Total Sports Media, Inc. - FORM 10-Q

Attached files

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EX-31.1 - CERTIFICATION - Total Sports Media, Inc.	sttk_ex311.htm
EXCEL - IDEA: XBRL DOCUMENT - Total Sports Media, Inc.	Financial_Report.xls
EX-32.1 - CERTIFICATION - Total Sports Media, Inc.	sttk_ex321.htm

U. S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Form 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended May 31, 2014

Commission File Number: 333-153502

STREAMTRACK, INC.

(Exact name of registrant as specified in its charter)

Wyoming		26-2589503
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

347 Chapala Street

Santa Barbara, California 93101

(Address of principal executive offices)

(805) 308-9151

(Registrant’s telephone number, including area code)

______________________________________________________________

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

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T 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 Company is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	o	Accelerated filer	o
Non-accelerated filer	o	Smaller reporting company	x
(Do not check if a smaller reporting company)

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

At June 30, 2014, there were 117,207,233 shares of the Company’s common stock outstanding.

TABLE OF CONTENTS

		Page
PART I

Item 1.	Financial Statements		F-1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operation		3
Item 3.	Controls and Procedures		11

PART II

Item 1.	Legal Proceedings		12
Item 1A.	Risk Factors
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		12
Item 3.	Defaults Upon Senior Securities		12
Item 4.	Mine Safety Disclosures		12
Item 5.	Other Information		12
Item 6.	Exhibits		13

Item 1. Financial Statements

StreamTrack, Inc.

Consolidated Balance Sheets

(unaudited)

	As of May 31, 2014			As of August 31, 2013
Assets:
Current assets
Cash	$	39,490		$	7,980
Accounts receivable, net of allowances of $14,853 and $19,000 at May 31, 2014 and August 31, 2013, respectively		386,824			373,971
Prepaid expenses		17,307			11,076
Other current assets		20,143			-
Total current assets		463,764			393,027
Property and equipment, net		190,511			400,133
Other assets
Notes receivable		168,375			160,500
Other assets		37,562			37,562
Total other assets		205,937			198,062
Total assets	$	860,212		$	991,222

Liabilities and Stockholders' Deficit
Current liabilities
Account payable and accrued expenses	$	1,050,227		$	1,376,138
Line of credit		505,717			362,331
Derivative liabilities embedded within convertible notes payable		884,883			778,074
Capital lease payable - in default		72,704			90,704
Related party payables		483,595			468,705
Related party convertible notes payable		100,000			-
Convertible notes payable, net of discount of $200,133 and $0, respectively		373,962			200,000
Convertible notes payable, in default		-			127,000
Total current liabilities		3,471,088			3,402,952
Long term liabilities
Convertible notes payable, net of discount of $18,299 and $30,233, respectively		291,701			279,767
Related party convertible notes payable, net of discount of $20,683 and $37,585, respectively		404,317			487,415
Total long term liabilities		696,018			767,182
Total liabilities		4,167,106			4,170,134
Commitments and contingencies (note 5)
Stockholders' Deficit:
Series A preferred stock; $0.0001 par value; 5,000,000 shares authorized; 0 shares issued and outstanding as of May 31, 2014 and August 31, 2013		-			-
Series B preferred stock; $0.0001 par value; 5,000,000 shares authorized; 200,000 and 0 shares issued and outstanding as of May 31, 2014 and August 31, 2013		20			-
Common stock, $0.0001 par value; 1,000,000,000 shares authorized; 113,433,833 shares issued and 104,025,833 outstanding at May 31, 2014; 17,045,823 shares issued and outstanding as of August 31, 2013		10,403			1,705
Additional paid-in capital		1,950,806			1,223,508
Deferred stock based compensation		-			(8,262	)
Accumulated deficit		(5,268,123	)		(4,395,863	)
Total stockholders' deficit		(3,306,894	)		(3,178,912	)
Total liabilities and stockholders' deficit	$	860,212		$	991,222

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

F-1

StreamTrack, Inc.

Consolidated Statements of Operations

(unaudited)

	For Three Months Ended May 31, 2014			For Three Months Ended May 31, 2013			For Nine Months Ended May 31, 2014			For Nine Months Ended May 31, 2013
Revenues:
Advertising	$	437,342		$	348,904		$	1,339,729		$	1,017,424
Services		8,250			9,100			24,750			206,794
Total revenues		445,592			358,004			1,364,479			1,224,218

Costs of sales:
Media network		108,047			53,734			302,768			120,812
Depreciation and amortization		82,296			91,130			246,888			282,224
Colocation services		38,334			47,850			133,884			164,458
Broadcaster commissions		51,180			61,327			152,068			159,559
Other costs		28,626			137,551			166,817			548,599
Total costs of sales		308,483			391,592			1,002,425			1,275,652

Gross profit (loss)		137,109			(33,588	)		362,054			(51,434	)

Operating expenses:
Product development (includes stock compensation of $0 , $48,583, $0 and $145,750, respectively)		88,400			151,193			204,128			389,707
Officer compensation		120,000			120,000			360,000			347,379
Marketing and sales (includes stock compensation of $0, $2,208, $8,262 and $25,790, respectively)		39,813			43,309			104,628			247,937
Other expenses (includes stock compensation of $0, $19,125, $0 and $45,625, respectively)		177,795			212,255			474,268			625,787
Total operating expenses		426,008			526,757			1,143,024			1,610,810

Loss from operations		(288,899	)		(560,345	)		(780,970	)		(1,662,244	)

Other income (expense)
Interest income		2,625			2,625			7,875			7,875
Interest expense (including accretion of $81,058, $56,303, $101,595, and $373,724, respectively)		(193,387	)		(150,940	)		(358,987	)		(509,561	)
Other income (expense)		(46,413	)		71,847			73,951			71,847
Loss on extinguishment		(1,439,044	)		-			(1,439,044	)		-
Change in fair value of derivatives		1,570,945			663,372			1,624,915			285,391
Total other income (expenses)		(105,274	)		586,904			(91,290	)		(144,448	)

Income (loss) before provision for income taxes		(394,173	)		26,559			(872,260	)		(1,806,692	)

Provision for income taxes		-			-			-			-

Net income (loss)		(394,173	)		26,559			(872,260	)		(1,806,692	)

Deemed dividend		-			-			-			(50,927	)

Net income (loss) attributable to common stockholders	$	(394,173	)	$	26,559		$	(872,260	)	$	(1,857,619	)

Basic net loss per common share attributable to common stockholders	$	(0.01	)	$	0.01		$	(0.02	)	$	(0.24	)
Diluted net loss per common share attributable to common stockholders	$	(0.01	)	$	0.01		$	(0.02	)	$	(0.24	)
Weighted-average number of shares used in computing basic per share amounts		36,471,854			5,277,530			53,946,877			7,848,130
Weighted-average number of shares used in computing dilutive per share amounts		36,471,854			5,277,530			53,946,877			7,848,130

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

F-2

StreamTrack, Inc.

Consolidated Statements of Cash Flows

(unaudited)

	Nine Months Ended May 31, 2014			Nine Months Ended May 31, 2013
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(872,260	)	$	(1,806,692	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Stock-based compensation and stock for services		25,780			217,165
Bad debt expense		-			18,057
Depreciation and amortization		252,122			289,329
Re-measurement of derivative liabilities		(1,624,915	)		(285,391	)
Accretion of debt discount		101,595			373,724
Amortization of finance fees		25,000			41,865
Gain on disposal of assets`		-			(71,847	)
Loss on extinguishment of debt		1,439,044			-
Changes in operating assets and liabilities:
Accounts receivable		(12,853	)		53,880
Prepaid expenses		(6,231	)		(21,948	)
Other assets		(20,143	)		(2,146	)
Accounts payable and accrued expenses		35,819			352,922
Deferred revenue		-			(157,805	)
Net cash used in operating activities		(657,042	)		(998,887	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of convertible promissory notes		315,000			360,000
Proceeds from line of credit		118,386			213,500
Payments on capital lease		(18,000	)		(9,000	)
Interest on note receivable		(7,875	)		(7,875	)
Net advances from related parties		214,890			289,100
Net (payments) advances to Factor		-			(68,091	)
Fees paid to ASC under settlement		66,151			-
Net cash provided by financing activities		688,552			777,634

Change in cash and cash equivalents		31,510			(221,253	)
Cash and cash equivalents, beginning of period		7,980			227,435
Cash and cash equivalents, end of period	$	39,490		$	6,182

Supplemental disclosures of cash flow information:
Cash paid for interest	$	983		$	19,882
Cash paid for income taxes	$	-		$	-

Non cash investing and financing activities:
Deemed dividend	$	-		$	50,927
Issuance of common stock for conversion of debt and accrued interest	$	209,321		$	28,500
Issuance of preferred stock in satisfaction of amounts owed to officers	$	200,000		$	-
Acquisition of assets with issuance of common stock	$	42,500		$	-
Beneficial conversion feature recorded on convertible debt	$	272,895		$	-
Issuance of common stock for accounts payable	$	37,500		$	-

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

F-3

StreamTrack, Inc.

