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EX-31 - Max Sound Corpexhibit311.htm
EX-31 - Max Sound Corpexhibit312.htm
EX-32 - Max Sound Corpexhibit32.htm
EX-4 - Max Sound Corpexhibit3.htm
EX-2 - Max Sound Corpexhibit2.htm
EX-1 - Max Sound Corpexhibit1.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

_______________

 

FORM 10-Q

_______________

 

(Mark One)

 

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

 

For the quarterly period ended June 30, 2016

 

o 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  000-51886

 

MAX SOUND CORPORATION
(Exact name of registrant as specified in its charter)
     
Delaware   26-3534190
State or other jurisdiction of incorporation or organization   (I.R.S.  Employer Identification No.)
     

8837 Villa La Jolla Drive, Unit 12109,

La Jolla, California

 

 

92039

(Address of principal executive offices)   (Zip Code)

_______________

 

(800) 327-6293

(Registrant’s telephone number, including area code)

_______________

 

N/A

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

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes  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  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 definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.

 

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

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes  No  

Indicate the number of shares outstanding of each of the issuer’s classes of common stock.

As of August 12, 2016, the registrant had 835,052,691 shares, par value $0.00001 per share, of common stock issued and outstanding.

 

 
 

 

MAX SOUND CORPORATION

 

FORM 10-Q

for the period ended June 30, 2016

 

INDEX  

 

PART I-- FINANCIAL INFORMATION  
     
Item 1. Financial Statements 2
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 23
Item 3. Quantitative and Qualitative Disclosures About Market Risk 29
Item 4. Controls and Procedures 29
     
PART II-- OTHER INFORMATION  
     
Item 1. Legal Proceedings 30
Item 1A. Risk Factors 30
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 30
Item 3. Defaults Upon Senior Securities 30
Item 4. Mine Safety Disclosures 30
Item 5. Other Information 30
Item 6. Exhibits 30
     
SIGNATURES   31

CAUTIONARY STATEMENT ON FORWARD-LOOKING INFORMATION

 

This Quarterly Report on Form 10-Q (this “Report”) contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements discuss matters that are not historical facts. Because they discuss future events or conditions, forward-looking statements may include words such as “anticipate,” “believe,” “estimate,” “intend,” “could,” “should,” “would,” “may,” “seek,” “plan,” “might,” “will,” “expect,” “predict,” “project,” “forecast,” “potential,” “continue” negatives thereof or similar expressions. Forward-looking statements speak only as of the date they are made, are based on various underlying assumptions and current expectations about the future and are not guarantees. Such statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, level of activity, performance or achievement to be materially different from the results of operations or plans expressed or implied by such forward-looking statements.

 

We cannot predict all of the risks and uncertainties. Accordingly, such information should not be regarded as representations that the results or conditions described in such statements or that our objectives and plans will be achieved and we do not assume any responsibility for the accuracy or completeness of any of these forward-looking statements. These forward-looking statements are found at various places throughout this Report and include information concerning possible or assumed future results of our operations, including statements about potential acquisition or merger targets; business strategies; future cash flows; financing plans; plans and objectives of management; any other statements regarding future acquisitions, future cash needs, future operations, business plans and future financial results, and any other statements that are not historical facts.

 

These forward-looking statements represent our intentions, plans, expectations, assumptions and beliefs about future events and are subject to risks, uncertainties and other factors. Many of those factors are outside of our control and could cause actual results to differ materially from the results expressed or implied by those forward-looking statements. In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than we have described. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Report. All subsequent written and oral forward-looking statements concerning other matters addressed in this Report and attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this Report.

 

Except to the extent required by law, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, a change in events, conditions, circumstances or assumptions underlying such statements, or otherwise.

 

CERTAIN TERMS USED IN THIS REPORT

 

When this report uses the words “we,” “us,” “our,” and the “Company,” they refer to Max Sound Corporation, and “SEC” refers to the Securities and Exchange Commission.

   

PART I Ð FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

MAX SOUND CORPORATION

 

CONTENTS

 

PAGE 3 CONDENSED BALANCE SHEETS AS OF JUNE 30, 2016 (UNAUDITED) AND AS OF DECEMBER 31, 2015 (AUDITED).
     
PAGE 4 CONDENSED STATEMENTS OF OPERATIONS FOR THE THREE AND SIX MONTH ENDED JUNE 30, 2016 AND 2015 (UNAUDITED).
     
PAGE 5 CONDENSED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 2016 AND 2015 (UNAUDITED).
     
PAGES 6 - 22 NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED).

  

 

 
 

 

Max Sound Corporation

Condensed Balance Sheets

ASSETS

 

   June 30, 2016  December 31, 2015
   (UNAUDITED)   
Current Assets          
Cash  $2,223   $211,064 
Prepaid expenses   65,908    82,681 
Debt offering costs - net   10,436    36,699 
Total  Current Assets   78,567    330,444 
Property and equipment, net   96,862    130,961 
Other Assets          
Security deposit   413    413 
Intangible assets   1,036,231    1,092,621 
Total  Other Assets   1,036,644    1,093,034 
Total  Assets  $1,212,073   $1,554,439 
LIABILITIES AND STOCKHOLDERS' DEFICIT          
Current Liabilities          
Accounts payable  $1,788,733   $1,393,074 
Accrued expenses   240,495    257,457 
Accrued expenses - related party   473    473 
Demand Note   60,000    —   
Derivative liability   5,253,141    3,684,184 
Convertible note payable, net of debt discount of $2,056,408  and $2,658,213 respectively   2,717,468    1,976,639 
Total Current Liabilities   10,060,310    7,311,827 
Commitments and Contingencies          
Stockholders' Deficit          
Preferred stock,  $0.0001 par value; 10,000,000 shares authorized,          
No shares issued and outstanding   —      —   
Series, A Convertible Preferred stock,  $0.00001 par value; 10,000,000 shares authorized,          
5,000,000 and 0 shares issued and outstanding, respectively   50    50 
Common stock,  $0.00001 par value; 1,650,000,000 shares authorized,          
835,052,691 and 422,310,693 shares issued and outstanding, respectively   8,349    4,222 
Additional paid-in capital   62,286,027    58,052,946 
Treasury stock   (519,575)   (519,575)
Accumulated deficit   (70,623,088)   (63,295,031)
Total Stockholders' Deficit   (8,848,237)   (5,757,388)
Total Liabilities and Stockholders' Deficit  $1,212,073   $1,554,439 
           

 

See accompanying notes to condensed unaudited financial statements.

  

 
 

 

Max Sound Corporation

Condensed Statements of Operations

(UNAUDITED)

 

   For the Three Months Ended,  For the Six Months Ended,
   June 30, 2016  June 30, 2015  June 30, 2016  June 30, 2015
Revenue  $—     $—     $—     $—   
Operating Expenses                    
General and administrative   197,381    829,361    741,905    1,616,664 
Consulting   70,142    174,712    139,832    244,549 
Professional fees   119,833    219,653    229,753    337,277 
Website development   7,000    10,000    28,000    15,000 
Compensation   198,000    228,000    410,000    469,300 
Total Operating Expenses   592,356    1,461,726    1,549,490    2,682,790 
Loss from Operations   (592,356)   (1,461,726)   (1,549,490)   (2,682,790)
Other Income / (Expense)                    
Other income   1,315    20,710    36,529    20,710 
Loss on inventory write off   —      —      —      (29,275)
Interest expense   (74,684)   (91,893)   (164,145)   (148,336)
Derivative Expense   (424,320)   (866,758)   (2,505,412)   (1,034,281)
Amortization of debt offering costs   (23,532)   —      (58,000)   (41,929)
Loss on debt settlement   (215,161)   (125,953)   (316,270)   (125,953)
Amortization of debt discount   (1,508,607)   (1,001,924)   (2,847,565)   (1,932,848)
Change in fair value of embedded derivative liability   2,550,645    696,219    76,297    1,169,954 
Total Other Income / (Expense)   305,656    (1,369,599)   (5,778,566)   (2,121,958)
Provision for Income  Taxes   —      —      —      —   
Net Loss  $(286,700)  $(2,831,325)  $(7,328,056)  $(4,804,748)
Net Loss Per Share  - Basic and Diluted  $(0.00)  $(0.01)  $(0.01)  $(0.01)
Weighted average number of shares outstanding during the year Basic and Diluted   825,352,459    305,550,413    710,704,959    335,473,464 

 

 

See accompanying notes to condensed unaudited financial statements.

  

 
 

 

Max Sound Corporation

Condensed Statements of Cash Flows

(UNAUDITED)

 

   For the Six Months Ended,
   June 30, 2016  June 30, 2015
Cash Flows From Operating Activities:          
Net Loss  $(7,328,056)  $(4,804,748)
  Adjustments to reconcile net loss to net cash used in operations          
   Depreciation/Amortization   40,498    38,855 
   Stock and stock options issued for services   105,894    212,925 
   Warrants issued for services   91,556    —   
   Loss on debt conversion settled through the issuance of stock   —      105,246 
   Amortization of intangible assets   56,390    527,179 
   Amortization of debt offering costs   58,000    41,929 
   Amortization of debt discount   2,847,565    1,932,848 
   Change in fair value of derivative liability   (76,297)   (1,169,954)
   Gain/(Loss) on debt extinguishment   (35,200)   —   
   Derivative Expense   2,505,412    1,034,281 
  Changes in operating assets and liabilities:          
      (Increase)/Decrease in inventory   —      29,275 
      (Increase)/Decrease in prepaid expenses   16,773    2,490 
      Increase/(Decrease) accounts payable   391,285    702,735 
      Increase/(Decrease) in accrued expenses   165,286    161,678 
Net Cash Used In Operating Activities   (1,160,894)   (1,185,261)
Cash Flows From Investing Activities:          
  Purchase of property equipment   (6,398)   (8,009)
Net Cash Used In Investing Activities   (6,398)   (8,009)
Cash Flows From Financing Activities:          
  Proceeds from stockholder loans / lines of credit   —      144,024 
  Repayment from stockholder loans / lines of credit   —      (368,000)
  Repayment of convertible note   (1,197,096)   (231,000)
  Proceeds from issuance of convertible note, less offering costs and OID costs paid   2,195,547    1,687,816 
  Repayment of note payable   (40,000)   —   
  Cash paid on interest expense   —      (69,102)
Net Cash Provided by Financing Activities   958,451    1,163,738 
Net Decrease in Cash   (208,841)   (29,532)
Cash at Beginning of Year   211,064    35,747 
Cash at End of Year  $2,223   $6,215 
Supplemental disclosure of cash flow information:          
Cash paid for interest  $—     $—   
Cash paid for taxes  $—     $—   
Supplemental disclosure of non-cash investing and financing activities:          
Shares issued in conversion of convertible debt and accrued interest  $1,000,029   $3,520,886 
Reclass of convertible debt to demand note  $100,000   $—   

 

 

See accompanying notes to condensed unaudited financial statements. 

 

 
 

 

MAX SOUND CORPORATION

NOTES TO FINANCIAL STATEMENTS

AS OF JUNE 30, 2016

(UNAUDITED)

 

NOTE 1           SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION

 

(A) Organization and Basis of Presentation

 

Max Sound Corporation (the "Company") was incorporated in Delaware on December 9, 2005, under the name 43010, Inc. The Company business operations are focused primarily on developing and launching audio technology software.

 

Effective March 1, 2011, the Company filed with the State of Delaware a Certificate of Amendment of Certificate of Incorporation changing our name from So Act Network, Inc. to Max Sound Corporation.

 

The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in The United States of America and the rules and regulations of the Securities and Exchange Commission applicable to interim financial information and with instructions to Form 10Q and Articles of Regulations S-X.. Accordingly, they do not include all the information necessary for a comprehensive presentation of financial position and results of operations.

 

It is management's opinion, however, that all material adjustments (consisting of normal and recurring adjustments) have been made which are necessary for a fair financial statements presentation. The results for the interim period are not necessarily indicative of the results to be expected for the year.

