0000741114 2015-01-01 2015-06-30 0000741114 2015-06-30 0000741114 2014-12-31 0000741114 2015-04-01 2015-06-30 0000741114 2014-04-01 2014-06-30 0000741114 2014-01-01 2014-06-30 0000741114 2013-12-31 0000741114 us-gaap:WarrantMember 2015-04-01 2015-06-30 0000741114 us-gaap:StockOptionMember 2015-04-01 2015-06-30 0000741114 us-gaap:WarrantMember 2014-04-01 2014-06-30 0000741114 us-gaap:StockOptionMember 2014-04-01 2014-06-30 0000741114 us-gaap:CustomerConcentrationRiskMember us-gaap:SalesRevenueProductLineMember 2015-01-01 2015-06-30 0000741114 us-gaap:SupplierConcentrationRiskMember us-gaap:CostOfGoodsProductLineMember 2015-01-01 2015-06-30 0000741114 us-gaap:CustomerConcentrationRiskMember us-gaap:AccountsReceivableMember 2015-01-01 2015-06-30 0000741114 us-gaap:SupplierConcentrationRiskMember us-gaap:LiabilitiesTotalMember 2015-01-01 2015-06-30 0000741114 us-gaap:SupplierConcentrationRiskMember us-gaap:CostOfGoodsProductLineMember 2014-01-01 2014-06-30 0000741114 us-gaap:SupplierConcentrationRiskMember us-gaap:LiabilitiesTotalMember 2014-01-01 2014-06-30 0000741114 us-gaap:CustomerConcentrationRiskMember us-gaap:AccountsReceivableMember 2014-01-01 2014-06-30 0000741114 us-gaap:CustomerConcentrationRiskMember us-gaap:SalesRevenueProductLineMember 2014-01-01 2014-06-30 0000741114 ifit:WarehouseLeaseMember 2015-04-01 2015-06-30 0000741114 ifit:HeadquartersLeaseMember 2015-04-01 2015-06-30 0000741114 ifit:HeadquartersLeaseMember 2014-04-01 2014-06-30 0000741114 2014-01-01 2014-12-31 0000741114 ifit:HeadquartersLeaseMember 2015-06-30 0000741114 ifit:WarehouseLeaseMember 2015-06-30 0000741114 us-gaap:WarrantMember 2013-01-01 2013-12-31 0000741114 us-gaap:WarrantMember 2013-12-31 0000741114 ifit:TwoThousandTwelvePerformanceIncentivePlanMember us-gaap:EmployeeStockOptionMember 2015-03-01 2015-03-31 0000741114 ifit:TwoThousandTwelvePerformanceIncentivePlanMember us-gaap:EmployeeStockOptionMember 2014-01-01 2014-12-31 0000741114 ifit:TwoThousandTwelvePerformanceIncentivePlanMember us-gaap:EmployeeStockOptionMember 2015-03-23 0000741114 us-gaap:WarrantMember ifit:MicrocapHeadlinesMember 2013-12-31 0000741114 us-gaap:WarrantMember ifit:MicrocapHeadlinesMember 2013-01-01 2013-12-31 0000741114 us-gaap:WarrantMember ifit:OptivestGlobalPartnersMember 2013-12-31 0000741114 us-gaap:WarrantMember ifit:OptivestGlobalPartnersMember 2013-01-01 2013-12-31 0000741114 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel1Member us-gaap:WarrantMember 2015-01-01 2015-06-30 0000741114 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel1Member us-gaap:WarrantMember 2015-06-30 0000741114 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel1Member us-gaap:WarrantMember 2014-01-01 2014-12-31 0000741114 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel1Member us-gaap:WarrantMember 2014-12-31 0000741114 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel2Member us-gaap:WarrantMember 2015-01-01 2015-06-30 0000741114 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel2Member us-gaap:WarrantMember 2015-06-30 0000741114 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel2Member us-gaap:WarrantMember 2014-01-01 2014-12-31 0000741114 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel2Member us-gaap:WarrantMember 2014-12-31 0000741114 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel3Member us-gaap:WarrantMember 2015-01-01 2015-06-30 0000741114 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel3Member us-gaap:WarrantMember 2015-06-30 0000741114 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel3Member us-gaap:WarrantMember 2014-01-01 2014-12-31 0000741114 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel3Member us-gaap:WarrantMember 2014-12-31 0000741114 2015-08-10 0000741114 2014-06-30 0000741114 us-gaap:StockOptionMember 2015-01-01 2015-06-30 0000741114 us-gaap:StockOptionMember 2014-01-01 2014-06-30 0000741114 us-gaap:WarrantMember 2015-01-01 2015-06-30 0000741114 us-gaap:WarrantMember 2014-01-01 2014-06-30 0000741114 ifit:HeadquartersLeaseMember 2015-01-01 2015-06-30 0000741114 ifit:HeadquartersLeaseMember 2014-01-01 2014-06-30 0000741114 ifit:WarehouseLeaseMember 2015-01-01 2015-06-30 0000741114 us-gaap:SettledLitigationMember 2015-01-01 2015-06-30 0000741114 us-gaap:SettledLitigationMember 2014-01-01 2014-12-31 0000741114 us-gaap:SettledLitigationMember 2014-12-31 0000741114 ifit:TwoThousandTwelvePerformanceIncentivePlanMember ifit:ContractedEmployeeMember 2015-03-01 2015-03-31 0000741114 ifit:TwoThousandTwelvePerformanceIncentivePlanMember ifit:ContractedEmployeeMember 2015-03-05 0000741114 ifit:TwoThousandTwelvePerformanceIncentivePlanMember ifit:ContractorMember 2015-04-01 2015-04-30 0000741114 ifit:TwoThousandTwelvePerformanceIncentivePlanMember ifit:ContractorMember 2015-04-03 0000741114 ifit:TwoThousandTwelvePerformanceIncentivePlanMember ifit:FormerEmployeeMember 2015-04-01 2015-04-30 0000741114 ifit:TwoThousandTwelvePerformanceIncentivePlanMember ifit:FormerEmployeeMember 2015-04-08 0000741114 ifit:TwoThousandTwelvePerformanceIncentivePlanMember us-gaap:EmployeeStockOptionMember 2015-05-01 2015-05-31 0000741114 ifit:TwoThousandTwelvePerformanceIncentivePlanMember us-gaap:EmployeeStockOptionMember us-gaap:MinimumMember 2015-05-13 0000741114 ifit:TwoThousandTwelvePerformanceIncentivePlanMember us-gaap:EmployeeStockOptionMember us-gaap:MaximumMember 2015-05-13 0000741114 ifit:TwoThousandTwelvePerformanceIncentivePlanMember ifit:ContractorMember 2015-05-01 2015-05-31 0000741114 ifit:TwoThousandTwelvePerformanceIncentivePlanMember ifit:ContractorMember 2015-05-13 0000741114 2013-01-01 2013-12-31 0000741114 ifit:TwoThousandTwelvePerformanceIncentivePlanMember us-gaap:EmployeeStockOptionMember 2015-01-01 2015-06-30 0000741114 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel1Member us-gaap:WarrantMember 2013-12-31 0000741114 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel2Member us-gaap:WarrantMember 2013-12-31 0000741114 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel3Member us-gaap:WarrantMember 2013-12-31 iso4217:USD xbrli:shares iso4217:USD xbrli:shares xbrli:pure iSatori, Inc. 0000741114 10-Q 2015-06-30 false --12-31 No No Yes Smaller Reporting Company Q2 2015 1349065 925506 23593 28939 2158853 2483602 0 34979 772552 217668 4694175 4429419 11485 11485 196025 128902 110418 57408 332171 332171 57317 43942 467091 425238 240325 148670 52695 52695 57314 57314 33799 45207 91113 102521 5078308 4733305 1905258 819918 236645 253208 0 191127 57314 57314 1275000 1620519 211321 15708 3685538 2957794 0 152849 225 225 133688 129093 5058077 4796241 -3799220 -3302897 1392770 1622662 5078308 4733305 0.01 0.01 750000 750000 22500 22500 22500 22500 450000 450000 0.01 0.01 56250000 56250000 13368791 12909278 13368791 12909278 390112 738725 822876 1717916 1349065 925506 1905258 819918 390112 738725 1349065 925506 1905258 819918 1307881 951396 41184 -25890 0 0 186305 170435 249847 308333 1722701 2004834 0.001 0.573 0.001 0.573 2.22 0.573 0.573 0.001 0.001 0.01 2.25 2.50 2.25 2.50 2.50 2.50 2.50 2.25 2.25 1.02 13089814 13371791 13686754 13714797 0.52 0.84 0.45 0.61 0.63 0.48 0.80 0.66 85000 85000 76288 The predecessor company disposed of a dormant product line of vitamins in December 2010. As part of the consideration in this divestiture, the Company received from the purchaser of this product line an unsecured note in the amount of $170,000. The original note was due to be repaid on or before March 2014, where interest accrued principally at an annual rate of 5%, based upon the initial $170,000 principal and was payable monthly. As of March 31, 2013, the note was novated and a new promissory note was issued to reflect a modification in the payment terms, which includes no interest. 2017-05-01 1224856 689960 849356 1360091 21782 20716 20716 41394 41394 43565 2017-01-31 2018-12-31 131200 331094 10726 7796 63382 79205 844543 2.25 0.00 0.00 0.00 0.4595 0.4565 0.4897 1.6428 0.0072 0.0213 0.0171 0.0142 0.0241 0.019 5 years 6.08-6.33 years 5.51-8.01 years 0.00 0.00 0.00 0.3522 195000 10000 200000 25000 120538 62500 1.02 1.0065 0.01 0.95 0.75 0.80 0.80 100000 250000 2.25 2.25 2025-03-20 2018-01-01 2018-07-16 2025-03-05 2025-04-03 2025-04-08 2025-05-13 2025-05-13 Three year vesting schedules of 1/3 each year through March 2018 These warrants were subject to conditional vesting schedule in one-fourth (quarterly) increments, subject to the Company’s sole discretion. The first increment was granted and fully vested on January 1, 2013, the second increment was granted and fully vested on April 1, 2013, the third increment was granted and fully vested on July 1, 2013, and the fourth increment was granted and fully vested on October 1, 2013. Fully vested Fully vested Vest October 1, 2015 Vest January 1, 2016 One and a half to three year vesting schedules of 1/3 each year through October 2016 and April 2018 Three year vesting schedules of 1/3 each year through May 2018 102288 350000 770649 2015-10-16 2015-11-16 Prime (as reflected in the Wall Street Journal) plus 2.0% The principal balance will note bear interest at the one month USD LIBOR rate measured not more often than once per month (the "Index"). Interest on any unpaid balance will bear interest at the Index plus 3.750% with a minimum interest rate of 4.00% per annum and is payable monthly. The agreement requires the Company to comply with certain affirmative covenants, including a minimum current ratio of 1.5 to 1, a maximum leverage ratio of 2 to 1, and minimum tangible equity capital of $2,750,000 through November 30, 2014, and $3,000,000 thereafter, as well as providing limitations on dividends, additional indebtedness, and certain other changes. On January 7, 2015, Colorado Business Bank provided the Company with notice of a non-monetary event of default concerning the Company’s violation of the minimum tangible equity capital covenant set forth in the loan agreement. On March 27, 2015, and effective March 23, 2015, the Company and Colorado Business Bank (“CBB”) entered into a Change in Terms Agreement (the “Change in Terms Agreement) and Business Loan Agreement (the “Business Loan Agreement and, together with the Change in Terms Agreement, the “Agreements”), to replace that previous Business Loan Agreement, dated as of July 16, 2012, by and between iSatori, Inc. and CBB (the “Prior Agreement”). Pursuant to the Agreements CBB agreed to waive the violation of the Minimum Tangible Equity Covenant; the lending relationship between the Company and CBB was restructured from a revolving loan to a term loan; the Company agreed to pay down the amount outstanding under the Prior Agreement to $1,500,000 in the short term. On July 16, 2015, and effective June 30, 2015, the Company and Colorado Business Bank (“CBB”) entered into a Change in Terms Agreement (the “Change in Terms Agreement) and Business Loan Agreement (the “Business Loan Agreement and, together with the Change in Terms Agreement, the “Agreements”), to replace that previous Business Loan Agreement, dated as of March 27, 2015, by and between iSatori, Inc. and CBB (the “Prior Agreement”). Pursuant to the Agreements CBB agreed to a revision of the Minimum Tangible Equity Covenant; the Company continues to pay down the amount outstanding under the Prior Agreement with monthly payments of $75,000 plus interest, at an interest rate of Prime (as reflected in the Wall Street Journal) plus 2.0%, and is set to mature on October 16, 2015. Monthly 75000 0 34979 0 152849 0 34979 0 0 0 152849 108228 0 471015 -34979 -115881 0 0 -214837 0 0 42632 0 0 61988 -348166 13368791 5859116 2460676 2877496 6096740 37993 18774 30501 63127 20607 9442 10370 19767 5917716 2488892 2918367 6179634 3204205 1494658 1306245 2550043 2713511 994234 1612122 3629591 1123165 497720 477413 1260101 1205785 586531 600968 1248381 700359 374983 299775 513753 48260 25176 20015 39144 3077569 1484410 1398171 3061379 -364058 -490176 213951 568212 -57482 10741 204642 234842 27746 15385 9476 30827 36311 20096 9636 20685 -485597 -514916 399481 751542 -496323 -522712 336099 672337 -0.04 -0.04 0.03 0.05 -0.04 -0.04 0.02 0.05 13089814 13371791 12886401 12883026 48260 39144 67630 28397 34979 -14800 61988 -192002 0 66152 -423559 250030 0 45448 5346 3656 324749 -261040 -570920 10313 5002 20904 1085340 106393 -16563 128135 -191127 -77238 -65197 825829 133509 16149 0 87843 -133509 71694 203010 0 7397 2347 345519 136 0 0 -149906 -2483 -348612 895040 39696 26670 8500 6700 <p style="font-family: Times New Roman, Times, Serif; text-indent: 0; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b><u>Note 1 - Summary of Significant Accounting Policies</u></b></font></p> <p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b>Organization and Nature of Business, and Basis of Presentation</b></font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">iSatori, Inc. (the &#147;Company&#148;) is a Delaware incorporated Company who trades under the symbol of &#147;IFIT&#148; on the OCTQB exchange.</font></p> <p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">The Company is engaged in researching, designing, developing, contracting for the manufacture, marketing, selling and distributing of various branded nutritional and dietary supplement products for the general nutrition market. The &#147;general nutrition market&#148; may include such activities as body-building, physique enhancement (increase of lean body mass and decrease in fat mass) and enhanced athletic performance through increased strength and/or endurance and proper nutrition.</font></p> <p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">The Company does engage from time to time in funding of clinical studies with the objective of discovering and/or validating claims of new, efficacious products for the Company&#146;s relevant market as well as providing necessary and appropriate substantiation for any claims which the Company may use in its marketing and advertising. The Company markets products which are under its control and which are in some way proprietary to the Company. Some of the Company&#146;s products are the subject of trademarks, patented or patent-pending, owned or licensed the Company.</font></p> <p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b>Plan of Merger Announced</b></font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">On May 18, 2015, iSatori, Inc., (the &#147;Company&#148;) entered into an Agreement and Plan of Merger (the &#147;Merger Agreement&#148;), among the Company, FitLife Brands, Inc., a Nevada corporation (&#147;FitLife&#148;) and ISFL Merger Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of FifLife (&#147;Merger Sub&#148;). The Merger Agreement provides that, upon the terms and subject to the conditions set forth in the Merger Agreement, Merger Sub will merge with and into the Company, with the Company surviving as a wholly-owned subsidiary of FitLife (the &#147;Merger&#148;). The Merger Agreement and the Merger have been approved by the boards of directors of iSatori and FitLife.</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">Subject to the terms and conditions of the Merger Agreement, at the effective time of the Merger, each outstanding share of common stock of the Company (&#147;iSatori Common Stock&#148;), other than iSatori Common Stock with respect to which dissent rights have been properly exercised and not withdrawn (the &#147;Dissenting Shares&#148;), will be exchanged for 0.30000 of a share (the &#147;Share Exchange Ratio&#148;) of FitLife common stock (the &#147;FitLife Common Stock&#148;) subject to adjustment for iSatori&#146;s Net Debt Amount and Non-Cash Working Capital (each as defined in the Merger Agreement). Each outstanding stock option to purchase iSatori Common Stock, warrant to purchase iSatori Common Stock, restricted stock unit measured in relation to, or settleable in, iSatori Common Stock and each award of restricted stock relating to iSatori Common Stock, whether vested or unvested, will be assumed by FitLife and converted automatically at the effective time of the Merger into an option, warrant, restricted stock unit or restricted stock award, as the case may be, denominated in shares of FitLife Common Stock based on the Share Exchange Ratio and subject to terms and conditions substantially identical to those in effect at the effective time of the Merger.