Notes to Consolidated Financial Statements

(unaudited)

1. Nature of Business

StreamTrack, Inc. (the “Company”) is a digital media and technology services company. The Company provides audio and video streaming and advertising services through its RadioLoyaltyTM Platform (the “Platform”) to over 5,500 internet and terrestrial radio stations and other broadcast content providers. The Platform consists of a web-based and mobile player that manages streaming audio and video content, social media engagement, display and video ad serving within the web player and is also capable of replacing audio ads with video ads within the web player in a live or on-demand environment. The Company offers the Platform directly to its broadcasters and integrates or white labels its technologies with web-based internet radio guides and other web-based content providers. The Company is also continuing development of WatchThis™, a patent-pending technology to provide web, mobile and IP television streaming services that are e-commerce enabled within streamed content. The Company was incorporated as a Wyoming corporation on May 6, 2008.

Basis of Presentation

The accompanying interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission (“SEC”), and should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s Form 10-K for year ended August 31, 2013 In the opinion of management, all adjustments necessary in order for the financial statements to be not misleading have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, StreamTrack Media, Inc., a California corporation. All intercompany balances and transactions have been eliminated in consolidation. In the opinion of the Company’s management, the consolidated financial statements include all adjustments, which include only normal recurring adjustments, necessary for the fair presentation of the Company’s financial position for the periods presented.

Going Concern

The Company’s financial statements are prepared using accounting principles generally accepted in the United States of America applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. For the nine months ended May 31, 2014, the Company recorded an operating loss of $872,260 and used cash flow from operations of $657,042. As of May 31, 2014, the Company had a working capital deficit of $3,007,324. These factors raise substantial doubt about our ability to continue as a going concern.

Management is confident but cannot guarantee that additional capital can be raised in order to repay debts and continue operations. Normal operating costs are also significant and include consulting fees, professional fees, product development costs and marketing and sales costs associated with management’s business plan. Since inception and through the date of these financial statements, the Company has successfully raised a significant amount of capital. On April 11, 2013, the Company closed a non-dilutive line of credit financing for $250,000 with an institutional fund. During the nine months ended May 31, 2014, the institutional fund has increased the Company’s line of credit to $520,000 and received proceeds from convertible notes payable of $315,000 in which have used to fund operations. Additionally, the Company anticipates launching several new product offerings and initiating certain new partnerships during the fiscal year ending August 31, 2015. The Company expects those products and partnerships to be profitable but notes that it will require an unknown amount of capital for product development and commercial deployment. The Company will attempt to have its potential partners pay for the majority of these costs but management cannot be certain that arrangement will occur. Management may potentially make a business decision to move forward, delay, or cancel certain partnerships because of the Company’s overall capital needs. Nonetheless, the ability of the Company to continue as a going concern is dependent on the successful execution of the business plan in order to reach sustained break-even and become profitable as well as financing to support the cash flow. If the Company is unable to become profitable and sustain cash flow, the Company could be forced to modify its business operations or possibly cease operations entirely. Management cannot provide any assurances that the Company will be successful in its 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.

F-4

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make certain estimates, judgments, and assumptions that affect the reported amounts of assets and liabilities and the related disclosures at the date of the financial statements, as well as the reported amounts of revenue and expenses during the periods presented. Estimates are used for determining the allowance for doubtful accounts, stock-based compensation, fair values of warrants to purchase common stock, derivative liabilities and income taxes. To the extent there are material differences between these estimates, judgments, or assumptions and actual results, the Company’s financial statements could be affected. In many cases, the accounting treatment of a particular transaction is specifically dictated by U.S. GAAP and does not require management’s judgment in its application. There are also areas in which management’s judgment in selecting among available alternatives would not produce a materially different result.

2. Composition of Certain Financial Statement Captions

Property and Equipment

Property and equipment consisted of the following:

	May 31, 2014			August 31, 2013
Software	$	810,624		$	771,666
Servers, computers, and other related equipment		198,924			198,924
Leasehold improvements		1,675			1,675
		1,011,223			972,265
Less accumulated depreciation and amortization		(820,712	)		(572,132	)
Property and equipment, net	$	190,511		$	400,133

Depreciation expense totaled $82,860 and $252,122 for the three and nine months ended May 31, 2014, respectively. Depreciation expense totaled $115,887 and $231,773 for the three and nine months ended May 31, 2013, respectively. There have been no write-offs or impairments of property and equipment since the Company’s inception on November 30, 2011.

Note Receivable

Note receivable consisted of a $150,000 convertible promissory note and $18,375 in accrued interest. The note bears interest at 7% and is due from a digital content provider on or before August 28, 2016. The balance owed can be converted into either preferred stock or common stock of the digital content provider, at the Company’s election, subject to certain conditions and contingencies. The Company agreed to work with the digital content provider to make modifications to its Universal PlayerTM technology platform to better suit the digital content provider’s specific needs. The Company received a $25,000 deposit previously. The Company has not received the remaining fees, which are recorded as a note receivable. Beginning in January 2014, the Company began earning additional revenue from the client. Although not significant to date, the Company expects to earn increased amounts during the fourth fiscal quarter of 2014 and fiscal year of 2015.

F-5

Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses consisted of the following:

	May 31, 2014		August 31, 2013
Accounts payable	$	827,751	$	1,028,287
Accrued interest		73,947		139,639
Accrued broadcaster commissions		92,134		90,632
Accrued consulting fees		4,158		64,049
Credit card		52,237		53,531
Accounts payable and accrued expenses	$	1,050,227	$	1,376,138

3. Fair Value

Fair value is an exit price, representing the amount that would be received from the sale of an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. Fair value measurements are required to be disclosed by level within the following fair value hierarchy:

Level 1– Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.

Level 2 – Inputs (other than quoted prices included in Level 1) are either directly or indirectly observable for the asset or liability through correlation with market data at the measurement date and for the duration of the instrument’s anticipated life.

Level 3 – Inputs lack observable market data to corroborate management’s estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.

When determining fair value, whenever possible the Company uses observable market data, and relies on unobservable inputs only when observable market data is not available. Fair-value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of May 31, 2014 and August 31, 2013. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. These financial instruments include cash, accounts receivable, prepaids, accounts payable, accrued liabilities, notes payable, and convertible notes payable. Fair values for these items were assumed to approximate carrying values because of their short term in nature or they are payable on demand

F-6

The fair value of these financial assets and liabilities was determined using the following inputs:

	Fair Value Measurement Using
	Quoted Prices in Active Markets for Identical Instruments (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Fair values as of May 31, 2014
Liabilities:
Derivative liabilities	$	-	$	884,883	$	-	$	884,883

Total liabilities measured at fair value	$	-	$	884,883	$	-	$	884,883

Fair values as of August 31, 2013
Liabilities:
Derivative liabilities	$	-	$	778,074	$	-	$	778,074

Total liabilities measured at fair value	$	-	$	778,074	$	-	$	778,074

The Company’s derivative liabilities were classified as Level 2 within the fair value hierarchy because they were valued using significant other observable inputs. At each reporting period, the Company calculates the derivative liability using the Black-Scholes pricing model taking into account variables such as expected life, risk free interest rate, expected volatility, the fair market value of the Company's common stock and the conversion price.