 

These unaudited interim consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2015, filed with the SEC on March 30, 2015.

 

(B) Use of Estimates

 

In preparing financial statements in conformity with generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reported period. Actual results could differ from those estimates.

 

(C) Cash and Cash Equivalents

 

For purposes of the cash flow statements, the Company considers all highly liquid investments with original maturities of three months or less at the time of purchase to be cash equivalents. As of June 30, 2016 and December 31, 2015, the Company had no cash equivalents.

 

(D) Property and Equipment

 

Property and equipment are stated at cost, less accumulated depreciation. Expenditures for maintenance and repairs are charged to expense as incurred. Depreciation is provided using the straight-line method over the estimated useful life of three to five years.

 

(E) Research and Development

 

The Company has adopted the provisions of FASB Accounting Standards Codification No. 350, Intangibles - Goodwill & Other (“ASC Topic 350”). Costs incurred in the planning stage of a website are expensed as research and development while costs incurred in the development stage are capitalized and amortized over the life of the asset, estimated to be three years. Expenses subsequent to the launch have been expensed as website development expenses.

 

(F) Concentration of Credit Risk

 

The Company at times has cash in banks in excess of FDIC insurance limits. The Company had $0 in excess of FDIC insurance limits as of June 30, 2016 and 2015.

 

 

(G) Revenue Recognition

 

The Company recognized revenue on arrangements in accordance with FASB Codification Topic 605, “Revenue

Recognition” (“ASC Topic 605”). Under ASC Topic 605, revenue is recognized only when the price is fixed and determinable, persuasive evidence of an arrangement exists, the service is performed and collectability of the resulting receivable is reasonably assured. We had revenues of $0, $0, $0 and $0 for the three and six months ended June 30, 2016 and 2015, respectively.

 

(H) Advertising Costs

 

Advertising costs are expensed as incurred and include the costs of public relations activities. These costs are included in consulting and general and administrative expenses and totaled $1,942 and $0 for the six months ended June 30, 2016 and 2015, respectively.

 

(I) Inventories

 

Inventory consists primarily of finished goods and is valued at the lower of cost or market. Cost is determined using the weighted average method and average cost is recomputed after each inventory purchase or sale. Inventory is periodically reviewed in order to identify obsolete or damaged inventory and impaired values. For the year ended December 31, 2015, the inventory was impaired and valued at $0. The Company had no inventory as of June 30, 2016.

 

 (J) Identifiable Intangible Assets

 

ASC 350 prescribes a two-step process for impairment testing of goodwill and intangibles with indefinite lives, which is performed annually, as well as when an event triggering impairment may have occurred. ASC 350 also allows preparers to qualitatively assess goodwill impairment through a screening process which would permit companies to forgo Step 1 of their annual goodwill impairment process. This qualitative screening process will hereinafter be referred to as "Step 0". Goodwill and intangible assets deemed to have an indefinite life are tested for impairment on an annual basis, or earlier when events or changes in circumstances suggest the carrying amount may not be fully recoverable. The Company has elected to perform its annual assessment on $16,796,237 of intangible assets. For the year ended December 31, 2015, $15,703,616 impairment loss has been recorded due to a change in business model, this being significantly impacted by the impairment of Liquid Spins assets, as digital music sales are no longer relevant in today’s market for the following assets:

 

    Cost , net    Impairment Loss    Amortization for six months ended June 30, 2016    Balance as of June 30, 2016 
Trademarks  $7,500,000   $(6,630,419)   (43,479)   826,102 
Distribution rights   7,372,561    (7,372,561)   —      —   
Licensing Rights   1,923,401    (1,700,393)   (12,909)   210,099 
Other   275    (243)   (2)   30 
   $16,796,237    (15,703,616)   (56,390)   1,036,231 

  

As of June 30, 2016 and December 31, 2015, $826,102 and $869,581, respectively, of costs related to registering a trademark and acquiring technology rights [audio technology known as Max Audio Technology (MAXD)] have been capitalized. It has been determined that the trademark and technology rights have an indefinite useful life and are not subject to amortization. However, the trademark and technology rights will be reviewed for impairment annually or more frequently if impairment indicators arise. As a result of this review, the Company recorded an impairment loss of $6,630,419 that is recorded as impairment loss on intangible asset for the year ended December 31, 2015.

 

On November 15, 2012, the Company acquired the rights to assets and audio technology known as Liquid Spins, Inc. through a share exchange, whereby the Company issued 24,752,475 shares of common stock for their rights in Liquid Spins technology. As of June 30, 2016 and December 31, 2015, $0 and $0, respectively, of costs related to this intangible remain capitalized. The technology was placed in service on August 23, 2013 with a useful life of 10 years. During 2015, the Company the reviewed the intangible asset for impairment and determined that certain items had been impaired due to obsolescence. As a result of this review, the Company recorded an impairment loss of $7,372,562 that is recorded as impairment loss on intangible asset.

 

 

On May 19, 2014, the Company entered into an agreement with VSL Communications to acquire the rights to intellectual property titled “Optimized Data Transmission System and Method” (“ODT”) through a cash payment of $500,000 in addition

to a share issuance, whereby the Company issued 10,000,000 shares of common stock, valued at $1,000,000 ($0.10/share). In exchange, the Company received a perpetual, exclusive, worldwide license to the ODT technology for all fields of use. In addition, the Company issued 1,000,000 shares of common stock, valued at $120,000 ($0.12/share), as compensation for the introduction and identification of a seller based on the agreement dated April 10, 2014. As of June 30, 2016and December 31, 2015, $178,438 and $187,830, respectively, of costs related to the “ODT” intangible asset remains capitalized. The technology will be reviewed for impairment annually or more frequently if impairment indicators arise. As a result of this review, the Company recorded an impairment loss of $1,432,170 that is recorded as impairment loss on intangible asset for the year ended December 31, 2015 In connection with this agreement, the Company is obligated to make an additional five (5) payments totaling $1,000,000 to be made every 30 days, with the thirty (30) day periods to be waived if fund raising occurs on an anticipated faster time line. The payments of additional cash are contingent on the following funding criteria:

 

  The Company shall pay set increments of cash based on a percentage of gross funds received through funds raised.
  The Company shall pay 20% of such monies as soon as they are received.

 

In connection with funds raised through June 30, 2016, the Company recorded a liability and expensed $1,096,510 as royalty cost, related to the 20% fee, as of June 30, 2016 $30,000, has been paid. The remaining liability as of June 30, 2016, is $1,060,845 and is included in accounts payable.

 

The Company shall act as the exclusive agent to facilitate and negotiate any opportunities on behalf of ODT to Companies, Organizations and other qualified entities. Upon any closing, ODT shall receive 50% of gross dollars and the Company shall receive the other 50% at the time of a completion of any transaction opportunity, including legal settlements after subtracting applicable contingent legal fees. The term of the agreement is for the life of the acquired intellectual property. As a result of this review, the Company recorded an impairment loss of $6,630,419 on intangible asset during the year ended December 31, 2016.

 

On August 11, 2014, the Company and VSL simultaneously filed trade secret and patent infringement actions against Google, Inc. and its subsidiaries, YouTube, LLC and On2 Technologies, Inc., relating to proprietary and patented technology owned by Vedanti Systems Limited, a subsidiary of VSL.  The patent infringement complaint was brought in U.S. District Court for the District of Delaware and the trade secret suit was filed in Superior Court of California, County of Santa Clara.  The lawsuits contend that, in 2010, while Google was in discussions with Vedanti about the possibility of acquiring Vedanti's patented digital video streaming techniques and other proprietary methods, Google gained access to and received technical guidance regarding Vedanti’s proprietary codec, a computer program capable of encoding and decoding a digital data stream or signal.  The complaints allege that soon after the two companies initiated negotiations, Google began implementing Vedanti's technology into its own WebM/VP8 video codec without informing Vedanti, and without compensating Vedanti for its use.  Plaintiffs are seeking a permanent injunction against Google, compensatory damages, as well as treble damages. As exclusive agent to VSL to enforce all rights with respect to the subject technology, the Company has hired Grant &Eisenhofer, PA to represent the Company and VSL in the suits. On November 24, 2015 the District Court entered an order granting the Google defendants’ motion to dismiss. The Company timely filed its notice of appeal with the appeals court on February 22, 2016. The two issues on appeal are, (i) whether the district court erred by granting the Google defendants’ motion to dismiss the Company’s lawsuit on the ground that the Company lacked standing to sue the Google defendants for infringement of the 339 patent, and (ii) whether the district court erred by denying the Company’s motion for leave to amend the complaint and add as a party VSL, a former licensee of the 339 patent to cure any defect in prudential standing to the extent VSL is a necessary party. These cases will be vigorously prosecuted and the Company believes it has a good likelihood of success. 

 

On May 22, 2014, the Company entered into a five (5) year agreement to acquire the rights to intellectual property titled “Engineered Architecture” (“EA Technology”) through a cash payment of $50,000 in addition to a share issuance, whereby the Company issued 4,000,000 shares of common stock, valued at $394,000 ($0.0985/share). In exchange, the Company received for the term of the agreement, the exclusive worldwide right to use the EA Technology. As of June 30, 2016 and December 31, 2015, $31,660 and $35,178, respectively of costs related to this intangible remains capitalized. The technology will be reviewed for impairment annually or more frequently if impairment indicators arise. As a result of this review, the Company recorded an impairment loss of $268,223 on intangible asset for the year ended December 31, 2015.

 

In connection with this agreement, the Company is obligated to make an additional five (5) payments totaling $500,000 to be made every 30 days, with the thirty (30) day periods to be waived if fund raising occurs on an anticipated faster time line. The payments of additional cash are contingent on the following funding criteria:

 

  The Company shall pay set increments of cash based on a percentage of gross funds received through funds raised.
  The Company shall pay 10% of such monies as soon as they are received.

 

In connection with funds raised through June 30, 2016, the Company recorded a liability and expensed $548,255 as royalty cost, related to the 10% fee, as of June 30 , 2016, $40,000 has been paid. The remaining liability as of June 30, 2016, is $515,423 and is included in accounts payable.

 

  

The Company shall act as the exclusive agent to facilitate and negotiate any opportunities on behalf of EA Technology to Companies, Organizations and other qualified entities. Upon any closing, EA shall receive 50% of gross dollars and the Company shall receive the other 50% at the time of a completion of any transaction opportunity, including legal settlements after subtracting applicable contingent legal fees. In the event the Company sublicenses EA to other entities, profits shall be split evenly 50%/50%.

  

(K) Impairment of Long-Lived Assets and Intangible Assets with Definite Life

 

The Company accounts for its long-lived assets in accordance with ASC Topic 360-10-05, “Accounting for the Impairment or Disposal of Long-Lived Assets.” ASC Topic 360-10-05 requires that long-lived assets, such as technology rights, be reviewed for impairment annually, or whenever events or changes in circumstances indicate that the historical cost carrying value of an asset may no longer be appropriate. The Company assesses recoverability of the carrying value of an asset by estimating the future net cash flows expected to result from the asset, including eventual disposition. If the future net cash flows are less than the carrying value of the asset, an impairment loss is recorded equal to the difference between the asset’s carrying value and fair value or disposable value. The Company recorded $0, $0 and $15,703,617 in impairment of the intangible asset for the three and six months ended June 30, 2016 and the year ended December 31, 2015, respectively (See Note 1J).

 

(L) Loss Per Share

 

In accordance with accounting guidance now codified as FASB ASC Topic 260, “Earnings per Share,” Basic earnings (loss) per share (“EPS”) is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding during the period, excluding the effects of any potentially dilutive securities. Diluted EPS gives effect to all dilutive potential of shares of common stock outstanding during the period including stock options or warrants, using the treasury stock method (by using the average stock price for the period to determine the number of shares assumed to be purchased from the exercise of stock options or warrants), and convertible debt or convertible preferred stock, using the if-converted method. Diluted EPS excludes all dilutive potential of shares of common stock if their effect is anti-dilutive. Because of the Company’s net losses, the effects of stock warrants and stock options would be anti-dilutive and accordingly, is excluded from the computation of earnings per share.