</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">The closing of the Merger is subject to satisfaction of certain customary closing conditions.</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">The Company and FitLife have made customary representations, warranties and covenants in the Merger Agreement, including, among other things, covenants (i) with respect to the conduct of their respective businesses during the interim period between the execution of the Merger Agreement and consummation of the Merger and (ii) prohibiting each of the Company and FitLife from soliciting alternative acquisition proposals and providing information to or engaging in discussions with third-parties, except in the limited circumstances as provided in the Merger Agreement.</font></p> <p style="text-align: justify; margin: 0">&#160;</p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">The Agreement contains certain termination rights for both the Company and FitLife including, but not limited to, in the event that (i) the Merger has not been consummated on or prior to September 30, 2015 (subject to certain extensions); (ii) the other party materially breaches its representations or covenants and such breach is not, or is not capable of being, cured within 30 days of notice; (iii) the Company&#146;s shareholders fail to approve the Merger; or (iv) the other party&#146;s board of directors makes Change of Recommendation (as defined in the Merger Agreement), or fails to reaffirm its recommendation following receipt of an Acquisition Proposal (as defined in the Merger Agreement). In addition, prior to obtaining shareholder approval of the Merger and subject to the payment of a termination fee, the Company and FitLife each may terminate the Agreement in order to enter into an agreement for a Superior Proposal (as defined in the Merger Agreement). Upon termination of the Agreement, under specified circumstances (including in connection with an Adverse Recommendation Change or a Superior Proposal), either the Company or FitLife will be obligated to pay to the other party a termination fee of $200,000.</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">FitLife agreed to take all necessary corporate action to appoint Stephen Adele, the Chief Innovation Officer and a director of FitLife as of the effective time of the Merger.</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">Each of Stephen Adele Enterprises, Inc., RENN Universal Growth Investment Trust PLC and RENN Global Entrepreneurs Fund Inc. has agreed to vote their shares of iSatori Common Stock in favor of the Merger.</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">The newly combined company will be called "Fit Life Brands."</font></p> <p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b>Unaudited Interim Financial Information</b></font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="font-family: Times New Roman, Times, Serif; text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">The accompanying interim condensed financial statements have been prepared in accordance with our accounting practices described in our audited financial statements for the year ended December 31, 2014, and are unaudited. The unaudited interim condensed financial statements should be read in conjunction with the audited financial statements and accompanying notes for the year ended December 31, 2014. The accompanying interim condensed financial statements are presented in accordance with the rules and regulations of the Securities and Exchange Commission and, accordingly, do not include all the disclosures required by generally accepted accounting principles in the United States (&#147;U.S. GAAP&#148;) with respect to annual financial statements. In the opinion of management, all adjustments, consisting of normal recurring accruals that are considered necessary for a fair presentation of the interim financial information, have been included. However, operating results for the periods presented are not necessarily indicative of the results that may be expected for a full year.</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b>Financial Instruments</b></font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="font-family: Times New Roman, Times, Serif; text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">The Company considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents. Accordingly, cash and cash equivalents consist of petty cash, checking accounts and money market funds.</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b>Fair Value Measurements</b></font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">ASC 820-10 establishes a framework for measuring the fair value of assets and liabilities and requires additional disclosure about fair value measurements. ASC 820-10 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in the principal (or most advantageous market) for the asset or liability in an orderly transaction between market participants at the measurement date.</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="font-family: Times New Roman, Times, Serif; text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">At June 30, 2015 and December 31, 2014, the financial instruments of the Company consisted principally of cash and cash equivalents, receivables, accounts payable, certain accrued liabilities and long-term debt. The carrying amount of cash and cash equivalents, receivables, accounts payable and accrued liabilities approximates their fair value because of the short maturity of these instruments. The actual and estimated fair values, respectively, of the Company&#146;s financial instruments are as follows:</font></p> <p style="margin: 0"></p> <table cellspacing="0" cellpadding="0" style="width: 100%; margin-top: 0px; font-size: 9pt"> <tr style="font-size: 1pt"> <td style="width: 57%"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="width: 9%"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="width: 9%"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="width: 9%"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="width: 9%"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td></tr> <tr> <td style="vertical-align: bottom"><font style="font: 9pt Times New Roman, Times, Serif">&#160;</font></td> <td colspan="5" style="border-bottom: #000000 1px solid; vertical-align: bottom; font-size: 8.5pt; text-align: center"><font style="font: 9pt Times New Roman, Times, Serif"><b>June 30, 2015</b></font></td> <td style="vertical-align: bottom; font-size: 8.5pt"><font style="font: 9pt Times New Roman, Times, Serif">&#160;</font></td> <td colspan="5" style="border-bottom: #000000 1px solid; vertical-align: bottom; font-size: 8.5pt; text-align: center"><font style="font: 9pt Times New Roman, Times, Serif"><b>December 31, 2014</b></font></td></tr> <tr style="vertical-align: bottom"> <td><font style="font: 9pt Times New Roman, Times, Serif">&#160;</font></td> <td colspan="2" style="border-bottom: #000000 1px solid"><p style="font-size: 8.5pt; text-align: center; margin: 0"><font style="font: 9pt Times New Roman, Times, Serif"><b>Carrying</b></font></p> <p style="font-size: 8.5pt; text-align: center; margin: 0"><font style="font: 9pt Times New Roman, Times, Serif"><b>Amount</b></font></p></td> <td><font style="font: 9pt Times New Roman, Times, Serif">&#160;</font></td> <td colspan="2" style="border-bottom: #000000 1px solid; font-size: 8.5pt; text-align: center"><font style="font: 9pt Times New Roman, Times, Serif"><b>Fair Value</b></font></td> <td><font style="font: 9pt Times New Roman, Times, Serif">&#160;</font></td> <td colspan="2" style="border-bottom: #000000 1px solid"><p style="font-size: 8.5pt; text-align: center; margin: 0"><font style="font: 9pt Times New Roman, Times, Serif"><b>Carrying</b></font></p> <p style="font-size: 8.5pt; text-align: center; margin: 0"><font style="font: 9pt Times New Roman, Times, Serif"><b>Amount</b></font></p></td> <td><font style="font: 9pt Times New Roman, Times, Serif">&#160;</font></td> <td colspan="2" style="border-bottom: #000000 1px solid; font-size: 8.5pt; text-align: center"><font style="font: 9pt Times New Roman, Times, Serif"><b>Fair Value</b></font></td></tr> <tr style="background-color: #ebebff"> <td style="vertical-align: bottom"><font style="font: 10pt Times New Roman, Times, Serif"><b>Cash and cash equivalents</b></font></td> <td style="vertical-align: bottom"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="vertical-align: top; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">390,112</font></td> <td style="vertical-align: bottom"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="vertical-align: bottom"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="vertical-align: top; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">390,112</font></td> <td style="vertical-align: bottom"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="vertical-align: bottom"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="vertical-align: top; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">738,725</font></td> <td style="vertical-align: bottom"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="vertical-align: bottom"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="vertical-align: top; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">738,725</font></td></tr> <tr> <td style="vertical-align: bottom"><font style="font: 10pt Times New Roman, Times, Serif"><b>Receivables</b></font></td> <td style="vertical-align: bottom"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="vertical-align: top; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">1,349,065</font></td> <td style="vertical-align: bottom"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="vertical-align: bottom"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="vertical-align: top; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">1,349,065</font></td> <td style="vertical-align: bottom"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="vertical-align: bottom"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="vertical-align: top; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">925,506</font></td> <td style="vertical-align: bottom"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="vertical-align: bottom"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="vertical-align: top; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">925,506</font></td></tr> <tr style="background-color: #ebebff"> <td style="vertical-align: bottom"><font style="font: 10pt Times New Roman, Times, Serif"><b>Accounts Payable</b></font></td> <td style="vertical-align: bottom"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="vertical-align: top; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">1,905,258</font></td> <td style="vertical-align: bottom"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="vertical-align: bottom"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="vertical-align: top; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">1,905,258</font></td> <td style="vertical-align: bottom"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="vertical-align: bottom"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="vertical-align: top; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">819,918</font></td> <td style="vertical-align: bottom"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="vertical-align: bottom"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="vertical-align: top; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">819,918</font></td></tr> <tr> <td style="vertical-align: bottom"><font style="font: 10pt Times New Roman, Times, Serif"><b>Derivative Liability</b></font></td> <td style="vertical-align: bottom"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="vertical-align: top; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">0</font></td> <td style="vertical-align: bottom"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="vertical-align: bottom"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="vertical-align: top; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">0</font></td> <td style="vertical-align: bottom"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="vertical-align: bottom"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="vertical-align: top; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">152,849</font></td> <td style="vertical-align: bottom"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="vertical-align: bottom"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="vertical-align: top; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">152,849</font></td></tr> </table> <p style="margin: 0">&#160;</p> <p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b>Trade Receivables and Credit Policy</b></font></p> <p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">Trade receivables are uncollateralized customer obligations due under normal trade terms requiring payment generally within 10-60 days from the invoice date. Accounts are considered delinquent when outstanding for more than 7 days past due date. The Company does not have a policy of accruing interest on past due accounts. Payments on trade receivables are applied as instructed per the customer, or to the earliest unpaid invoices. The allowance for doubtful accounts represents an estimate of amounts considered uncollectible and is determined based on management&#146;s historical collection experience, adverse situations that may affect the customer&#146;s ability to repay, and prevailing economic conditions. Specific accounts deemed uncollectible are written off periodically with subsequent receipts on previously written off accounts credited to bad debt expense. The allowance for doubtful accounts is $0 for each of the periods ended June 30, 2015 and December 31, 2014. Receivables at each of the below respective periods consisted of the following:</font></p> <p style="text-align: justify; margin: 0"></p> <table cellspacing="0" cellpadding="0" style="width: 100%; margin-top: 0px; font-size: 9pt"> <tr style="font-size: 1pt"> <td style="width: 69%"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="width: 14%"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="width: 14%"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td></tr> <tr> <td style="vertical-align: bottom"><font style="font: 9pt Times New Roman, Times, Serif">&#160;</font></td> <td colspan="2" style="border-bottom: #000000 1px solid; vertical-align: bottom"><p style="font-size: 8.5pt; text-align: center; margin: 0"><font style="font: 9pt Times New Roman, Times, Serif"><b>June 30,</b></font></p> <p style="font-size: 8.5pt; text-align: center; margin: 0"><font style="font: 9pt Times New Roman, Times, Serif"><b>2015</b></font></p></td> <td style="vertical-align: bottom; font-size: 8.5pt"><font style="font: 9pt Times New Roman, Times, Serif">&#160;</font></td> <td colspan="2" style="border-bottom: #000000 1px solid; vertical-align: bottom"><p style="font-size: 8.5pt; text-align: center; margin: 0"><font style="font: 9pt Times New Roman, Times, Serif"><b>December 31,</b></font></p> <p style="font-size: 8.5pt; text-align: center; margin: 0"><font style="font: 9pt Times New Roman, Times, Serif"><b>2014</b></font></p></td></tr> <tr style="vertical-align: bottom; background-color: #ebebff"> <td><font style="font: 10pt Times New Roman, Times, Serif"><b>Trade Receivables</b></font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">1,307,881</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">951,396</font></td></tr> <tr style="vertical-align: bottom"> <td><font style="font: 10pt Times New Roman, Times, Serif"><b>Other</b></font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">41,184</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(25,890)</font></td></tr> <tr style="vertical-align: bottom; background-color: #ebebff"> <td><font style="font: 10pt Times New Roman, Times, Serif"><b>Allowance for doubtful accounts</b></font></td> <td style="border-bottom: #000000 1px solid"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(0)</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="border-bottom: #000000 1px solid"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(0)</font></td></tr> <tr style="vertical-align: bottom"> <td><font style="font: 10pt Times New Roman, Times, Serif"><b>Totals</b></font></td> <td style="border-bottom: #000000 3px double"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="border-bottom: #000000 3px double; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">1,349,065</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="border-bottom: #000000 3px double"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="border-bottom: #000000 3px double; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">925,506</font></td></tr> </table> <p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">In addition, the Company has recorded an allowance for customer returns in the amount of approximately $85,000 at June 30, 2015 and December 31, 2014 in accrued expenses.