4. Asset Acquisition / Disposition

Asset Acquisition

On November 21, 2013, the Company, entered into an Asset Purchase Agreement with Robot Fruit, Inc., a New York corporation ("Robot Fruit") pursuant to which, the Company issued 850,000 shares of common stock in exchange for Robot Fruit Mobile Application Development Platform and related code, intellectual property and goodwill. The Company accounted for the purchase as an asset acquisition as the assets did not meet the definition of a business. In connection with the agreement, the Company determined the fair market value of the common stock issued to be $42,500, which was recorded as software within property and equipment on the accompanying balance sheet. The Company determined the expected life of the asset acquired to be 36 months.

F-7

Disposition

On November 15, 2013, the Company entered into an Asset Purchase Agreement with Dane Media, LLC (the "Agreement"), a New Jersey limited liability corporation ("Dane Media") pursuant to which, for an aggregate purchase price of $150,000, Dane Media purchased from Streamtrack, its (i) Student Matching Services (as defined in the Agreement), (ii) each of (A) www.studentmatchingservice.com and (B) www.studentmatchingservices.com, and (iii) each of the (A) Call Center Agreement, and the (B) Data/List Management Agreement (as each are described in the Agreement).

Pursuant to the Agreement, the Company shall not compete with Dane Media in call center verified education leads for a period of 12 months following execution of the Agreement. The Company will continue to operate its advertising and lead generation business in various other vertical markets. Moreover, pursuant to the Agreement, the Company forgave certain payments owed by Dane Media to the Company of $38,135 which were invoiced between September 1, 2013 and November 15, 2013. The $150,000 purchase price was paid according to the following schedule: $50,000 upon closing of the transaction; $50,000 on December 13, 2013; and $50,000 on December 31, 2013. In connection, with the transaction the Company recorded a gain on sale of $111,865. The Company did not reclass the income and expenses directly related to the disposition of the education related lead generation to discontinued operations. The Company still operates within the advertising and lead generation business services other verticals.

5. Commitments and Contingencies

On October 23, 2013, the Superior Court in the Judicial District of Danbury, Connecticut entered an order approving the stipulation of the parties (the "Stipulation") in the matter of ASC Recap LLC ("ASC") v. StreamTrack, Inc. Under the Stipulation, the Company agreed to issue, as settlement of liabilities owed by the Company to ASC in the aggregate amount of $766,288 (the "Claim Amount"), shares of common stock (the "Settlement Shares") as follows:

(a) In one or more tranches as necessary, 3,740,000 shares of common stock (the "Initial Issuance") and an additional 200,000 shares of common stock as a settlement fee.

(b) Through the Initial Issuance and any required additional issuances, that number of shares of common stock with an aggregate value equal to (A) the sum of

(i) the Claim Amount and (ii) reasonable attorney fees and trade execution fees in the amount of $75,000, divided by (B) the Purchase Price (defined under the Stipulation as the market price (defined as the lowest closing bid price of the Company's common stock during the valuation period set forth in the Stipulation) less the product of the Discount (equal to 25%) and the market price. The parties reasonably estimated that the fair market value of the Settlement Shares and all other amounts to be received by ASC is equal to approximately $1,100,000.

(c) If at any time during the valuation period the closing bid price of the Company's common stock is below 90% of the closing bid price on the day before an issuance date, the Company will immediately cause to be issued to ASC such additional shares as may be required to effect the purposes of the Stipulation.

(d) Notwithstanding anything to the contrary in the Stipulation, the number of shares beneficially owned by ASC will not exceed 9.99% of the Company's outstanding common stock.

In connection with the Settlement Shares, the Company relied on the exemption from registration provided by Section 3(a)(10) under the Securities Act.

In connection with the settlement, during the nine months ended May 31, 2014 the Company issued 24,165,000 shares of common stock to ASC in which gross proceeds of $211,284 were generated from the sale of the common shares. In connection with the transaction, ASC received fees of $66,151 and providing payments of $145,133 to settle outstanding vendor payables. Subsequent to May 31, 2014, the Company issued ASC 9,378,000 shares of common stock. The remaining amount on the settlement of liabilities owed by the Company to ASC is in the aggregate amount of $370,488 as of June 30, 2014. The Company cannot reasonably estimate the amount of proceeds ASC expects to receive from the sale of these shares which will be used to satisfy the liabilities. Thus, the Company accounts for the transaction as the shares are sold and the liabilities are settled. All amounts are included within accounts payable. Shares in which are held by ASC at each reporting period are accounted for as issued but not outstanding.

F-8

Legal Proceedings

The Company is potentially subject to various legal proceedings and claims arising in the ordinary course of its business. There are no pending legal proceedings against the Company as of the date of these financial statements.

6. Capital Lease

The Company periodically leases computer servers and related hardware under capital lease agreements. The lease terms are typically from three to five years, depending on the type of equipment. The leased equipment typically has a bargain purchase price, and qualifies for treatment as a capital lease. For book purposes, the assets are amortized over their estimated useful lives.

Assets under capital lease, included within property and equipment on the balance sheet, as of May 31, 2014 and August 31, 2013 were as follows:

	May 31, 2014			August 31, 2013
Servers	$	147,049		$	147,049
Less: accumulated depreciation		(142,676	)		(99,984	)
Net assets under capital lease	$	4,373		$	47,065

On March 22, 2013, the Company reached a settlement and release agreement with IBM Credit, LLC, (“IBM”) the lessor associated with the Company’s computer servers and software classified under capital lease. The balance owed to IBM as of March 22, 2013 was agreed to be $108,704. Payments of $9,000 per month were scheduled in order to satisfy this balance. The final payment was due March 1, 2014 is for $9,704. As of May 31, 2014 and as of the date of these financial statements, the Company was in default of this agreement and the amount outstanding of $72,704 is reflected as a current liability on the accompanying balance sheet.

7. Related Party Transactions

The Company has only been operating since November 30, 2011. As a result, the Company has an extremely limited credit history. The Company’s Chief Executive Officer, and the Chief Executive Officer of StreamTrack Media, Inc. (the “Executives”) use their personal credit cards to fund operations on a frequent basis. If the Company did not have access to these credit cards, the Company would have to rely exclusively on external sources of capital. The Company’s external sources of capital are not always readily available. Once the Company’s track record is more established and results of operations are profitable, then external sources of capital should become more readily available. As a result, in time-constrained circumstances, the use of personal credit cards is necessary until such time as the Company is able to build up its own credit-worthiness and access more readily available and significant credit.

The related party payable as of May 31, 2014 and August 31, 2013 consists of unpaid compensation and non-interest bearing cash advances and charges on personal credit lines made on behalf of the Company by the Executives. The balances owed to the Executives are not secured and are due on demand. Interest will be charged on these balances. However, no formal agreement has been executed to quantify the interest.

See Notes 9 and 11 for additional related party transactions.

F-9

8. Factor Line of Credit

On January 26, 2012 the Company executed a contract with an unrelated party (the “Factor”) to provide financing to the Company in the form of a factoring line of credit. The Company utilizes the factoring line of credit to receive cash advances on its accounts receivable balances prior to its customers paying the balances owed to the Company. The Factor charges a variety of fees totaling approximately 3% of the funds advanced by the Factor. On April 16, 2013, the Company executed a payoff agreement with the Factor and made payment to the Factor in full satisfaction of all amounts owed to the Factor. By executing the payoff agreement, the Company also terminated its agreement with the Factor.

9. Debt Instruments

Asset-Based Debt Financing

On April 11, 2013, the Company executed a non-dilutive asset-based debt financing (the “Lender Financing”) with a third party (the “Lender”). The Lender Financing consists of a $250,000 line of credit secured by all of the Company’s assets. The Company’s management also executed limited recourse guarantees with the Lender. Interest is payable monthly based on a floating interest rate determined based on a formula outlined in detail within the financing agreement. The Company anticipates the effective monthly interest rate charged on the outstanding balance owed to the third party will be between 2.2% and 1.1%. The Lender Financing was due and payable in full on September 30, 2013.

Subsequently on June 20, 2014, the Company executed an extension to this agreement whereby the maturity date has been extended to September 30, 2015. The Lender financing is currently capped at $520,000 in which begins decreasing to $500,000 on September 30, 2014; $450,000 on December 31, 2014; $400,000 on March 31, 2015; and $300,000 on June 30, 2015.

