FORM 10-Q

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

THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended July 31, 2014

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

THE SECURITIES EXCHANGE ACT

Commission file number: 0-17386

CYCLONE URANIUM CORPORATION

 (Exact name of the registrant as specified in its charter)

2186 S. Holly St., Suite 5

Denver, CO  80222

(Address of principal executive offices)

303-800-0678

Telephone number, including

Area code

(Former name or former address if changed since last report)

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

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

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

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

There were 159,562,125 shares of the issuer's common stock, par value $0.001, outstanding as of September 17, 2014.

EXCHANGE RATES

Except as otherwise indicated, all dollar amounts described in this Report are expressed in United States (US) dollars.

CONVERSION TABLE

For ease of reference, the following conversion factors are provided:

Forward Looking Statements

The Company desires to take advantage of the "safe harbor" provisions contained in Section 27A of the Securities Act of 1933, as amended (the "1933 Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "1934 Act"), and is including this statement herein in order to do so:

From time to time, the Company's management or persons acting on the Company's behalf may wish to make, either orally or in writing, forward-looking statements (which may come within the meaning of Section 27A of the 1933 Act and Section 21E of the 1934 Act), to inform existing and potential security holders regarding various matters including, without limitation, projections regarding financial matters, timing regarding transfer of licenses and receipts of government approvals, effects of regulation and completion of work programs.

Such forward-looking statements are generally accompanied by words such as "estimate," "project," "predict," "believes," "expect," "anticipate," "goal" or other words that convey the uncertainty of future events or outcomes. Forward-looking statements by their nature are subject to certain risks, uncertainties and assumptions and will be influenced by various factors. Should one or more of these forecasts or underlying assumptions prove incorrect, actual results could vary materially.

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CYCLONE URANIUM CORPORATION

QUARTERLY REPORT ON FORM 10-Q

FOR THE PERIOD ENDED JULY 31, 2014

CONTENTS

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ITEM 1. Financial Statements and Notes

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

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

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

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

July 31, 2014

(Unaudited)

NOTE 1 – Nature of Operations and Basis of Presentation

Cyclone Uranium Corporation (“Cyclone” or the “Company”), and its subsidiaries are engaged in the business of mining and mineral exploration.  This includes locating, acquiring, exploring, improving, leasing and developing mineral interests, primarily in the field of uranium.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) pursuant to Item 210 of Regulation S-X. They do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been included. The results of operations for the periods presented are not necessarily indicative of the results to be expected for the full year. For further information, refer to the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended January 31, 2014.

The accounting policies followed by the Company are set forth in Note 1 to the Company’s consolidated financial statements in the Report on Form 10-K for the year ended January 31, 2014, and are supplemented throughout the notes to condensed consolidated financial statements. It is suggested that these condensed consolidated financial statements be read in conjunction with the consolidated financial statements and notes included in the Company’s Report on the Form 10-K for the year ended January 31, 2014.

The accompanying condensed consolidated financial statements include the accounts of the Company and its subsidiaries. Intercompany transactions and balances have been eliminated in consolidation.

In June 2014, the FASB issued ASU No. 2014-10, which amended Accounting Standards Codification (ASC) Topic 915 Development Stage Entities. The amendment eliminates certain financial reporting requirements surrounding development stage entities, including an amendment to the variable interest entities guidance in ASC Topic 810, Consolidation. The amendment removes the definition of a development stage entity from the ASC, thereby removing the financial reporting distinction between development stage entities and other entities from U.S. GAAP. Consequently, the amendment eliminates the requirements for development stage entities to (1) present inception-to-date information in the statements of income, cash flows and shareholder equity, (2) label the financial statements as those of a development stage entity, (3) disclose a description of the development stage activities in which the entity is engaged, and (4) disclose the first year in which the entity is no longer a development stage entity that in prior years it had been in the development stage.

This amendment is effective for fiscal years beginning after December 15, 2014, and interim periods therein. Early application of each of the amendments is permitted for any annual reporting period or interim period for which the entity’s financial statements have not yet been issued. The Company has made the election to early adopt this amendment effective June 30, 2014 and, as a result, the Company is no longer presenting or disclosing the information previously required under Topic 915. The early adoption was made to reduce data maintenance by removing all incremental financial reporting requirements for development stage entities. The adoption of this amendment alters the disclosure requirements of the Company, but it does not have any material impact on the Company’s financial position or results of operations for the current or any prior reporting periods.

