10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2014

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

For the transition period from               to

Commission File No. 000-50331

REALSOURCE RESIDENTIAL, INC.

(Exact name of registrant as specified in its charter)

Nevada	98-0371433
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

2089 East Fort Union Blvd., Salt Lake City, Utah	84121
(Address of Principal Executive Offices)	(Zip Code)

(801) 601-2700

(Registrant’s telephone number, including area code)

Former Fiscal Year:

September 30, 2013

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

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☐ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

☐   Large accelerated filer	☐    Accelerated filer
☐   Non-accelerated filer	☒   Smaller reporting company

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes ☐  No ☐

As of August 14, 2014, the registrant had 11,975,645 shares of common stock outstanding.

RealSource Residential, Inc.

Quarterly Report on Form 10-Q

TABLE OF CONTENTS

			Page
Cautionary Note Regarding Forward-Looking Statements			ii
PART 1-FINANCIAL INFORMATION
	Item 1.	Financial Statements (unaudited)	F-1
		Balance Sheets as of June 30, 2014 (Unaudited) and December 31, 2013	F-2
		Statements of Operations for the Three and Six Months ended June 30, 2014 and 2013 (Unaudited)	F-3
		Statement of Changes in Stockholders’ Deficit for the Interim Period ended June 14, 2014 (Unaudited)	F-4
		Statements of Cash Flows for the Six months ended June 30, 2014 and 2013 (Unaudited)	F-5
		Notes to Financial Statements (Unaudited)	F-6
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1
	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	3
	Item 4.	Control and Procedures	4
PART II-OTHER INFORMATION
	Item 1.	Legal Proceedings	5
	Item 1A.	Risk Factors	5
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	5
	Item 3.	Defaults Upon Senior Securities	5
	Item 4.	Mine Safety Disclosures	5
	Item 5.	Other Information	5
	Item 6.	Exhibits	6
SIGNATURES			7

i

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain information set forth in this Quarterly Report on Form 10-Q, including in Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere herein may address or relate to future events and expectations and as such constitutes “forward-looking statements” within the meaning of the Private Securities Litigation Act of 1995. Statements which are not historical reflect our current expectations and projections about our future results, performance, liquidity, financial condition, prospects and opportunities and are based upon information currently available to us and our management and their interpretation of what is believed to be significant factors affecting our business, including many assumptions regarding future events. Such forward-looking statements include statements regarding, among other things:

· our ability to implement our current stated business plan of acquiring, managing and holding real estate assets as a real estate investment trust;

· our ability to establish and maintain our brand;

· our ability to attract and retain key members of our management team;

· our future financing plans and our ability to consummate financing on favorable terms if at all;

· our anticipated needs for working capital;

· the anticipated trends in our industry;

· our ability to expand operational capabilities;

· competition existing today or that will likely arise in the future; and

· our ability to establish a market for our common stock and operate as a public company.

Forward-looking statements, which involve assumptions and describe our future plans, strategies, and expectations, are generally identifiable by use of the words “may,” “should,” “would,” “could,” “scheduled,” “expect,” “anticipate,” “estimate,” “believe,” “intend,” “seek,” or “project” or the negative of these words or other variations on these words or comparable terminology. Actual results, performance, liquidity, financial condition and results of operations, prospects and opportunities could differ materially and perhaps substantially from those expressed in, or implied by, these forward-looking statements as a result of various risks, uncertainties and other factors. These statements may be found under the section of our Transition Report on Form 10-K for the three month period ended December 31, 2013 (filed on March 27, 2014) entitled “Risk Factors” as well as in our other public filings.

In light of these risks and uncertainties, and especially given the pre-revenue, start-up nature of our business, there can be no assurance that the forward-looking statements contained herein will in fact occur. Readers should not place undue reliance on any forward-looking statements. Except as expressly required by the federal securities laws, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changed circumstances or any other reason.

ii

PART 1-FINANCIAL INFORMATION

RealSource Residential, Inc.

June 30, 2014 and 2013

Index to the Financial Statements

Contents	Page(s)
Balance Sheets at June 30, 2014 (Unaudited) and December 31, 2013	F-2
Statements of Operations for the Three and Six Months ended June 30, 2014 and 2013 (Unaudited)	F-3
Statement of Stockholders’ Deficit for the Interim Period ended June 30, 2014 (Unaudited)	F-4
Statements of Cash Flows for the Six Months ended June 30, 2014 and 2013 (Unaudited)	F-5
Notes to the Financial Statements (Unaudited)	F-6

F-1

RealSource Residential, Inc.

Balance Sheets

	June 30, 2014			December 31, 2013
	(Unaudited)
ASSETS
CURRENT ASSETS:
Cash	$	272,598		$	524,417
Subscription receivable		—			200,000
Interest receivable		104,713			11,071
Total Current Assets		377,311			735,488
Deposits		1,562,636			1,537,636
Investment		390,117			—
Total Assets	$	2,330,064		$	2,273,124
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable and accrued liabilities	$	160,394		$	30,627
Total Current Liabilities		160,394			30,627
LONG-TERM LIABILITIES:
Convertible notes payable		2,310,000			2,310,000
Total Long Term Liabilities		2,310,000			2,310,000
Total Liabilities		2,470,394			2,340,627
STOCKHOLDERS' DEFICIT:
Preferred stock par value $0.001: 100,000,000 shares authorized;
none issued or outstanding		—			—
Common stock par value $0.001: 100,000,000 shares authorized;
11,975,645 shares issued and outstanding		11,975			11,975
Additional paid-in capital		7,215,770			7,215,770
Accumulated deficit		(7,368,075	)		(7,295,248	)
Total Stockholders' Deficit		(140,330	)		(67,503	)
Total Liabilities and Stockholders' Deficit	$	2,330,064		$	2,273,124

See accompanying notes to the financial statements.

F-2

RealSource Residential, Inc.

Statements of Operations

	For the Six Months			For the Six Months			For the Three Months			For the Three Months
	Ended			Ended			Ended			Ended
	June 30, 2014			June 30, 2013			June 30, 2014			June 30, 2013
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Revenue from equity investments in real estate	$	15,117		$	—		$	15,117		$	—
Operating expenses:
Professional fees		36,589			3,721			13,050			1,000
General and administrative expenses		7,813			5,772			2,274			3,745
Total operating expenses		44,402			9,493			15,324			4,745
Loss from operations		(29,285	)		(9,493	)		(207	)		(4,745	)
Other (income) expense:
Interest and finance charges		137,461			—			69,110			—
Interest income		(93,919	)		—			(47,271	)		—
Forgiveness of debt		—			(32,079	)					(32,079	)
Other (income) expense, net		43,542			(32,079	)		21,839			(32,079	)
Income (loss) before income tax provision		(72,827	)		22,586			(22,046	)		27,334
Income tax provision		—			—			—			—
Net income (loss)	$	(72,827	)	$	22,586		$	(22,046	)	$	27,334
Net income (loss) per common share:
- Basic and diluted	$	(0.01	)	$	0.01		$	(0.00	)	$	0.01
Weighted average common shares outstanding:
- Basic and diluted		11,975,645			2,304,630			11,975,645			2,140,630

See accompanying notes to the financial statements.

F-3

RealSource Residential, Inc.

Statement of Stockholders' Deficit

For the Interim Period Ended June 30, 2014

(Unaudited)

	Common Stock Par Value $0.001				Additional					Total
	Number of				Paid-in		Accumulated			Stockholders'
	Shares		Amount		Capital		Deficit			Deficit
Balance, December 31, 2012		1,975,645	$	1,975	$	7,190,770	$	(7,248,726	)	$	(55,981	)
Common stock issued for debt		10,000,000		10,000		25,000					35,000
Net loss								(46,522	)		(46,522	)
Balance, December 31, 2013		11,975,645		11,975		7,215,770		(7,295,248	)		(67,503	)
Net loss								(72,827	)		(72,827	)
Balance at June 30, 2014		11,975,645	$	11,975	$	7,215,770	$	(7,368,075	)	$	(140,330	)

See accompanying notes to the financial statements.

F-4

RealSource Residential, Inc.

Statements of Cash Flows

	For the Six Months			For the Six Months
	Ended			Ended
	June 30, 2014			June 30, 2013
	(Unaudited)			(Unaudited)
Cash flows from operating activities:
Net income (loss)	$	(72,827	)	$	22,586
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Changes in operating assets and liabilities:
Prepaid expenses		—			2,125
Due from related party		—			(705	)
Other receivables		(93,642	)		(900	)
Accounts payable and accrued liabilities		129,767			(28,348	)
Net cash used in operating activities		(36,702	)		(5,242	)
Cash flows from investing activities:
Investment		(390,117	)		—
Deposit		(25,000	)		—
Net cash used in investing activities		(415,117	)		—
Cash flows from financing activities:
Advances from (repayment made to) related party		—			(30,823	)
Proceeds from issuance of convertible notes payable		200,000			—
Issuance of common stock		—			35,000
Net cash provided by financing activities		200,000			4,177
Net change in cash		(251,819	)		(1,065	)
Cash at beginning of reporting period		524,417			1,065
Cash at end of reporting period	$	272,598		$	—
Supplemental disclosure of cash flows information:
Interest paid	$	—		$	—
Income tax paid	$	—		$	—

See accompanying notes to the financial statements.

F-5

RealSource Residential, Inc. 

June 30, 2014 and 2013 

Notes to the Financial Statements 

(Unaudited)

Note 1 - Organization and Operations

Upstream Biosciences, Inc.

Upstream Biosciences, Inc. ("Upstream Biosciences") was incorporated on March 20, 2002 under the laws of the State of Nevada. Upstream Biosciences engaged in developing technology relating to biomarker identification, disease susceptibility and drug response areas of cancer.

Change in Control

On May 24, 2013, Charles El-Moussa and Six Capital Limited (“Six Capital”) (collectively, the “Sellers”), as majority stockholders of Upstream Biosciences, Inc., a Nevada corporation, and RealSource Acquisitions Group, LLC, a Utah limited liability company, and Chesterfield Faring Ltd., a New York corporation (collectively, the “Purchasers”), entered into a Securities Purchase Agreement (the “Agreement”) pursuant to which the Sellers agreed to sell to the Purchasers an aggregate of 10,778,081 shares (representing approximately 90% of the issued and outstanding voting securities of the Company) of common stock of the Company (the “Common Stock”) for $175,000 in cash from the personal funds of the Purchasers.

RealSource Residential, Inc.

On July 11, 2013, Upstream Biosciences entered into an Agreement and Plan of Merger (the “Merger Agreement”) pursuant to which Upstream Biosciences merged with its newly formed, wholly owned subsidiary, RealSource Residential, Inc., a Nevada corporation (“Merger Sub” and such merger transaction, the “Merger”) with the Company remaining as the surviving corporation under the name “RealSource Residential, Inc.” (the “Surviving Company” or the “Company”). Upon the consummation of the Merger, the separate existence of Merger Sub ceased and shareholders of the Company became shareholders of the surviving company named RealSource Residential, Inc. The Merger was effective on Monday, July 15, 2013 and was approved by the Financial Industry Regulatory Authority on August 5, 2013.

The Company has been engaged in real estate ownership and management based since the merger with RealSource Residential, Inc.

Note 2 - Significant and Critical Accounting Policies and Practices

The Management of the Company is responsible for the selection and use of appropriate accounting policies and the appropriateness of accounting policies and their application. Critical accounting policies and practices are those that are both most important to the portrayal of the Company’s financial condition and results and require management’s most difficult, subjective, or complex judgments, often as a result of the need to make estimates about the effects of matters that are inherently uncertain. The Company’s significant and critical accounting policies and practices are disclosed below as required by generally accepted accounting principles.

Basis of Presentation - Unaudited Interim Financial Information

The accompanying unaudited interim financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information, and with the rules and regulations of the United States Securities and Exchange Commission (“SEC”) to Form 10-Q and Article 8 of Regulation S-X.  Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements.  The unaudited interim financial statements furnished reflect all adjustments (consisting of normal recurring accruals) which are, in the opinion of management, necessary to a fair statement of the results for the interim periods presented.  Interim results are not necessarily indicative of the results for the full year.  These financial statements should be read in conjunction with the financial statements of the Company for the transition period ended December 31, 2013 and notes thereto contained in the Company’s Transitional Report on Form 10-K as filed with the SEC on March 27, 2014.

Development Stage Company

The Company is a development stage company as defined by section 915-10-20 of the FASB Accounting Standards Codification. Although the Company recognized nominal amount of revenues, it is still devoting substantially all of its efforts on establishing the business and its planned principal operations have not commenced. All losses accumulated since inception have been considered as part of the Company's development stage activities.

F-6

The Company is considered a development stage company. The Company has elected to adopt early application of Accounting Standards Update No. 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements. Upon adoption, the Company no longer presents or discloses inception-to-date information and other remaining disclosure requirements of Topic 915.

Fiscal Year-End

The Company originally elected September 30th as its fiscal year-end date upon formation

On July 9, 2013, the Company’s board of directors voted to change the Company’s fiscal year end from September 30th to December 31st. The Company’s 2014 fiscal began on January 1, 2014 and will end on December 31, 2014.

Use of Estimates and Assumptions and Critical Accounting Estimates and Assumptions

The preparation of 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 and disclosure of contingent assets and liabilities at the date(s) of the financial statements and the reported amounts of revenues and expenses during the reporting period(s).

Critical accounting estimates are estimates for which (a) the nature of the estimate is material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change and (b) the impact of the estimate on financial condition or operating performance is material. The Company’s critical accounting estimates and assumptions affecting the financial statements were:

(i) Assumption as a going concern: Management assumes that the Company will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business;

(ii) Valuation allowance for deferred tax assets: Management assumes that the realization of the Company’s net deferred tax assets resulting from its net operating loss (“NOL”) carry–forwards for Federal income tax purposes that may be offset against future taxable income was not considered more likely than not and accordingly, the potential tax benefits of the net loss carry-forwards are offset by a full valuation allowance. Management made this assumption based on (a) the Company has incurred recurring losses, (b) general economic conditions, and (c) its ability to raise additional funds to support its daily operations by way of a public or private offering, among other factors.

(iii) Estimates and assumptions used in valuation of equity instruments: Management estimates expected term of share options and similar instruments, expected volatility of the Company’s common shares and the method used to estimate it, expected annual rate of quarterly dividends, and risk free rate(s) to value share options and similar instruments.

These significant accounting estimates or assumptions bear the risk of change due to the fact that there are uncertainties attached to these estimates or assumptions, and certain estimates or assumptions are difficult to measure or value.

Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable in relation to the financial statements taken as a whole under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

Management regularly evaluates the key factors and assumptions used to develop the estimates utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions. After such evaluations, if deemed appropriate, those estimates are adjusted accordingly.

Actual results could differ from those estimates.

Reclassification

Certain amounts in the prior period financial statements have been reclassified to conform to the current period presentation. These reclassifications had no effect on reported income or losses.