Convertible Notes Payable

Creditor

The Company has relied on financing from a lender since 2010 (the “Creditor”). Each note issued by the Creditor (the “Creditor Notes”) bears interest per annum at a rate of 8%, default interest rate of 22% and is generally payable within six months from the issuance date. The table below details the transactions with the Creditor during the nine months ended May 31, 2014. The Company is currently in default on these Creditor’s Notes.

Creditor’s Notes, in default, principal balance as of August 31, 2013	$	230,500
Proceeds received from Creditor		42,500
Conversion of a portion of Creditor’s Note to common stock (25,499,783 common shares issued)		(127,356	)
Assignment of Creditor Note		(145,644	)
Creditor’s Notes, principal balance as of May 31, 2014	$	-

F-10

In April 2014, the Creditor entered into an exchange agreement with another lender whereby they transferred their interest in the Creditor Notes to the other lender. See below for additional information.

Creditor #2

In April 2014, the Creditor entered into an exchange agreement with another lender (the “Creditor #2”). Whereby the Creditor transferred the Creditor's notes and accrued interest to Creditor #2. In April, the Company entered i) a note agreement for $284,560 representing amounts transferred from the Creditor; ii) two $125,000 notes in which the proceeds were received on the same date (collectively referred to as the “Creditor #2 Notes”) with Creditor #2. The Creditor #2 Notes bears interest per annum at 10.0%, payable six months after the issuance date and is convertible on the date of issuance based upon based upon a 45% discount to lowest trading price, for the 15 trading days prior to conversion. As a result, the lower the stock price at the time the Creditor #2 converts the Creditor #2 Notes, the more common shares the Creditor #2 will receive.. The table below details the transactions with the Creditor #2 during the nine months ended May 31, 2014.

Creditor #2’s Notes, principal balance as of August 31, 2013	$	-
Assignment of Creditor Note and accrued interest		284,560
Proceeds received from Creditor #2		250,000
Conversion of a portion of Creditor #2’s Note to common stock (11,031,476 common shares issued)		(35,765	)
Creditor #2’s Notes, principal balance as of May 31, 2014	$	498,795

To the extent the Creditor #2 converts the Creditor #2 Notes and then sells its common stock, the market price of the common stock may decrease due to the additional shares in the market. This could allow the Creditor #2 to receive greater amounts of common stock upon conversion. The sale of each share of common stock could further depress the stock price. Due to the floating conversion price of the notes, the Company does not know the exact number of shares that the Creditor #2 would be issued upon conversion. The table below details the number of shares of the Company’s common stock the Creditor #2 would be issued, if the Creditor #2 elected to convert the Creditor #2 Notes to common shares on each reporting date. The shares issuable upon conversion of the Creditor #2 Notes may result in substantial dilution to the interests of the Company’s other shareholders. In this regard, even though the investor may not hold shares amounting to more than 9.99% of the outstanding shares at one time, this restriction does not prevent the investor from selling some of its holdings and then receiving additional shares. In this way, the investor could sell more than the 9.99% limit while never holding more than the limit.

The table below details the number of shares issuable to the Creditor #2, without regard to the 9.99% limitation, in the event the share price decreases 25%, 50% or 75% from the stock price as of each date set forth below.

	May 31, 2014
Stock price	$	.0060
Effective conversion price	$	.0023
Creditor Note and accrued interest balance outstanding	$	498,795
Actual outstanding shares of common stock		96,358,010

Shares issuable upon conversion, at actual price		221,194,718
% of outstanding common stock, at actual price		230	%
Shares issuable upon conversion, assuming 25% price decrease		294,926,291
% of outstanding common stock, assuming 25% price decrease		306	%
Shares issuable upon conversion, assuming 50% price decrease		442,389,437
% of outstanding common stock, assuming 50% price decrease		459	%
Shares issuable upon conversion, assuming 75% price decrease		884,778,874
% of outstanding common stock, assuming 75% price decrease		918	%

F-11

Due to the significant change in terms and amounts payable between the Creditor Notes and Creditor #2 Notes, the Company accounted for the transaction as an extinguishment of the Creditor Note on the date of the exchange. In connection with this extinguishment, the Company recorded a loss on extinguishment of $1,439,044 as the derivatively liability associated with the Creditor #2 Notes was significantly greater in value than that of the Creditor Notes. See below for valuation methods used to determine the fair value of the Company's derivative liabilities

In addition, due to the recording of a derivative liability in connection with the $250,000 in proceeds received from the Creditor #2. The Company recorded a full discount to these notes in which is being amortized over the term of the Creditor #2 Notes using the straight line method. During the three and nine months ended May 31, 2014, $62,498 was amortized to interest expense with $187,502 of the discount remaining as of May 31, 2014.

Vendor Convertible Note

The Company issued a non-interest bearing convertible promissory note due on demand (the “Vendor Note”) to settle all outstanding debts with a former vendor (the “Vendor”). The table below details the transactions with the Vendor during the nine months ended May 31, 2014.

Vendor Notes, principal balance as of August 31, 2013	$	96,500
Conversion of Vendor Note to common stock (18,000,000 common shares issued)		(46,200	)
Vendor Note, principal balance, May 31, 2014	$	50,300

As of May 31, 2014, the conversion price of the $50,300 Vendor Note is based upon a 50% discount to lowest five days bid prices of the Company’s common stock over the five-day period prior to conversion. As a result, the lower the stock price at the time the Vendor converts the Vendor Note, the more common shares the Vendor will receive. To the extent the Vendor converts the Vendor Note and then sells its common stock, the common stock may decrease due to the additional shares in the market. This could allow the Vendor to receive greater amounts of common stock upon conversion. The sale of each share of common stock further depresses the stock price. Due to the floating conversion price of the notes, the Company does not know the exact number of shares that the Vendor would be issued upon conversion. The table below details the number of shares of the Company’s common stock the Vendor would be issued, if the Vendor elected to convert the Vendor Note to common shares on each reporting date. The shares issuable upon conversion of the Vendor Note may result in substantial dilution to the interests of the Company’s other shareholders.

The table below details the number of shares issuable to the Vendor in the event the share price decreases 25%, 50% or 75% from the stock price as of each date set forth below.

	May 31, 2014
Stock price	$	0.0060
Effective conversion price	$	0.0021
Convertible promissory notes balance outstanding	$	50,300
Actual outstanding shares of common stock		96,358,010

Shares issuable upon conversion, at actual price		24,526,829
% of outstanding common stock, at actual price		25	%
Shares issuable upon conversion, assuming 25% price decrease		32,702,439
% of outstanding common stock, assuming 25% price decrease		34	%
Shares issuable upon conversion, assuming 50% price decrease		49,053,659
% of outstanding common stock, assuming 50% price decrease		51	%
Shares issuable upon conversion, assuming 75% price decrease		98,107,317
% of outstanding common stock, assuming 75% price decrease		102	%

F-12

Convertible Promissory Notes

As of May 31, 2014, the Company has ten convertible promissory notes issued between December 2011 and May 2014. The convertible promissory notes bear interest at ether 4% or 8% per annum and are due in full, including principal and interest, three years from the issuance date ranging from December 2014 to August 2016. The convertible promissory notes also include a conversion option whereby the holders o may elect at any time to convert any portion or the entire balance into the Company’s common stock at conversion prices ranging from $0.0038 to $1.25. The table below details the transactions associated with the convertible promissory notes during the nine months ended May 31, 2014.

Convertible promissory notes, principal balance as of August 31, 2013	$	835,000
Issuance of convertible promissory notes		25,000
Conversion of convertible promissory notes to common stock		-
Convertible promissory notes, principal balance, May 31, 2014	$	860,000

Of the $860,000 of convertible promissory notes outstanding, $540,000 are held by related parties. These related parties consist of the Company's officers, significant shareholders or entities controlled by these individuals. As of May 31, 2014, $135,000 of these notes were included within the current portion of convertible promissory notes on the accompanying balance sheet as the note was due within one year of the balance sheet.

For eight of the convertible promissory notes, the conversion feature associated with the convertible promissory note provide for a rate of conversion that is below market value. This conversion feature is accounted for as a beneficial conversion feature. A beneficial conversion feature was recorded and classified as a debt discount on the balance sheet at the time of issuance of each convertible promissory note with a corresponding credit to additional paid-in capital.

