UNITED STATES 

SECURITIES AND EXCHANGE COMMISSION 

Washington, D.C. 20549

FORM 10-Q

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

For quarterly period ended July 31, 2014

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

For the transition period from ___________ to ___________

Commission file number 000-53627

3751 Seneca Ave., Pahrump, NV 89048 

(Address of principal executive offices - Zip Code)

(775)-751-6931

(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the 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 that 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 filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in 12b-2 of the Exchange 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: 18,607,193 shares of common stock, par value $0.001, were outstanding on September 8, 2014.

GOLD HILL RESOURCES, INC. 

FORM 10-Q

For the Quarterly Period July 31, 2014

Table of Contents

PART I — FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements (Unaudited)

Gold Hill Resources, Inc. and Subsidiaries

Consolidated Balance Sheets

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

Gold Hill Resources, Inc. and Subsidiaries

Consolidated Statements of Operations (Unaudited)

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

Gold Hill Resources, Inc. and Subsidiaries

Consolidated Statements of Changes in Stockholders' Equity (Deficit)

For the Nine Months Ended July 31, 2014 (Unaudited) and Year Ended October 31, 2013

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

Gold Hill Resources, Inc. and Subsidiaries

Consolidated Statements of Cash Flows (Unaudited)

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

Gold Hill Resources, Inc. and Subsidiaries 

Notes to Consolidated Financial Statements

NOTE 1 - Organization, Basis of Presentation, New Accounting Guidance and Going Concern

Organization

Gold Hill Resources, Inc., (the "Company", "we", "us" and "our") a Nevada corporation, was incorporated on March 2, 2001. Prior to June 13, 2013, we were a public “shell” company.

On June 13, 2013, Gold Hill Resources, Inc. closed a share exchange transaction pursuant to which it became the parent of Accurate Locators, Inc., an Oregon corporation, and Imaging Locators, Inc., a Nevada Corporation and assumed the operations of Accurate Locators and Imaging Locators. Gold Hill Resources, Inc. was deemed the legal acquirer in the reverse merger. Consequently, the assets and liabilities and the historical operations of Accurate Locators, Inc. and Imaging Locators, Inc. are reflected in the financial statements  . As a result, we are solely engaged in Accurate Locators’ and Imaging Locators' business. Accurate Locators has been a metal detector manufacturer and distributor since 1992 for dealers, treasure hunters, gold prospectors and utility companies world-wide. The Company provides industry standard metal detectors for treasure hunting, gold prospecting and locating under-ground cable, pipe and utilities. The Company’s products are used by many sectors of the US Government and many mining type operations including the likes of Westinghouse, Bureau of Land Management, Bechtel, Graybar, US Army, Navy and Marines. 

Imaging Locators, Inc. operates a metal detector store with a wide variety of instruments. The Company specializes in underground Surveyor Apparatus units, Ground Penetrating Radar, Pulse Induction Metal Detectors and Tunnel Locators.

We are engaged in several research and development projects; we are evolving our current ground penetrating radar, induced polarization, pulse induction and other metal detection systems. We filed our first provisional patent on our blanket antenna technology on November 12, 2012. We also plan to file several additional patents in the next twelve months; which will further enhance and protect our intellectual property portfolio and greatly improve on our detection systems capabilities, thus positioning the Company to capture greater market share in the geophysics sector. Research and development expenses were not material during the periods presented.

In addition our core business of development, manufacturing and distribution of metal detection products and systems, and utilizing our evolving technology in metal detection products, we plan to identify potential acquisition and partnership opportunities within the precious metals mining sector.

Basis of Presentation

All transactions and accounts between and among Gold Hill Resources, Inc., Accurate Locators, Inc. and Imaging Locators, Inc. have been eliminated. The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial reporting, accordingly, they do not include all of the disclosures required by accounting principles generally accepted in the United States for complete financial statements and should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended October 31, 2013, as filed with the Securities and Exchange Commission as part of the Company's Form 10-K. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of the interim financial information have been included. The results of operations for any interim period are not necessarily indicative of the results of operations for the entire year. The Company did not record an income tax provision during the periods presented due to net taxable losses and fully reserved deferred tax assets.