Fair Value of Financial Instruments

The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:

F-7

Level 1	Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.
Level 2	Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.
Level 3	Pricing inputs that are generally observable inputs and not corroborated by market data.

Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable.

The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.

The carrying amounts of the Company’s financial assets and liabilities, such as cash, interest receivable and accounts payable and accrued liabilities, approximate their fair values because of the short maturity of these instruments.

The Company’s convertible notes payable approximate the fair value of such instruments based upon management’s best estimate of interest rates that would be available to the Company for similar financial arrangements at June 30, 2014.

Transactions involving related parties cannot be presumed to be carried out on an arm's-length basis, as the requisite conditions of competitive, free-market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm's-length transactions unless such representations can be substantiated.

Cash Equivalents

The Company considers all highly liquid investments with maturities of three months or less at the time of purchase to be cash equivalents.

Investments - Equity Method and Joint Ventures

The Company accounts for investments in common stock or in-substance common stock (or both common stock and in-substance common stock) of an investee of which the Company has significant influence (see paragraph 323-10-15-6) in the operating or financial policies even though the Company holds 50% or less of the common stock or in-substance common stock, in accordance with sub-topic 323-10 of the FASB Accounting Standards Codification (“Sub-topic 323-10”).

Method of Accounting

Investments held in stock of entities other than subsidiaries, namely corporate joint ventures and other non-controlled entities usually are accounted for by one of three methods (i) the fair value method (addressed in Topic 320), (ii) the equity method (addressed in Topic 323), or (iii) the cost method (addressed in Subtopic 325-20). Pursuant to paragraph 323-10-05-5 the equity method tends to be most appropriate if an investment enables the investor to influence the operating or financial policies of the investee.

The Ability to Exercise Significant Influence

Pursuant to paragraph 323-10-15-6 the ability to exercise significant influence over operating and financial policies of an investee may be indicated in several ways, including but limited to the following: a. Representation on the board of directors, b. Participation in policy-making processes, c. Material intra-entity transactions, d. Interchange of managerial personnel, and e. Technological dependency. Pursuant to paragraph 323-10-15-8 an investment (direct or indirect) of 20 percent or more of the voting stock of an investee shall lead to a presumption that in the absence of predominant evidence to the contrary an investor has the ability to exercise significant influence over an investee. Conversely, an investment of less than 20 percent of the voting stock of an investee shall lead to a presumption that an investor does not have the ability to exercise significant influence unless such ability can be demonstrated.

F-8

Initial and Subsequent Measurement

Pursuant to Paragraph 323-10-30-2 an investor shall measure an investment in the common stock of an investee (including a joint venture) initially at cost in accordance with the guidance in Section 805-50-30. An investor shall initially measure, at fair value, a retained investment in the common stock of an investee (including a joint venture) in a deconsolidation transaction in accordance with paragraphs 810-10-40-3A through 40-5.

Pursuant to Section 323-10-35 under the equity method, an investor shall recognize its share of the earnings or losses of an investee in the periods for which they are reported by the investee in its financial statements rather than in the period in which an investee declares a dividend. An investor shall adjust the carrying amount of an investment for its share of the earnings or losses of the investee after the date of investment including adjustments similar to those made in preparing consolidated financial statements and shall report the recognized earnings or losses in income. An investor's share of losses of an investee may equal or exceed the carrying amount of an investment accounted for by the equity method plus advances made by the investor. An equity method investor shall continue to report losses up to the investor's investment carrying amount, including any additional financial support made or committed to by the investor and the investor ordinarily shall discontinue applying the equity method if the investment (and net advances) is reduced to zero and shall not provide for additional losses unless the investor has guaranteed obligations of the investee or is otherwise committed to provide further financial support for the investee. If the investee subsequently reports net income, the investor shall resume applying the equity method only after its share of that net income equals the share of net losses not recognized during the period the equity method was suspended. If a series of operating losses of an investee or other factors indicate that a decrease in value of the investment has occurred that is other than temporary the loss in value of an investment that is other than a temporary decline shall be recognized. Evidence of a loss in value might include, but would not necessarily be limited to, absence of an ability to recover the carrying amount of the investment or inability of the investee to sustain an earnings capacity that would justify the carrying amount of the investment. A current fair value of an investment that is less than its carrying amount may indicate a loss in value of the investment. However, a decline in the quoted market price below the carrying amount or the existence of operating losses alone is not necessarily indicative of a loss in value that is other than temporary.

Disclosure

Pursuant to paragraph 323-10-50-3 all of the following disclosures generally shall apply to the equity method of accounting for investments in common stock:

a. Financial statements of an investor shall disclose all of the following parenthetically, in notes to financial statements, or in separate statements or schedules: (1) the name of each investee and percentage of ownership of common stock. (2) The accounting policies of the investor with respect to investments in common stock. Disclosure shall include the names of any significant investee entities in which the investor holds 20 percent or more of the voting stock, but the common stock is not accounted for on the equity method, together with the reasons why the equity method is not considered appropriate, and the names of any significant investee corporations in which the investor holds less than 20 percent of the voting stock and the common stock is accounted for on the equity method, together with the reasons why the equity method is considered appropriate. (3) The difference, if any, between the amount at which an investment is carried and the amount of underlying equity in net assets and the accounting treatment of the difference.

b. For those investments in common stock for which a quoted market price is available, the aggregate value of each identified investment based on the quoted market price usually shall be disclosed.

c. If investments in common stock of corporate joint ventures or other investments accounted for under the equity method are, in the aggregate, material in relation to the financial position or results of operations of an investor, it may be necessary for summarized information as to assets, liabilities, and results of operations of the investees to be presented in the notes or in separate statements, either individually or in groups, as appropriate.

d. Conversion of outstanding convertible securities, exercise of outstanding options and warrants, and other contingent issuances of an investee may have a significant effect on an investor's share of reported earnings or losses. Accordingly, material effects of possible conversions, exercises, or contingent issuances shall be disclosed in notes to financial statements of an investor.

Related Parties

The Company follows subtopic 850-10 of the FASB Accounting Standards Codification for the identification of related parties and disclosure of related party transactions.

Pursuant to Section 850-10-20 the related parties include a. affiliates of the Company; b. entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 825–10–15, to be accounted for by the equity method by the investing entity; c. trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management; d. principal owners of the Company; e. management of the Company; f. other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g. other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.

F-9

The financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated or combined financial statements is not required in those statements. The disclosures shall include: a. the nature of the relationship(s) involved; b. a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; c. the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and d. amounts due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.

Commitment and Contingencies

The Company follows subtopic 450-20 of the FASB Accounting Standards Codification to report accounting for contingencies. Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.

If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed.

Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. Management does not believe, based upon information available at this time, that these matters will have a material adverse effect on the Company’s financial position, results of operations or cash flows. However, there is no assurance that such matters will not materially and adversely affect the Company’s business, financial position, and results of operations or cash flows.

Revenue Recognition

The Company follows paragraph 605-10-S99-1 of the FASB Accounting Standards Codification for revenue recognition. The Company recognizes revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the product has been shipped or the services have been rendered to the customer, (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured.

Income Tax Provision

The Company accounts for income taxes under Section 740-10-30 of the FASB Accounting Standards Codification. Deferred income tax assets and liabilities are determined based upon differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the statements of operations in the period that includes the enactment date.

The Company adopted section 740-10-25 of the FASB Accounting Standards Codification (“Section 740-10-25”). Section 740-10-25 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under Section 740-10-25, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement. Section 740-10-25 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures.

The estimated future tax effects of temporary differences between the tax basis of assets and liabilities are reported in the accompanying balance sheets, as well as tax credit carry-backs and carry-forwards. The Company periodically reviews the recoverability of deferred tax assets recorded on its balance sheets and provides valuation allowances as management deems necessary.

F-10

Management makes judgments as to the interpretation of the tax laws that might be challenged upon an audit and cause changes to previous estimates of tax liability. In addition, the Company operates within multiple taxing jurisdictions and is subject to audit in these jurisdictions. In management’s opinion, adequate provisions for income taxes have been made for all years. If actual taxable income by tax jurisdiction varies from estimates, additional allowances or reversals of reserves may be necessary.

Uncertain Tax Positions

The Company did not take any uncertain tax positions and had no adjustments to its income tax liabilities or benefits pursuant to the provisions of Section 740-10-25 for the reporting period ended June 30, 2014 or 2013.

Limitation on Utilization of NOLs due to Change in Control

Pursuant to the Internal Revenue Code Section 382 (“Section 382”), certain ownership changes may subject the NOL’s to annual limitations which could reduce or defer the NOL. Section 382 imposes limitations on a corporation’s ability to utilize NOLs if it experiences an “ownership change.” In general terms, an ownership change may result from transactions increasing the ownership of certain stockholders in the stock of a corporation by more than 50 percentage points over a three-year period. In the event of an ownership change, utilization of the NOLs would be subject to an annual limitation under Section 382 determined by multiplying the value of its stock at the time of the ownership change by the applicable long-term tax-exempt rate. Any unused annual limitation may be carried over to later years. The imposition of this limitation on its ability to use the NOLs to offset future taxable income could cause the Company to pay U.S. federal income taxes earlier than if such limitation were not in effect and could cause such NOLs to expire unused, reducing or eliminating the benefit of such NOLs.

Net Income (Loss) per Common Share

Net income (loss) per common share is computed pursuant to Section 260-10-45 of the FASB Accounting Standards Codification. Basic net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. Diluted net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock and potentially dilutive outstanding shares of common stock during the period to reflect the potential dilution that could occur from common shares issuable through contingent share arrangements, stock options and warrants.

The following table shows the potentially outstanding dilutive common shares excluded from the diluted net income (loss) per common share calculation as they were anti-dilutive:

	Potentially Outstanding Dilutive Common Shares
		For the Reporting Period Ended June 30, 2014	For the Reporting Period Ended June 30, 2013
Convertible Notes Payable Shares and Related Warrant Shares
On December 9, 2013, the Company consummated the closing (the “Closing”) of a private placement offering (the “Offering”) of 231 units (“Units”) for $10,000 per Unit, for aggregate gross proceeds of $2,310,000. No placement agents or brokers were utilized by the Company in connection with the Offering. Each Unit consists of: (i) a $10,000 face value 12% Series A Senior Unsecured Convertible Promissory Note of the Company (collectively, the “Notes”) convertible into shares of Common Stock at $0.50 per share, and (ii) one detachable Common Stock Purchase Warrant (collectively, the “Warrants”) to purchase 10,000 shares (the “Warrant Shares”) of common stock of the Company (the “Common Stock”) with an exercise price of $1.00 per share expiring five years from the date of issuance.		(i) 4,620,000 (ii) 2,310,000	—
Sub-total: convertible notes payable shares and related warrant shares		6,930,000	—
Total potentially outstanding dilutive common shares		6,930,000	—

Cash Flows Reporting

The Company adopted paragraph 230-10-45-24 of the FASB Accounting Standards Codification for cash flows reporting, classifies cash receipts and payments according to whether they stem from operating, investing, or financing activities and provides definitions of each category, and uses the indirect or reconciliation method (“Indirect method”) as defined by paragraph 230-10-45-25 of the FASB Accounting Standards Codification to report net cash flow from operating activities by adjusting net income to reconcile it to net cash flow from operating activities by removing the effects of (a) all deferrals of past operating cash receipts and payments and all accruals of expected future operating cash receipts and payments and (b) all items that are included in net income that do not affect operating cash receipts and payments. The Company reports the reporting currency equivalent of foreign currency cash flows, using the current exchange rate at the time of the cash flows and the effect of exchange rate changes on cash held in foreign currencies is reported as a separate item in the reconciliation of beginning and ending balances of cash and cash equivalents and separately provides information about investing and financing activities not resulting in cash receipts or payments in the period pursuant to paragraph 830-230-45-1 of the FASB Accounting Standards Codification.

F-11

Subsequent Events

The Company follows the guidance in Section 855-10-50 of the FASB Accounting Standards Codification for the disclosure of subsequent events. The Company will evaluate subsequent events through the date when the financial statements were issued. Pursuant to ASU 2010-09 of the FASB Accounting Standards Codification, the Company as an SEC filer considers its financial statements issued when they are widely distributed to users, such as through filing them on EDGAR.

Recently Issued Accounting Pronouncements

In June 2014, the FASB issued ASU No. 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation.

The amendments in this Update remove the definition of a development stage entity from the Master Glossary of the Accounting Standards Codification, thereby removing the financial reporting distinction between development stage entities and other reporting entities from U.S. GAAP. In addition, the amendments eliminate the requirements for development stage entities to (1) present inception-to-date information in the statements of income, cash flows, and shareholder equity, (2) label the financial statements as those of a development stage entity, (3) disclose a description of the development stage activities in which the entity is engaged, and (4) disclose in the first year in which the entity is no longer a development stage entity that in prior years it had been in the development stage.

The amendments also clarify that the guidance in Topic 275, Risks and Uncertainties, is applicable to entities that have not commenced planned principal operations.

Finally, the amendments remove paragraph 810-10-15-16. Paragraph 810-10-15-16 states that a development stage entity does not meet the condition in paragraph 810-10-15-14(a) to be a variable interest entity if (1) the entity can demonstrate that the equity invested in the legal entity is sufficient to permit it to finance the activities that it is currently engaged in and (2) the entity’s governing documents and contractual arrangements allow additional equity investments.

The amendments in this Update also eliminate an exception provided to development stage entities in Topic 810, Consolidation, for determining whether an entity is a variable interest entity on the basis of the amount of investment equity that is at risk. The amendments to eliminate that exception simplify U.S. GAAP by reducing avoidable complexity in existing accounting literature and improve the relevance of information provided to financial statement users by requiring the application of the same consolidation guidance by all reporting entities. The elimination of the exception may change the consolidation analysis, consolidation decision, and disclosure requirements for a reporting entity that has an interest in an entity in the development stage.

The amendments related to the elimination of inception-to-date information and the other remaining disclosure requirements of Topic 915 should be applied retrospectively except for the clarification to Topic 275, which shall be applied prospectively. For public business entities, those amendments are effective for annual reporting periods beginning after December 15, 2014, and interim periods therein.

Early application of each of the amendments is permitted for any annual reporting period or interim period for which the entity’s financial statements have not yet been issued (public business entities) or made available for issuance (other entities). Upon adoption, entities will no longer present or disclose any information required by Topic 915.

In June 2014, the FASB issued the FASB Accounting Standards Update No. 2014-12 “Compensation—Stock Compensation (Topic 718) : Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period” (“ASU 2014-12”).

The amendments clarify the proper method of accounting for share-based payments when the terms of an award provide that a performance target could be achieved after the requisite service period.  The Update requires that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. The performance target should not be reflected in estimating the grant-date fair value of the award. Compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service has already been rendered.

F-12

The amendments in this Update are effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. Earlier adoption is permitted.

Management does not believe that any recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying consolidated financial statements.

Note 3 – Going Concern

The financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business.