In addition, six of the convertible promissory notes received warrants to purchase shares of the Company's common stock. The valuation of the stock warrants and the beneficial conversion feature associated with the issuance of convertible promissory notes utilized valuation inputs and related figures provided by a professional and independent valuation firm. The Company allocated the a portion of the proceeds received from the convertible promissory notes to the warrants using the relative fair value resulting in a debt discount to each convertible promissory note.

The discount is amortized over the term of the convertible promissory note using the straight line method. The amortized value for each period is recorded as an offset against the debt discount on the balance sheet, classified as interest expense - accretion in the statement of operations and as accretion of debt discount within the statement of cash flows. During the nine months ended May 31, 2014, the Company recorded a beneficial conversion feature of $22,895 in connection with the issuance of $25,000 in convertible notes. During the nine months ended May 31, 2014 and 2013, $39,097 and $19,224 of the discounts were amortized to interest expense, respectively.

Future maturities of the principal balances of the Company’s convertible promissory notes, in the aggregate, are as follows for the years ending August 31,

2014	$	125,000
2015		625,000
2016		110,000
Thereafter		-
	$	860,000

F-13

10. Derivatives

Creditor Notes

Upon the six-month anniversary (180 days) of all financings with the Creditor, the shares underlying the Creditor’s Notes were issuable without restriction and could be sold to the public through the OTC Bulletin Board. As a result of the conversion price not being fixed, the number of shares of the Company’s common stock that were issuable upon the conversion of the Creditor’s Notes was indeterminable until such time as the Creditor elects to convert to common stock.

On the six-month anniversary of Creditor Notes, the Company measures and records a derivative liability using the input attributes disclosed below. On April 15, 2014 (date of exchange with Creditor #2) and May 31, 2013, the Company re-measured the derivative liability using the weighted average input attributes below and determined the value to be $206,576 and $3,610, respectively. Other income of $300,734 and $51,455 was classified as “change in fair value of derivatives” and was recorded for the nine months ended May 31, 2014 and 2013 in the statement of operations, respectively.

	April 15, 2014			May 31, 2013
Expected life (in years)		0.10			0.10
Balance of note and accrued interest outstanding	$	327,240		$	63,377
Stock price	$	0.0140		$	0.2000
Effective conversion price	$	0.0084		$	0.2089
Shares issuable upon conversion		33,864,861			303,349
Risk-free interest rate		0.30	%		0.40	%
Expected volatility		61.83	%		61.83	%
Expected dividend yield		-			-

Creditor #2 Note

The Creditor #2 Notes were executed on April 15, 2014 and were immediately convertible into the Company’s common stock at a 45% discount to the lowest trading price for the 15 days prior to the conversion date. As a result of the fact that the number of shares the Creditor #2 Notes was convertible into was indeterminable, the Company determined a derivative liability was embedded within the Creditor #2 Notes. The Company measured the derivative liability using the input attributes disclosed below and recorded a derivative liability of $3,158,190 as of April 15, 2014 of which $1,219,891 was included within “change in fair value of derivatives” due to a portion of the derivative liability being in excess of the $250,000 in proceeds received and $1,481,723, which included offset of $206,576 from relief of the derivative liability related to the Creditor Notes, within “Loss on extinguishment” due to extinguishment accounting on the Creditor Note transferred to Creditor #2. On May 31, 2014, the Company re-measured the derivative liability using the input attributes below and determined the value to be $835,828. Other income (expense) of $2,322,361 was classified as “change in fair value of derivatives” and was recorded for the nine months ended May 31, 2014 and included in the statement of operations.

F-14

	May 31, 2014			April 15, 2014
Expected life (in years)		0.375			0.50
Balance of note and accrued interest outstanding	$	498,795		$	534,560
Stock price	$	0.0060		$	0.0140
Effective conversion price	$	0.0023		$	0.0021
Shares issuable upon conversion		225,899,580			254,692,702
Risk-free interest rate		0.50	%		0.30	%
Expected volatility		61.83	%		61.83	%
Expected dividend yield		-			-

Vendor Note

The Vendor Note was executed on November 1, 2012 and was immediately convertible into the Company’s common stock at a 50% discount to the lowest bid price as quoted on the OTC Bulletin Board for the five days prior to the conversion date. As a result of the fact that the number of shares the Vendor Note was convertible into was indeterminable, the Company determined a derivative liability was embedded within the Vendor Note. The Company measured the derivative liability using the input attributes disclosed below and recorded a derivative liability of $190,927 as of November 1, 2012. As a result of the valuation of the derivative liability being in excess of the value of the proceeds of the Vendor Note by $50,927, a deemed dividend of $50,927 was recorded by the Company on November 1, 2012. The debt discount of $140,000 associated with the Vendor Note was immediately expensed to interest expense – accretion as a result of the Vendor Note being immediately convertible and due on demand. On May 31, 2014 and 2013, the Company re-measured the derivative liability using the input attributes below and determined the value to be $49,054 and $96,500, respectively. Other income of $167,741 and $94,427 was classified as “change in fair value of derivatives” and was recorded for the nine months ended May 31, 2014 and 2013, respectively, and included in the statement of operations.

	May 31, 2014			May 31, 2013
Expected life (in years)		0.10			0.10
Balance of note outstanding	$	50,300		$	96,500
Stock price	$	0.0060		$	0.2000
Effective conversion price	$	0.0021		$	0.1000
Shares issuable upon conversion		24,526,829			965,000
Risk-free interest rate		0.50	%		0.40	%
Expected volatility		61.83	%		61.83	%
Expected dividend yield		-			-

F-15

11. Stockholders’ Equity

Series A Preferred Stock

Each share of Series A Preferred Stock has voting rights equal to the voting equivalent of the common stock into which it is convertible at the time of the vote. The holders of the Series A Preferred Stock are not entitled to dividends. The Series A Preferred Stock has no preferential rights to the Company’s common stock and will share in any liquidation proceeds with the common stock on an as converted basis.

Series B Preferred Stock

On October 25, 2013, the Company filed a Certificate of Designation of Series B Preferred Stock (the "Series B Certificate of Designation") with the Secretary of State of Wyoming. Pursuant to the Series B Certificate of Designation, the Company designated 200,000 shares of its blank check preferred stock as Series B Preferred Stock. The Series B Preferred Stock will rank senior to the common stock, Series A Preferred Stock and any subsequently created series of preferred stock that does not expressly rank pari passu with or senior to the Series B Preferred Stock (the "Junior Stock"). The Series B Preferred Stock will not be entitled to dividends. In the event of a liquidation, the Series B Preferred Stock will be entitled to a payment of the Stated Value of $1.00 per share prior to any payments being made in respect of the Junior Stock. Each share of Series B Preferred Stock will entitle the holder to vote on all matters voted on by holders of common stock as a single class. With respect to any such vote, each share of Series B Preferred Stock will entitle the holder to cast such number of votes equal to 0.000255% of the total number of votes entitled to be cast. Effective upon the closing of a Qualified Financing, all issued and outstanding shares of Series B Preferred Stock will automatically convert into common stock in an amount determined by dividing the product of the number of shares being converted and the Stated Value by the Conversion Price. The Conversion Price will be equal to the price per share of the common stock sold under the Qualified Financing (or, if the Qualified Financing involves the sale of securities convertible into common stock, by the conversion price of such convertible securities). A "Qualified Financing" is defined as the sale by the Company in a single offering of common stock or securities convertible into common stock for gross proceeds of at least $5,000,000.

On October 31, 2013, the Company entered into amendment, waiver and exchange agreements (the "Exchange Agreements") with Michael Hill (the Company's chief executive officer and director) and Aaron Gravitz (the Company's director). Under each Exchange Agreement, the Company issued to each of Mr. Hill and Mr. Gravitz 100,000 shares of Series B Preferred Stock in exchange for $100,000 in unpaid compensation. In connection with the Exchange Agreements, the Company relied on the exemptions from registration provided by Section 3(a)(9) and 4(a)(2) under the Securities Act of 1933, as amended (the "Securities Act"). The Series B Preferred Stock was valued at $100,000 per issuance as the fair value of the consideration received was more determinable.

Common Stock

Each share of common stock has the right to one vote per share. The holders of common stock are also entitled to receive dividends as and when declared by the board of directors of the Company, whenever funds are legally available. These rights are subordinate to the dividend rights of holders of all classes of stock outstanding at the time.