New Accounting Guidance

In May 2014, the Financial Accounting Standards Board issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognition requirements in Accounting Standards Codification (“ASC”) 605, Revenue Recognition. The new revenue recognition standard requires entities to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. ASU 2014-09 is effective for interim and annual reporting periods beginning after December 15, 2016 and is to be applied retrospectively. The Company is in the process of evaluating the effect that ASU 2014-09 will have on its results of operations and financial position.

Going Concern

The accompanying financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America, which contemplate continuation of the Company as a going concern. In the course of funding development and sales and marketing activities, the Company has sustained operating losses and has an accumulated deficit of $457,203 at July 31, 2014. In addition, the Company has negative working capital of $156,697 at July 31, 2014. We have funded operations through accumulated earnings, borrowings from related parties, and proceeds from debt and equity.

 We are in need of generating significant cash resources to achieve our future strategic plan. We anticipate that our existing cash on hand will not be sufficient to fund our business needs. These factors raise substantial doubt about the ability of the Company to continue as a going concern. In this regard, management is proposing to raise any necessary additional funds not provided by operations through loans or through additional sales of common stock. There is no assurance that the Company will be successful in raising this additional capital or in achieving profitable operations. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might result from this uncertainty.

Note 2 - Inventories

Inventories include metal detectors for treasure hunting, gold and royal metal prospecting, forensic and military applications and also for locating under-ground utilities. Most inventory is finished goods. Inventories are valued at the lower of cost or market. Cost is determined using a weighted-average method. The reserves for obsolescence are maintained based on historical trends and specific identification, and therefore require management to make assumptions and to apply judgment about a number of factors, such as market conditions, the selling environment, historical results and current inventory trends. The reserve for obsolete inventory was $51,259 as of July 31, 2014 and October 31, 2013, respectively.

Note 3 - Property and Equipment

Property and equipment consisted of the following:

For the three months ended July 31, 2014 and 2013, the Company recognized $2,586 and $3,451, respectively of depreciation expense. For the nine months ended July 31, 2014 and 2013, the Company recognized $16,082 and $32,935, respectively of depreciation expense.

During the three months ended July 31, 2014, the Company sold certain assets for $3,500 resulting in a gain of $3,088. The assets sold had a basis of $17,641 and accumulated depreciation of $17,229 as of the date of sale. The gain on sales of equipment for the three months ended July 31, 2013 was $22,800.

During the nine months ended July 31, 2014, the Company sold certain assets for $16,700 resulting in a gain of $15,557. The assets sold had a basis of $36,149 and accumulated depreciation of $35,006 as of the date of sale. The gain on sales of equipment for the nine months ended July 31, 2013 was $22,800.

Note 4 - Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses consisted of the following:

Note 5 - Related Parties

As of July 31, 2014, The Company owed Wayne Good, our CEO, $55,964 for advances made to the Company. As of October 31, 2013, the $222,357 balance due to related parties included $66,357 due to Mr. Good and $156,000 due to Eric Stoppenhagen, our former Director and CFO. As a result of his resignation, balances owing to Mr. Stoppenhagen were reclassified to accounts payable. During the three months ended July 31, 2014, the Company wrote off all amounts due to Mr. Stoppenhagen, including $33,550 of accounts payable, $29,800 note payable and $8,427 of accrued interest when management determined that such amounts were no longer owed.

The Company leases its facilities from Mr. Good on a year to year basis for monthly rent of $1,800. Rent in the amount of $5,400 and $16,200 was paid to Mr. Good during the three and nine months ended July 31, 2014, respectively. Rent in the amount of $5,400 and $16,200 was paid or accrued to Mr. Good during the three and nine months ended July 31, 2013, respectively.