As reflected in the financial statements, the Company had an accumulated deficit at June 30, 2014, a net loss and net cash used in operating activities for the reporting period then ended. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

The Company is attempting to commence operations and generate sufficient revenue; however, the Company’s cash position may not be sufficient to support the Company’s daily operations. While the Company believes in the viability of its strategy to generate sufficient revenue and in its ability to raise additional funds, there can be no assurances to that effect. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to further implement its business plan and generate sufficient revenue and its ability to raise additional funds.

The financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

Note 4 – Investment

On June 10, 2014, the Company invested $375,000 (approximately 18.8%) into newly formed RS Bakken One, LLC (“RS”), an entity that acquired two properties in North Dakota, one near Williston and one in Watford City. These properties are located in the heart of the Bakken oil development and had a combined acquisition price of $5,700,000. Additionally the Company purchased an option for $25,000 that will allow it to acquire 100% of these two properties after one year for a purchase price of not less than $7,000,000 or more than $8,000,000.

Pursuant to paragraph 323-10-05-5 the equity method tends to be most appropriate if an investment enables the investor to influence the operating or financial policies of the investee. Although the Company owns less than 20 percent of the voting stock, COO/CFO of the Company is the Vice President of RS and Chairman of the Company is the Manager of RS which enables the Company to influence the operating or financial policies of RS. Thus, the Company accounts for its investment in RS using the equity method of accounting and reports such in the balance sheets as investment.

Investment consisted of the following:

	June 30, 2014		December 31, 2013
Investment	$	375,000	$	—
Add: proportional share of net income of an equity investment		15,117		—
	$	390,117	$	—

Note 5 – Convertible Notes

On December 9, 2013, the Company consummated the closing (the “Closing”) of a private placement offering (the “Offering”) of 231 units (“Units”) for $10,000 per Unit, for aggregate gross proceeds of $2,310,000. No placement agents or brokers were utilized by the Company in connection with the Offering. Each Unit consists of: (i) a $10,000 face value 12% Series A Senior Unsecured Convertible Promissory Note of the Company convertible into common shares at $0.50 per share (collectively, the “Notes”), and (ii) one detachable Common Stock Purchase Warrant (collectively, the “Warrants”), each to purchase 10,000 shares (the “Warrant Shares”) of common stock of the Company (the “Common Stock”) with an exercise price of $1.00 per share expiring five years from the date of issuance. In connection with the Closing, the Company entered into definitive subscription agreements (the “Subscription Agreements”) with twenty nine (29) accredited investors. The Notes accrue interest at 12% per year and have a maturity date of December 9, 2015.  The Notes will be automatically converted into shares of the Company’s Common Stock at the then applicable conversion price in the event that the 90-day trading volume weighted average price per share of the Common Stock exceeds $1.50 per share at any time during the term of the Notes.  

F-13

The Company estimated the relative fair value of the warrants on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions:

	December 9, 2013
Expected life (year)		5
Expected volatility (*)		61.39	%
Expected annual rate of quarterly dividends		0.00	%
Risk-free rate(s)		1.54	%

* As a thinly traded entity it is not practicable for the Company to estimate the expected volatility of its share price. The Company selected five (5) comparable public companies listed on NYSE MKT and NASDAQ Capital Market within real estate brokerage and management industry which the Company engages in to calculate the expected volatility. The Company calculated those five (5) comparable companies’ historical volatility over the expected life of the options or warrants and averaged them as its expected volatility.

The estimated relative fair value of the warrants was deminimus at the date of issuance using the Black-Scholes Option Pricing Model.

Note 6 – Related Party Transactions

Related Parties

Related parties with whom the Company had transactions are:

Related Parties	Relationship
Michael Anderson	Chairman, significant stockholder and director
Nathan Hanks	President and CEO, significant stockholder and director
V. Kelly Randall	Chief Operating Officer, Chief Financial Officer and Director
RS Cambridge Apartments, LLC	An entity controlled and partially owned by the Chairman, President and CEO of the Company
RS Bakken One, LLC	An investee

Purchase and Sale Agreement - RS Cambridge Apartments, LLC

Proceeds from the Offering were used to (i) acquire a $2.85 million face value subordinated mortgage note secured by the Cambridge Apartments in Gulfport, Mississippi (the “Property”) for approximately $1,073,000 (the “B Note”) and (ii) fund (in the amount of approximately $465,000) certain costs associated with a refinancing of the senior mortgage indebtedness encumbering the Property (which refinancing occurred concurrently with the Company’s acquisition of the B Note).  The remaining proceeds from the Offering (in the amount of approximately $772,000) will be used for the general working capital of the Company.  The Cambridge Property is owned by RS Cambridge Apartments, LLC (the “Property Owner”). Nathan Hanks and Michael Anderson, officers and directors of the Company, own 10% of the outstanding membership interests of the Property Owner.

Immediately upon the acquisition of the B Note, the Company converted the B Note into a right of first refusal and option (the “Option”) in the amount of approximately $1,538,000 (the “Option Payment”), which is the amount of funds from the Offering used to purchase the B Note and otherwise support the refinancing of the Property.

To memorialize the Option, on December 9, 2013, the Company entered into a Right of First Refusal and Option Agreement (the “Option Agreement”) with the Property Owner.  The Option affords the Company the right to acquire the Property within five (5) years after the Closing at the fair value of the Property as negotiated between the Company and the Property Owner. In addition, under the Option, if the Property Owner receives an offer to purchase the Property during the option period, the Company will have a right of first refusal to purchase the Property on the same terms as the offer. Should the Company elect not to match the offer, the Option Payment is required to be repaid upon the sale of the Property to the other buyer. 

F-14

On March 12, 2014, the Company entered into a Purchase and Sale Agreement (the “PS Agreement”) with the Property Owner. The Option Payment was converted into a “Deposit” against the purchase of the property and shall continue to accrue interest at the rate of 12% per annum, from the date of the Option Agreement through the date of the purchase of the Property. The property will not be purchased prior to August 1, 2014.

Note 7 – Stockholders’ Deficit

Shares Authorized

Upon formation the total number of shares of all classes of stock which the Company is authorized to issue is Two Hundred Million (200,000,000) shares of which One Hundred Million (100,000,000) shares shall be Preferred Stock, par value $0.001 per share, and One Hundred Million (100,000,000) shares shall be Common Stock, par value $0.001 per share.

Common Stock

Issuance of Common Stock

On March 28, 2013, the Company entered into a share for debt agreement whereby it issued 10,000,000 shares of its common stock in exchange for the extinguishment of $35,000 in debt to a related party.

Warrants

Summary of the Company’s Warrants Activities

The table below summarizes the Company’s warrants activities for the reporting period ended June 30, 2014:

	Number of Warrant Shares		Exercise Price Range Per Share		Weighted Average Exercise Price		Relative Fair Value at Date of Issuance		Aggregate Intrinsic Value
Balance, December 31, 2013	2,310,000	$	2.00	$	2.00	$	*	$	—
Granted	—		—		—		—		—
Canceled	—		—		—		—		—
Exercised	—		—		—		—		—
Expired	—		—		—		—		—
Balance, June 30, 2014	2,310,000	$	2.00	$	2.00	$	*	$	—
Earned and exercisable, June 30, 2014	2,310,000	$	2.00	$	2.00	$	*	$	—
Unvested, June 30, 2014	—	$	—	$	—	$	—	$	—

* The relative fair value at date of issuance was de minimis.

The following table summarizes information concerning outstanding and exercisable warrants as of June 30, 2014:

	Warrants Outstanding					Warrants Exercisable
Range of Exercise Prices	Number Outstanding	Average Remaining Contractual Life (in years)		Weighted Average Exercise Price		Number Exercisable	Average Remaining Contractual Life (in years)		Weighted Average Exercise Price
$   2.00	2,310,000		4.7	$	2.00	2,310,000		4.7	$	2.00

Note 8 – Subsequent Events

The Company has evaluated all events that occur after the balance sheet date through the date when the financial statements were issued to determine if they must be reported. The Management of the Company determined that there were no reportable subsequent events to be disclosed.

F-15

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

The following discussion should be read in conjunction with our consolidated financial statements and related notes thereto included elsewhere in this Quarterly Report on Form 10-Q and the consolidated financial statements and related notes thereto in our Transition Report on Form 10-K for the three month period ended December 31, 2013.

This discussion contains certain forward-looking statements that involve risks and uncertainties. Our actual results and the timing of certain events could differ materially from those discussed in these forward-looking statements as a result of certain factors, including, but not limited to, those set forth herein and elsewhere in this Quarterly Report and in our other filings with the Securities and Exchange Commission. See “Cautionary Note Regarding Forward Looking Statements.”

Corporate History and Recent Developments

We were incorporated pursuant to the laws of the State of Nevada on March 20, 2002 under the name Integrated Brand Solutions Inc. and on February 6, 2006, changed our name to Upstream Biosciences Inc. From 2006 to December 2009, our company operated as a biotechnology company, and from 2010 until May 2013, our company had no operating business.

On May 24, 2013, our then majority stockholders of our company sold their interests in our company (consisting of 10,778,081 shares of our common stock representing approximately 90% of the issued and outstanding voting security of our company) to RealSource Acquisition Group, LLC, a Utah limited liability company (“RSAG”), and Chesterfield Faring Ltd., a New York corporation in consideration of an aggregate of $175,000 in cash. RSAG is affiliated with The RealSource Group, a group of affiliated real estate brokerage and management companies based in Salt Lake City, Utah. On July 11, 2013, we changed our corporate name by merging with our newly formed, wholly owned subsidiary called RealSource Residential, Inc., a Nevada corporation, and we remained as the surviving corporation under the name “RealSource Residential, Inc.” The merger was effective on July 15, 2013 and was approved by the Financial Industry Regulatory Authority on August 5, 2013.

Leveraging the experience of our management team and The RealSource Group, we plan to focus on acquiring, managing and holding primarily multi-family housing assets in anticipation of creating a real estate investment trust (a “REIT”). We expect the process of acquiring such multi-family housing assets during 2014. There are certain regulatory requirements that must be satisfied in order to acquire these assets and to operate as a REIT, including audited financial statements for the specific properties acquired, and no assurances can be given that we will be able to do so. We are not currently structured or operating as a REIT

On June 10, 2014, we invested $375,000 (approximately 19%) into newly formed RS Bakken One, LLC, an entity that acquired two properties in North Dakota, one near Williston and one in Watford City. These properties are located in the heart of the Bakken oil development and had a combined acquisition price of $5,700,000. Additionally we purchased an option for $25,000 that will allow us to acquire 100% of these two properties after one year for a purchase price of not less than $7,000,000 or more than $8,000,000. During the three months ended March 31, 2014, we also acquired an option to purchase one multi-family housing asset in Gulfport, Mississippi. On March 12, 2014, we entered into a Purchase and Sale Agreement to acquire the property, but it will not be acquired prior to August 1, 2014. We are not currently structured or operating as a REIT.

Critical Accounting Policies

Our financial statements are prepared using the accrual basis of accounting in accordance with accounting principles generally accepted in the United States (“US GAAP”). Our fiscal year ends December 31.

This Management’s Discussion and Analysis of Financial Condition and Results of Operations discuss our financial statements, which have been prepared in accordance with US GAAP. The preparation of these financial statements requires making estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported revenues and expenses for the reporting periods. On an ongoing basis, we evaluate such estimates and judgments. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ (perhaps significantly) from these estimates under different assumptions or conditions.

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While all the accounting policies impact the financial statements, certain policies may be viewed to be critical. Our management believes that the accounting policies which involve more significant judgments and estimates used in the preparation of our consolidated financial statement include warrants liability, stock-based compensation, capitalization of costs and useful lives of assets:

Results of Operations

For the six months ended June 30, 2014 compared to the six months ended June 30, 2013:

Revenues

For the six month periods ended June 30, 2014 that Company recorded $15,117 in income from its equity investment in RS Bakken One, LLC. As an equity investment we recorded our net share of income from this investment. There were no revenues for the comparable period in 2013.

Cost of Revenues

For the six month periods ended June 30, 2014 and 2013, we did not incur any cost of revenues from operations.

Professional fees

Professional fees for the six months ended June 30, 2014 were $36,889 compared to $3,721 for the same period in 2013. The professional fees are comprised primarily of legal and accounting fees. During the six months ended June 30, 2013, we had limited activity that incurred professional costs.

General and Administrative Expenses

Our general and administrative costs increased from $5,772 during the first six months of 2013 to $7,318 for the same period of 2014 with the primary increase related to travel costs.

Other income and expense

In the six month of 2014 we recorded $137,461 of interest expense on our outstanding 12% Senior Convertible Debentures and $93,919 in interest income on our option to purchase to purchase the Cambridge apartments. There were no such income and expense items for the same quarter in 2013. As part of the Change in Control disclosed in the Notes to the Consolidated Financial Statements, a shareholder agreed to cancel and forgive all indebtedness due to that shareholder in the amount of $17, 823. In addition this shareholder agreed to repay $14,256 in outstanding accounts payable. The relief of these two obligations is recorded as forgiveness of debt during the first six months of 2013.

Net loss

Net loss for the six month period ended June 30, 2014 was $72,827 compared to net income of $22,586 for the same period in 2013. The components of this net loss and reasons for the change are explained above.

Plan of Operations and Cash Requirements for the Next 12 Months

Anticipated Cash Requirements

Over the next 12 months, we have estimated our minimum cash requirements (not including the costs associated with our initial and any subsequent acquisition of properties) to be as follows:

Cash Operating Expenses		—
Legal and accounting fees	$	68,000
General and administrative expenses	$	6,000
Corporate communications and SEC filing fees	$	10,000
Total	$	84,000

As our operations are currently minimal, our operating expenses are similarly limited. However, as we implement our business plan to acquire, manage and hold multifamily real estate assets, we will incur significant additional expenses related to these transactions (particularly the formation of a REIT structure and acquisitions and financings of the properties themselves) and thereafter the operations of the properties. While we expect that our

2

acquired properties will generate sufficient cash flow to cover our operating costs related to our properties, no assurances can be given that this will in fact be the case.

At June 30, 2014, we had working capital of $300,917. For the next 12 months, we estimate minimum cash requirements of $84,000 to fund on-going operations before consideration of operating revenues and expenses related to any properties that may be acquired during the next 12 months.

Liquidity and Capital Resources

Our financial position as at June 30, 2014 and December 31, 2014 and the changes for the six months then ended are as follows:

Working Capital

	As of June 30, 2014		As of December 31, 2013
Current Assets	$	377,311	$	735,488
Current Liabilities		160,394		30,627
Working Capital	$	300,917	$	704,861	)

As of June 30, 2014 we had $272,598 in cash and cash equivalents. Working capital decreased by $403,944 from December 31, 2013 to June 30, 2014. The decrease resulted primarily from cash used to purchase a membership interest in RS Bakken One, LLC of $375,000 and an option to purchase the two Bakken properties owned by RS Bakken One, LLC in the amount of $25,000.