NOTE 2 - Going Concern

The Company has an accumulated deficit of $21,721,390 and has a working capital deficit of $1,594,667 at July 31, 2014.  The Company has no current revenue producing operations and is in default on its $300,000, $150,000 and $35,000 notes payable.  These conditions raise substantial doubt about the Company's ability to continue as a going concern.

The ability of the Company to achieve its operating goals and thus positive cash flows from operations is dependent upon the future market price of metals, future capital raising efforts, and the ability to achieve and sustain efficient revenue producing operations. Management's plans will require additional financing, reduced exploration activity or disposition of or joint ventures with respect to mineral properties. While the Company has been successful in capital raising endeavors in the past, there can be no assurance that its future efforts and anticipated operating improvements will be successful.

The consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going concern.

NOTE 3 - Notes Payable

Shareholders

In 2005, a shareholder advanced $30,000 to the Company for working capital purposes and to assist in identification of new mining properties.  This loan is due on demand and bore interest at 5% per annum through January 31, 2009, at which time the interest rate increased to 10% per annum.  During the years ended January 31, 2010 and 2009, the shareholder advanced an additional $50,000 and $80,000, respectively, under substantially identical terms. On August 31, 2011, the shareholder advanced a further $150,000 and added an additional $30,000 on October 27, 2011, for a loan total of $340,000 at January 31, 2012. The additional loans were drafted under identical terms of previous loans advanced to the Company. Payments of $180,000 were made on these loans during the year ended January 31, 2013.  As of July 31, 2014 principal and interest due are $160,000 and $119,477.

On January 7, 2013, the Company entered into an agreement with a shareholder in the form of a promissory note payable, in the amount of $35,000. The terms of the note include an interest rate of 15% that is accrued and due upon maturity. The note and accrued interest was due and payable July 7, 2013. As of July 31, 2014, the Company had recorded $8,213 in accrued interest. In connection with the note payable, the Company issued a warrant to purchase 1,000,000 shares of common stock, exercisable on or before January 7, 2016 at $0.02 per share.  The fair value of the warrant at the date of grant was $25,417 using a Black Scholes option pricing model using inputs described in Note 4, and the full expense was recorded as of the date of issuance.  As of July 31, 2014, the Company is in default on the note.  On July 31, 2014 the balance due, including interest is $43,213.  We are currently engaged in discussions with the lender to extend the note.

On August 30, 2013, the Company entered into an agreement with a shareholder in the form of a promissory note payable, in the amount of $150,000. The terms of the note include an interest rate of 30% per annum.  The note was due and payable 120 days from August 30, 2013.  In addition, the Note was secured by a pledge of certain shares of common stock owned by James Baughman.  In connection with the financing agreement, on August 30, 2013 the Company issued a warrant to purchase 5,000,000 shares of common stock, exercisable on or before August 30, 2016 at $0.02 per share.  The fair value of the warrant at the date of grant was $119,698 using a Black Scholes option pricing model using inputs described in Note 4.  The proceeds from the note were allocated to notes payable and warrants based on the relative fair value of the debt and warrants.  The remaining amount of $66,573 was amortized and expensed over the life of the note which matured December 30, 2013.  As of July 31, 2014, the Company was unable to repay the note, thus, the Company is in default on the note.  On July 31, 2014 the balance due, including interest, is $191,548.   The Company is currently engaged in settlement negotiations with lender for payment of the note.

Non-affiliated

On August 31, 2012 the Company entered into a $300,000 bridge loan financing arrangement with an unaffiliated accredited investor, the proceeds of which were used to pay maintenance fees to the Bureau of Land Management and general operating expenses of the Company.  The note payable bears interest at a rate of 15% per annum and was due and payable on or before October 30, 2012.  As of July 31, 2014, the Company is in default on the note.  The default interest rate is 45%. As of July 31, 2014 the balance due, including interest, is $550,028. The Note is secured by all of the property of the Company in addition to a pledge of certain shares of common stock owned by James Baughman, Maria Baughman, Purcell Group LLC and Publican Capital Corporation.  The Company is currently engaged in settlement negotiations with lender for payment of the note.