Note 6 - Debt

The Company’s debt is summarized below: 

Notes Payable

Notes payable consisted of $29,800 due to Mr. Stoppenhagen. The note had an accrued interest balance of $8,427 and $7,393 as of April 30, 2014 and October 31, 2013, respectively. The Company recognized interest expense on the note of $1,034 during the nine months ended July 31, 2014. This note and accrued interest were written off to other income during the three months ended July 31, 2014, See "Note 5 - Related Parties" above.

Convertible Promissory Notes

On December 30, 2013 and January 28, 2014 the Company received proceeds of $63,000 and $42,500, respectively, in connection with issuing two identical convertible promissory notes ("CPN") to Asher Enterprises, Inc., ("Holder") a private corporation. The CPNs accrue interest at 8% and mature nine months from the date of issuance. The Holder may convert the principal and unpaid interest into shares of common stock beginning one hundred eighty days following the date of each CPN. The conversion price is 61% multiplied by the average of the lowest three Trading Prices for the common stock during the ten trading day period ending on the latest trading day prior to the conversion date. “Trading Price” means, for any security as of any date, the closing bid price on the Over-the-Counter Markets or applicable trading market as reported by a reliable reporting service designated by the Holder (i.e. Bloomberg). The total intrinsic value of the beneficial conversion feature amounted to $90,929. The Company recorded a discount to the face amount of the CPN which is being accreted over the term of each CPN using the effective interest method.

During the three months ended July 31, 2014, the Holder converted $10,000 of principal into 221,239 shares of common stock.

During the three and nine months ended July 31, 2014, the Company recognized $2,075 and $4,873, respectively, of interest expense related to the CPNs. During the three and nine months ended July 31, 2014, the Company recognized $15,325 and $24,337, respectively of accretion related to the debt discount. The remaining debt discount of $66,592 will be amortized through October 31, 2014.

Secured Debt

Secured debt is summarized below:

The fixed, On Deck Capital, Inc. and Other Fixed credit facilities were secured by inventory, accounts receivable and equipment as of July 31, 2014 and October 31, 2013. The term financings were secured by vehicles.

Our fixed credit facility has a maturity date of November 1, 2014 with interest at 7%.

On April 4, 2014, the Company entered into a financing agreement with On Deck Capital Inc. (the "On Deck Financing"). Under the terms of the On Deck Financing, the Company borrowed $125,000, received net proceeds of $121,875 after paying an Origination fee of $3,125, and will repay the On Deck Financing over 15 months by making 314 payments including interest of $559.52 on each business day during the term.

The Company entered into a financing agreement with Direct Capital on December 31, 2013. The face amount of the debt was $61,001. The Company received net proceeds of $50,001 and recorded $11,000 of interest expense during the nine months ended July 31, 2014. The loan was being repaid at the rate of approximately $5,400 per month. On April 7, 2014, this loan was repaid in full from the proceeds of the On Deck Financing.

Our term financing has a maturity date in March 2028 with interest at 6.25%.

Our Other Fixed facility with a balance of $80,545 as of July 31, 2014 was converted to a fixed credit facility on November 7, 2012 with an extended maturity date due on November 1, 2017.

During the three months ended July 31, 2014 and 2013, the Company recognized $18,863 and $5,184, respectively, of interest expense related to secured debt. During the nine months ended July 31, 2014 and 2013, the Company recognized $46,623 and $15,233, respectively, of interest expense related to secured debt.

Note 7 - Stockholders' (Deficit)

During the nine months ended July 31, 2014, the Company recognized the following equity related activity:

Note 8 - Subsequent Events

Subsequent to July 31, 2014, the Company received 3,300,000 shares from certain shareholders and intends to cancel said shares.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