Cash Flows

	6 Months Ended June 30, 2014			6 Months Ended June 30, 2013
Net cash (used in) Operating Activities	$	(36,702	)	$	(5,242	)
Net cash (used in) Investing Activities		(415,117	)		0
Net cash provided by Financing Activities		200,000			4,177
Decrease in Cash during the Period		(251,819	)		(1,065	)
Cash, Beginning of Period		524,417			1,065
Cash, End of Period	$	272,598		$	0

Our net cash used in operating activities increased by $31,460 from the six month period ended June 30, 2013 to the same six month period in 2014. The net loss for the six months ended June 30, 2014 increased by $95,413 over the same period in the prior year and the increase is explained above under the results of operations.

In order to effectuate our business plan of acquiring multi-family properties and operating as a REIT, we we will be required to raise substantial additional capital through a debt and/or equity financing both at the company level as well as on specific assets. We can provide no assurance that we will be able to consumate such financings on favorable terms or at all. These conditions raise substantial doubt about our ability to continue as a “going concern”.

Off-Balance Sheet Arrangements

As of June 30, 2014, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4) of Regulation S-K.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

We are a smaller reporting company and therefore are not required to provide the information for this item for Form 10-Q.

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Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures 

As of the end of the period covered by this Report, our Chief Executive Officer and Chief Financial Officer (the “Certifying Officers”), conducted evaluations of our disclosure controls and procedures. As defined under Sections 13a – 15(e) and 15d – 15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the term “disclosure controls and procedures” means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission (“SEC”). Disclosure controls and procedures include without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including the Certifying Officers, to allow timely decisions regarding required disclosures.

Based on their evaluation, the Certifying Officers concluded that, as of June 30, 2014, our disclosure controls and procedures were not designed at a reasonable assurance level and were therefore ineffective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including the Certifying Officers, as appropriate, to allow timely decisions regarding required disclosure.

The material weakness which relate to internal control over financial reporting that was identified at June 30, 2014 that we did not have sufficient personnel staffing in our accounting and financial reporting department. As a result, we were not able to achieve adequate segregation of duties and were not able to provide for adequate review of the financial statements

This control deficiency could result in a reasonable possibility that material misstatements of the financial statements will not be prevented or detected on a timely basis. However, our management believes that the material weakness identified does not result in the restatement of any previously reported financial statements or any other related financial disclosure, and management does not believe that the material weakness had any effect on the accuracy of our financial statements included as part of this Quarterly Report.

We will continue to monitor and evaluate the effectiveness of our disclosure controls and procedures and our internal controls over financial reporting on an ongoing basis and are committed to taking action and implementing additional enhancements or improvements, as necessary and as funds allow.

Changes in internal control over financial reporting.

Except as disclosed above, there were no changes in our internal control over financial reporting that occurred during the quarter ended June 30, 2014 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Limitations on the Effectiveness of Internal Controls

Readers are cautioned that our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will necessarily prevent all fraud and material error. An internal control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our control have been detected. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any control design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.

4

PART II-OTHER INFORMATION

Item 1. Legal Proceedings.

None.

Item 1A. Risk Factors.

Factors that could cause our actual results to differ materially from those in this report are any of the risks described in our Transition Report on Form 10-K for the three month period ended March 31, 2104 filed with the SEC on March 27, 2014, as amended on March 31, 2014 to include Item 8 disclosure. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations.

As of the date of this Quarterly Report there have been no material changes to the risk factors disclosed in our Transition Report on Form 10-K for the three month period ended March 31, 2104 filed with the SEC, except we may disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC.

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

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

None.

Item 5. Other Information.

On June 10, 2014, the Company invested $375,000 in RS Bakken One, LLC, a Delaware limited liability company, that acquired two properties in North Dakota, one near Williston and one in Watford City (collectively, the “Properties”). The Company acquired approximately 18.8% membership interest in RS Bakken One, LLC. The Properties are located in the heart of the Bakken oil development and had a combined acquisition price of $5,700,000. In connection with this investment, the Company purchased an option from RS Bakken One, LLC for $25,000 that provides the Company the option to acquire 100% of the Properties after one year for a purchase price to be determined by a real estate appraisal, provided, however, the purchase price shall not be less than $7,000,000 or more than $8,000,000. Mr. Anderson, the Company’s Chairman of the Board, serves the manager of RS Bakken One, LLC and Mr. Kelly Randal, the Company’s Chief Operating Officer, Chief Financial Officer and Secretary, serves as Vice-President. RealSource Property Consulting LLC, an affiliate of the Company, is also an investor and provides certain asset and property management on the project. The description of the option acquired by the Company is qualified in its entirety by reference to the complete text of the Form of Right of First Refusal & Option Agreement attached hereto as Exhibit 10.9

5

Item 6. Exhibits.

No.	Description of Exhibit
10.9	Right of First Refusal and Option Agreement dated June 10, 2014, between the Company and RS Bakken One LLC.
31.1	Certification of Principal Executive Officer Pursuant to Securities Exchange Act Rules 13a-14(a) and 15(d)-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Principal Financial Officer Pursuant to Securities Exchange Act Rules 13a-14(a) and 15(d)-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS *	XBRL Instance Document
101.CAL *	XBRL Taxonomy Extension Calculation Linkbase Document
101.SCH *	XBRL Taxonomy Extension Schema Document
101.DEF *	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB *	XBRL Taxonomy Extension Labels Linkbase Document
101.PRE *	XBRL Taxonomy Extension Presentation Linkbase Document

*	XBRL (eXtensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
**	Filed herewith.

6

SIGNATURES

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

Date:  August 14, 2014	RealSource Residential, Inc.
	By:	/s/ Nathan W. Hanks
	Name:	Nathan W. Hanks
	Title:	President and Chief Executive Officer
	By:	/s/ V. Kelly Randall
	Name:	V. Kelly Randall
	Title:	Chief Operating Officer and Chief Financial Officer

7

EX-10.9

Realsource Residential, Inc. 10-Q  

Exhibit 10.9

RS BAKKEN ONE, LLC

to

REALSOURCE RESIDENTIAL, INC.

RIGHT OFFIRST REFUSAL & OPTION

Dated:As of June 10, 2014

Property Location:	6421 13 Mile Center Road NW	113, 115, 117, 119, 121, 123 and
	Williston, North Dakota	125 Frontier Avenue
	WilliamsCounty	City of Watford City, North Dakota
		McKenzie County

DOCUMENT PREPARED BY AND WHEN RECORDED,RETURN TO:

Michael Best & Friedrich LLP6995

Union Park Center, Suite 100

Salt Lake City, Utah 84047

Attention: Jason Rogers

RIGHT OF FIRST REFUSAL & OPTION

FortheOptionFee(ashereafterdefined)andothergoodandvaluableconsideration,RS BakkenOne,LLC,aDelawarelimitedliabilitycompany(the“Grantor”)havinganaddressof2089FortUnionBlvd,SaltLakeCity,UT84121,herebygrantstoRealSourceResidential,Inc., aNevadacorporation(“Grantee”),havinganaddressof2089FortUnionBlvd,SaltLakeCity,UT84121,therightoffirstrefusalandanoptiontopurchasethefollowingpropertyundertheterms andconditionshereof(collectively,the “Property”):

FeetitletotheparcelofrealpropertylocatedinMcKenzieCounty,NorthDakota, andtheleaseholdinterestintheparcelofrealpropertylocatedin WilliamsCounty,NorthDakotaundertheCrossRoadsLeaseAgreement,datedJanuary1, 2013,betweenBakkenDevelopmentSolutions,LLC,aKentuckylimitedliabilitycompany(“BDS”),astenant,andPilotTravelCentersLLC,aDelawarelimitedliabilitycompany(“Pilot”),aslandlord,asamendedbytheFirstAmendmenttoCrossRoadLeaseAgreement,datedFebruary11,2014,asassignedtoGrantorpursuanttotheAssignmentandAssumption ofLease,datedonoraboutthedatehereof,betweenBDS,asassignor, andGrantor,asassignee,assuchleasewas further amended by the Second Amendment to Cross Road Lease Agreement, dated on or about the date hereof between Grantor and Pilot and, as such parcels are described on Exhibit “A” hereto;

TOGETHERWITHallofGrantor’sright,titleandinterestinallrights,easements,appurtenances,buildings,improvements,fixturesandhereditamentsupon,underordirectlyorindirectlyassociatedwithorconnectedwithsuchpropertyandsubjecttoall encumbrances thereon.

Attachment:                       Exhibit “A”-- Description of Property

1.Option.AtanytimeafterthefirstanniversaryoftheEffectiveDateandpriortothesecondanniversaryoftheEffectiveDate(suchperiod,the“OptionExercisePeriod”)GranteeshallhavetheoptiontopurchasetheProperty(the“OptiontoPurchase”)duringtheOptionExercisePeriodfortheOptionPrice(asdefinedherein)subjecttoallofthetermsprovidedherein.The“OptionPrice”shallbeequaltothefairmarketvalueofthePropertyasdeterminedbyanappraisalbyanappraiseragreeduponbyGrantorandGranteeminus theOptionFee;provided,however,thattheOptionPriceshallbe nolessthan$7,000,000.00andno greaterthan$8,000,000.00. The “Option Fee” shall be $25,000.00.

a.IfGranteeelectstoexercisetheOptiontoPurchaseduringtheOptionExercise Period,GranteeshallnotifyGrantorofGrantee’selectiontoexercisetheOptiontoPurchaseinwritingatGrantor’saddresssetforthabove.Thedatesuchnotice isdeliveredpersonallytoGrantororsentbyUnitedStatesregisteredorcertifiedmail,postageprepaid,andaddressedtoGrantoratGrantor’saddresssetforthaboveisthe“Option Exercise Date”.

b.GranteeandGrantorshallusecommerciallyreasonableeffortstoobtaintherequiredconsents(includinganylenders,Grantor’smembersorotherrequiredapprovals,

the“RequiredConsents”)toclosethetransferofthePropertyassoonasreasonablypracticablefollowingtheOptionExerciseDate.Theclosingshallbesubjectto,amongotherthings,thereceiptofallrequiredconsents(suchdate,the“ClosingDate”).

c.ThisoptionisgivenwiththeunderstandingthatGranteeisfamiliarwiththeProperty,hasreviewedcurrenttitlereportsofthePropertyandhasreviewedtheloandocuments(asthesamemaybeamended,increased,renewed,extended,spread,consolidated,severed, restated, or otherwisechangedfromtimetotime,the“LoanDocuments”)encumberingthepropertyissuedbySilverpeakRealEstateFinanceLLC,aDelaware limited liability company, datedonoraboutthedatehereof.

2.RightofFirstRefusal.IfatanytimepriortothesecondanniversaryoftheEffectiveDateGrantororGrantor’ssuccessors,asthecasemaybe,receivesanybonafideoffertopurchase(the“Offer to Purchase”)theProperty,whichofferGrantorortheGrantor’ssuccessorsdesirestoaccept,GrantororGrantor’ssuccessorsshallnotifyGranteeinwriting(atGrantee’s addresssetforthabove)ofsuchoffer,andGranteeshallhavethirty(30)businessdaysafter receipt of such notice within which to notify Grantor or Grantor’s successorsof Grantee’s electiontopurchasethePropertydescribedinsuchofferonthetermsandconditions setforthin such offer. The notice from Grantor or Grantor’s successors to Grantee shall contain a copy of theOffertoPurchaseasdescribedintheoffer.

a.IfGranteeelectstoexerciseitsrightoffirstrefusal,byprovidingnoticetoGrantororGrantor’ssuccessorswithinthetimeperiodsetforthabove,GranteeandGrantororGrantor’ssuccessorsshallproceedtoclosethetransferofthe Property(subjecttothereceiptoftheRequiredConsents),ortheportionthereofdescribedinthe offer,inthe time periodfortheclosingas set forth in the Offer to Purchase.

b.IntheeventthatGranteefailstoprovideGrantororGrantor’ssuccessorswithnotice within the time period set forth above,Grantor or Grantor’s successors maytransfertheProperty,ortheportionthereofsetforthintheOffertoPurchase,freeandclearofthetermsofthisAgreementandofanyrightsofGranteesolongastheOptionFeeis repaidtoGranteeattheclosingofsuchsale.

c.AllnoticeshereundershallbeinwritingandshallbeeffectivewhendeliveredpersonallyorwhensentbyUnitedStatesregisteredorcertifiedmail,postageprepaid,andaddressedtothepartiesattheaddressesset forth above.

3.Subordination.Notwithstandinganythinghereintothecontrary,thisRightofFirstRefusal&Option,andalltermsandprovisionshereof,asthesamemayhereafterbemodified,amendedorextended,(i)shallbe,andshallatalltimesremain,subjectandsubordinatetotheterms,conditionsandprovisionsoftheLoanDocumentsandthelienthereofand (ii)shallautomaticallyterminateupontheforeclosureordeed-in-lieuofforeclosureofthelienscreatedbytheLoanDocuments.

[Signature page follows]

Exhibit “A”

DESCRIPTION OF PROPERTY

McKenzie County, North Dakota Parcel

Parcel 1:

Lot 1, Block 1, The Crossings at Watford City,McKenzieCounty,NorthDakota,asshownonthe Plat recorded as Document No. 464880

Parcel 2:

Togetherwiththebeneficialrighttouse360footby170footprivate storm drainage facilities easement as shown in Warranty Deed recorded October17,2012as Document No.441489,McKenzie County, North Dakota

Williams County, North Dakota Parcel

Parcel 1:

UnitsEandF,inLot6,Block3,13MileCenterSubdivisionlocatedinthe SW¼ of Section 12, Township156 North, Range 101 West, 5thP.M., Williams County,NorthDakota

Parcel 2:

Togetherwiththe beneficial right touseparkingareaslocatedon Lot 6, Block 3, 13 Mile CenterSubdivisionlocatedintheSW¼ of Section 12, Township 156 North, Range 101 West, 5thP.M.,Williams County, NorthDakota

EX-31.1

Realsource Residential, Inc. 10-Q  

Exhibit 31.1

Certification of Chief Executive Officer

Pursuant to Rule 13a-14(a)

I, Nathan W. Hanks, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of RealSource Residential, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 14, 2014

/s/ Nathan W. Hanks

Nathan W. Hanks

President and Chief Executive Officer

EX-31.2

Realsource Residential, Inc. 10-Q  

Exhibit 31.2

Certification of Chief Financial Officer

Pursuant to Rule 13a-14(a)

I, V. Kelly Randall, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of RealSource Residential, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 14, 2014

/s/ V. Kelly Randall

Name: V. Kelly Randall

Title: Chief Operating Officer and Chief Financial Officer

EX-32.1

Realsource Residential, Inc. 10-Q 

Exhibit 32.1

REALSOURCE RESIDENTIAL, INC.