</font></p> <p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b>Inventory Valuation</b></font></p> <p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">Inventories of nutritional and dietary supplements are stated at lower of cost or market on a first-in, first-out (FIFO) basis as noted below:</font></p> <p style="text-align: justify; margin: 0"></p> <table cellspacing="0" cellpadding="0" style="width: 100%; margin-top: 0px; font-size: 9pt"> <tr style="font-size: 1pt"> <td style="width: 68%"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="width: 15%"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="width: 14%"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td></tr> <tr> <td style="vertical-align: bottom"><font style="font: 9pt Times New Roman, Times, Serif">&#160;</font></td> <td colspan="2" style="border-bottom: #000000 1px solid; vertical-align: bottom"><p style="font-size: 8.5pt; text-align: center; margin: 0"><font style="font: 9pt Times New Roman, Times, Serif"><b>June 30,</b></font></p> <p style="font-size: 8.5pt; text-align: center; margin: 0"><font style="font: 9pt Times New Roman, Times, Serif"><b>2015</b></font></p></td> <td style="vertical-align: bottom; font-size: 8.5pt"><font style="font: 9pt Times New Roman, Times, Serif">&#160;</font></td> <td colspan="2" style="border-bottom: #000000 1px solid; vertical-align: bottom"><p style="font-size: 8.5pt; text-align: center; margin: 0"><font style="font: 9pt Times New Roman, Times, Serif"><b>December 31,</b></font></p> <p style="font-size: 8.5pt; text-align: center; margin: 0"><font style="font: 9pt Times New Roman, Times, Serif"><b>2014</b></font></p></td></tr> <tr style="vertical-align: bottom; background-color: #ebebff"> <td><font style="font: 10pt Times New Roman, Times, Serif"><b>Labels and packaging</b></font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">186,305</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">170,435</font></td></tr> <tr style="vertical-align: bottom"> <td><font style="font: 10pt Times New Roman, Times, Serif"><b>Raw materials</b></font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">249,847</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">308,333</font></td></tr> <tr style="vertical-align: bottom; background-color: #ebebff"> <td><font style="font: 10pt Times New Roman, Times, Serif"><b>Finished goods</b></font></td> <td style="border-bottom: #000000 1px solid"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">1,722,701</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="border-bottom: #000000 1px solid"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">2,004,834</font></td></tr> <tr style="vertical-align: bottom"> <td><font style="font: 10pt Times New Roman, Times, Serif"><b>Totals</b></font></td> <td style="border-bottom: #000000 3px double"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="border-bottom: #000000 3px double; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">2,158,853</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="border-bottom: #000000 3px double"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="border-bottom: #000000 3px double; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">2,483,602</font></td></tr> </table> <p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b>Note Receivable</b></font></p> <p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">The predecessor company disposed of a dormant product line of vitamins in December 2010. As part of the consideration in this divestiture, the Company received from the purchaser of this product line an unsecured note in the amount of $170,000. The original note was due to be repaid on or before March 2014, where interest accrued principally at an annual rate of 5%, based upon the initial $170,000 principal and was payable monthly. As of March 31, 2013, the note was novated and a new promissory note was issued to reflect a modification in the payment terms, which includes no interest. The total note receivable balance at June 30, 2015 was $76,288, and is due to be repaid on or before May 1, 2017.</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b>Revenue Recognition</b></font></p> <p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">The Company operates predominantly as a distributor of its dietary supplement products through traditional large retailers and electronic intermediaries. Revenue from product sales is recognized upon transfer of title to the Company&#146;s product to its customers. Net sales represent product sales less actual returns, allowances, discounts, and promotions. Sales to direct customers have an unconditional money back guarantee for thirty to sixty days after the date of purchase. Sales to several of the retail customers carry a &#147;Sale or Return&#148; Purchase agreement per contract, where if minimum sales thresholds are not met within required timeframe, the inventory will be returned to the Company for full credit. Other retail customers receive a percentage discount from invoice to cover any customer returns or damages they may incur. Returns, allowances and discounts, and promotions were $689,960 and $849,356 for the three month period ended June 30, 2015 and 2014, respectively. Returns, allowances and discounts, and promotions were $1,224,856 and $1,360,091 for the six month period ended June 30, 2015 and 2014, respectively.</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">In addition, the Company provides allowances for sales returns based upon estimated and known returns. Product returns are recorded as a reduction of net revenues and as a reduction of the accounts receivable balance.</font></p> <p style="text-align: justify; margin: 0">&#160;</p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">The Company receives other revenues which include but are not limited to shipping and handling charges billed to customers.</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b>Cost of Sales</b></font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">The Company purchases its products directly from third party manufacturers. The Company&#146;s cost of sales include product costs, cost of warehousing and distribution. Included in the cost of sales are shipping and handling costs that are incurred by the Company.</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b>Income Taxes</b></font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">The Company utilizes the asset and liability method of accounting for income taxes. Under this asset and liability method, deferred tax assets and liabilities are recognized for the estimated 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 in effect for the year in which those temporary differences are expected to be recovered or settled. See Note 4, &#147;Income Taxes&#148;.</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">Since 2012 was the Company&#146;s initial tax year, there are no prior federal or state tax returns subject to examination. Accordingly, the only taxable periods subject to examination by federal and state taxing authorities are the periods ended December 31, 2014 and 2013. Federal and state tax returns for the Company prior to the short form merger are open for the period ended December 31, 2011.</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b>Leases</b></font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">The Company leases its headquarters facility, comprising approximately 10,044 square feet, in Golden (metropolitan Denver), Colorado. The total rent expense for each of the three month periods ended June 30, 2015 and 2014, was $20,716. The total rent expense for each of the six month periods ended June 30, 2015 and 2014, was $41,394. The lease term expires January 31, 2017 and requires equal monthly payments over the remaining term. Future payments under the lease total $131,200.</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">The Company leases its warehouse facility, of approximately 17,026 square feet in Denver. The total rent expense for the warehouse lease for the three month period ended June 30, 2015 was $21,782. The total rent expense for the warehouse lease for the six month period ended June 30, 2015 was $43,565. The lease term expires on December 31, 2018 and calls for inflation-adjusted increasing payments over the remaining term. Future payments under the warehouse lease are $331,094.</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">The Company also leases miscellaneous office and warehouse equipment. In most cases, management expects that in the normal course of business these leases will be renewed or replaced by other leases as applicable.</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b>Marketing</b></font></p> <p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">The Company expenses all production costs related to advertising costs as they are incurred, including print and television when the advertisement has been broadcast or otherwise distributed. Other marketing expenses include digital and social media, product sampling, sponsorships and endorsements with athletes, promotional events, and consumer education efforts. For the three month period ended June 30, 2015 and 2014, marketing expenses totaled $279,208 and $314,696, respectively. For the six month period ended June 30, 2015 and 2014, marketing expenses totaled $619,759 and $942,119, respectively.</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b>Research and Development Costs</b></font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">Research and development costs are expensed when incurred. Research and development costs of $5,315 and $4,481 for the three month period ended June 30, 2015 and 2014, respectively, are included in selling and marketing expense. Research and development costs of $24,025 and $10,905 for the six month period ended June 30, 2015 and 2014.</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b>Distribution, Shipping and Handling Costs</b></font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">Shipping costs on purchases and shipping and handling fees related to sales charged to customers are both included in cost of sales. As mentioned in Revenue Recognition, shipping and handling revenue billed customers are reflected in other revenues.</font></p> <p style="text-align: justify; margin: 0">&#160;</p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b>Concentration of Credit Risk</b></font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">Financial instruments that potentially subject the Company to concentration of credit risk consist principally of temporary cash investments and trade accounts receivables. Concentrations of credit with respect to trade receivables are limited due to the large number of customers comprising the Company&#146;s customer bases and their dispersion across different geographic locations.</font></p> <p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">The Company maintains cash balances at one financial institution located in Colorado and one in California. Accounts at these institutions are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000 per account. At times during the year, the Company&#146;s bank balances have exceeded the FDIC limit. Management believes the risk of loss at such institutions to be minimal.</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">During the six month period ended June 30, 2015, sales to three customers made up 52% of total product revenue, with each customer representing greater than 10% of product revenue on an individual basis. These customers&#146; combined accounts receivable balances were 45% of total accounts receivable at June 30, 2015. During the six month period ended June 30, 2014, sales to three customers made up 66% of total product revenue, with each customer representing greater than 10% of product revenue on an individual basis. These customers&#146; combined accounts receivable balances were 80% of total accounts receivable as of June 30, 2014.</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">During the six month period ended June 30, 2015, purchases from four vendors made up 84% of total inventory purchases. These vendors&#146; combined accounts payable balances were 61% of total accounts payable as of June 30, 2015. During the six month period ended June 30, 2014, purchases from three vendors made up 63% of total inventory purchases. These vendors&#146; combined accounts payable balances were 48% of total accounts payable as of June 30, 2014.</font></p> <p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b>Use of Estimates</b></font></p> <p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include but are not limited to the fair value determination of derivative instruments, the valuation allowance with respect to estimated utilization of net operating losses, estimated allowances for sales returns and collectability of notes receivable.</font></p> <p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b>Earnings (Loss) Per Share</b></font></p> <p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">Net earnings (loss) per share is computed by dividing net income (loss) less preferred dividends for the period by the weighted average number of common stock outstanding during each period. Diluted earnings (loss) per share is computed by dividing net income (loss) less preferred dividends for the period by the weighted average number of common stock, common stock equivalents and potentially dilutive securities outstanding during each period.