 

The computation of basic and diluted loss per share for the years ended June 30, 2016 and 2015 excludes the common stock equivalents of the following potentially dilutive securities because their inclusion would be anti-dilutive:

 

   June 30, 2016  June 30, 2015
           
Stock Warrants (Exercise price - $0.25 - $.52/share)   21,070,690    —   
Stock Options (Exercise price - $0.10 - $.50/share)   2,866,652    —   
Convertible Debt  (Exercise price - $0.07 - $.0817/share)   1,700,859,726    134,002,173 
Series A Convertible Preferred Shares ($0.0/share)   125,000,000    125,000,000 
           
Total   1,849,797,068    259,002,173 

 

(M) Income Taxes

 

The Company accounts for income taxes under FASB Codification Topic 740-10-25 (“ASC 740-10-25”) Income Taxes. Under ASC 740-10-25, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under ASC 740-10-25, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

 

The Company's federal income tax returns are no longer subject to examination by the IRS for the years prior to 2011, and the related state income tax returns are no longer subject to examination by state authorities for the years prior to 2010.

 

(N) Business Segments

 

The Company operates in one segment and therefore segment information is not presented.

 

 

(N) Recent Accounting Pronouncements

 

In April 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2015-03, Interest–Imputation of Interest (Subtopic 835-30) (“ASU 2015-03”), which changes the presentation of debt issuance costs in financial statements. ASU 2015-03 requires an entity to present such costs in the balance sheet as a direct deduction from the related debt liability rather than as an asset. Amortization of the costs will continue to be reported as interest expense. It is effective for annual reporting periods beginning after December 15, 2016. Early adoption is permitted. The new guidance will be applied retrospectively to each prior period presented. The Company is currently in the process of evaluating the impact of adoption of ASU 2015-03 on its balance sheets.

 

All other newly issued accounting pronouncements but not yet effective have been deemed either immaterial or not applicable.

 

(P) Fair Value of Financial Instruments

 

The carrying amounts on the Company’s financial instruments including intangible assets, accounts payable, derivative liability, convertible note payable, and note payable, approximate fair value due to the relatively short period to maturity for these instruments.

 

We adopted accounting guidance for financial and non-financial assets and liabilities (ASC 820). The adoption did not have a material impact on our results of operations, financial position or liquidity. This standard defines fair value, provides guidance for measuring fair value and requires certain disclosures. This standard does not require any new fair value measurements, but rather applies to all other accounting pronouncements that require or permit fair value measurements. This guidance does not apply to measurements related to share-based payments. This guidance discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to replace the service capacity of an asset or replacement cost). The guidance utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:

 

Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2: Inputs other than quoted prices that are observable, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

Level 3: Unobservable inputs in which little or no market data exists, therefore developed using estimates and assumptions developed by us, which reflect those that a market participant would use.

 

The following are the major categories of liabilities measured at fair value on a recurring basis: as of June 30, 2016 and December 31, 2015, using quoted prices in active markets for identical liabilities (Level 1); significant other observable inputs (Level 2); and significant unobservable inputs (Level 3):

 

   June 30, 2016  December 31, 2015
   Fair Value Measurement Using  Fair Value Measurement Using
                         
    Level 1    Level 2    Level 3    Total    Level 1    Level 2    Level 3    Total 
                                         
Derivative Liabilities   —      5,253,141    —      5,253,141    —      3,684,184    —      3,684,184 
Intangible Assets   —      1,036,230    —      1,036,230    —      1,092,621    —      1,092,621 

 

(Q) Stock-Based Compensation

 

In December 2004, the FASB issued FASB Accounting Standards Codification No. 718, Compensation - Stock Compensation. Under FASB Accounting Standards Codification No. 718, companies are required to measure the compensation costs of share-based compensation arrangements based on the grant-date fair value and recognize the costs in the financial statements over the period during which employees are required to provide services. Share-based compensation arrangements include stock options, restricted share plans, performance-based awards, share appreciation rights and employee share purchase plans. As such, compensation cost is measured on the date of grant at their fair value. Such compensation amounts, if any, are amortized over the respective vesting periods of the option grant. The Company applies this statement prospectively.

 

Equity instruments (“instruments”) issued to other than employees are recorded on the basis of the fair value of the instruments, as required by FASB Accounting Standards Codification No. 718. FASB Accounting Standards Codification No. 505, Equity Based Payments to Non-Employees defines the measurement date and recognition period for such instruments. In general, the measurement date is when either a (a) performance commitment, as defined, is reached or (b) the earlier of (i) the non-employee performance is complete or (ii) the instruments are vested. The measured value related to the instruments is recognized over a period based on the facts and circumstances of each particular grant as defined in the FASB Accounting Standards Codification.

 

 

(R) Reclassification

 

Certain amounts from prior periods have been reclassified to conform to the current period presentation. These reclassifications had no impact on the Company's net loss or cash flows.

 

(S) Derivative Financial Instruments

 

Fair value accounting requires bifurcation of embedded derivative instruments such as conversion features in convertible debt or equity instruments, and measurement of their fair value for accounting purposes. In determining the appropriate fair value, the Company uses the Black-Scholes option-pricing model. In assessing the convertible debt instruments, management determines if the convertible debt host instrument is conventional convertible debt and further if there is a beneficial conversion feature requiring measurement. If the instrument is not considered conventional convertible debt, the Company will continue its evaluation process of these instruments as derivative financial instruments.

 

Once determined, derivative liabilities are adjusted to reflect fair value at each reporting period end, with any increase or decrease in the fair value being recorded in results of operations as an adjustment to fair value of derivatives. In addition, the fair value of freestanding derivative instruments such as warrants, are also valued using the Black-Scholes option-pricing model. 

 

(T) Original Issue Discount

 

For certain convertible debt issued, the Company provides the debt holder with an original issue discount. The original issue discount is recorded to debt discount, reducing the face amount of the note and is amortized to interest expense over the life of the debt.

 

(U) Debt Issue Costs and Debt Discount

 

The Company may pay debt issue costs, and record debt discounts in connection with raising funds through the issuance of convertible debt. These costs are amortized to interest expense over the life of the debt. If a conversion of the underlying debt occurs, a proportionate share of the unamortized amounts is immediately expensed.

  

(V) Licensing & Distribution

 

On June 20, 2015, the Company entered into a license agreement with Santok LTD of United Kingdom (“Santok). The term of the agreement is three years. Santok will pay the Company a royalty fee of $1.50 for each licensed product. Santok guarantees to the Company a minimum total of 150,000 cumulative licensed product installation with a minimum total guaranteed value of $225,000 over the three years of the agreement. If the total royalty paid is less than the guaranteed value, Santok will pay the difference.

 

On July 13, 2015, the Company entered into a license agreement with Luna Mobile, Inc. of United States (“Luna). The term of the agreement is three years. Luna will pay the Company a royalty fee of $1.50 for each licensed product manufactured and sold.

 

NOTE 2           GOING CONCERN 

 

As reflected in the accompanying condensed unaudited financial statements, the Company had a net loss of $7,328,056 for the six months ended June 30, 2016, has an accumulated deficit of $70,623,088 as of June 30, 2016, and has negative cash flow from operations of $1,160,894 for the six months ended June 30, 2016.

 

As the Company continues to incur losses, transition to profitability is dependent upon the successful commercialization of its products and achieving a level of revenues adequate to support the Company’s cost structure.

 

The Company may never achieve profitability, and unless and until it does, the Company will continue to need to raise additional cash. Management intends to fund future operations through additional private or public debt or equity offerings. Based on the Company’s operating plan, existing working capital at December 31, 2015 was not sufficient to meet the cash requirements to fund planned operations through June 30, 2016 without additional sources of cash. This raises substantial doubt about the Company’s ability to continue as a going concern.  The accompanying financial statements have been prepared assuming that the Company will continue as a going concern and do not include adjustments that might result from

the outcome of this uncertainty.

 

 

NOTE 3           DEBT AND ACCOUNTS PAYABLE

 

Debt consists of the following:

   As of  As of
   June 30, 2016  December 31, 2015
           
Line of credit - related party  $473   $473 
           
Convertible debt   4,773,876    4,634,852 
Less: debt discount   (2,056,408)   (2,658,213)
Convertible debt - net   2,717,468    1,976,639 
 Demand note   60,000      
Total current debt   2,777,941   $1,976,639 

 

  (A) Line of credit – related party

 

Line of credit with the principal stockholder consisted of the following activity and terms:

 

   Principal  Interest Rate  Maturity
Balance - December 31, 2015  $473           
Borrowings during the six months ended June 30, 2016   —      4%   September 26, 2016 
Interest accrual   —             
Repayments   —             
Balance - June 30, 2016  $473    4%   September 26, 2016 

 

 

Accounts payable consists of the following:

 

   As of June 30, 2016  As of December 31, 2015
           
Accounts Payable   1,788,733   $1,393,074 
           
Total accounts payable   1,788,733   $1,393,074 

 

Accounts payable for the year ended included royalty payments due to VSL agreement entered into on August 11, 2014 in the amount of $1,033,000 and EA Technology agreement entered into on May 22, 2014 in the amount of $ 515,423 for a total payable of $1,060,845 See Note 1 (J).

 

(B) Loan Payable – Related Party  

 

On September 17, 2015, the Company received $170,000 from a related party. Pursuant to the terms of the note, the note is bearing an original issuance discount in the amount of $10,000 and is due on or before October 31, 2015. As of December 31, 2015, the balance of the note was repaid and remaining balance is $0.

 

(C) Convertible Debt

 

During the six months ended June 30, 2016 and the year December 31, 2015, the Company issued convertible notes totaling $2,289,101, less the original issue discount and debt issue costs of $93,554, for the net proceeds of $2,195,547 and $5,390,789, respectively.

 

On October 7, 2015, the Company issued 1,000,000 warrants in connection with the entry into certain convertible debenture agreements. Warrant vests immediately and expire on October 7, 2018 with an exercise price of $0.12.

 

On October 26, 2015, the Company issued 1,000,000 warrants in connection with the entry into certain convertible debenture agreements. Warrant vests immediately and expire on October 26, 2018 with an exercise price of $0.12.

 

 

The convertible notes issued for year ended June 30, 2016 and year ended December 31, 2015, consist of the following terms:

 

       Six months ended    Year ended 
       June 30, 2016    December 31, 2015 
       Amount of    Amount of 
       Principal Raised    Principal Raised 
Interest Rate      0% - 10%    0% - 10% 
Default interest rate      14% - 22%    14% - 22% 
Maturity      February 26, 2015 - November 23, 2017    February 26, 2015 - November 23, 2017 
              
Conversion terms 1  65% of the “Market Price”, which is the average of the lowest three (3) trading prices for the common stock during the ten (10) trading day period prior to the conversion.   3,542,400    2,104,000 
Conversion terms 2  65% of the “Market Price”, which is the lowest trading prices for the common stock during the ten (10) trading day period prior to the conversion.   465,416    420,410 
Conversion terms 3  70% of the “Market Price”, which is the average of the lowest three (3) trading prices for the common stock during the fifteen (15) trading day period prior to the conversion.   —      111,111 
Conversion terms 4  75% of the “Market Price”, which is the average of the lowest three (3) trading prices for the common stock during the ten (10) trading day period prior to the conversion.   765,000    787,778 
Conversion terms 5  60% of the “Market Price”, which is the lowest trading prices for the common stock during the fiften  (15) trading day period prior to the conversion.   —      35,000 
Conversion terms 6  Conversion at $0.10 per share   —      135,200 
Conversion terms 7  60% of the “Market Price”, which is the lowest trading prices for the common stock during the ten (10) trading day period prior to the conversion.   —      282,000 
Conversion terms 8  65% of the “Market Price”, which is the two lowest trading prices for the common stock during the ten (10) trading day period prior to the conversion.   1,060    390,778 
Conversion terms 9  65% of the “Market Price”, which is the two lowest trading prices for the common stock during the fifteen (15) trading day period prior to the conversion.   —      150,250 
Conversion terms 10  65% of the “Market Price”, which is the lowest trading prices for the common stock during the fifteen (15) trading day period prior to the conversion.   —      218,325 
   Convertible Debt   4,773,876    4,634,852 
   Less: Debt Discount   (2,056,408)   (2,658,213)
   Convertible Debt - net  $2,717,468   $1,976,639 

 

The debt holders are entitled, at their option, to convert all or part of the principal and accrued interest into shares of the Company’s common stock at conversion prices and terms discussed above.    The Company classifies embedded conversion features in these notes and warrants as a derivative liability due to management’s assessment that the Company may not have sufficient authorized number of shares of common stock required to net-share settle or due to the existence of a ratchet due to an anti-dilution provision. See Note 4 regarding accounting for derivative liabilities.