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of RealSource Residential, Inc. (the “Company”) on Form 10-Q for the period ending June 30, 2014, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Nathan W. Hanks, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. ss.1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/ Nathan W. Hanks

Name: Nathan W. Hanks

Title: President and Chief Executive Officer

Date: August 14, 2014

EX-32.2

Realsource Residential, Inc. 10-Q  

Exhibit 32.2

REALSOURCE RESIDENTIAL, INC.

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of RealSource Residential, Inc. (the “Company”) on Form 10-Q for the period ending June 30, 2014, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, V. Kelly Randall, Chief Financial Officer and Chief Operating Officer the Company, certify, pursuant to 18 U.S.C. ss.1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/ V. Kelly Randall

Name: V. Kelly Randall

Title: Chief Operating Officer and Chief Financial Officer

Date: August 14, 2014

XML

Going Concern

6 Months Ended

Jun. 30, 2014

Going Concern

Going Concern

The financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business.

As reflected in the financial statements, the Company had an accumulated deficit at June 30, 2014, a net loss and net cash used in operating activities for the reporting period then ended. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

The Company is attempting to commence operations and generate sufficient revenue; however, the Company’s cash position may not be sufficient to support the Company’s daily operations. While the Company believes in the viability of its strategy to generate sufficient revenue and in its ability to raise additional funds, there can be no assurances to that effect. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to further implement its business plan and generate sufficient revenue and its ability to raise additional funds.

The financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

XML

Significant and Critical Accounting Policies and Practices

6 Months Ended

Jun. 30, 2014

Significant and Critical Accounting Policies and Practices

Significant and Critical Accounting Policies and Practices

The Management of the Company is responsible for the selection and use of appropriate accounting policies and the appropriateness of accounting policies and their application. Critical accounting policies and practices are those that are both most important to the portrayal of the Company’s financial condition and results and require management’s most difficult, subjective, or complex judgments, often as a result of the need to make estimates about the effects of matters that are inherently uncertain. The Company’s significant and critical accounting policies and practices are disclosed below as required by generally accepted accounting principles.

Basis of Presentation - Unaudited Interim Financial Information

The accompanying unaudited interim financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information, and with the rules and regulations of the United States Securities and Exchange Commission (“SEC”) to Form 10-Q and Article 8 of Regulation S-X.  Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements.  The unaudited interim financial statements furnished reflect all adjustments (consisting of normal recurring accruals) which are, in the opinion of management, necessary to a fair statement of the results for the interim periods presented.  Interim results are not necessarily indicative of the results for the full year.  These financial statements should be read in conjunction with the financial statements of the Company for the transition period ended December 31, 2013 and notes thereto contained in the Company’s Transitional Report on Form 10-K as filed with the SEC on March 27, 2014.

Development Stage Company

The Company is a development stage company as defined by section 915-10-20 of the FASB Accounting Standards Codification. Although the Company recognized nominal amount of revenues, it is still devoting substantially all of its efforts on establishing the business and its planned principal operations have not commenced. All losses accumulated since inception have been considered as part of the Company's development stage activities.

The Company is considered a development stage company. The Company has elected to adopt early application of Accounting Standards Update No. 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements. Upon adoption, the Company no longer presents or discloses inception-to-date information and other remaining disclosure requirements of Topic 915.

Fiscal Year-End

The Company originally elected September 30th as its fiscal year-end date upon formation

On July 9, 2013, the Company’s board of directors voted to change the Company’s fiscal year end from September 30th to December 31st. The Company’s 2014 fiscal began on January 1, 2014 and will end on December 31, 2014.

Use of Estimates and Assumptions and Critical Accounting Estimates and Assumptions

The preparation of 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 and disclosure of contingent assets and liabilities at the date(s) of the financial statements and the reported amounts of revenues and expenses during the reporting period(s).

Critical accounting estimates are estimates for which (a) the nature of the estimate is material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change and (b) the impact of the estimate on financial condition or operating performance is material. The Company’s critical accounting estimates and assumptions affecting the financial statements were:

(i) Assumption as a going concern: Management assumes that the Company will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business;

(ii) Valuation allowance for deferred tax assets: Management assumes that the realization of the Company’s net deferred tax assets resulting from its net operating loss (“NOL”) carry–forwards for Federal income tax purposes that may be offset against future taxable income was not considered more likely than not and accordingly, the potential tax benefits of the net loss carry-forwards are offset by a full valuation allowance. Management made this assumption based on (a) the Company has incurred recurring losses, (b) general economic conditions, and (c) its ability to raise additional funds to support its daily operations by way of a public or private offering, among other factors.

(iii) Estimates and assumptions used in valuation of equity instruments: Management estimates expected term of share options and similar instruments, expected volatility of the Company’s common shares and the method used to estimate it, expected annual rate of quarterly dividends, and risk free rate(s) to value share options and similar instruments.

These significant accounting estimates or assumptions bear the risk of change due to the fact that there are uncertainties attached to these estimates or assumptions, and certain estimates or assumptions are difficult to measure or value.

Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable in relation to the financial statements taken as a whole under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

Management regularly evaluates the key factors and assumptions used to develop the estimates utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions. After such evaluations, if deemed appropriate, those estimates are adjusted accordingly.

Actual results could differ from those estimates.

Reclassification

Certain amounts in the prior period financial statements have been reclassified to conform to the current period presentation. These reclassifications had no effect on reported income or losses.

Fair Value of Financial Instruments

The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:

Level 1	Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.
Level 2	Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.
Level 3	Pricing inputs that are generally observable inputs and not corroborated by market data.

Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable.

The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.

The carrying amounts of the Company’s financial assets and liabilities, such as cash, interest receivable and accounts payable and accrued liabilities, approximate their fair values because of the short maturity of these instruments.

The Company’s convertible notes payable approximate the fair value of such instruments based upon management’s best estimate of interest rates that would be available to the Company for similar financial arrangements at June 30, 2014.

Transactions involving related parties cannot be presumed to be carried out on an arm's-length basis, as the requisite conditions of competitive, free-market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm's-length transactions unless such representations can be substantiated.

Cash Equivalents

The Company considers all highly liquid investments with maturities of three months or less at the time of purchase to be cash equivalents.

Investments - Equity Method and Joint Ventures

The Company accounts for investments in common stock or in-substance common stock (or both common stock and in-substance common stock) of an investee of which the Company has significant influence (see paragraph 323-10-15-6) in the operating or financial policies even though the Company holds 50% or less of the common stock or in-substance common stock, in accordance with sub-topic 323-10 of the FASB Accounting Standards Codification (“Sub-topic 323-10”).

Method of Accounting

Investments held in stock of entities other than subsidiaries, namely corporate joint ventures and other non-controlled entities usually are accounted for by one of three methods (i) the fair value method (addressed in Topic 320), (ii) the equity method (addressed in Topic 323), or (iii) the cost method (addressed in Subtopic 325-20). Pursuant to paragraph 323-10-05-5 the equity method tends to be most appropriate if an investment enables the investor to influence the operating or financial policies of the investee.

The Ability to Exercise Significant Influence

Pursuant to paragraph 323-10-15-6 the ability to exercise significant influence over operating and financial policies of an investee may be indicated in several ways, including but limited to the following: a. Representation on the board of directors, b. Participation in policy-making processes, c. Material intra-entity transactions, d. Interchange of managerial personnel, and e. Technological dependency. Pursuant to paragraph 323-10-15-8 an investment (direct or indirect) of 20 percent or more of the voting stock of an investee shall lead to a presumption that in the absence of predominant evidence to the contrary an investor has the ability to exercise significant influence over an investee. Conversely, an investment of less than 20 percent of the voting stock of an investee shall lead to a presumption that an investor does not have the ability to exercise significant influence unless such ability can be demonstrated.

Initial and Subsequent Measurement

Pursuant to Paragraph 323-10-30-2 an investor shall measure an investment in the common stock of an investee (including a joint venture) initially at cost in accordance with the guidance in Section 805-50-30. An investor shall initially measure, at fair value, a retained investment in the common stock of an investee (including a joint venture) in a deconsolidation transaction in accordance with paragraphs 810-10-40-3A through 40-5.

Pursuant to Section 323-10-35 under the equity method, an investor shall recognize its share of the earnings or losses of an investee in the periods for which they are reported by the investee in its financial statements rather than in the period in which an investee declares a dividend. An investor shall adjust the carrying amount of an investment for its share of the earnings or losses of the investee after the date of investment including adjustments similar to those made in preparing consolidated financial statements and shall report the recognized earnings or losses in income. An investor's share of losses of an investee may equal or exceed the carrying amount of an investment accounted for by the equity method plus advances made by the investor. An equity method investor shall continue to report losses up to the investor's investment carrying amount, including any additional financial support made or committed to by the investor and the investor ordinarily shall discontinue applying the equity method if the investment (and net advances) is reduced to zero and shall not provide for additional losses unless the investor has guaranteed obligations of the investee or is otherwise committed to provide further financial support for the investee. If the investee subsequently reports net income, the investor shall resume applying the equity method only after its share of that net income equals the share of net losses not recognized during the period the equity method was suspended. If a series of operating losses of an investee or other factors indicate that a decrease in value of the investment has occurred that is other than temporary the loss in value of an investment that is other than a temporary decline shall be recognized. Evidence of a loss in value might include, but would not necessarily be limited to, absence of an ability to recover the carrying amount of the investment or inability of the investee to sustain an earnings capacity that would justify the carrying amount of the investment. A current fair value of an investment that is less than its carrying amount may indicate a loss in value of the investment. However, a decline in the quoted market price below the carrying amount or the existence of operating losses alone is not necessarily indicative of a loss in value that is other than temporary.

Disclosure

Pursuant to paragraph 323-10-50-3 all of the following disclosures generally shall apply to the equity method of accounting for investments in common stock:

a. Financial statements of an investor shall disclose all of the following parenthetically, in notes to financial statements, or in separate statements or schedules: (1) the name of each investee and percentage of ownership of common stock. (2) The accounting policies of the investor with respect to investments in common stock. Disclosure shall include the names of any significant investee entities in which the investor holds 20 percent or more of the voting stock, but the common stock is not accounted for on the equity method, together with the reasons why the equity method is not considered appropriate, and the names of any significant investee corporations in which the investor holds less than 20 percent of the voting stock and the common stock is accounted for on the equity method, together with the reasons why the equity method is considered appropriate. (3) The difference, if any, between the amount at which an investment is carried and the amount of underlying equity in net assets and the accounting treatment of the difference.

b. For those investments in common stock for which a quoted market price is available, the aggregate value of each identified investment based on the quoted market price usually shall be disclosed.

c. If investments in common stock of corporate joint ventures or other investments accounted for under the equity method are, in the aggregate, material in relation to the financial position or results of operations of an investor, it may be necessary for summarized information as to assets, liabilities, and results of operations of the investees to be presented in the notes or in separate statements, either individually or in groups, as appropriate.

d. Conversion of outstanding convertible securities, exercise of outstanding options and warrants, and other contingent issuances of an investee may have a significant effect on an investor's share of reported earnings or losses. Accordingly, material effects of possible conversions, exercises, or contingent issuances shall be disclosed in notes to financial statements of an investor.

Related Parties

The Company follows subtopic 850-10 of the FASB Accounting Standards Codification for the identification of related parties and disclosure of related party transactions.

Pursuant to Section 850-10-20 the related parties include a. affiliates of the Company; b. entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 825–10–15, to be accounted for by the equity method by the investing entity; c. trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management; d. principal owners of the Company; e. management of the Company; f. other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g. other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.

The financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated or combined financial statements is not required in those statements. The disclosures shall include: a. the nature of the relationship(s) involved; b. a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; c. the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and d. amounts due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.

Commitment and Contingencies

The Company follows subtopic 450-20 of the FASB Accounting Standards Codification to report accounting for contingencies. Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.

If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed.

Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. Management does not believe, based upon information available at this time, that these matters will have a material adverse effect on the Company’s financial position, results of operations or cash flows. However, there is no assurance that such matters will not materially and adversely affect the Company’s business, financial position, and results of operations or cash flows.

Revenue Recognition

The Company follows paragraph 605-10-S99-1 of the FASB Accounting Standards Codification for revenue recognition. The Company recognizes revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the product has been shipped or the services have been rendered to the customer, (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured. 

Income Tax Provision

The Company accounts for income taxes under Section 740-10-30 of the FASB Accounting Standards Codification. Deferred income tax assets and liabilities are determined based upon differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the statements of operations in the period that includes the enactment date.

The Company adopted section 740-10-25 of the FASB Accounting Standards Codification (“Section 740-10-25”). Section 740-10-25 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under Section 740-10-25, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement. Section 740-10-25 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures.

The estimated future tax effects of temporary differences between the tax basis of assets and liabilities are reported in the accompanying balance sheets, as well as tax credit carry-backs and carry-forwards. The Company periodically reviews the recoverability of deferred tax assets recorded on its balance sheets and provides valuation allowances as management deems necessary.

Management makes judgments as to the interpretation of the tax laws that might be challenged upon an audit and cause changes to previous estimates of tax liability. In addition, the Company operates within multiple taxing jurisdictions and is subject to audit in these jurisdictions. In management’s opinion, adequate provisions for income taxes have been made for all years. If actual taxable income by tax jurisdiction varies from estimates, additional allowances or reversals of reserves may be necessary.

Uncertain Tax Positions

The Company did not take any uncertain tax positions and had no adjustments to its income tax liabilities or benefits pursuant to the provisions of Section 740-10-25 for the reporting period ended June 30, 2014 or 2013.

Limitation on Utilization of NOLs due to Change in Control

Pursuant to the Internal Revenue Code Section 382 (“Section 382”), certain ownership changes may subject the NOL’s to annual limitations which could reduce or defer the NOL. Section 382 imposes limitations on a corporation’s ability to utilize NOLs if it experiences an “ownership change.” In general terms, an ownership change may result from transactions increasing the ownership of certain stockholders in the stock of a corporation by more than 50 percentage points over a three-year period. In the event of an ownership change, utilization of the NOLs would be subject to an annual limitation under Section 382 determined by multiplying the value of its stock at the time of the ownership change by the applicable long-term tax-exempt rate. Any unused annual limitation may be carried over to later years. The imposition of this limitation on its ability to use the NOLs to offset future taxable income could cause the Company to pay U.S. federal income taxes earlier than if such limitation were not in effect and could cause such NOLs to expire unused, reducing or eliminating the benefit of such NOLs. 

Net Income (Loss) per Common Share

Net income (loss) per common share is computed pursuant to Section 260-10-45 of the FASB Accounting Standards Codification. Basic net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. Diluted net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock and potentially dilutive outstanding shares of common stock during the period to reflect the potential dilution that could occur from common shares issuable through contingent share arrangements, stock options and warrants.