NOTE 4 – Stockholders’ Equity (Deficit)

On June 9, 2014 the Company, issued 10,000,000 shares of common stock for a $100,000 investment received from an accredited investor.  Each share also includes one warrant exercisable at $0.05 per share with a term of five years from issuance.  Based on the terms and conditions of the warrants, we have concluded that all of the warrants issued meet the criteria for equity classification.

NOTE 5 - Common Stock Options and Warrants   

The Company's 2012 Stock Option Plan adopted by the Board of Directors on September 17, 2012 states that the exercise price of each option will be granted at an amount that equals the fair market value at the date of grant. All options vest at a time determined at the discretion of the Company's Board of Directors. All options expire if not exercised within 10 years from the date of grant, unless stated otherwise by the Board of Directors upon issuance.

The Company records stock-based compensation expense ratably over the vesting period for the fair value of options granted under the Company's 2012 Stock Option Plan. The Company estimates the fair value of each stock option at the grant date by using the Black-Scholes option-pricing model.

On March 25, 2013 the Company issued stock options to purchase 4,000,000 shares of common stock to an individual providing contract CFO services to the Company, half of which vested upon issuance and twenty five percent will vest in each of the subsequent two years of service to the Company.  The options were priced at $0.02 per share and will expire five years from the date of issuance.  The fair value of the option grant was estimated on the date of grant utilizing the Black-Scholes option pricing model.  The fair value of these options was determined to be $79,498 Based on the following assumptions: expected life of the options of 5 years, expected volatility of 243.9%, risk-free interest rate of 0.80% and no dividend yield.  These options will be expensed over their vesting schedule.

On March 25, 2013 the Company issued stock options to purchase 500,000 shares of common stock to an individual providing contract accounting services to the Company, half of which vested upon issuance and the other half will vest after one year of service to the Company.  The options were priced at $0.02 per share and will expire five years from the date of issuance.  The fair value of the options granted is estimated using the market price at the end of each quarter. The fair value of these options as of the date of grant was determined to be $9,937. On the date of grant, utilizing the Black-Scholes model, the following assumptions were used: expected life of the options of 5 years, expected volatility of 243.9%, risk-free interest rate of 0.80% and no dividend yield.  These options will be expensed over their vesting schedule.

The following table summarizes information about stock options at July 31, 2014:

On July 31, 2014, the Company had the following outstanding warrants:

Fair Value Considerations:

GAAP establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. As presented in the tables below, this hierarchy consists of three broad levels:

We classify assets and liabilities measured at fair value in their entirety based on the lowest level of input that is significant to their fair value measurement. We measure all our stock options issued to contractors that are required to be measured at fair value on a recurring basis using Level 3 inputs. Level 3 inputs are unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.  On March 25, 2013, options to purchase 4,500,000 shares of common stock were issued to contractors, which require fair value measurement for the unvested options on a quarterly basis.

The options were revalued again using the Black-Scholes option pricing model for the quarter ended July 31, 2014 based on the following assumptions: expected life of the options of 3.75 years, expected volatility of 211.4%, risk-free interest rate of 1.76% and a stock price of $0.01 per share.  Based on these assumptions, the Company calculated that the value for the unvested options had decreased by $8,871 during the quarter which was recorded as a negative stock option expense in the quarter ended July 31, 2014. 

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During 2011, Minex Exploration which is controlled by our Director Gregory Schifrin, provided services to New Fork related to maintaining our mining claims in Sweetwater County, Wyoming for $86,358. As of July 31, 2014, $51,359 was owed to Minex Exploration for these services.

NOTE 7 – Subsequent Events

On September 2, 2014 the annual lease payments to the Bureau of Land Management were due for our federal mining claims covering about 10,000 acres of land in Arizona and Wyoming and account for substantially all of the assets in the Company.  We were unable to raise the capital required to make these payments to the BLM and as a result have lost all rights and interests in these claims. 

Management is currently assessing the options for the Company going forward.