 

 

During the six months ended June 30, 2016, the Company converted debt and accrued interest, totaling $1,000,029 into 400,741,998 shares of common stock

 

During the year ended December 31, 2015, the Company converted debt and accrued interest, totaling $2,918,633 into 154,673,471 shares of common stock.    

 

Convertible debt consisted of the following activity and terms:

 

Convertible Debt Balance as of December 31, 2015   4,634,852    4% - 10%    February 26, 2015 - November 23, 2017 
Borrowings during the six months ended June 30, 2016   2,289,101    8% - 10%      
Non-Cash Reclassification of accrued interest converted   55,163           
Repayments   (1,197,096)          
Conversion  of debt to into 400,741,998 shares of common stock with a valuation of $1,000,029 ($0.017 - $0.042/share) including the accrued interest of $55,163   (1,000,029)          
Reclassification into a demand note   —             
Convertible Debt Balance as of  6/30/16   4,781,991    4% - 10%    February 26, 2015 - November 23, 2017 

 

  (D) Debt Issue Costs

 

During the six months ended June 30, 2016, the Company paid debt issue costs totaling $21,737.

 

The following is a summary of the Company’s debt issue costs:

 

   As of  As of
   June 30, 2016  December 31, 2015
           
Debt issue costs  $195,113    163,375 
Accumulated amortization of debt issue costs   (184,677)   (126,676)
           
Debt issue costs - net  $10,436    36,699 

 

During the six months ended June 30, 2016 and 2015 the Company amortized $58,000 and $41,929 of debt issue costs, respectively.

 

(E) Debt Discount & Original Issue Discount

 

During the six months ended June 30, 2016 and December 31, 2015, the Company recorded debt discounts totaling $2,245,760 and $5,323,857, respectively.

 

The debt discount and the original issue discount recorded in 2016 and 2015 pertains to convertible debt that contains embedded conversion options that are required to bifurcated and reported at fair value and original issue discounts.

 

 

The Company amortized $1,338,958 and $1,932,848 during the six months ended June 30, 2016 and 2015, respectively, to amortization of debt discount expense.

 

   As of  As of
   June 30, 2016  December 31, 2015
           
Debt discount  $9,290,998    7,042,922 
Accumulated amortization of debt discount   (7,234,590)   (4,384,709)
           
Debt discount - Net  $2,056,408    2,658,213 
           

 

NOTE 4           DERIVATIVE LIABILITIES

 

The Company identified conversion features embedded within convertible debt issued in 2016 and 2015 and warrants issued in 2016 and 2015. The Company has determined that the features associated with the embedded conversion option should be accounted for at fair value as a derivative liability.

 

As a result of the application of ASC No. 815, the fair value of the conversion feature is summarized as follow:

 

Derivative Liability -December 31, 2015  $3,684,184 
      
      
Fair value at the commitment date for convertible instruments   4,696,124 
Fair value at the commitment date for warrants issued   91,556 
Change in fair value of embedded derivative liability for warrants issued   (20,313)
Change in fair value of embedded derivative liability for convertible instruments   (55,984)
Reclassification to additional paid in capital for financial instruments that ceased to be a derivative liability   (1,111,782)
Change from repayments   (2,030,644)
Derivative Liability -June 30, 2016  $5,253,141 

 

The Company recorded the debt discount to the extent of the gross proceeds raised, and expensed immediately the remaining value of the derivative as it exceeded the gross proceeds of the note. The Company recorded a derivative expense for the six months ended June 30, 2016 and 2015 of $2,505,412 and $1,034,281, respectively.

 

The fair value at the commitment and re-measurement dates for the Company’s derivative liabilities were based upon the following management assumptions as of June 30, 2016:

 

    Commitment Date    Re-measurement Date 
           
Expected dividends:   —      —   
Expected volatility:   133% - 262%    150% -268.842% 
Expected term:   0.41 - 3 Years    0.12–2.91 Years 
Risk free interest rate:   0.06% - 1.31%    0.04% - .1.58% 

 

 

The fair value at the commitment and re-measurement dates for the Company’s derivative liabilities were based upon the following management assumptions as of December 31, 2015:

 

    Commitment Date    Re-measurement Date 
           
Expected dividends:   —      —   
Expected volatility:   133% - 221%    177% -238.77% 
Expected term:   0.41 - 3 Years    0.12–2.9 Years 
Risk free interest rate:   0.06% - 1.31%    0.12% - .1.31% 

   

 

NOTE 5           PROPERTY AND EQUIPMENT

 

At June 30, 2016 and December 31, 2015, respectively, property and equipment is as follows:

 

   June 30, 2016  December 31, 2015
           
Website Development  $294,795   $294,795 
Furniture and Equipment   117,183    112,220 
Leasehold Improvements   6,708    6,573 
Software   54,598    53,897 
Music Equipment   2,578    2,578 
Office Equipment   80,710    80,110 
Domain Name   1,500    1,500 
Sign   628    628 
Total   558,700    552,301 
Less: accumulated depreciation and amortization   (461,838)   (421,340)
Property and Equipment, Net  $96,862   $130,961 

 

Depreciation/amortization expense for the three and six months ended June 30, 2016 totaled $20,334 and $40,498, respectively.

 

Depreciation/amortization expense for the three and six months ended June 30, 2015 totaled $19,645 and $38,854, respectively.

 

NOTE 6          STOCKHOLDERS’ EQUITY

 

On March 4, 2015, the Company with the consent of the Majority Shareholder and Unanimous Written Consent of the Board of Directors created and authorized the issuance of Series A Convertible Preferred stock, with a par value of $0.00001 per share. The face amount of state value of each Preferred Share of stock is $0.96 and the conversion price of $0.04 per share.

 

On June 24, 2015, the Company with the consent of the Majority Shareholder and Unanimous Written Consent of the Board of Directors filed with the State of Delaware an Amended Certificate of Incorporation increasing the authorized shares of common stock by 120,000,000 shares of common stock from 450,000,000 million shares of common stock to 570,000,000 shares of common stock.

 

On August 19, 2015, the Company with the consent of the Majority Shareholder and Unanimous Written Consent of the Board of Directors filed with the State of Delaware an Amended Certificate of Incorporation increasing the authorized shares of common stock by 280,000,000 shares of common stock from 570,000,000 million shares of common stock to 850,000,000 shares of common stock.

 

On January 13, 2016, the Company with the consent of the Majority Shareholder and Unanimous Written Consent of the Board of Directors filed with the Securities and Exchange Commission a Schedule 14C and with the State of Delaware an Amended Certificate of Incorporation increasing the authorized shares of common stock by 800,000,000 shares of common stock from 850,000,000 million shares of common stock to 1,650,000,000 shares of common stock.

 

(A)Common Stock 

 

During the six months ended June 30, 2016, the Company issued the following common stock:

 

Transaction Type  Quantity  Valuation  Range of Value per share
                
Conversion of convertible debt and accrued interest   400,741,998   $1,000,029    $0.00143 to- $0.00869 
Services - rendered   12,000,000    105,600    $0.12-$0.009 
Total shares issued   412,741,998   $1,105,629      
                

 

During the year ended December 31, 2015, the Company issued the following common stock:

 

Transaction Type  Quantity  Valuation  Range of Value per share
                
Conversion of convertible debt and accrued interest   154,673,471   $2,918,633    $0.009 - $0.042 
Services - rendered   9,195,182    294,548    $0.12-$0.07 
Return of shares   (120,000,000)   (1,200)  $0.000010 
Conversion of line of credit in common stock   5,000,000    150,000   $0.03 
Total shares issued   48,868,653   $3,361,981      
                

 

 

 

The following is a detailed description of transactions noted above:

 

1. Conversion of convertible debt and accrued interest

 

During the six months ended June 30, 2016, the Company converted debt and accrued interest, totaling $1,000,029 into 400,741,998 shares of common stock

 

2. Services Rendered

 

During the six months ended June 30, 2016, the Company issued 12,000,000 shares of common stock to employee having a fair value of $105,600 ($0.009/sh.) in exchange for services.

 

During the year ended December 31, 2015, the Company issued 200,000 shares of common stock having a fair value of $14,000 ($0.070/sh.) in exchange for consulting services.

 

During the year ended December 31, 2015, the Company issued 200,000 shares of common stock having a fair value of $10,000 ($0.050/sh.) in exchange for consulting services.

 

During the year ended December 31, 2015, the Company issued 2,246,858 shares of common stock having a fair value of $53,925 ($0.012/sh.) in exchange for consulting services.

 

During the year ended December 31, 2015, the Company issued 200,000 shares of common stock having a fair value of $8,000 ($0.040/sh.) in exchange for consulting services.

 

On December 21, 2015, the Company issued 100,000 shares of common stock having a fair value of $2,000 ($0.020/sh.) in exchange for consulting services.

 

On November 23, 2015, the Company issued 200,000 shares of common stock having a fair value of $6,000 ($0.030/sh.) in exchange for consulting services.

 

On September l1, 2015, the Company issued 1,000,000 shares of common stock to employee having a fair value of $23,800 ($0.024/sh.) in exchange for services.

 

On September 10, 2015, the Company issued 2,048,324 shares of common stock having a fair value of $62,679($0.031/sh.) in exchange for legal services of 138,433. This resulted in a gain on settlement of $75,954.

 

On May 4, 2015, the Company issued 200,000 shares of common stock having a fair value of $10,700 ($0.054/sh) in exchange for consulting services.

 

On April 1, 2015, the Company issued 150,000 shares of common stock having a fair value of $4,455 ($0.0284/sh) in exchange for consulting services.

 

On April 1, 2015, the Company issued 150,000 shares of common stock having a fair value of $4,455 ($0.0284/sh) in exchange for consulting services.

 

On April 1, 2015, the Company issued 300,000 shares of common stock having a fair value of $8,910 ($0.0284/sh) in exchange for consulting services.

 

On March 1, 2015, the Company issued 375,000 shares of common stock to employees having a fair value of $20,725 ($0.040 – 0.063) in exchange for services.

 

On February 28, 2015, the Company entered into a services agreement. In connection with this agreement, the consultant will receive 700,000 shares of fully vested common stock.

 

The Company maintains on its books and within the above financials, debt to Venture Champion Asia Limited and ICG USA LLC or its designee(s) which is currently in default and has not been converted due to ICG’s settled administrative proceeding with the SEC, where the Company awaits any rightful exemption or regulatory no-action that would render any forward moving action compliant by all the parties.