</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">The Company has the following common stock equivalents as of June 30, 2015 and 2014:</font></p> <p style="margin: 0"></p> <table cellspacing="0" cellpadding="0" style="width: 100%; margin-top: 0px; font-size: 9pt"> <tr style="font-size: 1pt"> <td style="width: 53%"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="width: 11%"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="width: 10%"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="width: 11%"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="width: 11%"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td></tr> <tr> <td style="vertical-align: bottom"><font style="font: 9pt Times New Roman, Times, Serif">&#160;</font></td> <td style="vertical-align: bottom"><font style="font: 9pt Times New Roman, Times, Serif">&#160;</font></td> <td colspan="3" style="border-bottom: #000000 1px solid; vertical-align: bottom; font-size: 8.5pt; text-align: center"><font style="font: 9pt Times New Roman, Times, Serif"><b>Three Months Ended</b></font></td> <td style="vertical-align: bottom; font-size: 8.5pt"><font style="font: 9pt Times New Roman, Times, Serif">&#160;</font></td> <td colspan="3" style="border-bottom: #000000 1px solid; vertical-align: bottom; font-size: 8.5pt; text-align: center"><font style="font: 9pt Times New Roman, Times, Serif"><b>Six Months Ended</b></font></td></tr> <tr style="vertical-align: bottom"> <td style="font-size: 8.5pt"><font style="font: 9pt Times New Roman, Times, Serif">&#160;</font></td> <td style="font-size: 8.5pt"><font style="font: 9pt Times New Roman, Times, Serif">&#160;</font></td> <td style="border-bottom: #000000 1px solid; font-size: 8.5pt; text-align: center"><font style="font: 9pt Times New Roman, Times, Serif"><b>2015</b></font></td> <td style="font-size: 8.5pt"><font style="font: 9pt Times New Roman, Times, Serif">&#160;</font></td> <td style="border-bottom: #000000 1px solid; font-size: 8.5pt; text-align: center"><font style="font: 9pt Times New Roman, Times, Serif"><b>2014</b></font></td> <td style="font-size: 8.5pt"><font style="font: 9pt Times New Roman, Times, Serif">&#160;</font></td> <td style="border-bottom: #000000 1px solid; font-size: 8.5pt; text-align: center"><font style="font: 9pt Times New Roman, Times, Serif"><b>2015</b></font></td> <td style="font-size: 8.5pt"><font style="font: 9pt Times New Roman, Times, Serif">&#160;</font></td> <td style="border-bottom: #000000 1px solid; font-size: 8.5pt; text-align: center"><font style="font: 9pt Times New Roman, Times, Serif"><b>2014</b></font></td></tr> <tr style="vertical-align: bottom; background-color: #ebebff"> <td><font style="font: 10pt Times New Roman, Times, Serif">Basic weighted average Common Shares</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">13,371,791</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">12,886,401</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">13,089,814</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">12,883,026</font></td></tr> <tr style="vertical-align: bottom"> <td><font style="font: 10pt Times New Roman, Times, Serif">Stock options (exercise price &#150; $0.573-$2.50/share)</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">110,514</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">382,258</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">168,203</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">413,280</font></td></tr> <tr style="vertical-align: bottom; background-color: #ebebff"> <td><font style="font: 10pt Times New Roman, Times, Serif">Warrants (exercise price &#150; $0.001-$2.25/share)</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">0</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">418,095</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">0</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">418,491</font></td></tr> <tr style="vertical-align: bottom"> <td><font style="font: 10pt Times New Roman, Times, Serif">Total common stock equivalents</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">13,482,305</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">13,686,754</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">13,258,017</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">13,714,797</font></td></tr> </table> <p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="text-indent: 0; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b><u>Note 2 - Contingencies</u></b></font></p> <p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">In accordance with the standards on contingencies, the Company accrues a loss contingency if it is probable and can reasonably be estimated or a liability has been incurred at the date of the financial statements. If both of these conditions are not met, or if an exposure to loss exists in excess of the amount accrued, disclosure of the contingency shall be made when there is at least a reasonable possibility that a loss or an additional loss may have been incurred. The Company is exposed to legal claims encountered in the normal course of business. See Note 3, &#147;Litigation&#148;. Management believes that the ultimate resolution of these matters will not have a material adverse effect on the operating results or the financial position of the Company.</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="text-align: justify; text-indent: 0; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b><u>Note 3 - Litigation</u></b></font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">The Company is engaged in various legal actions, claims and proceedings arising in the normal course of business, including claims related to breach of contracts, product liabilities and intellectual property matters resulting from the Company&#146;s business activities. As with most actions such as these, an estimation of any possible and/or ultimate liability cannot always be determined. The following summaries highlight the current status of certain material commercial litigation in which the Company is involved.</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">On May 17, 2013 and on January 31, 2014 the Company received demand letters from the Environmental Research Corporation, &#147;ERC&#148; requesting substantiation of compliance with the State of California&#146;s Proposition 65 regulations for ten of its products. In October, while the Company was awaiting the results of the compliance testing, ERC contacted the Company again requesting settlement to their initial demand letter. And in February 2014, before compliance testing or any other demand letter validation was completed, ERC contacted the Company again requesting settlement to their second demand letter. After many discussions with ERC, a lawsuit was filed by ERC for the non-compliance issues with the State of California&#146; Proposition 65 regulations. After many conversations and mediation attempts, both parties agreed to a settlement, which was approved by the iSatori Board of Directors. The documents were generated for presentation to the California Court. These documents were accepted by the court in early June 2015, and iSatori has initiated the payments of the settlement amounts of $60,000.00. Settlement amounts have been accrued into FY 2014 and are reflected in this 10Q report.</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">On March 24, 2014 the Company received a summons in a civil action filed by Wise Sports Nutrition, LLC claiming alleged trademark infringement for iSatori&#146;s, Garcinia Trim product. Company counsel has made contact with the plaintiff&#146;s attorney and filed a response to the alleged trademark infringement with the Company&#146;s counterclaims. The Company believes the counterclaims have strong merit and are pursuing their defense. Both parties have prepared responses and presented them to the court. The court ruled in favor of iSatori and its filing of a motion for summary judgment. As a result of this ruling the trademark has been ruled as &#147;descriptive&#148; and therefore not eligible for trademark assignment. Settlement discussions are underway and have been substantively agreed to by both parties. The settlement includes a settlement and release agreement and allows for the assignment of the mark to iSatori and the license of the mark to Wise Sports.</font></p> <p style="text-align: justify; text-indent: 0; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b><u>Note 4 - Income Taxes</u></b></font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">For the three months ended June 30, 2015 and 2014, the Company recognized income tax expense of $7,796 and expense of $63,382, respectively. For the six months ended June 30, 2015 and 2014, the Company recognized income tax expense of $10,726 and expense of $79,205, respectively.</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">The difference between the three months ended June 30, 2015 effective rate of 0.0% and the Federal statutory rate of 35.0% is primarily due to a full valuation allowance of $844,543, which was recognized at December 31, 2014, on the deferred tax assets relating to the net operating loss carry forwards. Should future financial performance change and it is determined the Company can realize the use of these net operating losses, the appropriate tax expense and equity adjustments will be made. Any other difference is primarily due to state income taxes.</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">The difference between the six months ended June 30, 2014 effective rate of 8.96% and the Federal statutory rate of 35.0% is primarily due to state income taxes (net of federal benefit), change in the valuation allowance, and an adjustment to the income tax receivable.</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">At June 30, 2015 management believes there are no uncertain tax liabilities.</font></p> <p style="text-align: justify; text-indent: 0; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b><u>Note 5- Stockholders&#146; Equity</u></b></font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">At June 30, 2015, there were 13,368,791 shares of common stock, par value $.01 per share, outstanding for the Company.</font></p> <p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><i>Warrants</i></font></p> <p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">As of June 30, 2015, there were common stock warrants outstanding to purchase aggregate shares of common stock pursuant to the warrant grants described below.</font></p> <p style="margin: 0">&#160;</p> <p style="margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">Effective January 1, 2013, the Company entered into a one year agreement, subject to quarterly cancellation at the Company&#146;s sole discretion, with Microcap Headlines, Inc. In connection with this agreement, the Company issued warrants to purchase an aggregate of 100,000 shares of the Company&#146;s common stock at an exercise price of $2.25 per share (the &#147;Microcap warrants&#148;). These warrants were subject to conditional vesting schedule in one-fourth (quarterly) increments, subject to the Company&#146;s sole discretion. The first increment was granted and fully vested on January 1, 2013, the second increment was granted and fully vested on April 1, 2013, the third increment was granted and fully vested on July 1, 2013, and the fourth increment was granted and fully vested on October 1, 2013. These vested warrants expire on January 1, 2018.</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">Effective July 16, 2013, the Company entered into a business consulting agreement with Optivest Global Partners, LLC. In connection with this agreement, the Company issued warrants to purchase an aggregate of 250,000 shares of the Company&#146;s common stock at an exercise price of $2.25 per share (the &#147;Optivest warrants&#148;). These warrants are fully vested and expire July 16, 2018. These warrants will be assignable and transferable, at Optivest&#146;s discretion.</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">The Company has 350,000 warrants outstanding at June 30, 2015 and 770,649 at December 31, 2014.</font></p> <p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">The fair value of the Microcap and Optivest warrants were estimated on the date of grant using the Black-Scholes option-pricing model.</font></p> <p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">The Black-Scholes assumptions used when the warrants were issued are as follows:</font></p> <p style="margin: 0"></p> <table cellspacing="0" cellpadding="0" style="width: 100%; margin-top: 0px; font-size: 9pt"> <tr style="font-size: 1pt"> <td style="width: 83%"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="width: 14%"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="width: 2%"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td></tr> <tr> <td style="vertical-align: bottom"><font style="font: 9pt Times New Roman, Times, Serif">&#160;</font></td> <td colspan="2" style="border-bottom: #000000 1px solid; vertical-align: bottom; font-size: 8.5pt; text-align: center"><font style="font: 9pt Times New Roman, Times, Serif"><b>FY 2013</b></font></td> <td style="vertical-align: bottom"><font style="font: 9pt Times New Roman, Times, Serif">&#160;</font></td></tr> <tr style="vertical-align: bottom; background-color: #ebebff"> <td><font style="font: 10pt Times New Roman, Times, Serif">Exercise price</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">2.25</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td></tr> <tr style="vertical-align: bottom"> <td><font style="font: 10pt Times New Roman, Times, Serif">Expected dividends</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">0</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">%</font></td></tr> <tr style="vertical-align: bottom; background-color: #ebebff"> <td><font style="font: 10pt Times New Roman, Times, Serif">Expected volatility</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">45.95-48.97</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">%</font></td></tr> <tr style="vertical-align: bottom"> <td><font style="font: 10pt Times New Roman, Times, Serif">Risk fee interest rate</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">0.72-1.42</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">%</font></td></tr> <tr style="vertical-align: bottom; background-color: #ebebff"> <td><font style="font: 10pt Times New Roman, Times, Serif">Expected life</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">5 years</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td></tr> <tr style="vertical-align: bottom"> <td><font style="font: 10pt Times New Roman, Times, Serif">Expected forfeiture</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">0</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">%</font></td></tr> </table> <p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><i>2012 Performance Incentive Plan</i></font></p> <p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">On September 27, 2012, the Company&#146;s Board of Directors approved the 2012 Performance Incentive Plan (the Plan&#148;). The Plan allows the Company to promote the success of the Corporation and to increase stockholder value by providing an additional means through the grant of awards to attract, motivate, retain and reward selected employees and other eligible persons. Any stock option granted in the form of an incentive stock option will be intended to comply with the requirements of Section 422 of the Code. Only stock options granted to employees qualify for incentive stock option treatment. A stock option may be exercised in whole or in installments, which may be cumulative. Shares of common stock purchased upon the exercise of a stock option must be paid for in full at the time of the exercise in cash or such other consideration determined by the compensation committee. Payment may include tendering shares of common stock or surrendering of a stock award, or a combination of methods.</font></p> <p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">The Plan is administered by the Plan Administrator, being the Board or one or more committees appointed by the Board or another committee (within its delegated authority) to administer all or certain aspects of this Plan. The Administrator has full and exclusive power within the limitations set forth in the Plan to make all decisions and determinations regarding the selection of participants and the granting of awards; establishing the terms and conditions relating to each award; adopting rules, regulations and guidelines; and interpreting the Plan.</font></p> <p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">On March 23, 2015, the Company issued options to purchase 195,000 shares of the Company&#146;s common stock to six employees with an exercise price of $1.02 per share and which contained three year vesting schedules of 1/3 each year through March 2018. These options are due to expire on March 20, 2025.</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">On March 5, 2015, the Company issued options to purchase 10,000 shares of the Company&#146;s common stock to a contracted employee with an exercise price of $1.0065 per share, which are fully vested. These options are due to expire on March 5, 2025.</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">On April 3, 2015, the Company issued options to purchase 200,000 shares of the Company&#146;s common stock to a contractor with an exercise price of $0.01 per share, which will vest October 1, 2015. These options are due to expire on April 3, 2025.</font></p> <p style="text-align: justify; margin: 0">&#160;</p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">On April 8, 2015, the Company issued options to purchase 25,000 shares of the Company&#146;s common stock to a former employee with an exercise price of $0.95 per share, which will vest January 1, 2016. These options are due to expire on April 8, 2025.</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">On May 13, 2015, the Company issued options to purchase 120,538 shares of the Company&#146;s common stock to thirteen employees with an exercise price of $0.75-$0.80 per share and which contained one and a half to three year vesting schedules of 1/3 each year through October 2016 and April 2018. These options are due to expire on May 13, 2025.