Item 1.      Condensed Consolidated Financial Statements

7

BALLROOM DANCE FITNESS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

QUARTER ENDED SEPTEMBER 30, 2014

(UNAUDITED)

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES

Organization

Ballroom Dance Fitness, Inc. was organized January 2, 2009 under the laws of the State of Florida. The Company has earned revenues from providing private dance lessons and fitness dance classes in South Florida and operates a ballroom dance venue in North Palm Beach, Florida. In October 2013, the Company acquired the assets of Plaza Ballroom and Event Centre and on April 18, 2014,  acquired a license from the National Dance Council of America to operate ballroom dance competitions in the county of Palm Beach, Florida.

The Company has created two wholly owned subsidiaries: Palm Beach Dance Challenge, LLC under the laws of the state of Florida; for the purpose to market dance competitions in Palm Beach, Florida and Plaza Ballroom  & Event Centre, LLC.

Basis of Accounting

The accompanying condensed consolidated financial statements have been prepared by the Company without audit.  In the opinion of management, all adjustments necessary to present the financial position, results of operations and cash flows for the stated periods have been made.  Except as described below, these adjustments consist only of normal and recurring adjustments. Certain information and note disclosures normally included in the Company’s annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with a reading of the Company’s consolidated financial statements and notes thereto included in the Company’s Form 10-K annual report filed with the Securities and Exchange Commission (SEC) on April 9, 2014.  Interim results of operations for the three and nine months ended September 30, 2014 are not necessarily indicative of future results for the full year. 

As a result of the October 2013 acquisition and the April 2014 acquisition the Company is no longer considered to be a development stage company.  As a result, the Company no longer discloses activities since the inception of the development stage.

Principles of Consolidation

All inter-company accounts and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes.  Actual results could differ from those estimates

Fair Value of Financial Instruments

The Company’s balance sheet includes certain financial instruments. The carrying amounts of accounts payable and due to stockholders approximate their fair value because of the relatively short period of time between the origination of these instruments and their expected realization.

8

Cash and Cash Equivalents

Cash and cash equivalents includes all cash deposits and highly liquid financial instruments with an original maturity of three months or less.

Intangible Assets

Intangible assets, which are composed music rights, rights to dance competitions, and goodwill are considered intangible assets with infinite lives, which are not amortized but are reviewed for impairment at least annually. All intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable.  An impairment loss is recognized if the carrying amount of the asset exceeds its fair value.  No impairment loss has been recognized during the three and nine months ended September 30, 2014.

Stock-based Compensation

Share-based payments to employees, including grants of employee stock options are recognized as compensation expense in the financial statements based on their fair values, in accordance with FASB ASC Topic 718.  That expense is recognized over the period during which an employee is required to provide services in exchange for the award, known as the requisite service period (usually the vesting period).  The Company had no common stock options or common stock equivalents granted or outstanding for all periods presented.  The Company may issue shares as compensation in future periods for employee services.

The Company may issue restricted stock to consultants for various services.  Cost for these transactions will be measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable.  The value of the common stock is to be measured at the earlier of:  (i) the date at which a firm commitment for performance by the counterparty to earn the equity instruments is reached, or (ii) the date at which the counterparty's performance is complete.  The Company may issue shares as compensation in future periods for services associated with the registration of the common shares.

Revenue recognition

The Company leases its studio to third parties, who collect and retain fees for events and lessons.  The Company recognizes revenues related to these arrangements during the period in which the events are held or lessons are given.  Ancillary revenues related to events, including food and beverage sales, are recognized during the period in which the events are held.

Income taxes

We account for income taxes in accordance with ASC 740, Accounting for Income Taxes, as clarified by ASC 740-10, Accounting for Uncertainty in Income Taxes.  Under this method, deferred income taxes are determined based on the estimated future tax effects of differences between the financial statement and tax basis of assets and liabilities given the provisions of enacted tax laws. Deferred income tax provisions and benefits are based on changes to the assets or liabilities from quarter to quarter. In providing for deferred taxes, we consider tax regulations of the jurisdictions in which we operate, estimates of future taxable income, and available tax planning strategies. If tax regulations, operating results or the ability to implement tax-planning strategies vary, adjustments to the carrying value of deferred tax assets and liabilities may be required. Valuation allowances are recorded related to deferred tax assets based on the “more likely than not” criteria of ASC 740.

9

ASC 740-10 requires that we recognize the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the “more-likely-than-not” threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority.