THIS FORM 10-Q CONTAINS "FORWARD-LOOKING STATEMENTS" THAT CAN BE IDENTIFIED BY THE USE OF FORWARD-LOOKING WORDS SUCH AS "BELIEVES," "EXPECTS," "MAY," "WILL," "SHOULD," OR "ANTICIPATES," OR THE NEGATIVE OF THESE WORDS OR OTHER VARIATIONS OF THESE WORDS OR COMPARABLE WORDS, OR BY DISCUSSIONS OF PLANS OR STRATEGY THAT INVOLVE RISKS AND UNCERTAINTIES. MANAGEMENT WISHES TO CAUTION THE READER THAT THESE FORWARD-LOOKING STATEMENTS, INCLUDING, BUT NOT LIMITED TO, STATEMENTS REGARDING THE COMPANY'S MARKETING PLANS, GOALS, COMPETITIVE CONDITIONS, REGULATIONS THAT AFFECT PUBLIC COMPANIES THAT HAVE NO EXISTING BUSINESS AND OTHER MATTERS THAT ARE NOT HISTORICAL FACTS ARE ONLY PREDICTIONS. NO ASSURANCES CAN BE GIVEN THAT SUCH PREDICTIONS WILL PROVE CORRECT OR THAT THE ANTICIPATED FUTURE RESULTS WILL BE ACHIEVED. ACTUAL EVENTS OR RESULTS MAY DIFFER MATERIALLY EITHER BECAUSE ONE OR MORE PREDICTIONS PROVE TO BE ERRONEOUS OR AS A RESULT OF OTHER RISKS FACING THE COMPANY. FORWARD-LOOKING STATEMENTS SHOULD BE READ IN LIGHT OF THE CAUTIONARY STATEMENTS AND IMPORTANT FACTORS DESCRIBED IN THIS FORM 10-Q FOR GOLD HILL RESOURCES, INC., INCLUDING, BUT NOT LIMITED TO THE MATTERS SET FORTH IN MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. THE RISKS INCLUDE, BUT ARE NOT LIMITED TO, THE RISK FACTORS AND UNCERTAINTIES SET FORTH IN ITEM 1A, "RISK FACTORS" AND THE RISKS ASSOCIATED WITH A SMALL COMPANY THAT HAS ONLY A LIMITED HISTORY OF OPERATIONS, THE COMPARATIVELY LIMITED FINANCIAL RESOURCES OF THE COMPANY, THE INTENSE COMPETITION THE COMPANY FACES FROM OTHER ESTABLISHED COMPETITORS, ANY ONE OR MORE OF THESE OR OTHER RISKS COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THE FUTURE RESULTS INDICATED, EXPRESSED, OR IMPLIED IN SUCH FORWARD-LOOKING STATEMENTS. WE UNDERTAKE NO OBLIGATION TO UPDATE OR REVISE ANY FORWARD-LOOKING STATEMENT TO REFLECT EVENTS, CIRCUMSTANCES, OR NEW INFORMATION AFTER THE DATE OF THIS FORM 10-Q OR TO REFLECT THE OCCURRENCE OF UNANTICIPATED OR OTHER SUBSEQUENT EVENTS.

As used herein, the term "the Company," “Gold Hill,” "we," "us," and "our" refer to Gold Hill Resources, Inc. and subsidiaries unless otherwise noted.

Overview

During 2013, the Company completed a reverse merger whereby Accurate Locators, Inc. and Imaging Locators, Inc. became subsidiaries of Gold Hill Resources, Inc. Gold Hill Resources, Inc. is engaged in the mining and mineral detection technology via our wholly owned subsidiary Accurate Locators, Inc. Utilizing our evolving technology in metal detection products, we plan to identify potential acquisition and partnership opportunities within the precious metals mining sector.

Accurate Locators is a leading all-purpose metal detector manufacturer and distributor. Accurate Locators has been in business since 1992 providing several industry benchmark metal detectors for treasure hunting, gold and royal metal prospecting, forensic and military applications and also for locating under-ground utilities. The products have been used by mining operators, treasure hunters and various sectors of the US Government, including the military branches. Our client list includes the following: Westinghouse, Bureau of Land Management, Bechtel, Graybar, General Services Administration and U.S. Army, Navy and Marines. The Company also operates a metal detector store through its subsidiary, Imaging Locators, Inc.