 

 

3. Return of Shares and Issuance of Preferred shares

 

On March 4, 2015 the Company filed a form 8K with the SEC associated with the Company entering into a Securities Exchange Agreement and the Company filing with the Secretary of State Delaware a Certificate of Designations, Preferences and Rights whereby, among other things, the Company for good and valuable consideration, agreed that in consideration of a large shareholder exchanging 120,000,000 shares of common stock back to the Company, the shareholder would receive 5,000,000 shares of Series A Convertible Preferred Stock of the Company at a Stated Value of $0.96 per share and a Conversion Price of $0.04 per share. The Series A Convertible Preferred Stock carries certain voting preferences and will accrue dividends at a rate of 8% per annum Stated Value, payable in cash or in kind at the election of the Board of Directors. For the six months ended June 30, 2016 and for the year ended December 31, 2015, the Company has not declared dividends.

 

4. Conversion of line of credit into Common shares

 

On April 1, 2015, the principal stockholder converted $150,000 of the line of credit owed into 5,000,000 shares of common stock at $0.03 per share.


 (B) Stock Warrants

    

On May 27, 2016, the Company has agreed to issue 1,000,000 three-year warrants at an exercise price of $0.005/share of the common stock of the Company to a consultant for consulting services. The Company recorded the fair value of the warrants based on the fair value of each warrant grant estimated on the date of grant using the black – Scholes option pricing

 

On March 6, 2016, the Company entered into a revised engagement with its corporate counsel, McMenamin Law Group, for corporate legal services to be provided by legal counsel beginning July 28, 2015 through December 31, 2016, pursuant to which the Company has agreed to issue a five (5) warrants at an exercise price totaling $25,000 at a strike price of ($0.0029/share) per share of common stock of the Company, which share price was the closing price of the Company’s stock on March 3, 2016. In addition the Company has agreed to pay McMenamin Law Group cash consideration totaling $15,000 on or before March 31, 2016, or a funding of the Company, whichever occurs first. As of June 30, 2016, the payment was not made. This new engagement shall replace and supersede any previous engagements or other agreements between the Company and McMenamin Law Group.

 

On February 29, 2016, the Company has agreed to issue 2,000,000 three-year warrants at an exercise price of $0.01/share of the common stock of the Company to a consultant for consulting services.

 

On January 5, 2016, the Company increased the warrant issuance to a consultant from November 25, 2014, from 200,000 warrants to 2,800,000 warrants. The warrants vested immediately. The 2,000,000 have an exercise price of $0.02 per share. The 800,000 have an exercise price of $0.06 per share and contingent on the Common Stock on market price per share at $0.05 per share or higher for 30 or more consecutive days at the time of purchase. The Company will record the fair value of the warrants based on the fair value of each warrant grant estimated on the date of grant using the black – Scholes option pricing model. Subsequently, on May 24, 2016 the Company into a revised agreement, pursuant to which to Company cancelled the 3,000,000 issues previously issued and the Company has agreed to issue 5,600,000 a three (3) year warrant at a strike price of ($0.006/share) per share of common stock of the Company, which share price was the closing price of the Company’s stock on May 24, 2016.

 

On October 7, 2015, the Company issued 1,000,000 warrants in connection with the entry into certain convertible debenture agreements. Warrant vests immediately and expires on October 7, 2018 with an exercise price of $0.12.

 

On October 26, 2015, the Company issued 1,000,000 warrants in connection with the entry into certain convertible debenture agreements. Warrant vests immediately and expires on October 26, 2018 with an exercise price of $0.12.

 

 

The following tables summarize all warrant grants as of June 30, 2016, and the related changes during these periods are presented below:

   Number of Warrants  Weighted Average Exercise Price  Weighted Average Remaining Contractual Life (in Years)
 Balance, December 31, 2015    5,550,000   $0.25    1.5 
                  
 Granted     20,020,690           
 Exercised    —             
 Cancelled/Forfeited    (4,500,000)          
 Balance, June 30, 2016    21,070,690   $0.01    2.5 

 

During the six months ended June 30, 2016 the Company cancelled 3,000,000 warrants in connection with the re issuance of 5,600,000 warrants as per the warrant issuance as described in note 6(B). In addition, during the six months ended June 30, 2016 the Company cancelled 1,500,000 fully expired warrants.

 

 A summary of all outstanding and exercisable warrants as of June 30, 2016 is as follows:

 

         Weighted Average   
Exercise  Warrants  Warrants  Remaining     Aggregate
Price  Outstanding  Exercisable  Contractual Life     Intrinsic Value
                       
$0.01    2,000,000    2,000,000    2.66        $-
$0.005    1,000,000    1,000,000-     2.91-        $-
$0.0029    8,620,690    8,620,690    2.75        $-
$0.006    5,600,000    5,600,000    2.89    $ 
$0.12    2,000,000    2,000,000    2.27        $-
$0.40    1,850,000    1,850,000    0.53        $-
                       
      21,070,690    21,070,690    2.5        $-

 

A summary of all outstanding and exercisable warrants as of December 31, 2015 is as follows:

 

                Weighted Average      
 Exercise    Warrants    Warrants    Remaining    Aggregate 
 Price    Outstanding    Exercisable    Contractual Life    Intrinsic Value 
                       
$0.10    200,000    200,000    1.90   $—   
$0.12    2,000,000    2,000,000    2.77   $—   
                       
$0.40    2,850,000    2,850,000    0.73   $—   
$0.45    500,000    500,000    —     $—   
                       
      5,550,000    5,550,000    1.5 years   $—   

 

(C) Stock Options

 

The following tables summarize all option grants as of June 30, 2016, and the related changes during these periods are presented below:

 

   Number of Options  Weighted Average Exercise Price  Weighted Average Remaining Contractual Life
(in Years)
          
Outstanding - December 31, 2015   15,566,652   $0.13    1.32 
Granted   —     $—      —   
Exercised   —     $—      —   
Forfeited or Canceled   (12,700,000)  $—      —   
Outstanding – June 30, 2016   2,866,652   $0.13    1.02 
Exercisable - June 30, 2016   2,866,652           

 

 

NOTE 7         COMMITMENTS

 

(A) Employment Agreement

 

On January 31, 2016 Mr. Lloyd Trammell submitted a notice of resignation ending employment on March 1, 2016.

 

On January 8, 2016, the Company extended the employment agreement with its CEO, John Blaisure for an additional five years. The Company issued 12,000,000 shares of Company’s common stock as part of the compensation with a fair value of $105,600 ($0.0088) based on the stock trading price.

 

On September 11, 2015, the Company executed an employment agreement with an employee. The term of the agreement is for three years.   As compensation for services, the employee will receive a monthly compensation of $12,000.  In addition, the employee will receive up to 2,000,000 shares of common stock. The first 1,000,000 shares will be paid upon execution of Agreement. For the year ended December 31, 2015, the Company recorded $23,800 in expense for 1,000,000 shares of common stock at ($0.024/share) based on the trading price. The second 1,000,000 shares will be paid in month 13 of the agreement in lieu of the $12,000 that would be paid in that month. For the year ended December 31, 2015, the Company recorded $23,800 in stock based compensation payable for 1,000,000 shares of common stock at ($0.024/share) based on the trading price.

 

(B) Consulting Agreement

 

On April 14, 2016, the Company entered into an agreement, for consulting services, for which the Company issued 1,000,000 warrants at a strike price of ($0.005/share) per share.

 

On March 6, 2016, the Company entered into a revised engagement with its corporate counsel, McMenamin Law Group, for corporate legal services to be provided by legal counsel beginning July 28, 2015 through December 31, 2016, pursuant to which the Company has issued a five (5) warrants at an exercise price totaling $25,000 at a strike price of ($0.0029/share) per share of common stock of the Company, which share price was the closing price of the Company’s stock on March 3, 2016. In addition the Company has agreed to pay McMenamin Law Group cash consideration totaling $15,000 on or before March 31, 2016, or a funding of the Company, whichever occurs first. On March 23, 2016, the Company paid $15,000 to McMenamin

Law Group.

 

On June 11, 2015, the Company entered into a consulting services agreement with two consultants. The agreement will continue until September 10, 2015. In connection with this agreement, the consultant shall be paid $6,000 per month and receive up to 100,000 shares of common stock each upon completion, submission and approval of the first stage of working APP. An additional 100,000 shares will be issued upon the completion, submission and approval of the second stage working APP. As of December 31, 2015, the Company recorded $2,000 in stock based compensation for 100,000 shares of common stock at ($0.02/share) based on the trading price. No additional shares will be issued to the consultant’s due to the non-performance of services.

 

On May 4, 2015, the Company entered into a consulting services agreement. The agreement will remain in effect for three years. In connection with this agreement, the consultant shall be paid $7,500 per month and receive 200,000 shares of common stock upon the execution of the agreement. An additional 200,000 shares of common still will be grated within 10 days of achieving each of the following milestones, whichever comes first, up to one million shares of stock based on marketing goals. On July 2, 2015, the Company issued 200,000 shares of common stock having a fair value of $ 10,700 ($0.0535/sh) in exchange for consulting services agreement dated May 4, 2015.

 

On January 21, 2015, the Company entered into a consulting services agreement. In connection with this agreement, the consultant shall be paid $4,000 per month and receive up to 150,000 shares of common stock payable in lots of 50,000 per month and will be issued 90 days after the date of the signing of the agreement. For year ended December 31, 2015, the Company recorded $4,455 in stock based compensation.

 

On January 21, 2015, the Company entered into a consulting services agreement. In connection with this agreement, the consultant shall be paid $4,000 per month and receive up to 150,000 shares of common stock payable in lots of 50,000 per month and will be issued 90 days after the date of the signing of the agreement. For the year ended December 31, 2015, the Company recorded $4,455 in stock based compensation.

 

On March 17, 2015, the Company entered into a services agreement. In connection with this agreement, the consultant will receive 300,000 shares of fully vested common stock, payable in lots of 100,000 shares of common stock per month and 5,000 per month. The agreement will continue until June 17, 2015. For year ended December 31, 2015, the Company recorded $8,910 in stock based compensation.

 

On February 18, 2015, the Company entered into service agreement for a period of two years with the Company’s transfer agent for a period from September 23, 2014 to September 23, 2016. In consideration for these services, during the year ended December 31, 2015, 700,000 shares of fully vested common stock valued at $22,400 ($0.03/share) were granted.

 

 

NOTE 8       LITIGATION

 

From time to time, the Company has become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm its business.

 

On January 21, 2015, the Company filed a patent infringement action against Netflix Inc., Netflix Luxembourg S.a.r.l. and Netflix International B.V. with the District Court of Mannheim, Germany. The asserted patent is the same patent as in the German proceedings against Google Inc. and its subsidiaries. The Complaint alleges that Netflix Inc. and its subsidiaries are offering and transmitting video streams to German customers as part of their video-on-demand business model; the videos being encoded and transmitted in a manner claimed and protected by the patent. The Company primarily seeks a permanent injunction against the Defendants, plus damages and information regarding past infringements. The Company, upon advice of counsel, decided withdraw the litigation prior to oral argument, which withdrawal is without prejudice to re-file the lawsuit in the future.

 

The Company intends to vigorously prosecute these various patent infringement litigations. The Company believes it has a good likelihood of success associated with these patent infringement lawsuits. However, no assurance can be given by the Company as to the ultimate outcome of these actions or its effect on the Company. The law firm is prosecuting this action on a pure contingency fee basis.

 

On January 26, 2015, the Company was named as a defendant in an action filed in the Superior Court for the State of California and the County of Los Angeles captioned Bibicoff Family Trust v. Max Sound Corporation (Case No. SC123679). In the complaint the plaintiff alleges a cause of action for breach of contract associated with the non-payment by the Company for certain services plaintiff agreed to provide to the Company. The Company interposed a cross-complaint against plaintiffs averring causes of action for breach of contract, fraud, and negligent misrepresentation by defendants with respect to defendants’ fraudulent and intentional undisclosed inability to perform the services that plaintiffs’ agreed to perform that are the subject of this dispute. The parties recently participated in mediation and have arrived successfully at a settlement and resolution of the matter. The Company agreed in connection with the settlement to pay Bibicoff Trust $100,000 over a 13 month installment period commencing March 10, 2016, with the caveat that such settlement amount will be reduced to $93,000.00 in the event the Company pays $20,000.00 on or before March 10, 2016, which the Company successfully achieved thus reducing the settlement amount to $93,000.00.