The following table shows the potentially outstanding dilutive common shares excluded from the diluted net income (loss) per common share calculation as they were anti-dilutive:

	Potentially Outstanding Dilutive Common Shares
	For the Reporting Period Ended June 30, 2014		For the Reporting Period Ended June 30, 2013
Convertible Notes Payable Shares and Related Warrant Shares
On December 9, 2013, the Company consummated the closing (the “Closing”) of a private placement offering (the “Offering”) of 231 units (“Units”) for $10,000 per Unit, for aggregate gross proceeds of $2,310,000. No placement agents or brokers were utilized by the Company in connection with the Offering. Each Unit consists of: (i) a $10,000 face value 12% Series A Senior Unsecured Convertible Promissory Note of the Company (collectively, the “Notes”) convertible into shares of Common Stock at $0.50 per share, and (ii) one detachable Common Stock Purchase Warrant (collectively, the “Warrants”) to purchase 10,000 shares (the “Warrant Shares”) of common stock of the Company (the “Common Stock”) with an exercise price of $1.00 per share expiring five years from the date of issuance.		(i) 4,620,000 (ii) 2,310,000		-
Sub-total: convertible notes payable shares and related warrant shares		6,930,000		-
Total potentially outstanding dilutive common shares		6,930,000		-

Cash Flows Reporting

The Company adopted paragraph 230-10-45-24 of the FASB Accounting Standards Codification for cash flows reporting, classifies cash receipts and payments according to whether they stem from operating, investing, or financing activities and provides definitions of each category, and uses the indirect or reconciliation method (“Indirect method”) as defined by paragraph 230-10-45-25 of the FASB Accounting Standards Codification to report net cash flow from operating activities by adjusting net income to reconcile it to net cash flow from operating activities by removing the effects of (a) all deferrals of past operating cash receipts and payments and all accruals of expected future operating cash receipts and payments and (b) all items that are included in net income that do not affect operating cash receipts and payments. The Company reports the reporting currency equivalent of foreign currency cash flows, using the current exchange rate at the time of the cash flows and the effect of exchange rate changes on cash held in foreign currencies is reported as a separate item in the reconciliation of beginning and ending balances of cash and cash equivalents and separately provides information about investing and financing activities not resulting in cash receipts or payments in the period pursuant to paragraph 830-230-45-1 of the FASB Accounting Standards Codification.

Subsequent Events

The Company follows the guidance in Section 855-10-50 of the FASB Accounting Standards Codification for the disclosure of subsequent events. The Company will evaluate subsequent events through the date when the financial statements were issued. Pursuant to ASU 2010-09 of the FASB Accounting Standards Codification, the Company as an SEC filer considers its financial statements issued when they are widely distributed to users, such as through filing them on EDGAR.

Recently Issued Accounting Pronouncements

In June 2014, the FASB issued ASU No. 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation.

The amendments in this Update remove the definition of a development stage entity from the Master Glossary of the Accounting Standards Codification, thereby removing the financial reporting distinction between development stage entities and other reporting entities from U.S. GAAP. In addition, the amendments eliminate the requirements for development stage entities to (1) present inception-to-date information in the statements of income, cash flows, and shareholder equity, (2) label the financial statements as those of a development stage entity, (3) disclose a description of the development stage activities in which the entity is engaged, and (4) disclose in the first year in which the entity is no longer a development stage entity that in prior years it had been in the development stage.

The amendments also clarify that the guidance in Topic 275, Risks and Uncertainties, is applicable to entities that have not commenced planned principal operations.

Finally, the amendments remove paragraph 810-10-15-16. Paragraph 810-10-15-16 states that a development stage entity does not meet the condition in paragraph 810-10-15-14(a) to be a variable interest entity if (1) the entity can demonstrate that the equity invested in the legal entity is sufficient to permit it to finance the activities that it is currently engaged in and (2) the entity’s governing documents and contractual arrangements allow additional equity investments.

The amendments in this Update also eliminate an exception provided to development stage entities in Topic 810, Consolidation, for determining whether an entity is a variable interest entity on the basis of the amount of investment equity that is at risk. The amendments to eliminate that exception simplify U.S. GAAP by reducing avoidable complexity in existing accounting literature and improve the relevance of information provided to financial statement users by requiring the application of the same consolidation guidance by all reporting entities. The elimination of the exception may change the consolidation analysis, consolidation decision, and disclosure requirements for a reporting entity that has an interest in an entity in the development stage.

The amendments related to the elimination of inception-to-date information and the other remaining disclosure requirements of Topic 915 should be applied retrospectively except for the clarification to Topic 275, which shall be applied prospectively. For public business entities, those amendments are effective for annual reporting periods beginning after December 15, 2014, and interim periods therein.

Early application of each of the amendments is permitted for any annual reporting period or interim period for which the entity’s financial statements have not yet been issued (public business entities) or made available for issuance (other entities). Upon adoption, entities will no longer present or disclose any information required by Topic 915.

In June 2014, the FASB issued the FASB Accounting Standards Update No. 2014-12 “Compensation—Stock Compensation (Topic 718) : Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period” (“ASU 2014-12”).

The amendments clarify the proper method of accounting for share-based payments when the terms of an award provide that a performance target could be achieved after the requisite service period.  The Update requires that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. The performance target should not be reflected in estimating the grant-date fair value of the award. Compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service has already been rendered.

The amendments in this Update are effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. Earlier adoption is permitted.

Management does not believe that any recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying consolidated financial statements.

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Consolidated Balance Sheets (USD $)	Jun. 30, 2014	Dec. 31, 2013
CURRENT ASSETS:
Cash	$ 272,598	$ 524,417
Subscription receivable	0	200,000
Interest receivable	104,713	11,071
Total Current Assets	377,311	735,488
DEPOSIT	1,562,636	1,537,636
Investment	390,117	0
Total Assets	2,330,064	2,273,124
CURRENT LIABILITIES:
Accounts payable and accrued liabilities	160,394	30,627
Total Current Liabilities	160,394	30,627
LONG-TERM LIABILILTIES:
Convertible notes payable	2,310,000	2,310,000
Total Long Term Liabilities	2,310,000	2,310,000
Total Liabilities	2,470,394	2,340,627
STOCKHOLDERS' DEFICIT:
Preferred stock par value $0.001:100,000,000 shares authorized; none issued or outstanding	0	0
Common stock par value $0.001:100,000,000 shares authorized;11,975,645 shares issued and outstanding	11,975	11,975
Additional paid-in capital	7,215,770	7,215,770
Accumulated deficit	(7,368,075)	(7,295,248)
Total Stockholders' Deficit	(140,330)	(67,503)
Total Liabilities and Stockholders' Deficit	$ 2,330,064	$ 2,273,124

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Consolidated Statements of Cash Flows (USD $)	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013
Cash flows operating activities:
Net income (loss)	$ (72,827)	$ 22,586
Changes in operating assets and liabilities:
Prepaid expenses	0	2,125
Due from related party	0	(705)
Other receivables	(93,642)	(900)
Accounts payable and accrued liabilities	129,767	(28,348)
Net cash used in operating activities	(36,702)	(5,242)
Cash flows from investing activities:
Investment	(390,117)	0
Deposit	(25,000)	0
Net cash used in investing activities	(415,117)	0
Cash flows from financing activities:
Advances from (repayment made to) related party	0	(30,823)
Proceeds from issuance of convertible notes payable	200,000	0
Issuance of common stock	0	35,000
Net cash provided by financing activities	200,000	4,177
Net change in cash	(251,819)	(1,065)
Cash at beginning of reporting period	524,417	1,065
Cash at end of reporting period	272,598	0
Supplemental disclosure of cash flows information:
Interest paid	0	0
Income tax paid	0	0
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Common stock issued for debt	$ 0	$ 0

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Black-Scholes option-pricing model weighted-average assumptions (Details)	12 Months Ended
	Dec. 31, 2013
Black-Scholes option-pricing model weighted-average assumptions
Expected life (year)	5 years
Expected volatility	61.39%
Expected annual rate of quarterly dividends	0.00%
Risk-free rate	1.54%

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Outstanding and exercisable warrants (Details) (Warrants, USD $)	6 Months Ended
	Jun. 30, 2014
Warrants
Range of Exercise Prices	2.00
Outstanding, Ending	2,310,000
Warrants Outstanding Average Remaining Contractual Life (in years)	4 years 8 months 12 days
Weighted Average Exercise Price Outstanding, Ending	$ 2.00
Earned and exercisable, Ending	2,310,000
Warrants Exercisable Average Remaining Contractual Life (in years)	4 years 8 months 12 days
Weighted Average Exercise Price Exercisable, Ending	$ 2.00

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Organization and Operations

6 Months Ended

Jun. 30, 2014

Organization and Operations

Organization and Operations

Upstream Biosciences, Inc.

Upstream Biosciences, Inc. ("Upstream Biosciences") was incorporated on March 20, 2002 under the laws of the State of Nevada. Upstream Biosciences engaged in developing technology relating to biomarker identification, disease susceptibility and drug response areas of cancer.

Change in Control

On May 24, 2013, Charles El-Moussa and Six Capital Limited (“Six Capital”) (collectively, the “Sellers”), as majority stockholders of Upstream Biosciences, Inc., a Nevada corporation, and RealSource Acquisitions Group, LLC, a Utah limited liability company, and Chesterfield Faring Ltd., a New York corporation (collectively, the “Purchasers”), entered into a Securities Purchase Agreement (the “Agreement”) pursuant to which the Sellers agreed to sell to the Purchasers an aggregate of 10,778,081 shares (representing approximately 90% of the issued and outstanding voting securities of the Company) of common stock of the Company (the “Common Stock”) for $175,000 in cash from the personal funds of the Purchasers ..

RealSource Residential, Inc.

On July 11, 2013, Upstream Biosciences entered into an Agreement and Plan of Merger (the “Merger Agreement”) pursuant to which Upstream Biosciences merged with its newly formed, wholly owned subsidiary, RealSource Residential, Inc., a Nevada corporation (“Merger Sub” and such merger transaction, the “Merger”) with the Company remaining as the surviving corporation under the name “RealSource Residential, Inc.” (the “Surviving Company” or the “Company”). Upon the consummation of the Merger, the separate existence of Merger Sub ceased and shareholders of the Company became shareholders of the surviving company named RealSource Residential, Inc. The Merger was effective on Monday, July 15, 2013 and was approved by the Financial Industry Regulatory Authority on August 5, 2013.

The Company has been engaged in real estate ownership and management based since the merger with RealSource Residential, Inc.

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Consolidated Balance Sheets (Parenthetical) (USD $)	Jun. 30, 2014	Dec. 31, 2013
Assets [Abstract]
Preferred Stock, par value	$ 0.001	$ 0.001
Preferred Stock, shares authorized	100,000,000	100,000,000
Common Stock, par value	$ 0.001	$ 0.001
Common Stock, shares authorized	100,000,000	100,000,000
Common Stock, shares issued	11,975,645	11,975,645
Common Stock, shares outstanding	11,975,645	11,975,645

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Investment (Tables)

6 Months Ended

Jun. 30, 2014

Schedule of Investments [Abstract]

Summary of Investment

	June 30, 2014		December 31, 2013
Investment	$	375,000	$	-
Add: proportional share of net income of an equity investment		15,117		-
	$	390,117	$	-

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Document and Entity Information	6 Months Ended
	Jun. 30, 2014	Aug. 14, 2014
Document and Entity Information
Entity Registrant Name	RealSource Residential, Inc
Trading Symbol	RSRT
Document Type	10-Q
Document Period End Date	Jun. 30, 2014
Amendment Flag	false
Entity Central Index Key	0001174891
Current Fiscal Year End Date	--12-31
Entity Common Stock, Shares Outstanding		11,975,645
Entity Filer Category	Smaller Reporting Company
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q2

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Schedule of weighted average assumptions (Tables)

6 Months Ended

Jun. 30, 2014

Schedule of weighted average assumptions:

Schedule of weighted average assumptions

	December 9, 2013
Expected life (year)		5
Expected volatility (*)		61.39	%
Expected annual rate of quarterly dividends		0.00	%
Risk-free rate(s)		1.54	%

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Consolidated Statements of Operations (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Revenues [Abstract]
Revenue from equity investments in real estate	$ 15,117	$ 0	$ 15,117	$ 0
Operating expenses:
Professional fees	13,050	1,000	36,589	3,721
General and administrative expenses	2,274	3,745	7,813	5,772
Total operating expenses	15,324	4,745	44,402	9,493
Loss from operations	(207)	(4,745)	(29,285)	(9,493)
Other (income) expense:
Interest and finance charges	69,110	0	137,461	0
Interest income	(47,271)	0	(93,919)	0
Forgiveness of debt	0	(32,079)	0	(32,079)
Other (income) expense, net	21,839	(32,079)	43,542	(32,079)
Income (loss) before income tax provision	(22,046)	27,334	(72,827)	22,586
Income tax provision	0	0	0	0
Net income (loss)	$ (22,046)	$ 27,334	$ (72,827)	$ 22,586
Net income (loss) per common share:
- Basic and diluted	$ 0.00	$ 0.01	$ (0.01)	$ 0.01
Weighted average common shares outstanding:
- Basic and diluted	11,975,645	2,140,630	11,975,645	2,304,630

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Related Party Transactions

6 Months Ended

Jun. 30, 2014

Related Party Transactions

Related Party Transactions

Related Parties

Related parties with whom the Company had transactions are:

Related Parties		Relationship
Michael Anderson		Chairman, significant stockholder and director
Nathan Hanks		President and CEO, significant stockholder and director
V. Kelly Randall		Chief Operating Officer, Chief Financial Officer and Director
RS Cambridge Apartments, LLC		An entity controlled and partially owned by the Chairman, President and CEO of the Company
RS Bakken One, LLC		An investee

Purchase and Sale Agreement - RS Cambridge Apartments, LLC

Proceeds from the Offering were used to (i) acquire a $2.85 million face value subordinated mortgage note secured by the Cambridge Apartments in Gulfport, Mississippi (the “Property”) for approximately $1,073,000 (the “B Note”) and (ii) fund (in the amount of approximately $465,000) certain costs associated with a refinancing of the senior mortgage indebtedness encumbering the Property (which refinancing occurred concurrently with the Company’s acquisition of the B Note).  The remaining proceeds from the Offering (in the amount of approximately $772,000) will be used for the general working capital of the Company.  The Cambridge Property is owned by RS Cambridge Apartments, LLC (the “Property Owner”). Nathan Hanks and Michael Anderson, officers and directors of the Company, own 10% of the outstanding membership interests of the Property Owner.

Immediately upon the acquisition of the B Note, the Company converted the B Note into a right of first refusal and option (the “Option”) in the amount of approximately $1,538,000 (the “Option Payment”), which is the amount of funds from the Offering used to purchase the B Note and otherwise support the refinancing of the Property.

To memorialize the Option, on December 9, 2013, the Company entered into a Right of First Refusal and Option Agreement (the “Option Agreement”) with the Property Owner.  The Option affords the Company the right to acquire the Property within five (5) years after the Closing at the fair value of the Property as negotiated between the Company and the Property Owner. In addition, under the Option, if the Property Owner receives an offer to purchase the Property during the option period, the Company will have a right of first refusal to purchase the Property on the same terms as the offer. Should the Company elect not to match the offer, the Option Payment is required to be repaid upon the sale of the Property to the other buyer. 