Loss per share

Basic loss per share calculations are determined by dividing the net loss by the weighted average number of common shares outstanding during the period.  Diluted loss per share calculations are determined by dividing the net loss by the weighted average number of common shares plus any potentially dilutive shares.  The Company has not issued any potentially dilutive securities since its inception.

Recent Accounting Pronouncements

We have reviewed the FASB issued Accounting Standards Update (“ASU”) accounting pronouncements and interpretations thereof that have effectiveness dates during the periods reported and in future periods. The Company has carefully considered the new pronouncements that alter previous generally accepted accounting principles and does not believe that any new or modified principles will have a material impact on the corporation’s reported financial position or operations in the near term.  The applicability of any standard is subject to the formal review of our financial management and certain standards are under consideration.

NOTE 2: GOING CONCERN

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.  Going concern contemplates the realization of assets and the satisfaction of liabilities in the normal course of business over a reasonable period of time.  The Company had a loss of $231,451 for the nine months ended September 30, 2014 and working capital deficit of $517,309 and accumulated deficit of ($391,490) as of September 30, 2014.  The future of the Company is dependent on its ability to obtain funding from the sale of common stock pursuant to its S-1 registration statement, which was declared effective by the SEC on August 10, 2012.  These conditions cause substantial doubt about the Company’s ability to continue as a going concern. There have been no adjustments to the financial statements that may be necessary should the Company be unable to continue as a going concern.

Although the Company plans to pursue its equity funding, there can be no assurance that the Company will be able raise sufficient working capital to maintain its operations.  If the Company is unable to raise the necessary working capital through the equity funding it will be forced to continue relying on cash from operations and loans from stockholder in order to satisfy its working capital needs.  There can be no assurance that the Company will be able rely on these sources to maintain its operations.

NOTE 3: DUE TO STOCKHOLDER

The Company has received advances from an officer and stockholder for working capital purposes.  These advances are due on demand and accrue interest at an annual rate of 4% Interest expense totaled $8,330 for the nine months ended September 30, 2014. At September 30, 2014 and December 31, 2013, the amount due to the stockholder was $527,271 and $179,910, respectively.

In April 2014 and September 2014, a stockholder agreed to reduce stockholder debt by at total $72,900 for 2,550,000 shares of common stock.

10

NOTE 4 -

PROPERTY AND EQUIPMENT

Depreciation expense amounted to $17,390 and $-0- for the nine months ended September 30, 2014 and September 30, 2013, respectively.

NOTE 5:  INCOME TAXES

As of September 30, 2014, the Company had approximately $320,000 of operating loss carry forwards available to offset future taxable income, beginning to expire in 2030.

NOTE 6: STOCKHOLDERS’ EQUITY (DEFICIENCY)

During the previous year ended December 31, 2013, the Company issued 1,000,000 common shares for the Plaza acquisition. Pursuant to its agreement to acquire the assets of Plaza Ballroom & Event Centre, the Company agreed that if the seller was unable to realize an aggregate profit of $300,000 by June 18, 2014, from the sale of the common stock issued as consideration for the acquisition, the Company will issue shares to the sellers so that the aggregate market value of all shares issued as of June 18, 2014 is $300,000.  If the seller was unable to sell the aggregate number of shares by June 18, 2014, the Company agreed to pay the seller $300,000.  Because there is no active market for the Company’s common stock, and the Company’s potential obligation is beyond its control, equity classification of the issuance of the shares was prohibited.  Accordingly, the Company recorded $300,000 as contingent guaranty obligation on the accompanying consolidated balance sheet as of December 31, 2013.  

During the quarter ended March 31, 2014, the acquisition agreement was amended, relieving the Company of any potential obligations related to the realization of proceeds from the sale of the common stock issued as consideration for the acquisition.  Accordingly, the Company reclassed the $300,000 potential obligation as of December 31, 2013, to additional paid in capital.

On January 9, 2014 the Board of Directors approved issuing stock as prepayment for legal services to Corporate counsel for $25,000 of services; stock valued at $.20 a share based on the value of services to be provided. The Company recorded the fair value of $25,000 as deferred compensation to be expensed as services are provided, $2,000 was applied to accounts payable that was due as of December 31, 2013. Total shares issued were 125,000 shares.

On May 15, 2014 shareholder William Forhan agreed to reduce shareholder debt by $10,000 for 50,000 shares of common stock valued at $.20 a share.

On June 25, 2014 shareholder William Forhan agreed to reduce shareholder debt by $62,900 for 3,059,500 shares valued at $.02 a share. The shares were issued as of the quarter ended September 30, 2014.