Detachable Stock Warrants

As of May 31, 2014, the Company has a total of 362,500 detachable stock warrants outstanding. The warrants have a three-year term and are exercisable into the Company’s common stock at an exercise price of $0.41 per share.

F-16

Stock Based Compensation

The fair value of the Company’s Restricted Stock Units (“RSUs”) is expensed ratably over the vesting period. RSUs vest daily on a cliff basis over the service period, generally three years. The Company recorded stock-based compensation expense related to restricted stock units of $0 and $217,165 during the nine months ended May 31, 2014 and 2013, respectively. As of May 31, 2014, all compensation cost in connection with the RSUs has been recognized.

Common Stock Issued for Services

During the nine months ended May 31, 2014, the Company issued 7,750,000 shares of common stock valued at $58,500 to a law firm in settlement of accounts payable of $37,500 relating to legal services. The fair market value of the common stock issued was determined based upon the closing market price of the Company's common stock on the date of the issuance. The fair market value of the common stock issued in excess of the accounts payable was recorded as legal expense within general and administrative expenses.

12. Net Income (Loss) Per Share

Basic net income (loss) per share is computed by dividing the net income (loss) by the weighted-average number of shares of common stock outstanding during the period.

Diluted net loss per share is computed by giving effect to all potential shares of common stock, including convertible debt instruments, preferred stock, restricted stock unit grants and detachable stock warrants. Basic and diluted net loss per share for the three and nine months ended May 31, 2014 and 2013 was the same as the inclusion of all potential common shares outstanding would have been anti-dilutive.

13. Subsequent Events

See Note 5 for common stock issued to ASC subsequent to quarter end.

See Note 9 for extension of asset-based debt financing agreement.

F-17

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

The following discussion and analysis should be read in conjunction with the consolidated financial statements and related notes included in this report and those in our Form 10-K/A for the fiscal year ended August 31, 2013 filed with the Securities and Exchange Commission on December 12, 2013 and all subsequent filings. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those anticipated in such forward-looking statements as a result of certain factors, including but not limited to, those described under “Risk Factors” included in Part II, Item IA of this report.

Overview

StreamTrack, Inc. (“StreamTrack,” or the “Company”) is a digital media and technology services company. The Company provides audio and video streaming and advertising services through the RadioLoyaltyTM Platform (the “Platform”) to over a global group of over 5,500 internet and terrestrial radio stations and other broadcast content providers.

Our business model is focused on the following core principles:

1.	We barter with audio content providers, namely internet and terrestrial radio stations, to obtain control and management of their desktop advertising opportunity (“Ad Inventory”). We also routinely purchase any Ad Inventory the content providers have not previously given to us by barter.
2.	In exchange for the Ad Inventory, we pay for all internet and mobile streaming costs associated with the broadcaster’s content that is streamed through our platform. We barter in order to scale our business. The end result of the barter is that we aggregate Ad Inventory from our broadcasters that management believes can reach substantial size while maintaining a primarily fixed cost structure for our hardware, content delivery, labor and other costs, respectively.
3.	We re-broadcast original audio broadcast content through the Platform in a streaming media format in desktop and mobile environments. By re-broadcasting we ensure that we do not pay any royalties. Royalties are the responsibility of our broadcasters. This is a substantial advantage for us as many of our competitors pay royalties of up to 70% of revenues generated from licensed broadcast content.
4.	We serve advertisements (“Ads”) within the Platform in audio, display and video formats in a desktop environment and display ads in a mobile environment using our RadioLoyaltyTM Apps.
5.	Ads are served by our automated systems based on geography and demographics data, among others.
6.	The primary technology that makes our Platform unique in the industry is that we are able to re-broadcast audio content with geographically targeted Ads that replace Ads served within an original broadcast targeting a listener in a certain geography. By having this capability we can also choose to replace audio Ads that do not generate as high of Ad revenues with video-based Ads that generate much higher Ad revenues. In effect, we make the broadcaster’s original broadcast capable of delivering Ads that are geographically targeted throughout a global broadcast marketplace while also utilizing video Ads and our proprietary video in-stream technology to increase advertising rates.
7.	All of our primary technology that supports the Platform is automated and capable of operating in a live environment. Audio content is streamed, Ads are targeted and served, audio Ads are replaced as needed and video Ads replace audio Ads, as desired and when possible.

Advertising revenue constitutes the majority of our total revenue, representing 98.2% of total revenue for the nine months ended May 31, 2014. We anticipate this trend will continue and our revenues will be generated primarily from advertising. Our advertising revenue for the nine months ended May 31, 2014 was almost entirely derived from advertising delivered on desktop devices.

We deliver content on mobile devices through our RadioLoyaltyTM app but we do not currently generate significant mobile advertising revenues. Management believes that mobile advertising represents an opportunity for the Company in the coming years and on an ongoing basis. Management expects the mobile advertising market will grow at substantial rates in the coming years. However, many challenges exist in this market. We believe these challenges will be solved primarily with new technologies. We believe our current technologies and other technology under development will solve some of these challenges. By solving these challenges we will be able to monetize the mobile listenership we are growing today.

We are also continuing development of WatchThis™, a patent-pending merchandising in-stream technology to provide web-based and IP television streaming services with a unique e-commerce advertising capability. The technology is functional in a local environment. Our development efforts are currently focused on technical issues associated with operating the technology in a live streaming environment. If and once the technology is functional in a live streaming environment, management plans to use the in-video advertising method technology to create a video encode with keywords that tag frames with corresponding merchandise within video content. These tags would communicate with our advertising database to deliver the highest paying advertiser in real-time. Consumers would be able to view this content, select tagged products within the content, and complete purchases throughout the broadcast.

We recently completed an asset purchase of RobotFruit, a mobile loyalty and application platform. Robot Fruit provides a complete SAAS based mobile platform for publishers and content owners to directly sell their mobile web and in-app Ad Inventory on leading mobile devices. The platform is a self-service mobile loyalty and development platform that has an easy to use interface which enables station owners, content owners, business owners, artists and bands to quickly deploy in HTML5, native iOS and Android based application environments. We anticipate making the technology available to broadcasters, content owners and artists in the coming months.

Key Metrics:

We track listener hours because we believe it is the best key indicator of the growth of our business with Platform. Revenues from advertising through our Platform represented substantially all of revenues for the three and nine months ended May 31, 2014. We also track the number of active users on our Platform as well as the RadioLoyaltyTM app as indicators of the size and quality of our audience, which are particularly important to potential advertisers. Additionally, the Company anticipates launching several new product offerings and initiating certain new partnerships during the fiscal year ending August 31, 2015. The Company expects those products and partnerships to be profitable but notes that it will require an unknown amount of capital for product development and commercial deployment. Once these products are launched we will determine key indicators of growth for those products.

We calculate actual listener hours using our internal analytics systems. Some of our competitors do not always calculate their listener hours in the same way we do. As a result, their stated listener hours may not represent a truly comparable figure.

Player launches are defined as the number of individual times the UniversalPlayer™ was launched.

Registered users are defined as the number of users who have signed up for an account with us in order to access our broadcasters’ content and to earn loyalty points. The number of registered users may overstate the number of actual unique individuals who have signed up for an account with us in order to earn loyalty points, as an individual may register for, and use, multiple accounts under unique registration information. This is in breach of our terms and conditions but we may not be able to effectively manage and authenticate registration information in order to ensure each user is a unique individual. We define registered users as those who have signed up with us to receive loyalty points. We calculate this by the number of submissions we receive from users signing up for our loyalty service.

We calculate listener hours as follows. When the UniversalPlayer TM is launched a session is created - this is considered the listener's start time. At one minute following the launch of the UniversalPlayerTM, we record that as 1 minute of listening time. If a session lasts between 1 and 59 seconds, we record that as 30 seconds of listening time. At ten-minute intervals following the session being created, we count each 10 minute period as listening time. So for example, if a user launched the UniversalPlayer TM at 11:00am, we will recognize 1 minute of listening time at 11:01, then 10 minutes of listening time at 11:10, 20 minutes at 11:20, etc.