On March 12, 2014, the Company entered into a Purchase and Sale Agreement (the “PS Agreement”) with the Property Owner. The Option Payment was converted into a “Deposit” against the purchase of the property and shall continue to accrue interest at the rate of 12% per annum, from the date of the Option Agreement through the date of the purchase of the Property. The property will not be purchased prior to August 1, 2014.

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Convertible Notes

6 Months Ended

Jun. 30, 2014

Convertible Notes:

Convertible Notes

On December 9, 2013, the Company consummated the closing (the “Closing”) of a private placement offering (the “Offering”) of 231 units (“Units”) for $10,000 per Unit, for aggregate gross proceeds of $2,310,000. No placement agents or brokers were utilized by the Company in connection with the Offering. Each Unit consists of: (i) a $10,000 face value 12% Series A Senior Unsecured Convertible Promissory Note of the Company convertible into common shares at $0.50 per share (collectively, the “Notes”), and (ii) one detachable Common Stock Purchase Warrant (collectively, the “Warrants”), each to purchase 10,000 shares (the “Warrant Shares”) of common stock of the Company (the “Common Stock”) with an exercise price of $1.00 per share expiring five years from the date of issuance. In connection with the Closing, the Company entered into definitive subscription agreements (the “Subscription Agreements”) with twenty nine (29) accredited investors. The Notes accrue interest at 12% per year and have a maturity date of December 9, 2015.  The Notes will be automatically converted into shares of the Company’s Common Stock at the then applicable conversion price in the event that the 90-day trading volume weighted average price per share of the Common Stock exceeds $1.50 per share at any time during the term of the Notes.  

The Company estimated the relative fair value of the warrants on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions:

	December 9, 2013
Expected life (year)		5
Expected volatility (*)		61.39	%
Expected annual rate of quarterly dividends		0.00	%
Risk-free rate(s)		1.54	%

* As a thinly traded entity it is not practicable for the Company to estimate the expected volatility of its share price. The Company selected five (5) comparable public companies listed on NYSE MKT and NASDAQ Capital Market within real estate brokerage and management industry which the Company engages in to calculate the expected volatility. The Company calculated those five (5) comparable companies’ historical volatility over the expected life of the options or warrants and averaged them as its expected volatility.

The estimated relative fair value of the warrants was deminimus at the date of issuance using the Black-Scholes Option Pricing Model.

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Summary of the Company's Warrants Activities (Details) (Warrants, USD $)		Warrants USD ($)
Outstanding, Beginning at Dec. 31, 2013		2,310,000
Weighted Average Exercise Price Outstanding, Beginning at Dec. 31, 2013		$ 2.00
Number of Warrants Granted		0
Number of Warrants Canceled		0
Number of Warrants Exercised		0
Number of Warrants Expired		0
Weighted Average Exercise Price Granted		$ 0
Weighted Average Exercise Price Canceled		$ 0
Weighted Average Exercise Price Exercised		$ 0
Weighted Average Exercise Price Expired		$ 0
Weighted-average fair value granted during the period	[1]	$ 0.00
Aggregate Intrinsic Value vested and expected to vest at Jun. 30, 2014		$ 0
Aggregate Intrinsic Value Exercisable at Jun. 30, 2014		$ 0
Outstanding, Ending at Jun. 30, 2014		2,310,000
Earned and exercisable, Ending at Jun. 30, 2014		2,310,000
Weighted Average Exercise Price Outstanding, Ending at Jun. 30, 2014		$ 2.00
Weighted Average Exercise Price Exercisable, Ending at Jun. 30, 2014		$ 2.00

[1] The relative fair value at date of issuance was de minimis.

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Company's warrants activities (Tables)

6 Months Ended

Jun. 30, 2014

Company's warrants activities:

Schedule of warrants activities

	Number of Warrant Shares		Exercise Price Range Per Share			Weighted Average Exercise Price			Relative Fair Value at Date of Issuance		Aggregate Intrinsic Value
Balance, December 31, 2013		2,310,000		$	2.00		$	2.00	$	*		$	-
Granted		-			-			-		-			-
Canceled		-			-			-		-			-
Exercised		-			-			-		-			-
Expired		-			-			-		-			-
Balance, June 30, 2014		2,310,000		$	2.00		$	2.00	$	*		$	-
Earned and exercisable, June 30, 2014		2,310,000		$	2.00		$	2.00	$	*		$	-
Unvested, June 30, 2014		-		$	-		$	-	$	-		$	-

Schedule of Warrants Outstanding and Exercisable

	Warrants Outstanding						Warrants Exercisable
Range of Exercise Prices	Number Outstanding		Average Remaining Contractual Life  (in years)		Weighted Average Exercise Price		Number Exercisable		Average Remaining Contractual Life  (in years)		Weighted Average Exercise Price
$2.00		2,310,000		4.7	$	2.00		2,310,000		4.7	$	2.00

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ACCOUNTING POLICIES (Policies)

6 Months Ended

Jun. 30, 2014

Accounting Policies [Abstract]

Basis of Presentation - Unaudited Interim Financial Information

The accompanying unaudited interim financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information, and with the rules and regulations of the United States Securities and Exchange Commission (“SEC”) to Form 10-Q and Article 8 of Regulation S-X.  Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements.  The unaudited interim financial statements furnished reflect all adjustments (consisting of normal recurring accruals) which are, in the opinion of management, necessary to a fair statement of the results for the interim periods presented.  Interim results are not necessarily indicative of the results for the full year.  These financial statements should be read in conjunction with the financial statements of the Company for the transition period ended December 31, 2013 and notes thereto contained in the Company’s Transitional Report on Form 10-K as filed with the SEC on March 27, 2014.

Development Stage Company

The Company is a development stage company as defined by section 915-10-20 of the FASB Accounting Standards Codification. Although the Company recognized nominal amount of revenues, it is still devoting substantially all of its efforts on establishing the business and its planned principal operations have not commenced. All losses accumulated since inception have been considered as part of the Company's development stage activities.

The Company is considered a development stage company. The Company has elected to adopt early application of Accounting Standards Update No. 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements. Upon adoption, the Company no longer presents or discloses inception-to-date information and other remaining disclosure requirements of Topic 915.

Fiscal Year-End Policy

The Company originally elected September 30th as its fiscal year-end date upon formation

On July 9, 2013, the Company’s board of directors voted to change the Company’s fiscal year end from September 30th to December 31st. The Company’s 2014 fiscal began on January 1, 2014 and will end on December 31, 2014.

Use of Estimates and Assumptions and Critical Accounting Estimates and Assumptions

The preparation of 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 and disclosure of contingent assets and liabilities at the date(s) of the financial statements and the reported amounts of revenues and expenses during the reporting period(s).

Critical accounting estimates are estimates for which (a) the nature of the estimate is material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change and (b) the impact of the estimate on financial condition or operating performance is material. The Company’s critical accounting estimates and assumptions affecting the financial statements were:

(i) Assumption as a going concern: Management assumes that the Company will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business;

(ii) Valuation allowance for deferred tax assets: Management assumes that the realization of the Company’s net deferred tax assets resulting from its net operating loss (“NOL”) carry–forwards for Federal income tax purposes that may be offset against future taxable income was not considered more likely than not and accordingly, the potential tax benefits of the net loss carry-forwards are offset by a full valuation allowance. Management made this assumption based on (a) the Company has incurred recurring losses, (b) general economic conditions, and (c) its ability to raise additional funds to support its daily operations by way of a public or private offering, among other factors.

(iii) Estimates and assumptions used in valuation of equity instruments: Management estimates expected term of share options and similar instruments, expected volatility of the Company’s common shares and the method used to estimate it, expected annual rate of quarterly dividends, and risk free rate(s) to value share options and similar instruments.

These significant accounting estimates or assumptions bear the risk of change due to the fact that there are uncertainties attached to these estimates or assumptions, and certain estimates or assumptions are difficult to measure or value.

Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable in relation to the financial statements taken as a whole under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

Management regularly evaluates the key factors and assumptions used to develop the estimates utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions. After such evaluations, if deemed appropriate, those estimates are adjusted accordingly.

Actual results could differ from those estimates.

Reclassification

Certain amounts in the prior period financial statements have been reclassified to conform to the current period presentation. These reclassifications had no effect on reported income or losses.

Fair Value of Financial Instruments

The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:

Level 1	Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.
Level 2	Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.
Level 3	Pricing inputs that are generally observable inputs and not corroborated by market data.

Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable.

The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.

The carrying amounts of the Company’s financial assets and liabilities, such as cash, interest receivable and accounts payable and accrued liabilities, approximate their fair values because of the short maturity of these instruments.

The Company’s convertible notes payable approximate the fair value of such instruments based upon management’s best estimate of interest rates that would be available to the Company for similar financial arrangements at June 30, 2014.

Transactions involving related parties cannot be presumed to be carried out on an arm's-length basis, as the requisite conditions of competitive, free-market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm's-length transactions unless such representations can be substantiated.

Cash Equivalents Policy

The Company considers all highly liquid investments with maturities of three months or less at the time of purchase to be cash equivalents.

Investments - Equity Method and Joint Ventures

The Company accounts for investments in common stock or in-substance common stock (or both common stock and in-substance common stock) of an investee of which the Company has significant influence (see paragraph 323-10-15-6) in the operating or financial policies even though the Company holds 50% or less of the common stock or in-substance common stock, in accordance with sub-topic 323-10 of the FASB Accounting Standards Codification (“Sub-topic 323-10”).

Method of Accounting

Investments held in stock of entities other than subsidiaries, namely corporate joint ventures and other non-controlled entities usually are accounted for by one of three methods (i) the fair value method (addressed in Topic 320), (ii) the equity method (addressed in Topic 323), or (iii) the cost method (addressed in Subtopic 325-20). Pursuant to paragraph 323-10-05-5 the equity method tends to be most appropriate if an investment enables the investor to influence the operating or financial policies of the investee.

The Ability to Exercise Significant Influence

Pursuant to paragraph 323-10-15-6 the ability to exercise significant influence over operating and financial policies of an investee may be indicated in several ways, including but limited to the following: a. Representation on the board of directors, b. Participation in policy-making processes, c. Material intra-entity transactions, d. Interchange of managerial personnel, and e. Technological dependency. Pursuant to paragraph 323-10-15-8 an investment (direct or indirect) of 20 percent or more of the voting stock of an investee shall lead to a presumption that in the absence of predominant evidence to the contrary an investor has the ability to exercise significant influence over an investee. Conversely, an investment of less than 20 percent of the voting stock of an investee shall lead to a presumption that an investor does not have the ability to exercise significant influence unless such ability can be demonstrated.

Initial and Subsequent Measurement

Pursuant to Paragraph 323-10-30-2 an investor shall measure an investment in the common stock of an investee (including a joint venture) initially at cost in accordance with the guidance in Section 805-50-30. An investor shall initially measure, at fair value, a retained investment in the common stock of an investee (including a joint venture) in a deconsolidation transaction in accordance with paragraphs 810-10-40-3A through 40-5.

Pursuant to Section 323-10-35 under the equity method, an investor shall recognize its share of the earnings or losses of an investee in the periods for which they are reported by the investee in its financial statements rather than in the period in which an investee declares a dividend. An investor shall adjust the carrying amount of an investment for its share of the earnings or losses of the investee after the date of investment including adjustments similar to those made in preparing consolidated financial statements and shall report the recognized earnings or losses in income. An investor's share of losses of an investee may equal or exceed the carrying amount of an investment accounted for by the equity method plus advances made by the investor. An equity method investor shall continue to report losses up to the investor's investment carrying amount, including any additional financial support made or committed to by the investor and the investor ordinarily shall discontinue applying the equity method if the investment (and net advances) is reduced to zero and shall not provide for additional losses unless the investor has guaranteed obligations of the investee or is otherwise committed to provide further financial support for the investee. If the investee subsequently reports net income, the investor shall resume applying the equity method only after its share of that net income equals the share of net losses not recognized during the period the equity method was suspended. If a series of operating losses of an investee or other factors indicate that a decrease in value of the investment has occurred that is other than temporary the loss in value of an investment that is other than a temporary decline shall be recognized. Evidence of a loss in value might include, but would not necessarily be limited to, absence of an ability to recover the carrying amount of the investment or inability of the investee to sustain an earnings capacity that would justify the carrying amount of the investment. A current fair value of an investment that is less than its carrying amount may indicate a loss in value of the investment. However, a decline in the quoted market price below the carrying amount or the existence of operating losses alone is not necessarily indicative of a loss in value that is other than temporary.

Disclosure

Pursuant to paragraph 323-10-50-3 all of the following disclosures generally shall apply to the equity method of accounting for investments in common stock:

a. Financial statements of an investor shall disclose all of the following parenthetically, in notes to financial statements, or in separate statements or schedules: (1) the name of each investee and percentage of ownership of common stock. (2) The accounting policies of the investor with respect to investments in common stock. Disclosure shall include the names of any significant investee entities in which the investor holds 20 percent or more of the voting stock, but the common stock is not accounted for on the equity method, together with the reasons why the equity method is not considered appropriate, and the names of any significant investee corporations in which the investor holds less than 20 percent of the voting stock and the common stock is accounted for on the equity method, together with the reasons why the equity method is considered appropriate. (3) The difference, if any, between the amount at which an investment is carried and the amount of underlying equity in net assets and the accounting treatment of the difference.

b. For those investments in common stock for which a quoted market price is available, the aggregate value of each identified investment based on the quoted market price usually shall be disclosed.

c. If investments in common stock of corporate joint ventures or other investments accounted for under the equity method are, in the aggregate, material in relation to the financial position or results of operations of an investor, it may be necessary for summarized information as to assets, liabilities, and results of operations of the investees to be presented in the notes or in separate statements, either individually or in groups, as appropriate.

d. Conversion of outstanding convertible securities, exercise of outstanding options and warrants, and other contingent issuances of an investee may have a significant effect on an investor's share of reported earnings or losses. Accordingly, material effects of possible conversions, exercises, or contingent issuances shall be disclosed in notes to financial statements of an investor.

Related Parties Policy

The Company follows subtopic 850-10 of the FASB Accounting Standards Codification for the identification of related parties and disclosure of related party transactions.

Pursuant to Section 850-10-20 the related parties include a. affiliates of the Company; b. entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 825–10–15, to be accounted for by the equity method by the investing entity; c. trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management; d. principal owners of the Company; e. management of the Company; f. other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g. other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.

The financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated or combined financial statements is not required in those statements. The disclosures shall include: a. the nature of the relationship(s) involved; b. a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; c. the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and d. amounts due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.

Commitment and Contingencies

The Company follows subtopic 450-20 of the FASB Accounting Standards Codification to report accounting for contingencies. Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.

If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed.

Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. Management does not believe, based upon information available at this time, that these matters will have a material adverse effect on the Company’s financial position, results of operations or cash flows. However, there is no assurance that such matters will not materially and adversely affect the Company’s business, financial position, and results of operations or cash flows.

Revenue Recognition

The Company follows paragraph 605-10-S99-1 of the FASB Accounting Standards Codification for revenue recognition. The Company recognizes revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the product has been shipped or the services have been rendered to the customer, (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured.

Income Tax Provision Policy

The Company accounts for income taxes under Section 740-10-30 of the FASB Accounting Standards Codification. Deferred income tax assets and liabilities are determined based upon differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the statements of operations in the period that includes the enactment date.

The Company adopted section 740-10-25 of the FASB Accounting Standards Codification (“Section 740-10-25”). Section 740-10-25 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under Section 740-10-25, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement. Section 740-10-25 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures.

The estimated future tax effects of temporary differences between the tax basis of assets and liabilities are reported in the accompanying balance sheets, as well as tax credit carry-backs and carry-forwards. The Company periodically reviews the recoverability of deferred tax assets recorded on its balance sheets and provides valuation allowances as management deems necessary.

Management makes judgments as to the interpretation of the tax laws that might be challenged upon an audit and cause changes to previous estimates of tax liability. In addition, the Company operates within multiple taxing jurisdictions and is subject to audit in these jurisdictions. In management’s opinion, adequate provisions for income taxes have been made for all years. If actual taxable income by tax jurisdiction varies from estimates, additional allowances or reversals of reserves may be necessary.

Uncertain Tax Positions

The Company did not take any uncertain tax positions and had no adjustments to its income tax liabilities or benefits pursuant to the provisions of Section 740-10-25 for the reporting period ended June 30, 2014 or 2013.

Limitation on Utilization of NOLs due to Change in Control

Pursuant to the Internal Revenue Code Section 382 (“Section 382”), certain ownership changes may subject the NOL’s to annual limitations which could reduce or defer the NOL. Section 382 imposes limitations on a corporation’s ability to utilize NOLs if it experiences an “ownership change.” In general terms, an ownership change may result from transactions increasing the ownership of certain stockholders in the stock of a corporation by more than 50 percentage points over a three-year period. In the event of an ownership change, utilization of the NOLs would be subject to an annual limitation under Section 382 determined by multiplying the value of its stock at the time of the ownership change by the applicable long-term tax-exempt rate. Any unused annual limitation may be carried over to later years. The imposition of this limitation on its ability to use the NOLs to offset future taxable income could cause the Company to pay U.S. federal income taxes earlier than if such limitation were not in effect and could cause such NOLs to expire unused, reducing or eliminating the benefit of such NOLs.

Net Income (Loss) per Common Share Policy

Net income (loss) per common share is computed pursuant to Section 260-10-45 of the FASB Accounting Standards Codification. Basic net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. Diluted net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock and potentially dilutive outstanding shares of common stock during the period to reflect the potential dilution that could occur from common shares issuable through contingent share arrangements, stock options and warrants.

The following table shows the potentially outstanding dilutive common shares excluded from the diluted net income (loss) per common share calculation as they were anti-dilutive:

	Potentially Outstanding Dilutive Common Shares
	For the Reporting Period Ended June 30, 2014		For the Reporting Period Ended June 30, 2013
Convertible Notes Payable Shares and Related Warrant Shares
On December 9, 2013, the Company consummated the closing (the “Closing”) of a private placement offering (the “Offering”) of 231 units (“Units”) for $10,000 per Unit, for aggregate gross proceeds of $2,310,000. No placement agents or brokers were utilized by the Company in connection with the Offering. Each Unit consists of: (i) a $10,000 face value 12% Series A Senior Unsecured Convertible Promissory Note of the Company (collectively, the “Notes”) convertible into shares of Common Stock at $0.50 per share, and (ii) one detachable Common Stock Purchase Warrant (collectively, the “Warrants”) to purchase 10,000 shares (the “Warrant Shares”) of common stock of the Company (the “Common Stock”) with an exercise price of $1.00 per share expiring five years from the date of issuance.		(i) 4,620,000 (ii) 2,310,000		-
Sub-total: convertible notes payable shares and related warrant shares		6,930,000		-
Total potentially outstanding dilutive common shares		6,930,000		-

Cash Flows Reporting

The Company adopted paragraph 230-10-45-24 of the FASB Accounting Standards Codification for cash flows reporting, classifies cash receipts and payments according to whether they stem from operating, investing, or financing activities and provides definitions of each category, and uses the indirect or reconciliation method (“Indirect method”) as defined by paragraph 230-10-45-25 of the FASB Accounting Standards Codification to report net cash flow from operating activities by adjusting net income to reconcile it to net cash flow from operating activities by removing the effects of (a) all deferrals of past operating cash receipts and payments and all accruals of expected future operating cash receipts and payments and (b) all items that are included in net income that do not affect operating cash receipts and payments. The Company reports the reporting currency equivalent of foreign currency cash flows, using the current exchange rate at the time of the cash flows and the effect of exchange rate changes on cash held in foreign currencies is reported as a separate item in the reconciliation of beginning and ending balances of cash and cash equivalents and separately provides information about investing and financing activities not resulting in cash receipts or payments in the period pursuant to paragraph 830-230-45-1 of the FASB Accounting Standards Codification.

Subsequent Events Policy

The Company follows the guidance in Section 855-10-50 of the FASB Accounting Standards Codification for the disclosure of subsequent events. The Company will evaluate subsequent events through the date when the financial statements were issued. Pursuant to ASU 2010-09 of the FASB Accounting Standards Codification, the Company as an SEC filer considers its financial statements issued when they are widely distributed to users, such as through filing them on EDGAR.

Recently Issued Accounting Pronouncements

In June 2014, the FASB issued ASU No. 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation.

The amendments in this Update remove the definition of a development stage entity from the Master Glossary of the Accounting Standards Codification, thereby removing the financial reporting distinction between development stage entities and other reporting entities from U.S. GAAP. In addition, the amendments eliminate the requirements for development stage entities to (1) present inception-to-date information in the statements of income, cash flows, and shareholder equity, (2) label the financial statements as those of a development stage entity, (3) disclose a description of the development stage activities in which the entity is engaged, and (4) disclose in the first year in which the entity is no longer a development stage entity that in prior years it had been in the development stage.

The amendments also clarify that the guidance in Topic 275, Risks and Uncertainties, is applicable to entities that have not commenced planned principal operations.

Finally, the amendments remove paragraph 810-10-15-16. Paragraph 810-10-15-16 states that a development stage entity does not meet the condition in paragraph 810-10-15-14(a) to be a variable interest entity if (1) the entity can demonstrate that the equity invested in the legal entity is sufficient to permit it to finance the activities that it is currently engaged in and (2) the entity’s governing documents and contractual arrangements allow additional equity investments.

The amendments in this Update also eliminate an exception provided to development stage entities in Topic 810, Consolidation, for determining whether an entity is a variable interest entity on the basis of the amount of investment equity that is at risk. The amendments to eliminate that exception simplify U.S. GAAP by reducing avoidable complexity in existing accounting literature and improve the relevance of information provided to financial statement users by requiring the application of the same consolidation guidance by all reporting entities. The elimination of the exception may change the consolidation analysis, consolidation decision, and disclosure requirements for a reporting entity that has an interest in an entity in the development stage.

The amendments related to the elimination of inception-to-date information and the other remaining disclosure requirements of Topic 915 should be applied retrospectively except for the clarification to Topic 275, which shall be applied prospectively. For public business entities, those amendments are effective for annual reporting periods beginning after December 15, 2014, and interim periods therein.

Early application of each of the amendments is permitted for any annual reporting period or interim period for which the entity’s financial statements have not yet been issued (public business entities) or made available for issuance (other entities). Upon adoption, entities will no longer present or disclose any information required by Topic 915.

In June 2014, the FASB issued the FASB Accounting Standards Update No. 2014-12 “Compensation—Stock Compensation (Topic 718) : Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period” (“ASU 2014-12”).

The amendments clarify the proper method of accounting for share-based payments when the terms of an award provide that a performance target could be achieved after the requisite service period.  The Update requires that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. The performance target should not be reflected in estimating the grant-date fair value of the award. Compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service has already been rendered.

The amendments in this Update are effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. Earlier adoption is permitted.

Management does not believe that any recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying consolidated financial statements.

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Stockholders' Deficit

6 Months Ended

Jun. 30, 2014

Stockholders' Equity (Deficit)

Stockholders' Deficit

Shares Authorized

Upon formation the total number of shares of all classes of stock which the Company is authorized to issue is Two Hundred Million (200,000,000) shares of which One Hundred Million (100,000,000) shares shall be Preferred Stock, par value $0.001 per share, and One Hundred Million (100,000,000) shares shall be Common Stock, par value $0.001 per share.

Common Stock

Issuance of Common Stock

On March 28, 2013, the Company entered into a share for debt agreement whereby it issued 10,000,000 shares of its common stock in exchange for the extinguishment of $35,000 in debt to a related party.

Warrants

Summary of the Company’s Warrants Activities

The table below summarizes the Company’s warrants activities for the reporting period ended June 30, 2014:

	Number of Warrant Shares		Exercise Price Range Per Share			Weighted Average Exercise Price			Relative Fair Value at Date of Issuance		Aggregate Intrinsic Value
Balance, December 31, 2013		2,310,000		$	2.00		$	2.00	$	*		$	-
Granted		-			-			-		-			-
Canceled		-			-			-		-			-
Exercised		-			-			-		-			-
Expired		-			-			-		-			-
Balance, June 30, 2014		2,310,000		$	2.00		$	2.00	$	*		$	-
Earned and exercisable, June 30, 2014		2,310,000		$	2.00		$	2.00	$	*		$	-
Unvested, June 30, 2014		-		$	-		$	-	$	-		$	-

* The relative fair value at date of issuance was de minimis.

The following table summarizes information concerning outstanding and exercisable warrants as of June 30, 2014:

	Warrants Outstanding						Warrants Exercisable
Range of Exercise Prices	Number Outstanding		Average Remaining Contractual Life  (in years)		Weighted Average Exercise Price		Number Exercisable		Average Remaining Contractual Life  (in years)		Weighted Average Exercise Price
$2.00		2,310,000		4.7	$	2.00		2,310,000		4.7	$	2.00

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Subsequent Events

6 Months Ended

Jun. 30, 2014

Subsequent Events

Subsequent Events

The Company has evaluated all events that occur after the balance sheet date through the date when the financial statements were issued to determine if they must be reported. The Management of the Company determined that there were no reportable subsequent events to be disclosed.

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Schedule of Earnings Per Share Basic and Diluted (Tables)

6 Months Ended

Jun. 30, 2014

Schedule of Earnings Per Share Basic and Diluted:

Schedule of Earnings Per Share, Basic and Diluted

	Potentially Outstanding Dilutive Common Shares
	For the Reporting Period Ended June 30, 2014		For the Reporting Period Ended June 30, 2013
Convertible Notes Payable Shares and Related Warrant Shares
On December 9, 2013, the Company consummated the closing (the “Closing”) of a private placement offering (the “Offering”) of 231 units (“Units”) for $10,000 per Unit, for aggregate gross proceeds of $2,310,000. No placement agents or brokers were utilized by the Company in connection with the Offering. Each Unit consists of: (i) a $10,000 face value 12% Series A Senior Unsecured Convertible Promissory Note of the Company (collectively, the “Notes”) convertible into shares of Common Stock at $0.50 per share, and (ii) one detachable Common Stock Purchase Warrant (collectively, the “Warrants”) to purchase 10,000 shares (the “Warrant Shares”) of common stock of the Company (the “Common Stock”) with an exercise price of $1.00 per share expiring five years from the date of issuance.		(i) 4,620,000 (ii) 2,310,000		-
Sub-total: convertible notes payable shares and related warrant shares		6,930,000		-
Total potentially outstanding dilutive common shares		6,930,000		-

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Summary of Investment (Details) (USD $)	Jun. 30, 2014	Dec. 31, 2013
Schedule of Investments [Abstract]
Investment	$ 375,000	$ 0
Add: proportional share of net income of an equity investment	15,117	0
Investment, net	$ 390,117	$ 0

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Consolidated Statement of Stockholder's Equity (Unaudited) (USD $)	Common Stock	Additional Paid-In Capital	Accumulated Deficit	Total
Beginning Balance, Amount at Dec. 31, 2012	$ 1,975	$ 7,190,770	$ (7,248,726)	$ (55,981)
Beginning Balance, shares at Dec. 31, 2012	1,975,645
Common stock issued for debt, shares	10,000,000
Common stock issued for debt, amount	10,000	25,000		35,000
Net loss			(46,522)	(46,522)
Ending Balance, Amount at Dec. 31, 2013	11,975	7,215,770	(7,295,248)	(67,503)
Ending Balance, shares at Dec. 31, 2013	11,975,645
Net loss			(72,827)	(72,827)
Ending Balance, Amount at Jun. 30, 2014	$ 11,975	$ 7,215,770	$ (7,368,075)	$ (140,330)
Ending Balance, shares at Jun. 30, 2014	11,975,645

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Investment

6 Months Ended

Jun. 30, 2014

Schedule of Investments [Abstract]

Investment

On June 10, 2014, the Company invested $375,000 (approximately 18.8%) into newly formed RS Bakken One, LLC (“RS”), an entity that acquired two properties in North Dakota, one near Williston and one in Watford City. These properties are located in the heart of the Bakken oil development and had a combined acquisition price of $5,700,000. Additionally the Company purchased an option for $25,000 that will allow it to acquire 100% of these two properties after one year for a purchase price of not less than $7,000,000 or more than $8,000,000.

Pursuant to paragraph 323-10-05-5 the equity method tends to be most appropriate if an investment enables the investor to influence the operating or financial policies of the investee. Although the Company owns less than 20 percent of the voting stock, COO/CFO of the Company is the Vice President of RS and Chairman of the Company is the Manager of RS which enables the Company to influence the operating or financial policies of RS. Thus, the Company accounts for its investment in RS using the equity method of accounting and reports such in the balance sheets as investment.

Investment consisted of the following:

	June 30, 2014		December 31, 2013
Investment	$	375,000	$	-
Add: proportional share of net income of an equity investment		15,117		-
	$	390,117	$	-

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Potentially Outstanding Dilutive Common Shares (Details)	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013
Convertible Notes Payable Shares and Related Warrant Shares
(i) a $10,000 face value 12% Series A Senior Unsecured Convertible Promissory Note of the Company (collectively, the "Notes") convertible into shares of Common Stock at $0.50 per share,	4,620,000	0
(ii) one detachable Common Stock Purchase Warrant with an exercise price of $2.00 per share expiring five years from the date of issuance.	2,310,000	0
Sub-total: convertible notes payable shares and related warrant shares	6,930,000	0
Total potentially outstanding dilutive common shares	6,930,000	0