11

NOTE 7: COMMITMENTS AND CONTINGENCIES

Plaza Lease Agreement

As a result of the October 2013 acquisition, the Company assumed a lease for its dance facility. The lease requires monthly payments of $5,500 commencing on November 1, 2012 increasing by 5% on each anniversary date through October 2015. On August 1, 2014 the lease was amended to include additional space for events and competition. The new rate is increased to $6,500 through the balance of the lease term, October 2015.  The lease includes two, three year options at a rate of $7,000 per month. Future minimum rental payments under the lease are as follows:

2014

$  78,000

2015

    65,000

$  143,000

Rent expense for the nine months ended September 30, 2014 including operating expenses charged by the landlord, totaled $79,010.

Employment Agreements

Effective January 1, 2009, the Company entered into employment agreements with both Mr. William Forhan and Mr. Sean Forhan.  The agreements are the same for both officers and are for a term of four quarters and shall automatically renew for one-quarter terms thereafter unless terminated by either party at least 90 days prior to the next term.  Under the agreements, each employee shall receive a base salary of $72,000 per quarter and an annual bonus of 10% of EBITDA, but no wages shall be accrued until such time the Company has adequate cash flow.  The Officers shall also receive car allowance of $600 per month.  The employment agreements provide for health and life insurance and four weeks paid vacation.  Since inception, no amounts have been paid or accrued under the aforementioned employment agreements.

Legal Matters

From time to time, we may be involved in litigation relating to claims arising out of our operations in the normal course of business. As of November 13, 2014, there were no pending or threatened lawsuits that could reasonably be expected to have a material effect on the results of our operations and there are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial stockholder, is an adverse party or has a material interest adverse to our interest.

12

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

Forward-Looking Statements

This Report contains statements that we believe are, or may be considered to be, “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact included in this Report regarding the prospects of our industry or our prospects, plans, financial position or business strategy, may constitute forward-looking statements. In addition, forward-looking statements generally can be identified by the use of forward-looking words such as “may,” “will,” “expect,” “intend,” “estimate,” “foresee,” “project,” “anticipate,” “believe,” “plans,” “forecasts,” “continue” or “could” or the negatives of these terms or variations of them or similar terms. Furthermore, such forward-looking statements may be included in various filings that we make with the SEC or press releases or oral statements made by or with the approval of one of our authorized executive officers. Although we believe that the expectations reflected in these forward-looking statements are reasonable, we cannot assure you that these expectations will prove to be correct. These forward-looking statements are subject to certain known and unknown risks and uncertainties, as well as assumptions that could cause actual results to differ materially from those reflected in these forward-looking statements. Readers are cautioned not to place undue reliance on any forward-looking statements contained herein, which reflect management’s opinions only as of the date hereof. Except as required by law, we undertake no obligation to revise or publicly release the results of any revision to any forward-looking statements. You are advised, however, to consult any additional disclosures we make in our reports to the SEC. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements contained in this Report.

Unless stated otherwise, the words “we,” “us,” “our,” the “Company,” or “Ballroom Dance Fitness, Inc.” in this section collectively refer to BDF.

Overview

General: Ballroom Dance Fitness, Inc. was incorporated in the State of Florida on January 2, 2009. We filed a registration statement on Form S-1 with the Securities and Exchange Commission. The Securities and Exchange Commission declared our registration statement effective on August 10, 2012. We obtained a trading symbol and commenced trading on the OTC Markets QB of our shares of common stock on April 22,  2014 .  

The Company is competing in the weight loss and ballroom dance business and operates a dance study for lessons and competition in Palm Beach, Florida. Ballroom Dance Fitness, Inc. was organized January 2, 2009 under the laws of the State of Florida.  The Company creates fitness videos and DVD’s that promote “Fun Exercise” to the Ballroom Dance and fitness enthusiasts. 

The videos and DVD’s are designed for individuals that want to lose weight and also learn Ballroom Dance steps. The DVD’s will be marketed via TV infomercial, Corporate web site and Internet marketing. The Company will realize revenues when paid in full for purchase of DVD’s and merchandise purchased.

Fitness DVD Routines: Producing, marketing and selling DVD’s that will feature nine different ballroom dances: the Cha-Cha, Swing, Salsa, Merengue, Rumba and Waltz.   The program is to promote “Fun Exercise” to Ballroom Dance and fitness enthusiasts. The videos will be marketed as exercise videos designed for individuals that want to lose weight and also learn Ballroom Dance steps. The fitness routines will stress dance steps and use them in exercise routines, building the lower body, strengthening heart endurance, plus show how the use of hand free weights will develop and tone the upper body. When funds become available, the Company also plans to launch infomercials which will promote our DVDs.