</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">On May 13, 2015, the Company issued options to purchase 62,500 shares of the Company&#146;s common stock to a contractor with an exercise price of $0.80 per share, which contained a three year vesting schedules of 1/3 each year through May 2018. These options are due to expire on May 13, 2025.</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">The Company applied fair value accounting for all share based payment awards. The fair value of each option granted is estimated on the date of grant using the Black-Scholes option-pricing model. The total valuation of the options granted in 2015 was $189,423. Of this, $74,198 will be expensed over the three year vesting schedule and $28,090 over the year and a half vesting schedule. The total valuation of the options granted in 2014 was $3,363. Due to their forfeiture prior to vesting, expense of $747 recognized in previous quarters of 2014 was reversed within subsequent periods of 2014, for a net expense of $0 related to 2014 grants for the year ended December 31, 2014. The total valuation of the options granted in 2013 was $30,985, which is being expensed over the three year vesting period. The expense recognized related to these options for the year ended December 31, 2014 was $10,328. The Black-Scholes assumptions used when the options were issued are as follows:</font></p> <p style="margin: 0"></p> <table cellspacing="0" cellpadding="0" style="width: 100%; margin-top: 0px; font-size: 9pt"> <tr style="font-size: 1pt"> <td style="width: 62%"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="width: 16%"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="width: 17%"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="width: 2%"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td></tr> <tr> <td style="vertical-align: bottom"><font style="font: 9pt Times New Roman, Times, Serif">&#160;</font></td> <td style="vertical-align: bottom"><font style="font: 9pt Times New Roman, Times, Serif">&#160;</font></td> <td style="vertical-align: bottom; font-size: 8.5pt; text-align: center"><font style="font: 9pt Times New Roman, Times, Serif"><b>FY 2015</b></font></td> <td style="vertical-align: bottom"><font style="font: 9pt Times New Roman, Times, Serif">&#160;</font></td> <td style="vertical-align: bottom; font-size: 8.5pt"><font style="font: 9pt Times New Roman, Times, Serif">&#160;</font></td> <td style="vertical-align: bottom; font-size: 8.5pt; text-align: center"><font style="font: 9pt Times New Roman, Times, Serif"><b>FY 2014</b></font></td> <td style="vertical-align: bottom; font-size: 8.5pt"><font style="font: 9pt Times New Roman, Times, Serif">&#160;</font></td></tr> <tr style="vertical-align: bottom; background-color: #ebebff"> <td><font style="font: 10pt Times New Roman, Times, Serif">Exercise price</font></td> <td style="border-top: #000000 1px solid"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="border-top: #000000 1px solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">0.01-1.02</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="border-top: #000000 1px solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">2.22-2.50</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td></tr> <tr style="vertical-align: bottom"> <td><font style="font: 10pt Times New Roman, Times, Serif">Expected dividends</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">0</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">%</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">0</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">%</font></td></tr> <tr style="vertical-align: bottom; background-color: #ebebff"> <td><font style="font: 10pt Times New Roman, Times, Serif">Expected volatility</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">45.65%-164.28</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">%</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">35.22</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">%</font></td></tr> <tr style="vertical-align: bottom"> <td><font style="font: 10pt Times New Roman, Times, Serif">Risk fee interest rate</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">1.71-1.9</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">%</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">2.13-2.41</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">%</font></td></tr> <tr style="vertical-align: bottom; background-color: #ebebff"> <td><font style="font: 10pt Times New Roman, Times, Serif">Expected life of option</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">5.51-8.01 years</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">6.08-6.33 years</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td></tr> <tr style="vertical-align: bottom"> <td><font style="font: 10pt Times New Roman, Times, Serif">Expected forfeiture</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">0</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">%</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">0</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">%</font></td></tr> </table> <p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">The Company recognized $51,964 in expense related to stock compensation for the three month period and $67,630 for the six month period ended June 30, 2015. The Company recognized $28,397 in expense related to stock compensation for both the three month and six month period ended June 30, 2015.</font></p> <p style="text-align: justify; text-indent: 0; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b><u>Note 6- Revolving Line of Credit and Related Interest</u></b></font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">The Company entered into a renewed and expanded Credit Agreement with Colorado Business Bank West of Denver, Colorado on August 27, 2014. Borrowings under this agreement will be used to provide ongoing working capital and for other general corporate purposes of the Company and its subsidiaries.</font></p> <p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">The agreement provides a revolving commitment to the Company of $2,000,000. Amounts outstanding under the agreement will be reflected in a promissory note with a principal balance of $2,000,000 and a maturity date of November 16, 2015 (the &#147;Promissory Note&#148;). The principal balance on the Promissory Note bears interest at the one month USD LIBOR rate measured not more often than once per month (the &#147;Index&#148;). Interest on any unpaid balance under the promissory note will bear interest at the Index plus 3.75% with a minimum interest rate of 4.00% per annum, and is payable monthly. The agreement requires the Company to comply with certain affirmative covenants, including a minimum current ratio of 1.5 to 1, a maximum leverage ratio of 2 to 1, and minimum tangible equity capital of $2,750,000 through November 30, 2014, and $3,000,000 thereafter, as well as providing limitations on dividends, additional indebtedness, and certain other changes.</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">On January 7, 2015, Colorado Business Bank provided the Company with notice of a non-monetary event of default concerning the Company&#146;s violation of the minimum tangible equity capital covenant set forth in the loan agreement. On March 27, 2015, and effective March 23, 2015, the Company and Colorado Business Bank (&#147;CBB&#148;) entered into a Change in Terms Agreement (the &#147;Change in Terms Agreement) and Business Loan Agreement (the &#147;Business Loan Agreement and, together with the Change in Terms Agreement, the &#147;Agreements&#148;), to replace that previous Business Loan Agreement, dated as of July 16, 2012, by and between iSatori, Inc. and CBB (the &#147;Prior Agreement&#148;).</font></p> <p style="text-align: justify; margin: 0">&#160;</p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">Pursuant to the Agreements CBB agreed to waive the violation of the Minimum Tangible Equity Covenant; the lending relationship between the Company and CBB was restructured from a revolving loan to a term loan; the Company agreed to pay down the amount outstanding under the Prior Agreement to $1,500,000 in the short term; and the Company agreed to monthly payments of $75,000 plus interest, at an interest rate of Prime (as reflected in the Wall Street Journal) plus 2.0%, beginning in April 2015, and was set to mature on July 16, 2015.</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">On July 16, 2015, and effective June 30, 2015, the Company and Colorado Business Bank (&#147;CBB&#148;) entered into a Change in Terms Agreement (the &#147;Change in Terms Agreement) and Business Loan Agreement (the &#147;Business Loan Agreement and, together with the Change in Terms Agreement, the &#147;Agreements&#148;), to replace that previous Business Loan Agreement, dated as of March 27, 2015, by and between iSatori, Inc. and CBB (the &#147;Prior Agreement&#148;).</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">Pursuant to the Agreements CBB agreed to a revision of the Minimum Tangible Equity Covenant; the Company continues to pay down the amount outstanding under the Prior Agreement with monthly payments of $75,000 plus interest, at an interest rate of Prime (as reflected in the Wall Street Journal) plus 2.0%, and is set to mature on October 16, 2015.</font></p> <p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif; background-color: #ffffff">The Company has, and will continue to, enter into discussions with certain material vendors, offering early pay discounts to improve the timing of accounts receivable collection. In addition, the Company has, and will continue to, enter into discussions with certain material suppliers concerning extended credit terms to improve the flexibility of the Company's cash management program. These actions will help ensure the Company's liquidity and compliance with its loan covenants.</font></p> <p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">The Company&#146;s prior line of credit with Colorado Business Bank West of Denver, Colorado provided a revolving commitment to the Company in the amount of $1,500,000 and was in effect since its inception on July 16, 2012 and subsequent renewal on October 16, 2013 through the date of the renewal and expansion on August 27, 2014. Other terms of the former credit agreement were the same as those of the renewed and expanded credit agreement described above.</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">The outstanding balance on the revolving line of credit with CBB as of June 30, 2015 and December 31, 2014 was $1,275,000 and $1,620,519.</font></p> <p style="margin: 0pt"></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b><u>Note 7 &#150; Notes Payable, Related Parties</u></b></font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif; background-color: #ffffff">On June 16, 2015, the Company entered into a promissory note arrangement with a key employee in the amount of $150,000. The note bore interest at a rate of 3% annually. The note is subordinated to the prior payment in full of the line of credit to Colorado Business Bank. The note is set to mature the earliest of (a) December 31, 2016, (b) ten business days following the closing date of the merger, and (c) the occurrence of an event of default. The balance of this note is $150,000 as of June 30, 2015 and is included in the balance of Notes Payable in the accompanying condensed balance sheet.</font></p> <p style="margin: 0pt"></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b><u>Note 8 - Fair Value Measurements and Disclosures</u></b></font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">The Company follows ASC 820, Fair Value Measurements and Disclosures, which defines fair value, establishes a framework for using fair value to measure assets and liabilities, and expands disclosures about fair value measurements. The statement establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company&#146;s assumptions of what market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The hierarchy is broken down into three levels based on the reliability of the inputs as follows:</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">Level 1: Quoted prices are available in active markets for identical assets or liabilities.</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">Level 2: Quoted prices in active markets for similar assets and liabilities that are observable for the asset or liability; or</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">Level 3: Unobservable pricing inputs that are generally less observable from objective sources, such as discounted cash flow models or valuations.</font></p> <p style="text-align: justify; margin: 0">&#160;</p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font><br /></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">ASC 820 requires financial assets and liabilities to be classified based on the lowest level of input that is significant to the fair value measurement. The Company&#146;s assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the valuation of the fair value of assets and liabilities and their placement within the fair value hierarchy levels.</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">For the purposes of marketable securities where there is an active market, the Company uses the quoted prices available for the identical asset or liability. As of June 30, 2015, the Company had $0 assets held for sale valued using the Level 1 mark-to-market approach. As of December 31, 2014, the Company had $34,979 assets held for sale valued using the Level 1 mark-to-market approach.</font></p> <p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">The inputs used in the fair value measurements categorized within Level 3 include the stock price at the valuation date, the exercise price of the warrant, the expected period of time the warrant will be outstanding, the annual volatility of the underlying stock price, the annual yield rate of quarterly dividends, and the risk free rate of interest relevant to the expected time period the warrant will be outstanding.