 

On May 13, 2015 Google's “motion to dismiss” was denied by the Northern District of California court in a seven page order, stating that Max Sound had sufficiently alleged the existence and validity of the '339 Patent.

 

On June 11, 2015, the District Court of Mannheim announced it had scheduled the hearing in the video streaming patent case against Google and YouTube for December 8, 2015; however, at the oral argument hearing the Company, upon advice of counsel, determined that it was in the Company’s best interests to withdraw the action such that it cannot be re-filed against the same parties. The case was filed by Max Sound against Google Inc., Mountain View, USA, Google Commerce Ltd., Dublin, Ireland, Google Germany GmbH, Hamburg, Germany, and the Google subsidiary YouTube LLC, San Bruno, USA, in December 2014 because of the infringement of a video streaming patent, which is valid for the world's most important markets. Max Sound requested the German court to order Google and YouTube to stop streaming video via using the current VP8 or H.264 video codecs and to stop selling video-enabled devices like Nexus Phones and Chromecast sticks. Further requests are that information about any profits is rendered and that Google and YouTube are declared liable for damages based on patent infringement. Max Sound claims that Google and YouTube are using the technology protected by European Patent EP 2 026 277, which allows far more economically efficient transport of digital content due to greatly optimized data capacity.

 

MaxD v. VSL, et al. This is an arbitration action brought by the Company against VSL Communications, Ltd., Vedanti Systems, Ltd., Constance Nash, Robert Newell and eTech Investments as respondents before the American Arbitration Association for breach of contract, fraud, and other causes of action. Google filed a motion to dismiss the litigation based upon the argument that the Company’s underlying agreement with VSL did not confer on the Company legal standing to pursue the patent infringement claims against Google. On November 24, 2015 the Court granted the motion to dismiss in favor of Google. The Company timely filed it notice of appeal with the appeals court on February 22, 2016. The two issues on appeal are, (i) whether the district court erred by granting the Google defendants’ motion to dismiss the Company’s lawsuit on the ground that the Company lacked standing to sue the Google defendants for infringement of the 339 patent, and (ii) whether the district court erred by denying the Company’s motion for leave to amend the complaint and add as a party VSL, a former licensee of the 339 patent to cure any defect in prudential standing to the extent VSL is a necessary party. As noted herein, this finding by the Court was appealed to the Federal Circuit court of Appeals on February 22, 2016. The Circuit Court docketed the appeal on February 24, 2016, and the parties will be briefing the appeal during the next several months. Subsequently, the Company has pursued in arbitration claims against VSL to legally enforce the agreement and to compel VSL to comply with the agreement’s terms and conditions that inter alia VSL must fully cooperate with the Company to cure any issues the Court raised with standing to pursue the claims. This arbitration is still ongoing.

 

On April 22, 2016, Vedanti filed a lawsuit against the Company in the Northern District of California seeking to avoid participation in the aforementioned arbitration.  This lawsuit is ongoing.

 

On December 5, 2014, the Company, along with renowned architect Eli Attia, filed a lawsuit in the Superior Court of California, County of Santa Clara, against Google, its co-founders Sergey Brin and Larry Page, Google’s spinoff company Flux Factory, and senior executives of Flux. Plaintiffs’ allege misappropriation of trade secrets, breach of contract and other contract-related claims, breach of confidence, slander of title, violation of California’s Unfair Competition Law (California Business and Professionals Code §§ 17200 et seq.), and fraud, and also bring a claim for declaratory relief. The lawsuit contends that Google and the other Defendants stole Mr. Attia’s trade secrets, proprietary information, and know-how regarding a revolutionary architecture design and building process that he alone had invented, known as Engineered Architecture. Defendants are alleged to have engaged Mr. Attia in 2010 and 2011 to translate his architectural technology into software for a proof of concept, with the goal of determining at that point whether to continue with full-scale development with Mr. Attia. Instead, the lawsuit claims that once Mr. Attia had disclosed the trade secrets and proprietary information Defendants needed to bring the technology to market, they severed ties with Mr. Attia, and continued to use his technology without a license and without compensation, in order to bring the technology to market themselves. Plaintiffs seek a permanent injunction against Google, damages (including punitive damages), and restitution. As exclusive agent to Eli Attia to enforce all rights with respect to the subject technology, the Company has retained Buether Joe & Carpenter LLC to represent the Company in the suit, on a contingency fee basis. The case will be vigorously prosecuted, and the Company believes it has a good likelihood of success.  Defendants have filed multiple demurrers to the complaint, and the Court has issued orders allowing the case to proceed.  Defendants filed another demurrer on March 17, 2016, which is scheduled to be heard by the Court on August 12, 2016.

 

Attia v. Google and Flux Factory. As of December 31, 2015:  Defendants had filed a demurrer to the complaint.  The demurrer was pending as of December 31, 2015. Current status:  On February 1, 2016, the court granted in part and denied in part the demurrer and provided plaintiff leave to amend the complaint to cure certain deficiencies.  The amended complaint was filed on February 8, 2016. 

 

No assurance can be given as to the ultimate outcome of these actions or its effect on the Company.  

 

  

NOTE 9        INTANGIBLE ASSETS

 

As of June 30, 2016 and December 31, 2015 the Company owns certain trademarks and technology rights.    See Note 1 (I).

 

   Useful Life  Six  Months Ended June 30, 2016  December 31, 2015
              
Distribution rights  10 Years  $9,647,577   $9,647,577 
Trademarks  Indefinite   7,500,000    7,500,000 
Licensing Rights  Indefinite   2,064,000    2,064,000 
Other  Indefinite   275    275 
Accumulated amortization      (2,472,005)   (2,415,615)
  Impairment of the distributions rights      (15,703,616)   (15,703,616)
              
Net carrying value     $1,036,231   $1,092,621 
              

  

For the six months ended June 30, 2016 and 2015, amortization expense related to the intangibles with finite lives totaled $56,390 and $527,179, respectively, and was included in general and administrative expenses in the statement of operations.  The Company also recorded an impairment expense of $15,703,617 during the year ended December 31, 2015.

 

NOTE 10       SUBSEQUENT EVENTS

  

On July 26, 2016 the Company entered into an agreement with Iliad Research and Trading, L.P., to issue up to $171,665 in a convertible note. The note matures on July 26, 2017 and bears an interest charge of 8%. The conversion price equals the “Variable Conversion Price”, which is 65% of the “Market Price”, which is the average of the lowest two (2) trading prices for the common stock during the ten (10) trading day period prior to the conversion.. The holder of the note has a right to convert all or any part of the outstanding unpaid principal amount into shares of common stock after six months. The Company received $150,000 proceeds on July 28, 2016.

 

On July 15, 2016 the Company entered into an agreement with JSJ Investments, Inc., to issue up to $50,000 in a convertible note. The note matures on April 15, 2017 and bears an interest charge of 8%. The conversion price equals the “Variable Conversion Price”, which is 60% of the “Market Price”, which is the lowest trading prices for the common stock during the ten (10) trading day period prior to the conversion. The holder of the note has a right to convert all or any part of the outstanding unpaid principal amount into shares of common stock after six months. The Company received $49,000 proceeds on July 19, 2016.

 

On July 7, 2016 the Company entered into an agreement with Crossover Capital Fund I, LLC, to issue up to $52,632 in a convertible note. The note matures on April 7, 2017 and bears an interest charge of 10%. The conversion price equals the “Variable Conversion Price”, which is 60% of the “Market Price”, which is the average of the lowest two (2) trading prices for the common stock during the twelve (12) trading day period prior to the conversion.. The holder of the note has a right to convert all or any part of the outstanding unpaid principal amount into shares of common stock after six months. The Company received $45,000 proceeds on July 12, 2016.

 

On August 4, 2016 under the Terms of the term sheet entered into with Imperalis Holdings (IMHC), IMHC would acquire certain rights, title and interest in and to the MAX-D Audio Technology's Intellectual Property for certain MAXD HD Audio Technology IP component assets. At the date of this filing, and per the initial Terms, the purchase is on hold as the Company awaits verification by IMHC of adequate funding to propel potential business and solidify that the IMHC asset purchase would be in the best interest of Company's Shareholders.

 

On August 9, 2016 the Company has moved a level down from OTCQB to OTC Pink Current Information where it is within the continued standards and pricing requirements as found in Section 2 of the OTCQB Eligibility Standards. The company’s services, which remain active and are paid current with OTC Markets through the end of 2016, may re-apply at any time after a price increase to meet all of the OTCQB Eligibility Standards to be moved back to the higher OTCQB marketplace. 

 

  

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

 

The following plan of operation provides information which management believes is relevant to an assessment and understanding of our results of operations and financial condition. The discussion should be read along with our financial statements and notes thereto. This section includes a number of forward-looking statements that reflect our current views with respect to future events and financial performance. Forward-looking statements are often identified by words like believe, expect, estimate, anticipate, intend, project and similar expressions, or words which, by their nature, refer to future events. You should not place undue certainty on these forward-looking statements. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our predictions.

 

Overview

 

Max Sound Corporation (“we,” “us,” “our,” or the “Company”) was incorporated in the State of Delaware on December 9, 2005 as 43010, Inc. to engage in any lawful corporate undertaking, including, but not limited to, locating and negotiating with a business entity for combination in the form of a merger, stock-for-stock exchange or stock-for-assets exchange. On October 7, 2008, pursuant to the terms of a stock purchase agreement, Mr. Greg Halpern purchased a total of 100,000 shares of our common stock from Michael Raleigh for an aggregate of $30,000 in cash. The total of 100,000 shares represents 100% of our issued and outstanding common stock at the time of the transfer. As a result, Mr. Halpern became our sole shareholder. As part of the acquisition, and pursuant to the Stock Purchase Agreement, Michael Raleigh, our then President, CEO, CFO, and Chairman resigned from all the positions he held in the company, and Mr. Halpern was appointed as our President, CEO CFO and Chairman. The original business model was developed by Mr. Halpern in September of 2008 and began when he joined the Company on October 7, 2008. In October 2008, we became a development stage company focused on creating an Internet search engine and networking web site. 

 

From October 2008 until January 17, 2011, Mr. Halpern was our CEO, and during that time the Company was focused on developing their Internet search engine and networking web site. In January of 2010, the Company launched their Internet search engine and networking website.  In 2011, the Company decided to abandon its social networking website.  On May 11, 2010, the Company acquired the worldwide rights, title, and interest to all fields of use for MAX-D.

 

On January 17, 2011, Mr. Halpern resigned as the Company’s CEO and John Blaisure was appointed as CEO.  In February of 2011, the Company elected to change its business operations and focus primarily on developing and launching the MAX-D technology.  Our current website (www.maxsound.com) is used to showcase the MAX-D technology.  On March 8, 2011, the Company changed its name to Max Sound Corporation, and its trading symbol on the OTC Bulletin Board to MAXD.

  

MAX Sound Corporation owns the worldwide rights to all fields of use to MAX-D HD Audio, which was invented by Lloyd Trammell, a top sound designer and audio engineer who helped develop and sell the first working Surround Sound System to Hughes Aircraft.  Mr. Trammell, also developed MIDI for Korg and owns five patents in dimensional sound processing.  We believe that MAX-D is to Audio what High Definition is to Video.  MAX-D works by converting all audio files to their highest possible acoustically perfect equivalent without increasing files size or bandwidth usage.

 

On May 22, 2014, MAXD entered into a representation agreement with architect Eli Attia giving MAXD the exclusive rights to sue violators of Eli Attia’s intellectual property rights. MAXD has since filed suit against Google, Inc., Flux Factory, and various executives of these companies for misappropriation of trade secrets.

