ITEM 4. CONTROLS AND PROCEDURES

 

We conducted an evaluation, with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, as of September 30, 2013, to ensure that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities Exchange Commission’s rules and forms, including to ensure that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of September 30, 2013, our disclosure controls and procedures were not effective at the reasonable assurance level due to the material weaknesses identified and described below with respect to our internal control over financial reporting.

 

Our principal executive officers do not expect that our disclosure controls or internal controls will prevent all error and all fraud. Although our disclosure controls and procedures were designed to provide reasonable assurance of achieving their objectives and our principal executive officers have determined that our disclosure controls and procedures are effective at doing so, a control system, no matter how well conceived and operated, can provide only reasonable, not absolute assurance that the objectives of the 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 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 if there exists in an individual a desire to do so. There can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

 

Changes in Internal Control over Financial Reporting

 

No change in our system of internal control over financial reporting occurred during the quarter ended September 30, 2013 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

7
 

 

PART II: OTHER INFORMATION

 

ITEM 1 – LEGAL PROCEEDINGS

 

There are presently no pending legal proceedings to which the Company or any of its subsidiaries is a party or to which any of their property is subject and no such proceedings are known to the Company to be threatened or contemplated against it.

 

In the ordinary course of business, we are from time to time involved in various pending or threatened legal actions. The litigation process is inherently uncertain and it is possible that the resolution of such matters might have a material adverse effect upon our financial condition and/or results of operations. However, in the opinion of our management, other than as set forth herein, matters currently pending or threatened against us are not expected to have a material adverse effect on our financial position or results of operations.

 

ITEM 1A – RISK FACTORS.

 

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide information required by this Item.

 

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

 

During the period ended September 30, 2013, the Company has issued no unregistered equity security sales.

 

ITEM 3 – DEFAULTS UPON SENIOR SECURITIES

 

None.

 

ITEM 4 – MINE SAFETY DISCLOSURES

 

Not applicable.

 

ITEM 5 – OTHER INFORMATION

 

None.

 

8
 

 

ITEM 6 – EXHIBITS

 

The following exhibits are filed as part of this quarterly report on Form 10-Q:

 

Exhibit No.   Description
31.1   Certification by the Chief Executive Officer of Bitzio, Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a) or Rule 15d-14(a)).*
     
32.1   Certification by the Chief Executive Officer of Bitzio, Inc. pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).9
     
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**

 

*Filed Herewith

 

** In accordance with Regulation S-T, the XBRL-formatted interactive data files that comprise Exhibit 101 in this Quarterly Report on Form 10-Q shall be deemed “furnished” and not “filed”.

 

9
 

 

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.

 

Dated: November 15, 2013

BITZIO, INC.

     
  By: /s/ Hubert J. Blanchette
    Hubert J. Blanchette
    Chief Executive Officer

 

10