13

The Company provides fun exercise that teaches the exerciser how to dance while losing weight. The Company provides a training DVD that includes nine dances that are learned from repetitive steps, providing fun exercise and cardio workout at the convenience of the exerciser, from their home.

Certified Fitness Instructors: We intend to offer fitness trainers and ballroom dance instructors and opportunity to become certified as a Ballroom Dance Fitness instructor after completing a nine hour training session with Sean Forhan, the Company’s Founder.  The certified trainer will offer Ballroom Dance Fitness classes in his/her city and keep all of the revenue.  It is intended that the instructors will pay a one-time fee of $250 to become certified.  There will be an annual renewal fee of $175 to keep the certification active.  

Ballroom Dance Lessons and  Plaza Events: The Company on October 18, 2013 purchased the assets of Plaza Ballroom & Event Centre, LLC. In accordance with the terms and provisions of the Asset Purchase Agreement, the Company purchased certain assets to including, but not limited to, a dance studio and associated lease, domain address and associated website and data base of approximately 1,100 customers.

Through its acquisition of the assets of Plaza Centre and Events the Company is engaged in the business of providing ballroom dance lessons and hosting events in its leased facility, located in North Palm Beach, Florida.

Dance Competition: On April 2014, Ballroom Dance Fitness Inc. announced the purchase of a license for Ballroom Dance Contests sanctioned by The National Dance Council of America. The license is for two annual competitions in the county of Palm Beach, Florida. The license does not expire and can be upgraded to a two day competition after two years of competition. The competition dates are scheduled by the National Dance Council of America: the third Saturday in September and the third Saturday in January, of every year.

The Company has created a wholly owned subsidiary, Palm Beach Dance Challenge, LLC under the laws of the state of Florida; for the purpose to market the Competitions. The competition dates are September 20, 2014 and January 24, 2015, hosted in Palm Beach Gardens, Florida. The competition will include over 100 professional dancers (Teachers) and students; competing in over 1,000 dances, judged by 5 professional instructors.

Results of Operations:

The following discussion should be read in conjunction with our unaudited condensed consolidated financial statements and the related notes that appear elsewhere in this Quarterly Report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward looking statements. Factors that could cause or contribute to such differences include, but are not limited to those discussed below and elsewhere in this Quarterly Report. Our financial statements are stated in United States Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles.

Our financial statements have been prepared assuming that we will continue as a going concern and, accordingly, do not include adjustments relating to the recoverability and realization of assets and classification of liabilities that might be necessary should we be unable to continue in operation.

We will require additional capital to meet our long-term operating requirements. We expect to raise additional capital through, among other things, the sale of our products and through equity or debt securities.

14

Three Month Period Ended September 30, 2014 Compared to Three Month Period Ended September 30, 2013

Revenues

Revenues for the three months ended September 30, 2014 were $34,013 and revenues for the three months ended September 30, 2013 were $1,650. Revenues in 2014 were primarily due to Plaza Events sales from dance lessons and event rentals as a result of the Plaza Events acquisition in the last quarter of 2013.

Costs of Sales

Costs of sales for the three months ended September 30, 2014 was $27,799 and cost of sales for the three months ended September 30, 2013 were $4,200. Cost of sales in 2014 were primarily due to Plaza Events costs in the current quarter as a result of the Plaza Events acquisition in the last quarter of 2013.

Operating Expenses

Operating expenses for the quarter ended September 30, 2014 were $175,595 as compared to $14,919 for the quarter ended September 30, 2013. The increases in expenses during 2014 are due to rent expense of $37,670, $60,971 of professional fees, to the auditor and consultants and $21,101 of compensation for the quarter.

Net Loss

Net loss for the quarter ended September 30, 2014 was $165,001 compared to a net loss of $17,469 for the quarter ended September 30, 2013. The net loss for 2014 is after increased expenses in video production and fees for labor and expenses related to the Plaza operations.

Nine Month Period Ended September 30, 2014 Compared to Nine Month Period Ended September 30, 2013

Revenues

Revenues for the nine months ended September 30, 2014 were $110,706 and revenues in the nine months ended September 30, 2013 were $4,970. Revenues in 2014 were primarily due to Plaza Events sales from dance lessons and event rentals.

Costs of Sales

Costs of sales for the nine months ended September 30, 2014 was $27,800 and cost of sales for the nine months ended September 30, 2013 were $4,700. Cost of sales in 2014 was primarily due to Plaza Events costs in the current quarter as a result of the Plaza Events acquisition in the last quarter of 2013.