  

No later than June 20, 2014, MAXD entered into a representation agreement with VSL Communications, Inc., making MAXD the exclusive agent to VSL to enforce all rights with respect to patented technology owned and controlled by VSL. In particular, the Company announced that it had acquired a worldwide license and representation rights to a patented video and data technology “Optimized Data Transmission System and Method” which enables end-user licensees to transport 100% of data bandwidth content in only 3% of the bandwidth with the identical lossless quality. Significantly, this represents thirty three times reduction associated with transport cost and the time it takes for the video or digital content to be viewed by an end-user. As described more fully in the Legal Proceedings Section, The Company has since filed suit against Google, Inc., YouTube, LLC, and On2 Technologies, Inc., alleging willful infringement of the patent.

 

On June 20, 2015, the Company entered into a license agreement with Santok LTD of United Kingdom (“Santok). The term of the agreement is three years. Santok will pay the Company a royalty fee of $1.50 for each licensed product. Santok guarantees to the Company a minimum total of 150,000 cumulative licensed product installation with a minimum total guaranteed value of $225,000 over the three years of the agreement. If the total royalty paid is less than the guaranteed value, Santok will pay the difference.

 

On July 13, 2015, the Company entered into a license agreement with Luna Mobile, Inc. of United States (“Luna). The term of the agreement is three years. Luna will pay the Company a royalty fee of $1.50 for each licensed product manufactured and sold.

 

  

Plan of Operation

  

The Company believes that Max Sound HD Audio Technology is a game changer for several vertical markets whose demand will create revenue opportunities in 2016.

 

We expect our financial requirements to increase with the additional expenses needed to market and promote the MAX-D HD Audio Technology.  We plan to fund these additional expenses through financings and through loans from our stockholders and/or officers based on existing lines of credit and we are also considering various private funding opportunities until such time that our revenue stream is adequate enough to provide the necessary funds. 

 

Results of Operations

  

The following tables set forth key components of our results of operations for the periods indicated, in dollars, and key components of our revenue for the period indicated, in dollars.

 

For the three and six months ended June 30, 2016 and 2015:

 

   For the Three Months Ended,  For the Six Months Ended,
   June 30, 2016  June 30, 2015  June 30, 2016  June 30, 2015
             
Revenue  $—     $—     $—     $—   
Operating Expenses                    
General and administrative   197,381    829,361    741,905    1,616,664 
Consulting   70,142    174,712    139,832    244,549 
Professional fees   119,833    219,653    229,753    337,277 
Website development   7,000    10,000    28,000    15,000 
Compensation   198,000    228,000    410,000    469,300 
Total Operating Expenses   592,356    1,461,726    1,549,490    2,682,790 
Loss from Operations   (592,356)   (1,461,726)   (1,549,490)   (2,682,790)
Other Income / (Expense)                    
Other income   1,315    20,710    36,529    20,710 
Loss on inventory write off   —      —      —      (29,275)
Interest expense   (74,684)   (91,893)   (164,145)   (148,336)
Derivative Expense   (424,320)   (866,758)   (2,505,412)   (1,034,281)
Amortization of debt offering costs   (23,532)   —      (58,000)   (41,929)
Loss on debt settlement   (215,161)   (125,953)   (316,270)   (125,953)
Amortization of debt discount   (1,508,607)   (1,001,924)   (2,847,565)   (1,932,848)
Change in fair value of embedded derivative liability   2,550,645    696,219    76,297    1,169,954 
Total Other Income / (Expense)   305,656    (1,369,599)   (5,778,566)   (2,121,958)
Provision for Income  Taxes   —      —      —      —   
Net Loss  $(286,700)  $(2,831,325)  $(7,328,056)  $(4,804,748)
Net Loss Per Share  - Basic and Diluted  $(0.00)  $(0.01)  $(0.01)  $(0.01)
Weighted average number of shares outstanding during the year Basic and Diluted   825,358,459    305,550,413    710,704,959    335,473,464 

 

 

For the three months ended June 30, 2016 and 2015.

 

General and Administrative Expenses: Our general and administrative expenses were $197,381 for the three months ended June 30, 2016 and $829,361 for the three months ended June 30, 2015, representing a decrease of $631,980, or approximately 76%, as a result of decrease in the general operation of the Company included added personnel, product development and marketing of our Max Sound Technology.

 

Consulting Fees:  Our consulting fees were $70,142 for the three months ended June 30, 2016 and $174,712 for the three months ended June 30, 2015, representing a decrease of $104,570, or approximately 60%. The Company has decreased the use of consultants to assist the Company.

 

Professional Fees: Our professional fees were $119,833 for the three months ended June 30, 2016 and $219,653 for the three months ended June 30, 2015, representing an decrease of $99,820 or approximately 45%, as a result of ongoing litigation.

 

Compensation: Our compensation expenses were $198,000 for the three months ended June 30, 2016 and $228,000 for the three months ended June 30, 2015, representing a decrease of $30,000, or approximately 13%, as a result of our expensing of monthly compensation to our management and employees.

 

Net Loss: Our net loss for the three months ended June 30, 2016 was $286,700. While the operational expenses in marketing our Max Sound technology decreased from the same period of last year, the overall amount of our net loss substantially decreased as a result of an decrease in the change in the fair value of embedded derivative liability associated with the convertible debt and the impairment of the intangible asset.

 

For the six months ended June, 2016 and 2015

 

General and Administrative Expenses: Our general and administrative expenses were $741,905 for the six months ended June 30, 2016 and $1,616,664 for the six months ended June 30, 2015, representing a decrease of $874,759, or approximately 54%, as a result of decrease in the general operation of the Company included added personnel, product development and marketing of our Max Sound Technology.

 

Consulting Fees:  Our consulting fees were $139,832 for the six months ended June 30, 2016 and $244,549 for the six months ended June 30, 2015, representing a decrease of $104,717, or approximately 43%. The Company has decreased the use of consultants to assist the Company.

 

Professional Fees: Our professional fees were $229,753 for the six months ended June 30, 2016 and $337,277 for the six months ended June 30, 2015, representing a decrease of $107,524 or approximately 32%, as a result of ongoing litigation.

 

Compensation: Our compensation expenses were $410,000 for the six months ended June 30, 2016 and $469,300for the six months ended June 30, 2015, representing a decrease of $59,300, or approximately 13%, as a result of our expensing of monthly compensation to our management and employees.

 

Net Loss: Our net loss for the six months ended June 30, 2016 was $7,328,056. While the operational expenses in marketing our Max Sound technology decreased from the same period of last year, the overall amount of our net loss substantially increased as a result of an increase in the change in the fair value of embedded derivative liability associated with the convertible debt.

 

Liquidity and Capital Resources

 

Revenues for the six months ended June 30, 2016 and 2015, were $0 and $0, respectively. We have an accumulated deficit of $70,623,088 for the period from December 9, 2005 (inception) to June 30, 2016, and have negative cash flow from operations of $1,160,894 or the six months ended June 30, 2016.  

 

Our financial statements have been presented on the basis that it is a going concern, which contemplates the realization of revenues from our subscriber base and the satisfaction of liabilities in the normal course of business. We have incurred losses from inception. These factors raise substantial doubt about our ability to continue as a going concern.

 

From our inception through June 30, 2016, our primary source of funds has been the proceeds of private offerings of our common stock, private financing, and loans from stockholders.  Our need to obtain capital from outside investors is expected

to continue until we are able to achieve profitable operations, if ever. There is no assurance that management will be successful in fulfilling all or any elements of its plans.  

 

 

 

 

Below is a summary of our capital-raising activities for the six months ended June 30, 2016:

 

During the six months ended June 30, 2016 and December 31, 2015, the Company issued convertible notes totaling $2,195,547 and $5,390,789, respectively. The Convertible notes issued for six months ended June 30, 2016 and year ended December 31, 2015, consist of the following terms:

 

       Six months ended    Year ended 
       June 30, 2016    December 31, 2015 
       Amount of    Amount of 
       Principal Raised    Principal Raised 
Interest Rate      0% - 10%    0% - 10% 
Default interest rate      14% - 22%    14% - 22% 
Maturity      February 26, 2015 - November 23, 2017    February 26, 2015 - November 23, 2017 
              
Conversion terms 1  65% of the “Market Price”, which is the average of the lowest three (3) trading prices for the common stock during the ten (10) trading day period prior to the conversion.   3,542,400    2,104,000 
Conversion terms 2  65% of the “Market Price”, which is the lowest trading prices for the common stock during the ten (10) trading day period prior to the conversion.   465,416    420,410 
Conversion terms 3  70% of the “Market Price”, which is the average of the lowest three (3) trading prices for the common stock during the fifteen (15) trading day period prior to the conversion.   —      111,111 
Conversion terms 4  75% of the “Market Price”, which is the average of the lowest three (3) trading prices for the common stock during the ten (10) trading day period prior to the conversion.   765,000    787,778 
Conversion terms 5  60% of the “Market Price”, which is the lowest trading prices for the common stock during the fiften  (15) trading day period prior to the conversion.   —      35,000 
Conversion terms 6  Conversion at $0.10 per share   —      135,200 
Conversion terms 7  60% of the “Market Price”, which is the lowest trading prices for the common stock during the ten (10) trading day period prior to the conversion.   —      282,000 
Conversion terms 8  65% of the “Market Price”, which is the two lowest trading prices for the common stock during the ten (10) trading day period prior to the conversion.   1,060    390,778 
Conversion terms 9  65% of the “Market Price”, which is the two lowest trading prices for the common stock during the fifteen (15) trading day period prior to the conversion.   —      150,250 
Conversion terms 10  65% of the “Market Price”, which is the lowest trading prices for the common stock during the fifteen (15) trading day period prior to the conversion.   —      218,325 
   Convertible Debt   4,773,876    4,634,852 
   Less: Debt Discount   (2,056,408)   (2,658,213)
   Convertible Debt - net  $2,717,468   $1,976,639 

 

  

Loans and Advances

 

We have entered into three Credit Line Agreements with Greg Halpern.  The first two were for $100,000 each and matured and expired in 2011.  The third Credit Line Agreement issued by Mr. Halpern in March 2010 is for an additional $500,000 and matured and expired in 2012.  All three agreements accrue interest at the prime rate as of the date of issuance.  The prime rate of interest is the rate of interest that major banks charge their most creditworthy customers.  For the purposes of these agreements, we shall determine the prime rate by using the prime rate reported by the Wall Street Journal on the date funds are extended to the Company.  Based on the prime rate as of the date of issuance, the prime rate shall be 3.25%. On September 26, 2013, we entered into a Credit Line Agreement with Mr. Halpern for $1,000,000 that will mature and expire on or before the second anniversary of September 26, 2015.  Interest will accrue on each advance at an annual rate of 4%. As of December 31, 2013, the Company owed $0 in principal and $0 in accrued interest related to these loans and lines of credit.  We believe that the $1,000,000 line of credit issued will not be sufficient to cover the additional expense arising from maintenance of our regulatory filings with the SEC, and the marketing of our technology over the next twelve months, thus the Company will continue to pursue additional financing and/or additional funding in 2016 to continue marketing the Max Sound HD Audio Technology aggressively to Multi-Media Industry Users of Audio and Audio with Video products. 

 

In 2015, the Company has received from Mr. Halpern additional net advances on the established lines of credit in the amount of $264,000 of which it has repaid $536,000.  As of December 31, 2015, the balance including accrued interest on the line of credit is $473.  This further demonstrates our Chairman’s ongoing commitment to continue financing the Company’s needs.  While the Company expects to have ongoing needs for additional financing, the amount of those needs are not clearly established as the Company moves forward.

 

During the year ended December 31, 2015, the principal stockholder was repaid $536,000.  As of December 31, 2015, the line of credit balance including accrued interest totaled $473.

 

On September 17, 2015, the Company received $170,000 from a related party. Pursuant to the terms of the note, the note is bearing an original issuance discount in the amount of $10,000 and is due on or before October 31, 2015. As of December 31, 2015, the balance of the note is $0, and was fully repaid.