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

Cautionary Statement about Forward-Looking Statements

This Form 10-Q contains forward-looking statements regarding future events and the Company’s future results that are subject to the safe harbors created under the Securities Act of 1933 (the “Securities Act”) and the Securities Exchange Act of 1934 (the “Exchange Act”). These statements are based on current expectations, estimates, forecasts, and projections about the industry in which the Company operates and the beliefs and assumptions of the Company’s management. Words such as “hopes,” “expects,” “anticipates,” “targets,” “goals,” “projects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “continues,” “may,” variations of such words, and similar expressions are intended to identify such forward-looking statements. In addition, any statements that refer to projections of the Company’s future financial performance, the Company’s plans for a drill program, the Company’s potential for joint venture partners, and other characterizations of future events or circumstances are forward-looking statements. The Company’s properties are without known reserves and any proposed projects or drill programs are exploratory in nature.  Readers are cautioned that these forward-looking statements are only predictions and are subject to risks, uncertainties, and assumptions that are difficult to predict, including those identified under “Risk Factors” in our Form 10-K for the year ended January 31, 2014.  Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements.

The Company is under no duty to update any of these forward-looking statements after the date of this report. You should not place undue reliance on these forward-looking statements.

Overview

Cyclone Uranium Corporation (formerly known as Fischer-Watt Gold Company, Inc., collectively with its subsidiaries, "Cyclone Uranium", “Cyclone" or the "Company"), was formed under the laws of the State of Nevada in 1986. Cyclone Uranium's primary business is mining and mineral exploration, and to that end to own, acquire, improve, sell, lease, convey lands or  mineral  claims or any  right,  title or  interest  therein;  and to search, explore,  prospect or drill for and exploit ores and minerals therein or thereupon.

Mineral Properties

Through several acquisitions, the Company evolved and has focused on building a portfolio of uranium mining claims in Wyoming, and Arizona, the most recent of which was the March 14, 2012 acquisition of New Fork.  New Fork's assets are comprised of 521 federal mining claims covering about 10,000 acres of BLM land.  These claims cover a large portion of the sinuous, uranium bearing roll-front that exists in this part of south-central Wyoming.  The Company’s existing Cyclone Rim claims cover a 28-mile extent of the western portion of this same roll-front trend.  This area of Sweetwater County is a historical uranium-mining district that is seeing a resurgence of development activity.  The Company now holds significant acreage on key uranium ground in the Red Desert.

On March 19, 2012, James G. Baughman was appointed Chairman, President, CEO, and acting Chief Financial Officer to succeed Peter Bojtos who had held those positions since 2005.  Mr. Baughman is an experienced geologist and mining company executive with proven management skills, and possesses an international background in the mining industry. Mr. Baughman has worked as a geologist for more than 25 years in mining operations and mineral exploration projects for precious, base metals, and uranium and has also provided technical services and project management for a number of major and junior mining companies.

Corporate Strategy

Management believes that given the global supply and demand outlook for uranium over the next several years that demand could likely exceed supply which in turn could cause uranium prices to increase substantially from their current levels as well as prompt the large uranium producers to acquire uranium properties that could one day go into production.  The Company has strategically amassed a portfolio of mining claims that are largely focused on a historically productive uranium mining region in Wyoming and can maintain control of these claims going forward for an annual cost of between $150,000 and $200,000 annually in lease payments to the Bureau of Land Management.

Although the Company can maintain control of these claims going forward for a fairly minimal cost, management believes that it can significantly increase the value of the properties by investing in drill programs to define the resource of these claims.  The strategy would be to implement drill programs focused on our Cyclone Rim and New Fork properties in a phased approach over the next couple of years.  Management estimates the total required investment for these drill programs to be between $8 million and $15 million with the costs being weighted more heavily toward the later phases and depending on the results from the earlier phases.  The Company’s business plan will require additional capital through debt or equity financing to fund these programs, which may not be available at reasonable terms, if at all.

The advantages of implementing a phased drill program are that the Company can assess the results of the earlier phases to be more strategic in investing in the later, more expensive phases and by raising capital incrementally for each phase, management believes that it can minimize the dilutive effect of each subsequent equity raise by demonstrating added value of its claims with each drill program.  Assuming these drill programs are successful, management believes that they will substantially increase the value of it properties which would increase shareholder value.    

Results of Operations

The following discussion involves the results of operations for the three and six months ended July 31, 2014 and July 31, 2013.

The Company had no revenue from production during the three and six months ended July 31, 2014 or 2013 as the Company had no properties in production.