</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">The following table represents the Company&#146;s warrant derivative liabilities that were accounted for at fair value on a recurring basis by level within the fair value hierarchy:</font></p> <p style="margin: 0"></p> <table cellspacing="0" cellpadding="0" style="width: 100%; margin-top: 0px; font-size: 9pt"> <tr style="font-size: 1pt"> <td style="width: 35%"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="width: 9%"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="width: 9%"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="width: 9%"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="width: 9%"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="width: 9%"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="width: 9%"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td></tr> <tr> <td style="vertical-align: bottom"><font style="font: 9pt Times New Roman, Times, Serif">&#160;</font></td> <td colspan="8" style="border-bottom: #000000 1px solid; vertical-align: bottom; font-size: 8.5pt; text-align: center"><font style="font: 9pt Times New Roman, Times, Serif"><b>June 30, 2015</b></font></td> <td style="vertical-align: bottom; font-size: 8.5pt"><font style="font: 9pt Times New Roman, Times, Serif">&#160;</font></td> <td colspan="8" style="border-bottom: #000000 1px solid; vertical-align: bottom; font-size: 8.5pt; text-align: center"><font style="font: 9pt Times New Roman, Times, Serif"><b>December 31, 2014</b></font></td></tr> <tr style="vertical-align: bottom"> <td style="font-size: 8.5pt"><font style="font: 9pt Times New Roman, Times, Serif">&#160;</font></td> <td colspan="2" style="border-bottom: #000000 1px solid; font-size: 8.5pt; text-align: center"><font style="font: 9pt Times New Roman, Times, Serif"><b>Level 1</b></font></td> <td style="font-size: 8.5pt"><font style="font: 9pt Times New Roman, Times, Serif">&#160;</font></td> <td colspan="2" style="border-bottom: #000000 1px solid; font-size: 8.5pt; text-align: center"><font style="font: 9pt Times New Roman, Times, Serif"><b>Level 2</b></font></td> <td style="font-size: 8.5pt"><font style="font: 9pt Times New Roman, Times, Serif">&#160;</font></td> <td colspan="2" style="border-bottom: #000000 1px solid; font-size: 8.5pt; text-align: center"><font style="font: 9pt Times New Roman, Times, Serif"><b>Level 3</b></font></td> <td style="font-size: 8.5pt"><font style="font: 9pt Times New Roman, Times, Serif">&#160;</font></td> <td colspan="2" style="border-bottom: #000000 1px solid; font-size: 8.5pt; text-align: center"><font style="font: 9pt Times New Roman, Times, Serif"><b>Level 1</b></font></td> <td style="font-size: 8.5pt"><font style="font: 9pt Times New Roman, Times, Serif">&#160;</font></td> <td colspan="2" style="border-bottom: #000000 1px solid; font-size: 8.5pt; text-align: center"><font style="font: 9pt Times New Roman, Times, Serif"><b>Level 2</b></font></td> <td style="font-size: 8.5pt"><font style="font: 9pt Times New Roman, Times, Serif">&#160;</font></td> <td colspan="2" style="border-bottom: #000000 1px solid; font-size: 8.5pt; text-align: center"><font style="font: 9pt Times New Roman, Times, Serif"><b>Level 3</b></font></td></tr> <tr style="vertical-align: bottom; background-color: #ebebff"> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="border-bottom: #000000 3px double"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="border-bottom: #000000 3px double; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">0</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="border-bottom: #000000 3px double"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="border-bottom: #000000 3px double; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">-</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="border-bottom: #000000 3px double"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="border-bottom: #000000 3px double; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">0</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="border-bottom: #000000 3px double"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="border-bottom: #000000 3px double; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">34,979</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="border-bottom: #000000 3px double"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="border-bottom: #000000 3px double; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">-</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="border-bottom: #000000 3px double"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="border-bottom: #000000 3px double; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">152,849</font></td></tr> <tr style="vertical-align: bottom"> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td></tr> <tr style="vertical-align: bottom; background-color: #ebebff"> <td><font style="font: 10pt Times New Roman, Times, Serif">Beginning of period</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">34,979</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">-</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">152,849</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">108,228</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">-</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">471,015</font></td></tr> <tr style="vertical-align: bottom"> <td><font style="font: 10pt Times New Roman, Times, Serif">Additions</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">-</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">-</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">-</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">-</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">-</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">-</font></td></tr> <tr style="vertical-align: bottom; background-color: #ebebff"> <td><font style="font: 10pt Times New Roman, Times, Serif">Deletions</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(34,979)</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">-</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(214,837)</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(115,881)</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">-</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">-</font></td></tr> <tr style="vertical-align: bottom"> <td><font style="font: 10pt Times New Roman, Times, Serif">Revisions</font></td> <td style="border-bottom: #000000 1px solid"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="border-bottom: #000000 1px solid"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="border-bottom: #000000 1px solid"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">-</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="border-bottom: #000000 1px solid"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">61,988</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="border-bottom: #000000 1px solid"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">42,632</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="border-bottom: #000000 1px solid"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">-</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="border-bottom: #000000 1px solid"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(318,166)</font></td></tr> <tr style="vertical-align: bottom; background-color: #ebebff"> <td><font style="font: 10pt Times New Roman, Times, Serif">End of period</font></td> <td style="border-bottom: #000000 3px double"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="border-bottom: #000000 3px double; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">0</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="border-bottom: #000000 3px double"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="border-bottom: #000000 3px double; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">-</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="border-bottom: #000000 3px double"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="border-bottom: #000000 3px double; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">0</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="border-bottom: #000000 3px double"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="border-bottom: #000000 3px double; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">34,979</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="border-bottom: #000000 3px double"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="border-bottom: #000000 3px double; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">-</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="border-bottom: #000000 3px double"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="border-bottom: #000000 3px double; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">152,849</font></td></tr> </table> <p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b>Organization and Nature of Business, and Basis of Presentation</b></font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">iSatori, Inc. (the &#147;Company&#148;) is a Delaware incorporated Company who trades under the symbol of &#147;IFIT&#148; on the OCTQB exchange.</font></p> <p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">The Company is engaged in researching, designing, developing, contracting for the manufacture, marketing, selling and distributing of various branded nutritional and dietary supplement products for the general nutrition market. The &#147;general nutrition market&#148; may include such activities as body-building, physique enhancement (increase of lean body mass and decrease in fat mass) and enhanced athletic performance through increased strength and/or endurance and proper nutrition.</font></p> <p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">The Company does engage from time to time in funding of clinical studies with the objective of discovering and/or validating claims of new, efficacious products for the Company&#146;s relevant market as well as providing necessary and appropriate substantiation for any claims which the Company may use in its marketing and advertising. The Company markets products which are under its control and which are in some way proprietary to the Company. Some of the Company&#146;s products are the subject of trademarks, patented or patent-pending, owned or licensed the Company.</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b>Financial Instruments</b></font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="font-family: Times New Roman, Times, Serif; text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">The Company considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents. Accordingly, cash and cash equivalents consist of petty cash, checking accounts and money market funds.</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b>Fair Value Measurements</b></font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">ASC 820-10 establishes a framework for measuring the fair value of assets and liabilities and requires additional disclosure about fair value measurements. ASC 820-10 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in the principal (or most advantageous market) for the asset or liability in an orderly transaction between market participants at the measurement date.</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="font-family: Times New Roman, Times, Serif; text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">At June 30, 2015 and December 31, 2014, the financial instruments of the Company consisted principally of cash and cash equivalents, receivables, accounts payable, certain accrued liabilities and long-term debt. The carrying amount of cash and cash equivalents, receivables, accounts payable and accrued liabilities approximates their fair value because of the short maturity of these instruments.</font></p> <p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b>Trade Receivables and Credit Policy</b></font></p> <p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">Trade receivables are uncollateralized customer obligations due under normal trade terms requiring payment generally within 10-60 days from the invoice date. Accounts are considered delinquent when outstanding for more than 7 days past due date. The Company does not have a policy of accruing interest on past due accounts. Payments on trade receivables are applied as instructed per the customer, or to the earliest unpaid invoices. The allowance for doubtful accounts represents an estimate of amounts considered uncollectible and is determined based on management&#146;s historical collection experience, adverse situations that may affect the customer&#146;s ability to repay, and prevailing economic conditions. Specific accounts deemed uncollectible are written off periodically with subsequent receipts on previously written off accounts credited to bad debt expense.</font></p> <p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b>Inventory Valuation</b></font></p> <p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">Inventories of nutritional and dietary supplements are stated at lower of cost or market on a first-in, first-out (FIFO) basis</font>.</p> <p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b>Revenue Recognition</b></font></p> <p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">The Company operates predominantly as a distributor of its dietary supplement products through traditional large retailers and electronic intermediaries. Revenue from product sales is recognized upon transfer of title to the Company&#146;s product to its customers. Net sales represent product sales less actual returns, allowances, discounts, and promotions. Sales to direct customers have an unconditional money back guarantee for thirty to sixty days after the date of purchase. Sales to several of the retail customers carry a &#147;Sale or Return&#148; Purchase agreement per contract, where if minimum sales thresholds are not met within required timeframe, the inventory will be returned to the Company for full credit. Other retail customers receive a percentage discount from invoice to cover any customer returns or damages they may incur.</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">In addition, the Company provides allowances for sales returns based upon estimated and known returns. Product returns are recorded as a reduction of net revenues and as a reduction of the accounts receivable balance.</font></p> <p style="text-align: justify; margin: 0">&#160;</p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">The Company receives other revenues which include but are not limited to shipping and handling charges billed to customers.</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b>Cost of Sales</b></font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">The Company purchases its products directly from third party manufacturers. The Company&#146;s cost of sales include product costs, cost of warehousing and distribution. Included in the cost of sales are shipping and handling costs that are incurred by the Company.</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b>Income Taxes</b></font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">The Company utilizes the asset and liability method of accounting for income taxes. Under this asset and liability method, deferred tax assets and liabilities are recognized for the estimated 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 in effect for the year in which those temporary differences are expected to be recovered or settled.</font></p> <p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b>Marketing</b></font></p> <p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">The Company expenses all production costs related to advertising costs as they are incurred, including print and television when the advertisement has been broadcast or otherwise distributed. Other marketing expenses include digital and social media, product sampling, sponsorships and endorsements with athletes, promotional events, and consumer education efforts.</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b>Research and Development Costs</b></font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">Research and development costs are expensed when incurred.</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b>Distribution, Shipping and Handling Costs</b></font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">Shipping costs on purchases and shipping and handling fees related to sales charged to customers are both included in cost of sales. As mentioned in Revenue Recognition, shipping and handling revenue billed customers are reflected in other revenues.</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b>Concentration of Credit Risk</b></font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">Financial instruments that potentially subject the Company to concentration of credit risk consist principally of temporary cash investments and trade accounts receivables. Concentrations of credit with respect to trade receivables are limited due to the large number of customers comprising the Company&#146;s customer bases and their dispersion across different geographic locations.</font></p> <p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">The Company maintains cash balances at one financial institution located in Colorado and one in California. Accounts at these institutions are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000 per account. At times during the year, the Company&#146;s bank balances have exceeded the FDIC limit. Management believes the risk of loss at such institutions to be minimal.</font></p> <p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b>Use of Estimates</b></font></p> <p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include but are not limited to the fair value determination of derivative instruments, the valuation allowance with respect to estimated utilization of net operating losses, estimated allowances for sales returns and collectability of notes receivable.