Operating Expenses

Operating expenses for the nine months ended September 30, 2014 were $314,357 as compared to $47,171 for the nine months ended September 30, 2013. The increase in expenses during 2014 are due to rent expense of $79,010, $91,296 of professional fees to the auditor and consultants and compensation of $31,612.

Net Loss

Net loss for the nine months ended September 30, 2014 was $231,451 compared to a net loss of $46,901 for the quarter ended September 30, 2013. The net loss for 2014 is after increased expenses for labor and expenses related to the Plaza operations.

15

Liquidity and Capital Resources

The Company used cash in operations of $250,012 for nine months ended September 30, 2014 as compared to $47,901 used in nine months ended September 30, 2013. Increase cash used is mainly a result of higher net loss for the quarter and a increase in prepaid expenses of $17,820 and decrease in accounts payable of $18,035, offset by non-cash expenses for depreciation and stock compensation.

During the nine months ended September 30, 2014 the Company used cash for investing activities of $159,007 as compared to -0- for the nine months ended September 30, 2013. The decrease was primarily due to purchased of property and equipment of $119,037 and purchase of the license for the dance competition of $20,000.

During the nine months ended September 30, 2014 the Company was provided cash from financing activities of $420,241 as compared to $47,144 provided for nine months ended September 30, 2013. The increase was primarily  a result of additional advances from  a stockholder.

Assets

At December 31, 2013, we had total assets of $421,908 compared to $594,663 at September 30, 2014. Increase in total assets at September 30, 2014 was mainly to the purchase of license for dance competition of $20,000 and $119,037 for the purchase of fixed assets for the Plaza Events location and Production costs for the DVD, $17,820 of prepaid expenses related to the dance competition in 2015 and $21,470 of security deposits for the second space located next to the current Plaza space.

Liabilities

Our total liabilities were $199,870 at December 31, 2013, compared to $527,271 at September 30, 2014. The increase from 2013 to 2014 was primarily due to a $420,000 increase of loans from shareholder.

At September 30, 2014, management was owed $518,271.

Total Stockholders' Equity

Our stockholders' deficit was $77,962 at December 31, 2013, compared to equity of  $65,487 at September 30, 2014. The increase from 2013 to 2014 was mainly due to the reclassification of the $300,000 contingent obligation upon the waiver of the guaranty related to the October 2013 acquisition.  The reclassification was offset by the additional losses.

Our auditors in 2013 expressed doubt about our ability to continue as a going concern. At September 30, 2014, the Company had negative working capital and a stockholder deficit.  

On August 10, 2012, our Registration Statement on Form S-1 (the "Registration Statement") was declared effective by the SEC.  In the Registration Statement, we authorized  6,000,000 shares of common stock to be sold by Company at a price of $0.20 per share.  We have not sold any shares to investors.

Off –Balance Sheet Operations

We do not have any off-balance sheet operations.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

Not applicable.

16

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is a process designed under the supervision of our Chief Executive Officer and Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our financial statements for external purposes in accordance with U.S. generally accepted accounting principles.

With respect to the period ending September 30, 2014, under the supervision and with the participation of our management, we conducted an evaluation of the effectiveness of the design and operations of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934.  

Based upon our evaluation regarding the period ending September 30, 2014, the Company’s management, including its Chief Executive Officer and Chief Financial Officer, has concluded that its disclosure controls and procedures were not effective.  Through the use of external consultants and the review process, management believes that the financial statements and other information presented herewith are materially correct.  

The Company’s disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives.  However, the Company’s management, including its Chief Executive Officer, does not expect that its disclosure controls and procedures will prevent all error and all fraud.  A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.  Further, the design of a control system must reflect the fact that there are resource constraints, and the benefit of controls must be considered relative to their costs.

Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.

PART II

PART II - OTHER INFORMATION

Item 1.  Legal Proceedings.

Not applicable.

Item 1A. Risk Factors.

Not applicable.

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds.

January 9, 2014 the Board approved issuing 125,000 shares for $25,000 fees to its attorney for future services.

From August 10, 2014 to September 11, 2014 the Board approved 550,000 shares issued for removable of $18,789 shareholder debt.

September 25, 2014 the Board approved 2,500,000 shares issued for removable of $50,000 shareholder debt.

July 10, 2014 the Board approved 59,500 shares issued for $1,190 shareholder debt

17

Item 3.   Defaults upon Senior Securities.

Not applicable.

Item 4.  Mine Safety Disclosures

Not applicable.

Item 5.  Other Information.

Not applicable.

Item 6.   Exhibits.

18

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, there unto duly authorized.