Exploration expenses for the three months ended July 31, 2014 were $35,147 compared to $54,166 for the three months ended July 31, 2013.  For the six months ended July 31, 2014 and July 31, 2013, the exploration expenses were $69,147 and $102,914, respectively. This decrease for the three and six months are attributed to management’s decision to not renew certain claims that were deemed to be more speculative in the last year which weren’t adding to the Company’s strategy.

General and administrative expenses for the three months ended July 31, 2014 amounted to $21,445 compared to $126,452 for the three months ended July 31, 2013.  For the six months ended July 31, 2014 and 2013, general and administrative expenses were $106,681 and $230,391, respectively. This decrease for the three and six month comparable periods are attributed primarily to a decrease in professional services in 2014.

Total other expenses for the three months ended July 31, 2014 were $54,249 compared to $44,104 for the three months ended July 31, 2013.  Total other expenses for the six months ended July 31, 2014 and July 31, 2013 were $106,681 and $230,391, respectively. The increase in both comparable periods were due to increased interest expense recorded for all short-term notes given the Company’s additional debt issued during the past year. 

For the three months ended July 31, 2014, the Company reported a net loss of $110,841 compared to a net loss of $224,722 for the three months ended July 31, 2013. For the six months ended July 31, 2014, the Company reported a net loss of $282,557 compared to a net loss of $421,305 for the six months ended July 31, 2013.

Liquidity and Financial Condition

The Company had unrestricted cash on hand at July 31, 2014, of $3,251 compared to $2,582 on January 31, 2014.  The Company also holds restricted cash of $35,184 relating to reclamation bonds covering the mineral properties acquired from Tournigan Energy.

Current liabilities amounted to $1,645,563 on July 31, 2014 compared to $1,540,163 on January 31, 2014. This increase of $105,400 is associated with interest and accrued expenses recorded during the six months ended July 31, 2014. Current assets amounted to $50,896 resulting in a working capital deficit of $1,594,667 at July 31, 2014.

Cash used in operating activities for the six months ended July 31, 2014 was $99,331 compared to $158,760 for the three months ended July 31, 2013.

Cash provided by financing activities for the six months ended July 31, 2014 was $100,000 compared to $160,000 for the six months ended July 31, 2013. 

The first phase of drilling activities on the Wyoming properties will likely cost between $3 million and $4 million.  If we are unable to raise the additional capital necessary for these activities at favorable terms, we will postpone these drilling programs until we are able to do so and cash used in operating activities would remain in line with current levels.

The Company recognizes its need for additional funding either from equity sales or borrowings to create a more favorable working capital ratio and allow for a more aggressive property acquisition program. The Company also recognizes that there is no assurance that adequate additional financing is either available or achievable on terms acceptable to it.

Management intends to raise between $3 million and $4 million in capital from the issuance of equity over the next twelve months to fund the first phases of drilling programs for the Company’s Cyclone Rim and New Fork properties.  The scope of this phase would likely drilling as many as 100 drill holes on these properties to determine the presence or absence of uranium mineralization with the intent of being able to eventually establish and support an inferred mineral resource calculation for these claims.  If the Company is unable to raise this capital at favorable terms, management has the ability to postpone these activities until it is able to raise the level of capital needed.  Should that be the case, management has the ability to run the Company at its current level of activity and operating cash requirements going forward which require raising approximately $500,000 in capital over the next twelve months.

The Company's financial statements are prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company has experienced significant net losses since inception and has a significant negative working capital position.  These issues raise substantial doubt about the Company's ability to continue as a going concern.

Other

Management believes that the Company has adequately reserved its reclamation commitments. Management also believes that the Company is substantially in compliance with all environmental regulations.

While it intends to continue with its uranium exploration, management also continues to evaluate precious and/or base-metal mineral properties with a view to developing into a cash generating, profitable, producing mine. The chief area of interest is in the western United States.

The Company has no 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 that are material to our shareholders.