We are engaged in several research and development projects; we are evolving our current ground penetrating radar, induced polarization, pulse induction and other metal detection systems. We filed our first provisional patent on our blanket antenna technology on November 12, 2012. As of the date of this report, we have filed for a total of seven U.S. patents and plan to file additional patents in the next twelve months; which will further enhance and protect our intellectual property portfolio and greatly improve on our detection systems capabilities, thus positioning the Company to capture greater market share in the geophysics sector. 

Results of Operations

For the Three and Nine Months Ended July 31, 2014 and 2013 

Revenue

Our revenues decreased $43,327 to $142,819 during the three months ended July 31, 2014 compared to $186,146 during the three months ended July 31, 2013. Our revenues decreased $203,311 to $415,318 during the nine months ended July 31, 2014 compared to $618,629 during the nine months ended July 31, 2013. Our revenues decreased from 2013 due to competitive pricing pressure resulting in lower unit sales and increased discounting. The Company believes its products are superior to the foreign competitors who have caused the pricing declines. The Company is currently developing two new U.S. patent pending metal detectors which will be released in the current fiscal quarter. The Company has filed for two patents related to these products and expects sales to increase over the coming quarters upon their release.

Cost of Revenue and Gross Profit

Our gross profit decreased $36,290 to $81,247 during the three months ended July 31, 2014 compared to $117,537 during the three months ended July 31, 2013. Our gross profit decreased $105,488 to $287,546 during the nine months ended July 31, 2014 compared to $393,034 during the nine months ended July 31, 2013. The decrease in our gross profit during is primarily due to lower gross sales and increased discounts due to competitive pricing pressure and increased dealer vs. retail sales. Gross margin as a percent of revenue is expected to fluctuate due to our short operating history and inconsistent sales patterns. 

Selling, General and Administrative Expenses

Selling, general and administrative ("SG&A") expense decreased $50,420 to $168,467 during the three months ended July 31, 2014 compared to $218,887 during the three months ended July 31, 2013. SG&A expense increased $75,025 to $600,418 during the nine months ended July 31, 2014 compared to $525,393 during the nine months ended July 31, 2013. The three month year-over-year decrease is primarily due to a decrease in professional and administrative costs that were included in 2013 related to the 2013 Merger. The nine month year-over-year increase is primarily due to the inclusion of Gold Hill Resources, Inc. operating expenses in 2014 which costs were not included in 2013 prior to the Merger. The Company has implemented cost cutting measures and expects SG&A to decrease.

Other Income and (Expense)

Other income and (expense) consists of transactions not directly related to revenue generating activities, gain on sales of assets, interest related to our outstanding notes and accretion related to the debt discount of the Asher Enterprises Convertible Notes. During the three months ended July 31, 2014, total other income was $38,215 compared to other income of $12,366 during the three months ended July 31, 2013. The increase in other income is primarily due to the write off of liabilities related to Eric Stoppenhagen, our former Director and CFO totaling $71,777 offset by an increase in interest expense as a result of the amortization of the debt discount related to the beneficial conversion feature of the Asher Convertible Notes totaling $15,325 and higher interest expense as a result of the Company maintaining higher debt balances at higher interest rates compared to the prior year.

During the nine months ended July 31, 2014, total other income was $64,498 compared to $3,448 during the nine months ended July 31, 2013. The Company recognized other income during the nine months ended July 31, 2014 totaling $141,365, including $54,031 received from insurance proceeds related to product that was damaged in 2013 and previously written off as other expense, $71,777 gain from the write off liabilities related to Eric Stoppenhagen, and $15,557 of gain on the sale of assets offset by $76,867 of interest expense. Interest expense increased $56,385 from $20,482 during the nine months ended July 31, 2013 due to the amortization of the debt discount related to the Asher Convertible Notes and the Company maintaining higher debt balances at higher interest rates.

Liquidity and Capital Resources

Net cash used in operating activities was $276,335 and $142,408 during the nine months ended July 31, 2014 and 2013, respectively.