Events are user interactions such as a 10 minute interval, clicking song like/dislike, sharing what they are listening to, checking the news through our news app in the player, etc. The last event we see for the user is considered the end of their session. We then take that time minus the time the session started to determine how long the session is. So for example, if a user launched the UniversalPlayer TM at 11am, and liked a song at 11:07am, but exited the player at 11:09am, we would recognize that as 7 minutes of listening.

Comparison of the Nine Months Ended May 31, 2014 and May 31, 2013

	For the Nine Months Ended May 31, 2014		For the Nine Months Ended May 31, 2013
Revenue:
Advertising	$	1,339,729	$	1,017,424
Services		24,750		206,794
Total revenue	$	1,364,479	$	1,224,218

Revenues for the nine months ended May 31, 2014 and 2013, totaled $1,364,479 and $1,224,218 respectively. We generated substantial revenues from video and display Ads utilizing our Platform and the listenership from over 5,500 of our radio stations. The Company began focusing more of its effort on filling advertisements in the display and video category within the Platform itself as opposed to display and video advertisements in traditional internet webpage formats. We anticipate generating additional advertising revenues from the launch of several new product offerings and certain new partnerships during the year ending August 31, 2015.

	For the Nine Months Ended May 31, 2014		For the Nine Months Ended May 31, 2013
Costs of revenues:
Media network	$	302,768	$	120,812
Depreciation and amortization		246,888		282,224
Colocation services		133,884		164,458
Broadcaster commissions		152,068		159,559
Other		166,817		548,599
Total costs of revenue	$	1,002,425	$	1,275,652

Costs of revenues for the nine months ended May 31, 2014 and 2013, totaled $1,002,425 and $1,275,652, respectively. Each reporting period we have recorded substantial amortization costs associated with the Platform. The significant amortization costs associated with the Platform are anticipated to continue until these Platform asset value is fully amortized on December 1, 2014. In order to operate the Platform and the RadioLoyaltyTM mobile and tablet apps and our ad-serving technologies, we require substantial computing power, hosting and streaming hosting. We operate a substantial technology center at our offices in Santa Barbara, California but also utilize a contracted facility in Los Angeles, California, to support our operations and ensure our systems and content delivery maintain our service level agreements. We refer to these costs as colocation services. Colocation services costs should increase as our business grows. However, our current costs should remain fixed until and if we reach a substantial listener hours level that exceeds approximately 15,000,000 hours per month. We currently generate over 1,000,000 listener hours per month. Our advertising sales arrangements with over 5,500 broadcasters facilitate us paying the broadcasters a monthly revenue sharing or annual license fee. We refer to these costs as broadcaster commissions. Broadcaster commissions are paid on Ad Inventory we purchase from the broadcasters, not on Ad Inventory we receive as a barter from the broadcasters. Other costs of sales include affiliate marketing costs associated with the lead generation business, media network costs associated with the distribution of our content across a variety of advertising networks, streaming costs, call center operation costs, and various application technologies that support our primary product offerings.

	For the Nine Months Ended May 31, 2014		For the Nine Months Ended May 31, 2013
Operating expenses
Product development	$	204,128	$	389,707
Officer compensation		360,000		347,379
Sales and marketing		104,628		247,937
Other		474,268		625,787
Total operating expenses	$	1,143,024	$	1,610,810

Operating expenses for the nine months ended May 31, 2014 and 2013, totaled $1,143,024 and $1,610,810, respectively. Product development costs were associated with continuing improvements to the software and related infrastructure for our primary product offering as well as development work on our online product portfolio and the WatchThisTM technology. Officer compensation related to accrued but primarily unpaid salaries for our two primary executives officers. Marketing and sales costs incurred were primarily related to the labor costs of employing our sales force. Our sales force markets our products on a daily basis. We expect these costs to increase in the current fiscal year. Rents were primarily related to four leases we are obligated under for our Santa Barbara, California office. Consultant expenses included fees incurred with certain personnel primarily related to finance, business development and investor relations services. Professional fees included accounting, auditing and legal fees associated with public company matters. Travel and entertainment was associated with ongoing business development and investor relations activities. Other operating costs include telecom, depreciation, utilities, travel and entertainment and various other costs of doing business.

	For the Nine Months Ended May 31, 2014			For the Nine Months Ended May 31, 2013
Other income (expenses)
Interest income	$	7,875		$	7,875
Interest expense		(358,987	)		(509,561	)
Gain on disposal of assets		73,951			71,847
Gain on extinguishment		(1,439,044	)		-
Change in fair value of derivatives		1,624,915			285,391
Total other income (expenses)	$	(91,290	)	$	(144,448	)

Other (expense) income for the nine months ended May 31, 2014 and 2013, totaled $(91,290) and $(144,448), respectively. We generated interest income on the note receivable. We incurred interest expense calculated on our convertible promissory notes and fees charged by the provider of our factoring line of credit, among others. During the month of November 2013 we completed the sales of our education lead generation vertical, Student Matching Service. We also recorded the accretion of various debt discounts associated with our convertible promissory notes. The accretion is a result of the amortization of the debt discounts associated with the convertible promissory notes over the term of the convertible promissory notes. As a result of the derivative classification regarding the beneficial conversion feature on some of our convertible notes, the derivative liabilities have to be re-measured as of each reporting date. For the nine months ended May 31, 2014 and 2013, the re-measurement resulted in a decrease to the derivative liabilities of $1,624,915 and $285,391, respectively. If the convertible promissory notes issued to the Creditor remain outstanding at any time subsequent to the six-month anniversary of the date the convertible promissory notes were issued, a derivative liability exists and will have to be measured as of each reporting date. Similarly, if any portion of the Vendor Note remains outstanding at the reporting date, the derivative liability has to be re-measured as of the reporting date. The Company's stock price has a significant impact the valuation of the derivative liabilities.

We did not generate taxable profits for the nine months ended May 31, 2014 and 2013, respectively. As a result, no provision for income taxes was recorded during either period.

Comparison of the Three Months Ended May 31, 2014 and May 31, 2013

	For the Three Months Ended May 31, 2014		For the Three Months Ended May 31, 2013
Revenue:
Advertising	$	437,342	$	348,904
Services		8,250		9,100
Total revenue	$	445,592	$	358,004

Revenues for the three months ended May 31, 2014 and 2013, totaled $445,592 and $358,004 respectively. We generated substantial revenues from video and display Ads utilizing our Platform and the listenership from over 5,500 of our radio stations. The Company began focusing more of its effort on filling advertisements in the display and video category within the Platform itself as opposed to display and video advertisements in traditional internet webpage formats. We anticipate generating additional advertising revenues from the launch of several new product offerings and certain new partnerships during the year ending August 31, 2015.

	For the Three Months Ended May 31, 2014		For the Three Months Ended May 31, 2013
Costs of revenues:
Media network	$	108,047	$	53,734
Depreciation and amortization		82,296		91,130
Colocation services		38,334		47,850
Broadcaster commissions		51,180		61,327
Other		28,626		137,551
Total costs of revenue	$	308,483	$	391,592

Costs of revenues for the three months ended May 31, 2014 and 2013, totaled $308,483 and $391,592, respectively. Each reporting period we have recorded substantial amortization costs associated with the Platform. The significant amortization costs associated with the Platform are anticipated to continue until these Platform asset value is fully amortized on December 1, 2014. In order to operate the Platform and the RadioLoyaltyTM mobile and tablet apps and our ad-serving technologies, we require substantial computing power, hosting and streaming hosting. We operate a substantial technology center at our offices in Santa Barbara, California but also utilize a contracted facility in Los Angeles, California, to support our operations and ensure our systems and content delivery maintain our service level agreements. We refer to these costs as colocation services. Colocation services costs should increase as our business grows. However, our current costs should remain fixed until and if we reach a substantial listener hours level that exceeds approximately 15,000,000 hours per month. We currently generate over 1,000,000 listener hours per month. Our advertising sales arrangements with over 5,500 broadcasters facilitate us paying the broadcasters a monthly revenue sharing or annual license fee. We refer to these costs as broadcaster commissions. Broadcaster commissions are paid on Ad Inventory we purchase from the broadcasters, not on Ad Inventory we receive as a barter from the broadcasters. Other costs of sales include affiliate marketing costs associated with the lead generation business, media network costs associated with the distribution of our content across a variety of advertising networks, streaming costs, call center operation costs, and various application technologies that support our primary product offerings.