Recently Issued and Adopted Accounting Pronouncements

In June 2014, the FASB issued ASU No. 2014-10, which amended Accounting Standards Codification (ASC) Topic 915 Development Stage Entities. The amendment eliminates certain financial reporting requirements surrounding development stage entities, including an amendment to the variable interest entities guidance in ASC Topic 810, Consolidation. The amendment removes the definition of a development stage entity from the ASC, thereby removing the financial reporting distinction between development stage entities and other entities from U.S. GAAP. Consequently, the amendment eliminates the requirements for development stage entities to (1) present inception-to-date information in the statements of income, cash flows and shareholder equity, (2) label the financial statements as those of a development stage entity, (3) disclose a description of the development stage activities in which the entity is engaged, and (4) disclose the first year in which the entity is no longer a development stage entity that in prior years it had been in the development stage.

This amendment is effective for fiscal years beginning after December 15, 2014, and interim periods therein. Early application of each of the amendments is permitted for any annual reporting period or interim period for which the entity’s financial statements have not yet been issued. The Company has made the election to early adopt this amendment effective June 30, 2014 and, as a result, the Company is no longer presenting or disclosing the information previously required under Topic 915. The early adoption was made to reduce data maintenance by removing all incremental financial reporting requirements for development stage entities. The adoption of this amendment alters the disclosure requirements of the Company, but it does not have any material impact on the Company’s financial position or results of operations for the current or any prior reporting periods.

There were various other updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries. None of the other updates are expected to have a material impact on the Company's consolidated financial statements.

Item 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

           Not applicable.

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the 1934 Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.  Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the 1934 Act is accumulated and communicated to our management, including our principal executive officer as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There has not been any change in our internal controls over financial reporting that occurred during our quarterly period ended July 31, 2014 that has materially affected, or is reasonable likely to materially affect, our internal controls over financial reporting.

PART II - OTHER INFORMATION

Item 1.  LEGAL PROCEEDINGS

None.

Item 1A.  RISK FACTORS

There have been no material changes to the risk factors set forth in Item 1A. to Part II of our Form 10-K, as filed on May 16, 2014, except to the extent factual information disclosed elsewhere in this Form 10-Q relates to such risk factors.

Item 2.    UNREGISTERED SALES OF EQUITY SECURITIES

On June 9, 2014 the Company, issued 10,000,000 shares of common stock for a $100,000 investment received from an accredited investor.  Each share will also include one warrant exercisable at $0.05 per share with a term of five years from issuance.  Based on the terms and conditions of the warrants, we have concluded that all of the warrants issued meet the criteria for equity classification.

On January 7, 2013, the Company entered into an agreement with a shareholder in the form of a promissory note payable, in the amount of $35,000. The terms of the note include an interest rate of 15% that is accrued and paid at the time of maturity.The note and accrued interest are due and payable July 7, 2013. As of July 31, 2014, the Company recorded $8,213 in accrued interest. In connection with the note payable, the Company issued a Warrant to purchase 1,000,000 shares of common stock, exercisable on or before January 7, 2016 at $0.02 per share.  The fair value of the warrant at the date of grant was $25,417 using a Black Scholes option pricing model using inputs described in Note 4, and the full expense was recorded as of the date of issuance.  As of July 31, 2014, the Company was unable to repay the note, thus, the Company is in default on the note.  On July 31, 2014 the balance due, including interest is $43,213.  We are currently engaged in discussions with the lender with regard to negotiating an extension on the note.

On August 30, 2013, the Company entered into an agreement with a shareholder in the form of a promissory note payable, in the amount of $150,000. The terms of the note include an interest rate of 30% per annum.  The note is due and payable 120 days from August 30, 2013.  In addition, the Note was secured by a pledge of certain shares of common stock owned by James Baughman.  In connection with the financing agreement, on August 30, 2013 the Company issued a warrant to purchase 5,000,000 shares of common stock, exercisable on or before August 30, 2016 at $0.02 per share.  The fair value of the warrant at the date of grant was $119,698 using a Black Scholes option pricing model using inputs described in Note 4.  The proceeds from the note were allocated to notes payable and warrants based on the relative fair value of the debt and warrants.  The remaining amount of $66,573 was amortized and expensed over the life of the note which matured December 30, 2013.  As of July 31, 2014, the Company was unable to repay the note, thus, the Company is in default on the note.  On July 31, 2014 the balance due, including interest is $191,548.  The Company is currently engaged in settlement negotiations with lender for payment of the note.

Item 4. MINE SAFETY DISCLOSURES

Not applicable.

Item 5. OTHER INFORMATION

None.

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Item 6. EXHIBITS

SIGNATURES

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

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