</font></p> <p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b>Earnings (Loss) Per Share</b></font></p> <p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="text-align: justify; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">Net earnings (loss) per share is computed by dividing net income (loss) less preferred dividends for the period by the weighted average number of common stock outstanding during each period. Diluted earnings (loss) per share is computed by dividing net income (loss) less preferred dividends for the period by the weighted average number of common stock, common stock equivalents and potentially dilutive securities outstanding during each period.</font></p> <table cellspacing="0" cellpadding="0" style="width: 100%; margin-top: 0px; font-size: 9pt"> <tr> <td style="vertical-align: bottom"><font style="font: 9pt Times New Roman, Times, Serif">&#160;</font></td> <td colspan="5" style="border-bottom: #000000 1px solid; vertical-align: bottom; font-size: 8.5pt; text-align: center"><font style="font: 9pt Times New Roman, Times, Serif"><b>June 30, 2015</b></font></td> <td style="vertical-align: bottom; font-size: 8.5pt"><font style="font: 9pt Times New Roman, Times, Serif">&#160;</font></td> <td colspan="5" style="border-bottom: #000000 1px solid; vertical-align: bottom; font-size: 8.5pt; text-align: center"><font style="font: 9pt Times New Roman, Times, Serif"><b>December 31, 2014</b></font></td></tr> <tr style="vertical-align: bottom"> <td><font style="font: 9pt Times New Roman, Times, Serif">&#160;</font></td> <td colspan="2" style="border-bottom: #000000 1px solid"><p style="font-size: 8.5pt; text-align: center; margin: 0"><font style="font: 9pt Times New Roman, Times, Serif"><b>Carrying</b></font></p> <p style="font-size: 8.5pt; text-align: center; margin: 0"><font style="font: 9pt Times New Roman, Times, Serif"><b>Amount</b></font></p></td> <td><font style="font: 9pt Times New Roman, Times, Serif">&#160;</font></td> <td colspan="2" style="border-bottom: #000000 1px solid; font-size: 8.5pt; text-align: center"><font style="font: 9pt Times New Roman, Times, Serif"><b>Fair Value</b></font></td> <td><font style="font: 9pt Times New Roman, Times, Serif">&#160;</font></td> <td colspan="2" style="border-bottom: #000000 1px solid"><p style="font-size: 8.5pt; text-align: center; margin: 0"><font style="font: 9pt Times New Roman, Times, Serif"><b>Carrying</b></font></p> <p style="font-size: 8.5pt; text-align: center; margin: 0"><font style="font: 9pt Times New Roman, Times, Serif"><b>Amount</b></font></p></td> <td><font style="font: 9pt Times New Roman, Times, Serif">&#160;</font></td> <td colspan="2" style="border-bottom: #000000 1px solid; font-size: 8.5pt; text-align: center"><font style="font: 9pt Times New Roman, Times, Serif"><b>Fair Value</b></font></td></tr> <tr style="background-color: #ebebff"> <td style="vertical-align: bottom; width: 57%"><font style="font: 10pt Times New Roman, Times, Serif"><b>Cash and cash equivalents</b></font></td> <td style="vertical-align: bottom; width: 1%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="vertical-align: top; text-align: right; width: 9%"><font style="font: 10pt Times New Roman, Times, Serif">390,112</font></td> <td style="vertical-align: bottom; width: 1%"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="vertical-align: bottom; width: 1%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="vertical-align: top; text-align: right; width: 9%"><font style="font: 10pt Times New Roman, Times, Serif">390,112</font></td> <td style="vertical-align: bottom; width: 1%"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="vertical-align: bottom; width: 1%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="vertical-align: top; text-align: right; width: 9%"><font style="font: 10pt Times New Roman, Times, Serif">738,725</font></td> <td style="vertical-align: bottom; width: 1%"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="vertical-align: bottom; width: 1%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="vertical-align: top; text-align: right; width: 9%"><font style="font: 10pt Times New Roman, Times, Serif">738,725</font></td></tr> <tr> <td style="vertical-align: bottom"><font style="font: 10pt Times New Roman, Times, Serif"><b>Receivables</b></font></td> <td style="vertical-align: bottom"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="vertical-align: top; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">1,349,065</font></td> <td style="vertical-align: bottom"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="vertical-align: bottom"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="vertical-align: top; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">1,349,065</font></td> <td style="vertical-align: bottom"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="vertical-align: bottom"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="vertical-align: top; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">925,506</font></td> <td style="vertical-align: bottom"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="vertical-align: bottom"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="vertical-align: top; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">925,506</font></td></tr> <tr style="background-color: #ebebff"> <td style="vertical-align: bottom"><font style="font: 10pt Times New Roman, Times, Serif"><b>Accounts Payable</b></font></td> <td style="vertical-align: bottom"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="vertical-align: top; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">1,905,258</font></td> <td style="vertical-align: bottom"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="vertical-align: bottom"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="vertical-align: top; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">1,905,258</font></td> <td style="vertical-align: bottom"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="vertical-align: bottom"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="vertical-align: top; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">819,918</font></td> <td style="vertical-align: bottom"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="vertical-align: bottom"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="vertical-align: top; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">819,918</font></td></tr> <tr> <td style="vertical-align: bottom"><font style="font: 10pt Times New Roman, Times, Serif"><b>Derivative Liability</b></font></td> <td style="vertical-align: bottom"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="vertical-align: top; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">0</font></td> <td style="vertical-align: bottom"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="vertical-align: bottom"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="vertical-align: top; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">0</font></td> <td style="vertical-align: bottom"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="vertical-align: bottom"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="vertical-align: top; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">152,849</font></td> <td style="vertical-align: bottom"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="vertical-align: bottom"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="vertical-align: top; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">152,849</font></td></tr> </table> <table cellspacing="0" cellpadding="0" style="width: 100%; margin-top: 0px; font-size: 9pt"> <tr> <td style="vertical-align: bottom"><font style="font: 9pt Times New Roman, Times, Serif">&#160;</font></td> <td colspan="2" style="border-bottom: #000000 1px solid; vertical-align: bottom"><p style="font-size: 8.5pt; text-align: center; margin: 0"><font style="font: 9pt Times New Roman, Times, Serif"><b>June 30,</b></font></p> <p style="font-size: 8.5pt; text-align: center; margin: 0"><font style="font: 9pt Times New Roman, Times, Serif"><b>2015</b></font></p></td> <td style="vertical-align: bottom; font-size: 8.5pt"><font style="font: 9pt Times New Roman, Times, Serif">&#160;</font></td> <td colspan="2" style="border-bottom: #000000 1px solid; vertical-align: bottom"><p style="font-size: 8.5pt; text-align: center; margin: 0"><font style="font: 9pt Times New Roman, Times, Serif"><b>December 31,</b></font></p> <p style="font-size: 8.5pt; text-align: center; margin: 0"><font style="font: 9pt Times New Roman, Times, Serif"><b>2014</b></font></p></td></tr> <tr style="vertical-align: bottom; background-color: #ebebff"> <td style="width: 69%"><font style="font: 10pt Times New Roman, Times, Serif"><b>Trade Receivables</b></font></td> <td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="text-align: right; width: 14%"><font style="font: 10pt Times New Roman, Times, Serif">1,307,881</font></td> <td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="text-align: right; width: 14%"><font style="font: 10pt Times New Roman, Times, Serif">951,396</font></td></tr> <tr style="vertical-align: bottom"> <td><font style="font: 10pt Times New Roman, Times, Serif"><b>Other</b></font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">41,184</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(25,890)</font></td></tr> <tr style="vertical-align: bottom; background-color: #ebebff"> <td><font style="font: 10pt Times New Roman, Times, Serif"><b>Allowance for doubtful accounts</b></font></td> <td style="border-bottom: #000000 1px solid"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(0)</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="border-bottom: #000000 1px solid"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(0)</font></td></tr> <tr style="vertical-align: bottom"> <td><font style="font: 10pt Times New Roman, Times, Serif"><b>Totals</b></font></td> <td style="border-bottom: #000000 3px double"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="border-bottom: #000000 3px double; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">1,349,065</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="border-bottom: #000000 3px double"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="border-bottom: #000000 3px double; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">925,506</font></td></tr> </table> <table cellspacing="0" cellpadding="0" style="width: 100%; margin-top: 0px; font-size: 9pt"> <tr> <td style="vertical-align: bottom"><font style="font: 9pt Times New Roman, Times, Serif">&#160;</font></td> <td colspan="2" style="border-bottom: #000000 1px solid; vertical-align: bottom"><p style="font-size: 8.5pt; text-align: center; margin: 0"><font style="font: 9pt Times New Roman, Times, Serif"><b>June 30,</b></font></p> <p style="font-size: 8.5pt; text-align: center; margin: 0"><font style="font: 9pt Times New Roman, Times, Serif"><b>2015</b></font></p></td> <td style="vertical-align: bottom; font-size: 8.5pt"><font style="font: 9pt Times New Roman, Times, Serif">&#160;</font></td> <td colspan="2" style="border-bottom: #000000 1px solid; vertical-align: bottom"><p style="font-size: 8.5pt; text-align: center; margin: 0"><font style="font: 9pt Times New Roman, Times, Serif"><b>December 31,</b></font></p> <p style="font-size: 8.5pt; text-align: center; margin: 0"><font style="font: 9pt Times New Roman, Times, Serif"><b>2014</b></font></p></td></tr> <tr style="vertical-align: bottom; background-color: #ebebff"> <td style="width: 68%"><font style="font: 10pt Times New Roman, Times, Serif"><b>Labels and packaging</b></font></td> <td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="text-align: right; width: 15%"><font style="font: 10pt Times New Roman, Times, Serif">186,305</font></td> <td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="text-align: right; width: 14%"><font style="font: 10pt Times New Roman, Times, Serif">170,435</font></td></tr> <tr style="vertical-align: bottom"> <td><font style="font: 10pt Times New Roman, Times, Serif"><b>Raw materials</b></font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">249,847</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">308,333</font></td></tr> <tr style="vertical-align: bottom; background-color: #ebebff"> <td><font style="font: 10pt Times New Roman, Times, Serif"><b>Finished goods</b></font></td> <td style="border-bottom: #000000 1px solid"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">1,722,701</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="border-bottom: #000000 1px solid"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">2,004,834</font></td></tr> <tr style="vertical-align: bottom"> <td><font style="font: 10pt Times New Roman, Times, Serif"><b>Totals</b></font></td> <td style="border-bottom: #000000 3px double"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="border-bottom: #000000 3px double; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">2,158,853</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="border-bottom: #000000 3px double"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="border-bottom: #000000 3px double; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">2,483,602</font></td></tr> </table> <table cellspacing="0" cellpadding="0" style="width: 100%; margin-top: 0px; font-size: 9pt"> <tr> <td style="vertical-align: bottom"><font style="font: 9pt Times New Roman, Times, Serif">&#160;</font></td> <td style="vertical-align: bottom"><font style="font: 9pt Times New Roman, Times, Serif">&#160;</font></td> <td colspan="3" style="border-bottom: #000000 1px solid; vertical-align: bottom; font-size: 8.5pt; text-align: center"><font style="font: 9pt Times New Roman, Times, Serif"><b>Three Months Ended</b></font></td> <td style="vertical-align: bottom; font-size: 8.5pt"><font style="font: 9pt Times New Roman, Times, Serif">&#160;</font></td> <td colspan="3" style="border-bottom: #000000 1px solid; vertical-align: bottom; font-size: 8.5pt; text-align: center"><font style="font: 9pt Times New Roman, Times, Serif"><b>Six Months Ended</b></font></td></tr> <tr style="vertical-align: bottom"> <td style="font-size: 8.5pt; width: 53%"><font style="font: 9pt Times New Roman, Times, Serif">&#160;</font></td> <td style="font-size: 8.5pt; width: 1%"><font style="font: 9pt Times New Roman, Times, Serif">&#160;</font></td> <td style="border-bottom: #000000 1px solid; font-size: 8.5pt; text-align: center; width: 11%"><font style="font: 9pt Times New Roman, Times, Serif"><b>2015</b></font></td> <td style="font-size: 8.5pt; width: 1%"><font style="font: 9pt Times New Roman, Times, Serif">&#160;</font></td> <td style="border-bottom: #000000 1px solid; font-size: 8.5pt; text-align: center; width: 10%"><font style="font: 9pt Times New Roman, Times, Serif"><b>2014</b></font></td> <td style="font-size: 8.5pt; width: 1%"><font style="font: 9pt Times New Roman, Times, Serif">&#160;</font></td> <td style="border-bottom: #000000 1px solid; font-size: 8.5pt; text-align: center; width: 11%"><font style="font: 9pt Times New Roman, Times, Serif"><b>2015</b></font></td> <td style="font-size: 8.5pt; width: 1%"><font style="font: 9pt Times New Roman, Times, Serif">&#160;</font></td> <td style="border-bottom: #000000 1px solid; font-size: 8.5pt; text-align: center; width: 11%"><font style="font: 9pt Times New Roman, Times, Serif"><b>2014</b></font></td></tr> <tr style="vertical-align: bottom; background-color: #ebebff"> <td><font style="font: 10pt Times New Roman, Times, Serif">Basic weighted average Common Shares</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">13,371,791</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">12,886,401</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">13,089,814</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">12,883,026</font></td></tr> <tr style="vertical-align: bottom"> <td><font style="font: 10pt Times New Roman, Times, Serif">Stock options (exercise price &#150; $0.573-$2.50/share)</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">110,514</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">382,258</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">168,203</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">413,280</font></td></tr> <tr style="vertical-align: bottom; background-color: #ebebff"> <td><font style="font: 10pt Times New Roman, Times, Serif">Warrants (exercise price &#150; $0.001-$2.25/share)</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">0</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">418,095</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">0</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">418,491</font></td></tr> <tr