	For the Three Months Ended May 31, 2014		For the Three Months Ended May 31, 2013
Operating expenses
Product development	$	88,400	$	151,193
Officer compensation		120,000		120,000
Sales and marketing		39,813		43,309
Other		177,795		212,255
Total operating expenses	$	426,008	$	526,757

Operating expenses for the three months ended May 31, 2014 and 2013, totaled $426,008 and $526,757, respectively. Product development costs were associated with continuing improvements to the software and related infrastructure for our primary product offering as well as development work on our online product portfolio and the WatchThisTM technology. Officer compensation related to accrued but primarily unpaid salaries for our two primary executives officers. Marketing and sales costs incurred were primarily related to the labor costs of employing our sales force. Our sales force markets our products on a daily basis. We expect these costs to increase in the current fiscal year. Rents were primarily related to four leases we are obligated under for our Santa Barbara, California office. Consultant expenses included fees incurred with certain personnel primarily related to finance, business development and investor relations services. Professional fees included accounting, auditing and legal fees associated with public company matters. Travel and entertainment was associated with ongoing business development and investor relations activities. Other operating costs include telecom, depreciation, utilities, travel and entertainment and various other costs of doing business.

	For the Three Months Ended May 31, 2014			For the Three Months Ended May 31, 2013
Other income (expenses)
Interest income	$	2,625		$	2,625
Interest expense		(193,387	)		(150,940	)
Gain (loss) on disposal of assets		(46,413	)		71,847
Loss on extinguishment		(1,439,044	)		-
Change in fair value of derivatives		1,570,945			663,372
Total other income (expenses)	$	(105,274	)	$	586,904

Other (expense) income for the three months ended May 31, 2014 and 2013, totaled $(105,274) and $586,904, respectively. We generated interest income on the note receivable. We incurred interest expense calculated on our convertible promissory notes and fees charged by the provider of our factoring line of credit, among others. During the month of November we completed the sales of our education lead generation vertical, Student Matching Service. We also recorded the accretion of various debt discounts associated with our convertible promissory notes. The accretion is a result of the amortization of the debt discounts associated with the convertible promissory notes over the term of the convertible promissory notes. As a result of the derivative classification regarding the beneficial conversion feature on some of our convertible notes, the derivative liabilities have to be re-measured as of each reporting date. For the three months ended May 31, 2014 and 2013, the re-measurement resulted in a decrease to the derivative liabilities of $1,570,945 and $663,372, respectively. If the convertible promissory notes issued to the Creditor remain outstanding at any time subsequent to the six-month anniversary of the date the convertible promissory notes were issued, a derivative liability exists and will have to be measured as of each reporting date. Similarly, if any portion of the Vendor Note remains outstanding at the reporting date, the derivative liability has to be re-measured as of the reporting date.

We did not generate taxable profits for the three months ended May 31, 2014 and 2013, respectively. As a result, no provision for income taxes was recorded during either period.

Liquidity and Capital Resources

As of May 31, 2014 we had cash totaling $39,490, which consisted of cash funds held at major financial institutions. We had net a working capital deficit of $3,007,324 as of May 31, 2014, compared to a net working capital deficit of $3,009,925 as of August 31, 2013. Our principal uses of cash during the nine months ending May 31, 2014 were funding our operations.

Going Concern

Management is confident but cannot guarantee that additional capital can be raised in order to repay debts and continue operations. During the year ending August 31, 2014, the Company is obligated to make payments on certain operating leases, convertible debts, and a capital lease, among others. Normal operating costs are also significant and include consulting fees, professional fees, product development costs and marketing and sales costs associated with management’s business plan. Since inception and through the date of these financial statements, the Company has successfully raised a significant amount of capital. On April 11, 2013, the Company closed a non-dilutive line of credit financing for $250,000 with an institutional fund. During the nine months ended May 31, 2014, the institutional fund has increased the Company’s line of credit to $520,000. Additionally, the Company anticipates launching several new product offerings and initiating certain new partnerships during the fiscal year ending August 31, 2015. The Company expects those products and partnerships to be profitable but notes that it will require an unknown amount of capital for product development and commercial deployment. The Company will attempt to have its potential partners pay for the majority of these costs but management cannot be certain that arrangement will occur. Management may potentially make a business decision to move forward, delay, or cancel certain partnerships because of the Company’s overall capital needs. Nonetheless, the ability of the Company to continue as a going concern is dependent on the successful execution of the business plan in order to reach break-even and become profitable. If the Company is unable to become profitable and sustain cash flow, the Company could be forced to modify its business operations or possibly cease operations entirely. Management cannot provide any assurances that the Company will be successful in its 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.

Working Capital Related Party Financing

The Company has only been operating since November 30, 2011. As a result, the Company has an extremely limited credit history. The Company’s Chief Executive Officer, and the Chief Executive Officer of StreamTrack Media, Inc. use their personal credit cards to fund operations on a frequent basis. If the Company did not have access to these credit cards, the Company would have to rely exclusively on external sources of capital. The Company’s external sources of capital are not always readily available. Once the Company’s track record is more established and results of operations are profitable, then external sources of capital should become more readily available. As a result, in time-constrained circumstances, the use of personal credit cards is necessary until such time as the Company is able to build up its own credit-worthiness and access more readily available and significant credit.

Capital Expenditures

Based on current estimates, we believe that our anticipated capital expenditures will be adequate to implement our current plans.

Historical Trends

The following table summarizes our cash flow data for the nine months ended May 31, 2014 and 2013.

	Nine Months Ended May 31, 2014				Nine Months Ended May 31, 2013
Net cash used in operating activities		$	(657,042	)	$	(998,887	)
Net cash provided by financing activities			688,552			777,634

Cash flow used by operating activities totaled $657,042 for the nine months ended May 31, 2014, compared to $998,887 used for the nine months ended May 31, 2013. Operating cash flow was negative during the nine months ended May 31, 2014 as we continued operations and a focused effort on product development and efforts towards certain potential partnerships with third parties within the digital media industry.

Cash flow provided by financing activities totaled $688,552 for the nine months ended May 31, 2014, compared to $777,634 for the nine months ended May 31, 2013. We raised substantial capital through the issuance of convertible promissory notes, net proceeds from the line of credit, and advances from related our primary executive officers during the nine months ended May 31, 2014 and 2013, respectively.

Item 3. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The Company carried out an evaluation of the effectiveness of the design and operation of its disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of May 31, 2014. This evaluation was accomplished under the supervision and with the participation of our Chief Executive Officer, who also serves as our Chief Financial Officer, who concluded that our disclosure controls and procedures are currently effective to ensure that all material information required to be filed in the quarterly report on Form 10-Q has been made known to them.

For purposes of this section, the term disclosure controls and procedures means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Act (15 U.S.C. 78a et seg.) is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by in our reports filed under the Securities Exchange Act of 1934, as amended (the "Act") is accumulated and communicated to the issuer's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

As of the end of the period covered by this Quarterly Report, we conducted an evaluation, under the supervision and with the participation of our Chief Executive Officer (Principal Executive and Financial Officer); of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act). Based upon this evaluation, our Chief Executive Officer (Principal Executive and Financial Officer) concluded that the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and which also are effective in ensuring that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including the Company’s Chief Executive Officer (Principal Executive and Financial Officer), to allow timely decisions regarding required disclosure.

Changes in Internal Controls over Financial Reporting

There has not been any changes in our internal controls over financial reporting during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

The Company is not, currently, party to any legal proceeding.

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

None

Item 3. DEFAULTS UPON SENIOR SECURITIES

None

Item 4. MINE SAFETY DISCLOSURES

None

Item 5. OTHER INFORMATION

None

Item 6. EXHIBITS

(a) Exhibits:

Number		Description
31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification of Chief Executive Officer pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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

___________________

** XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

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.

	STREAMTRACK, INC.

Date: July 15, 2014	By:	/s/ Michael Hill
	Name:	Michael Hill
	Title:	Chairman of the Board of Directors, Chief Executive Officer, President, and Chief Financial Officer (Principal Executive Officer and Principal Financial Officer)

Total Sports Media, Inc. - FORM 10-Q - July 15, 2014

Attached files

Total Sports Media, Inc. Reports