 

In the event that we are unable to obtain additional financing and/or funding or Mr. Halpern either fails to extend us more financing, declines to loan additional cash, declines to fund the line of credit, or declines to defer his salary payments, we will no longer be able to continue to operate and will have to cease operations unless we begin to generate sufficient revenue to cover our costs.

 

Recent Accounting Pronouncements

 

In April 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2015-03, Interest–Imputation of Interest (Subtopic 835-30) (“ASU 2015-03”), which changes the presentation of debt issuance costs in financial statements. ASU 2015-03 requires an entity to present such costs in the balance sheet as a direct deduction from the related debt liability rather than as an asset. Amortization of the costs will continue to be reported as interest expense. It is effective for annual reporting periods beginning after December 15, 2016. Early adoption is permitted. The new guidance will be applied retrospectively to each prior period presented. The Company is currently in the process of evaluating the impact of adoption of ASU 2015-03 on its balance sheets.

 

All other newly issued accounting pronouncements but not yet effective have been deemed either immaterial or not applicable. 

 

Critical Accounting Policies and Estimates

 

Our financial statements and related public financial information are based on the application of accounting principles generally accepted in the United States (“GAAP”). GAAP requires the use of estimates; assumptions, judgments and subjective interpretations of accounting principles that have an impact on the assets, liabilities, revenues and expense amounts reported. These estimates can also affect supplemental information contained in our external disclosures including information regarding contingencies, risk and financial condition. We believe our use of estimates and underlying accounting assumptions adhere to GAAP and are consistently and conservatively applied. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions or conditions. We continue to monitor significant estimates made during the preparation of our financial statements.

 

  

Use of Estimates:  

In preparing financial statements in conformity with generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reported period.  Actual results could differ from those estimates.

 

Revenue Recognition:  

Revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable and collectability is assured. We had $0 and $0 in revenue for the six months ended June 30, 2015 and 2014, respectively.

 

Stock-Based Compensation:

In December 2004, the FASB issued FASB Accounting Standards Codification No. 718, Compensation – Stock Compensation.  Under FASB Accounting Standards Codification No. 718, companies are required to measure the compensation costs of share-based compensation arrangements based on the grant-date fair value and recognize the costs in the financial statements over the period during which employees are required to provide services. Share-based compensation arrangements include stock options, restricted share plans, performance-based awards, share appreciation rights and employee share purchase plans.  As such, compensation cost is measured on the date of grant at their fair value.  Such compensation amounts, if any, are amortized over the respective vesting periods of the option grant.  The Company applies this statement prospectively.

 

Equity instruments (“instruments”) issued to other than employees are recorded on the basis of the fair value of the instruments, as required by FASB Accounting Standards Codification No. 718.  FASB Accounting Standards Codification No. 505, Equity Based Payments to Non-Employees defines the measurement date and recognition period for such instruments.  In general, the measurement date is when either a (a) performance commitment, as defined, is reached or (b) the earlier of (i) the non-employee performance is complete or (ii) the instruments are vested. The measured value related to the instruments is recognized over a period based on the facts and circumstances of each particular grant as defined in the FASB Accounting Standards Codification.

 

Derivative Financial Instruments

Fair value accounting requires bifurcation of embedded derivative instruments such as conversion features in convertible debt or equity instruments, and measurement of their fair value for accounting purposes. In determining the appropriate fair value, the Company uses the Black-Scholes option-pricing model.  In assessing the convertible debt instruments, management determines if the convertible debt host instrument is conventional convertible debt and further if there is a beneficial conversion feature requiring measurement.  If the instrument is not considered conventional convertible debt, the Company will continue its evaluation process of these instruments as derivative financial instruments.

 

Once determined, derivative liabilities are adjusted to reflect fair value at each reporting period end, with any increase or decrease in the fair value being recorded in results of operations as an adjustment to fair value of derivatives.  In addition, the fair value of freestanding derivative instruments such as warrants, are also valued using the Black-Scholes option-pricing model.  

 

Impairment of Long-Lived Assets

The Company accounts for its long-lived assets in accordance with ASC Topic 360-10-05, Accounting for the Impairment or Disposal of Long-Lived Assets."  ASC Topic 360-10-05 requires that long-lived assets, such as technology rights, be reviewed for impairment annually, or whenever events or changes in circumstances indicate that the historical cost carrying value of an asset may no longer be appropriate.  The Company assesses recoverability of the carrying value of an asset by estimating the future net cash flows expected to result from the asset, including the eventual disposition.  If the future net cash flows are less than the carrying value of an asset, an impairment loss is recorded equal to the difference between the asset's carrying value and fair value or disposable value.  For the year ended December 31, 2013, the Company completed an impairment analysis on its' long-lived assets, their technology rights, and determined that no impairment was necessary.

 

The Company believes that the accounting estimate related to asset impairment is a "critical accounting estimate" because the impairment methodology is highly susceptible to change from period to period, because it requires management to make assumptions about future cash flows, and because the impact of recognizing impairment could have a significant effect on operations. Management's assumptions about future cash flows require significant judgment because actual business operations of marketing the technology rights is in its infancy stages and managements expects that their future operating levels to fluctuate. The analysis included assumptions that are based on annual business plans and other forecasted results which are used to reflect market-based estimates of the risks associated with the projected cash flows, based on the best information available as of the date of the impairment test. There can be no assurance that the estimates and assumptions used in the impairment tests will prove to be accurate predictions of the future.  If the future adversely differs from management's best estimate of key economic assumptions, and if associated future cash flows materially decrease, the Company may be required to record impairment charges related to its indefinite life intangible asset. 

 

  

Prior to February 2011, the Company's business operations were related to the development and launching of a social networking website.  However, since February 2011, our business focus has been on the marketing of our Max Sound HD Audio Technology.  Since 2011, was our initial year of marketing our technology, management considers past operational levels to be inconsistent with future operations mainly due to the shift in business focus.  In our impairment testing, the Company made assumptions towards the income and expenses expected in the future including, but not limited to, determining the actual expenses incurred in the current year that were attributable to the new business focus in order to develop an annual cost benchmark, trends in the marketplace, feedback from current and past marketing activities, and assessments upon the useful life of the technology rights.

 

The Company's primary focus over the next three to five years will be centered on the marketing and implementation of their technology in order to take advantage of the current trends in the marketplace for users of their technology.  In particular, the Company expects that expenses will increase significantly from year to year over the next five years, at which time in year six and beyond the year-to-year change will be a minimal increase.  In addition, the Company expects minimal revenue over the next two years, while in year three to six the Company expects to realize significant year to year increases in revenue, at which time in year seven and beyond the year to year change will be a minimal increase.

 

As part of the impairment test, the Company reviewed its' initial useful life analysis, in reference to their technology, and updated this analysis with factors that existed at the time of the impairment testing and determined that nothing had occurred in the marketplace that would change their initial determination of the useful life of their technology. The analysis included researching known technological advances in the marketplace and determining if those advances, which are similar to the Company’s products, would limit the useful life of the asset. The Company believes that the technological advances in the marketplace are geared to developing different playback devices and the implementation of technology that is similar to the Company's technology. Thus, the Company concluded that their technology rights continue to have an indefinite useful life. However, it is understood that technological advancements could happen in the future that would limit the useful life of their technology.  If a technology was created in the future that would limit the useful life of the technology, the Company would be required to update their impairment testing to include a useful life determination of the technology and may be required to record impairment charges at some time in the future.

 

Off-Balance Sheet Arrangements

 

We do not have any off-balance sheet arrangements, financings, or other relationships with unconsolidated entities or other persons, also known as “special purpose entities”.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

We are subject to certain market risks, including changes in interest rates and currency exchange rates.  We have not undertaken any specific actions to limit those exposures. 

 

Item 4.  Controls and Procedures

 

Disclosure controls and procedures. Pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 (“Exchange Act”), the Company carried out an evaluation, with the participation of the Company’s management, including the Company’s principal executive officer and principal financial officer, of the effectiveness of the Company’s disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, the Company’s principal executive officer and principal financial officer concluded that the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including the Company’s principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

 

Changes in internal control over financial reporting. There have been no changes in our internal control over financial reporting that occurred during the quarter covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. 

 

 

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

   

See NOTE 8 titled LITIGATION for information on Legal Proceedings.

 

Item 1A. Risk Factors.

 

Not required for smaller reporting companies.

 

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

 

Below is a summary of our capital-raising activities for the three months ended June 30, 2016 and underlying terms:

 

On April 1, 2016, the Company entered into a conversion agreement with JSJ Investments, Inc. relating to a convertible promissory note dated June 22, 2015 with the original principal amount of $150,000 for 8,503,401 shares based on a conversion price of $0.00294 per share.

 

On April 1, 2016, the Company entered into a conversion agreement with ZSP Capital, LLC, relating to a convertible promissory note dated July 13, 2015 with the original principal amount of $35,000 for 3,108,003 shares based on a conversion price of $0.00322 per share.

 

On April 1, 2016, the Company entered into a conversion agreement with Adar Bays, LLC relating to a convertible promissory note dated March 17, 2015, with the original principal amount of $110,250 for 4,720,237 shares based on a conversion price of $0.00143 per share.

 

On April 11, 2016, the Company entered into a conversion agreement with Rock Capital relating to a convertible promissory note dated February 24, 2016, with the original principal amount of $46,316 for 10,121,257 shares based on a conversion price of $0.00169 per share

 

On April 5 2016, the Company entered into a conversion agreement with Iliad Research and Trading, LP, relating to a convertible promissory note dated August 7, 2015 with the original principal amount of $143,889 for 13,500,000 shares based on a conversion price of $0.00182 per share.

 

On April 4, 2016, the Company entered into a conversion agreement with Union Capital, LLC relating to a convertible promissory note dated April 21, 2015 with the original principal amount of $110,250 for 10,276,247 shares based on a conversion price of $0.00182per share.

 

On April 6, 2016, the Company entered into a conversion agreement with Horberg Enterprises, LP relating to a convertible promissory note dated August 21, 2014, with the original principal amount of $250,000 for 13,041,420 shares based on a conversion price of $0.00169 per share.

 

On April 6, 2016, the Company entered into a conversion agreement with Horberg Enterprises, LP relating to a convertible promissory note dated August 21, 2014, with the original principal amount of $250,000 for 13,070,078 shares based on a conversion price of $0.00180 per share.

 

On April 16, 2016, the Company entered into a conversion agreement with The Vechery Family Trust DTD 10/9/84 relating to a convertible promissory note dated 1, 2015, with the original principal amount of $1,000,000 for 32,000,000 shares based on a conversion price of $0.0018 per share (See Note 6).

 

Item 3. Defaults Upon Senior Securities.

 

None.

 

Item 4. Mine Safety Disclosures.

 

Not applicable.

 

Item 5. Other Information.

 

None.

 

Item 6. Exhibits

 

All 10 Form exhibits previously exhibited associated with all Company 10 Form filings are incorporated herein.

 

 Exhibit Number   Description
 10.1   Convertible Redeemable Note, Dated 4.05.16 issued to ILIAD RESEARCH & TRADING L.P.
 10.2   Convertible Redeemable Note, Dated 4.08.16 issued to The Vechery Family Trust
 10.3   Convertible Redeemable Note, Dated 5.17.16 issued to ILIAD RESEARCH & TRADING L.P.
 31.1   Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 - Chief Executive Officer
 31.2   Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 - Chief Financial Officer
 32   Certifications Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

 
 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

Date: August 12, 2016.

 

MAX SOUND CORPORATION   
(Registrant)   
    
By:  /s/ John Blaisure
   John Blaisure
   Chief Executive Officer
(Principal Executive Officer)
    
By:  /s/ Greg Halpern
   Greg Halpern
   Chief Financial Officer
(Principal Financial and Accounting Officer)