style="vertical-align: bottom"> <td><font style="font: 10pt Times New Roman, Times, Serif">Total common stock equivalents</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">13,482,305</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">13,686,754</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">13,258,017</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">13,714,797</font></td></tr> </table> <table cellspacing="0" cellpadding="0" style="width: 100%; margin-top: 0px; font-size: 9pt"> <tr> <td style="vertical-align: bottom"><font style="font: 9pt Times New Roman, Times, Serif">&#160;</font></td> <td colspan="2" style="border-bottom: #000000 1px solid; vertical-align: bottom; font-size: 8.5pt; text-align: center"><font style="font: 9pt Times New Roman, Times, Serif"><b>FY 2013</b></font></td> <td style="vertical-align: bottom"><font style="font: 9pt Times New Roman, Times, Serif">&#160;</font></td></tr> <tr style="vertical-align: bottom; background-color: #ebebff"> <td style="width: 83%"><font style="font: 10pt Times New Roman, Times, Serif">Exercise price</font></td> <td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="text-align: right; width: 14%"><font style="font: 10pt Times New Roman, Times, Serif">2.25</font></td> <td style="width: 2%"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td></tr> <tr style="vertical-align: bottom"> <td><font style="font: 10pt Times New Roman, Times, Serif">Expected dividends</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">0</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">%</font></td></tr> <tr style="vertical-align: bottom; background-color: #ebebff"> <td><font style="font: 10pt Times New Roman, Times, Serif">Expected volatility</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">45.95-48.97</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">%</font></td></tr> <tr style="vertical-align: bottom"> <td><font style="font: 10pt Times New Roman, Times, Serif">Risk fee interest rate</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">0.72-1.42</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">%</font></td></tr> <tr style="vertical-align: bottom; background-color: #ebebff"> <td><font style="font: 10pt Times New Roman, Times, Serif">Expected life</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">5 years</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td></tr> <tr style="vertical-align: bottom"> <td><font style="font: 10pt Times New Roman, Times, Serif">Expected forfeiture</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">0</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">%</font></td></tr> </table> <table cellspacing="0" cellpadding="0" style="width: 100%; margin-top: 0px; font-size: 9pt"> <tr> <td style="vertical-align: bottom; width: 62%"><font style="font: 9pt Times New Roman, Times, Serif">&#160;</font></td> <td style="vertical-align: bottom; width: 1%"><font style="font: 9pt Times New Roman, Times, Serif">&#160;</font></td> <td style="vertical-align: bottom; font-size: 8.5pt; text-align: center; width: 16%"><font style="font: 9pt Times New Roman, Times, Serif"><b>FY 2015</b></font></td> <td style="vertical-align: bottom; width: 1%"><font style="font: 9pt Times New Roman, Times, Serif">&#160;</font></td> <td style="vertical-align: bottom; font-size: 8.5pt; width: 1%"><font style="font: 9pt Times New Roman, Times, Serif">&#160;</font></td> <td style="vertical-align: bottom; font-size: 8.5pt; text-align: center; width: 17%"><font style="font: 9pt Times New Roman, Times, Serif"><b>FY 2014</b></font></td> <td style="vertical-align: bottom; font-size: 8.5pt; width: 2%"><font style="font: 9pt Times New Roman, Times, Serif">&#160;</font></td></tr> <tr style="vertical-align: bottom; background-color: #ebebff"> <td><font style="font: 10pt Times New Roman, Times, Serif">Exercise price</font></td> <td style="border-top: #000000 1px solid"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="border-top: #000000 1px solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">0.01-1.02</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="border-top: #000000 1px solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">2.22-2.50</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td></tr> <tr style="vertical-align: bottom"> <td><font style="font: 10pt Times New Roman, Times, Serif">Expected dividends</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">0</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">%</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">0</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">%</font></td></tr> <tr style="vertical-align: bottom; background-color: #ebebff"> <td><font style="font: 10pt Times New Roman, Times, Serif">Expected volatility</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">45.65%-164.28</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">%</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">35.22</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">%</font></td></tr> <tr style="vertical-align: bottom"> <td><font style="font: 10pt Times New Roman, Times, Serif">Risk fee interest rate</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">1.71-1.9</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">%</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">2.13-2.41</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">%</font></td></tr> <tr style="vertical-align: bottom; background-color: #ebebff"> <td><font style="font: 10pt Times New Roman, Times, Serif">Expected life of option</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">5.51-8.01 years</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">6.08-6.33 years</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td></tr> <tr style="vertical-align: bottom"> <td><font style="font: 10pt Times New Roman, Times, Serif">Expected forfeiture</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">0</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">%</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">0</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">%</font></td></tr> </table> <table cellspacing="0" cellpadding="0" style="width: 100%; margin-top: 0px; font-size: 9pt"> <tr> <td style="vertical-align: bottom"><font style="font: 9pt Times New Roman, Times, Serif">&#160;</font></td> <td colspan="8" style="border-bottom: #000000 1px solid; vertical-align: bottom; font-size: 8.5pt; text-align: center"><font style="font: 9pt Times New Roman, Times, Serif"><b>June 30, 2015</b></font></td> <td style="vertical-align: bottom; font-size: 8.5pt"><font style="font: 9pt Times New Roman, Times, Serif">&#160;</font></td> <td colspan="8" style="border-bottom: #000000 1px solid; vertical-align: bottom; font-size: 8.5pt; text-align: center"><font style="font: 9pt Times New Roman, Times, Serif"><b>December 31, 2014</b></font></td></tr> <tr style="vertical-align: bottom"> <td style="font-size: 8.5pt"><font style="font: 9pt Times New Roman, Times, Serif">&#160;</font></td> <td colspan="2" style="border-bottom: #000000 1px solid; font-size: 8.5pt; text-align: center"><font style="font: 9pt Times New Roman, Times, Serif"><b>Level 1</b></font></td> <td style="font-size: 8.5pt"><font style="font: 9pt Times New Roman, Times, Serif">&#160;</font></td> <td colspan="2" style="border-bottom: #000000 1px solid; font-size: 8.5pt; text-align: center"><font style="font: 9pt Times New Roman, Times, Serif"><b>Level 2</b></font></td> <td style="font-size: 8.5pt"><font style="font: 9pt Times New Roman, Times, Serif">&#160;</font></td> <td colspan="2" style="border-bottom: #000000 1px solid; font-size: 8.5pt; text-align: center"><font style="font: 9pt Times New Roman, Times, Serif"><b>Level 3</b></font></td> <td style="font-size: 8.5pt"><font style="font: 9pt Times New Roman, Times, Serif">&#160;</font></td> <td colspan="2" style="border-bottom: #000000 1px solid; font-size: 8.5pt; text-align: center"><font style="font: 9pt Times New Roman, Times, Serif"><b>Level 1</b></font></td> <td style="font-size: 8.5pt"><font style="font: 9pt Times New Roman, Times, Serif">&#160;</font></td> <td colspan="2" style="border-bottom: #000000 1px solid; font-size: 8.5pt; text-align: center"><font style="font: 9pt Times New Roman, Times, Serif"><b>Level 2</b></font></td> <td style="font-size: 8.5pt"><font style="font: 9pt Times New Roman, Times, Serif">&#160;</font></td> <td colspan="2" style="border-bottom: #000000 1px solid; font-size: 8.5pt; text-align: center"><font style="font: 9pt Times New Roman, Times, Serif"><b>Level 3</b></font></td></tr> <tr style="vertical-align: bottom; background-color: #ebebff"> <td style="width: 35%"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="border-bottom: #000000 3px double; width: 1%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="border-bottom: #000000 3px double; text-align: right; width: 9%"><font style="font: 10pt Times New Roman, Times, Serif">0</font></td> <td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="border-bottom: #000000 3px double; width: 1%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="border-bottom: #000000 3px double; text-align: right; width: 9%"><font style="font: 10pt Times New Roman, Times, Serif">-</font></td> <td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="border-bottom: #000000 3px double; width: 1%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="border-bottom: #000000 3px double; text-align: right; width: 9%"><font style="font: 10pt Times New Roman, Times, Serif">0</font></td> <td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="border-bottom: #000000 3px double; width: 1%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="border-bottom: #000000 3px double; text-align: right; width: 9%"><font style="font: 10pt Times New Roman, Times, Serif">34,979</font></td> <td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="border-bottom: #000000 3px double; width: 1%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="border-bottom: #000000 3px double; text-align: right; width: 9%"><font style="font: 10pt Times New Roman, Times, Serif">-</font></td> <td style="width: 1%"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="border-bottom: #000000 3px double; width: 1%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="border-bottom: #000000 3px double; text-align: right; width: 9%"><font style="font: 10pt Times New Roman, Times, Serif">152,849</font></td></tr> <tr style="vertical-align: bottom"> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td></tr> <tr style="vertical-align: bottom; background-color: #ebebff"> <td><font style="font: 10pt Times New Roman, Times, Serif">Beginning of period</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">34,979</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">-</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">152,849</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">108,228</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">-</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">471,015</font></td></tr> <tr style="vertical-align: bottom"> <td><font style="font: 10pt Times New Roman, Times, Serif">Additions</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">-</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">-</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">-</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">-</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">-</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">-</font></td></tr> <tr style="vertical-align: bottom; background-color: #ebebff"> <td><font style="font: 10pt Times New Roman, Times, Serif">Deletions</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(34,979)</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">-</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(214,837)</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(115,881)</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">-</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">-</font></td></tr> <tr style="vertical-align: bottom"> <td><font style="font: 10pt Times New Roman, Times, Serif">Revisions</font></td> <td style="border-bottom: #000000 1px solid"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="border-bottom: #000000 1px solid"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="border-bottom: #000000 1px solid"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">-</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="border-bottom: #000000 1px solid"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">61,988</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="border-bottom: #000000 1px solid"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">42,632</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="border-bottom: #000000 1px solid"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">-</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="border-bottom: #000000 1px solid"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="border-bottom: #000000 1px solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(318,166)</font></td></tr> <tr style="vertical-align: bottom; background-color: #ebebff"> <td><font style="font: 10pt Times New Roman, Times, Serif">End of period</font></td> <td style="border-bottom: #000000 3px double"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="border-bottom: #000000 3px double; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">0</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="border-bottom: #000000 3px double"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="border-bottom: #000000 3px double; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">-</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="border-bottom: #000000 3px double"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="border-bottom: #000000 3px double; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">0</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="border-bottom: #000000 3px double"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="border-bottom: #000000 3px double; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">34,979</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="border-bottom: #000000 3px double"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="border-bottom: #000000 3px double; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">-</font></td> <td><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></td> <td style="border-bottom: #000000 3px double"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td> <td style="border-bottom: #000000 3px double; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">152,849</font></td></tr> </table> 0 110514 418095 382258 168203 413280 0 418491 The only taxable periods subject to examination by federal and state taxing authorities are the periods ended December 31, 2014 and 2013. Federal and state tax returns for the Company prior to the short form merger are open for the period ended December 31, 2011. 619759 279208 314696 942119 24025 5315 4481 10905 On May 17, 2013 and on January 31, 2014 the Company received demand letters from the Environmental Research Corporation, “ERC” requesting substantiation of compliance with the State of California’s Proposition 65 regulations for ten of its products. In October, while the Company was awaiting the results of the compliance testing, ERC contacted the Company again requesting settlement to their initial demand letter. And in February 2014, before compliance testing or any other demand letter validation was completed, ERC contacted the Company again requesting settlement to their second demand letter. After many discussions with ERC, a lawsuit was filed by ERC for the non-compliance issues with the State of California’ Proposition 65 regulations. 60000 The parties agreed to a settlement, which was approved by the iSatori Board of Directors. The documents were generated for presentation to the California Court. These documents were accepted by the court in early June 2015, and iSatori has initiated the payments of the settlement amounts of $60,000.00. Settlement amounts have been accrued into FY 2014 and are reflected in this 10Q report. 189423 3363 30985 67630 51964 28397 28397 10328 150000 0.03 13258017 13482305 13686754 13714797 1500000 2000000