Net cash provided by investing activities was $16,700 and $22,250 for the nine months ended July 31, 2014 and 2013, respectively.

Net cash provided by financing activities was $185,200 and $74,150 for the nine months ended July 31, 2014 and 2013, respectively.

Current liabilities of the Company at July 31, 2014 were $367,675 compared to cash of $12,293. To the extent our business erodes or we are unable to receive additional financing we would be unable to meet the payment terms of our debt and we would have difficulty continuing as a going concern. Certain debts are secured by inventory, accounts receivable, equipment and vehicles. As of July 31, 2014, we were in compliance in all material respects with our debt agreements. There are no financial covenants concerning debt-to-equity, tangible net equity and interest coverage ratios. Currently, we cannot borrow any more under our credit facilities. However, there are no covenants that restrict additional borrowing from other sources. There are no financial covenants under our promissory note agreements.

We have suffered recurring losses from operations during the nine months ended July 31, 2014 and in the past two fiscal years. We have funded operations through operating cash flow, borrowings from related parties, and proceeds from debt. We are in need of generating significant cash resources to achieve our future strategic plan. On June 4, 2013, the Company completed a private placement offering to certain institutional and accredited investors pursuant to which the Company sold an aggregate of 950,200 shares of the Company’s common stock resulting in gross proceeds of $283,173 to the Company. From June 14 to October 15, 2013, the Company completed a private placement offering to certain institutional and accredited investors pursuant to which the Company sold an aggregate of 390,000 shares of the Company’s common stock resulting in gross proceeds of $195,000 to the Company. During the nine months ended July 31, 2014, the Company received proceeds of $291,501 from issuing notes payable and $25,000 from the sale of common stock. The Company uses these proceeds for working capital and to develop its element detecting technologies. Even with the proceeds we raised, we anticipate that our existing cash and cash equivalents will not be sufficient to fund our business needs for more than three months and we are currently seeking additional financing. In the event we were unsuccessful in raising additional funding and our existing cash and cash equivalents were not sufficient to fund our business needs, we would scale back all new product development besides our Ground Penetrating Radar project. This would delay the release of our future products. Our officers have also indicated their willingness to defer amounts owed to them. This would allow us to maintain our existing operations.

These conditions raise substantial doubt about our ability to continue as a going concern. Our auditor has issued a "going concern" modification as part of their opinion in the Audit Report for the year ended October 31, 2013.

Capital Expenditures

We have not incurred any material capital expenditures.

Off-Balance Sheet Arrangements

We have not entered into 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, capital expenditures or capital resources and would be considered material to investors.

Recently Issued Accounting Pronouncements

We review new accounting standards as issued. Although some of these accounting standards issued or effective after the end of our previous fiscal year may be applicable to us, we have not identified any standards that we believe merit further discussion. We believe that none of the new standards will have a significant impact on our consolidated financial statements.

Item 4. Controls and Procedures.

Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation 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 (the “Exchange Act”), as of the end of the period covered by this quarterly report. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of July 31, 2014, that our disclosure controls and procedures were effective such that the information required to be disclosed in our United States Securities and Exchange Commission (the “SEC”) reports is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred 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 2. Unregistered Sales of Equity Securities and Use of Proceeds

On July 7, 2014, Asher Enterprises, Inc., the Holder of our convertible promissory notes converted $10,000 of principal into 221,239 shares of common stock.

In connection with the above stock sales, we did not pay any underwriting discounts or commissions. None of the sales of securities described or referred to above was registered under the Securities Act of 1933, as amended (the “Securities Act”). We had or one of our affiliates had a prior business relationship with each of the purchasers, and no general solicitation or advertising was used in connection with the sales. In making the sales without registration under the Securities Act, we relied upon the exemption from registration contained in Section 4(2) of the Securities Act.

Item 6. Exhibits

___________

* Filed herewith 

** Furnished herewith. 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 hereunto duly authorized.

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