United States Securities and Exchange Commission

1858 Cedar Hill Rd.

Lancaster, Ohio 43130

(Address of Principal Executive Offices)

(740) 415-2073

(Registrant’s Telephone Number, including area code)

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

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: Common Stock, par value $0.0001

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [ ] No [X]

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. Yes [ ] No [X]

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act 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.

(1) Yes [X] No [ ] (2) Yes [X] 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 [X ] 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:


Large accelerated filer [ ]	Accelerated filer [ ]
Non-accelerated filer [ ]	Smaller reporting company [X]

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

Yes [ ] No [X]

Indicate the number of shares outstanding of each of the registrant’s classes of common equity, as of the latest practicable date:

August 19, 2016: Common – 29,551,431

Preferred -- 600

Documents incorporated by reference: None.

FORWARD LOOKING STATEMENTS

This Quarterly Report contains certain forward looking statements, as defined in the Private Securities Litigation Reform Act of 1995, including or related to our future results, events and performance (including certain projections, business trends and assumptions on future financings), and our expected future operations and actions. In some cases, you can identify forward-looking statements by the use of words such as “may,” “should,” “plan,” “future,” “intend,” “could,” “estimate,” “predict,” “hope,” “potential,” “continue,” “believe,” “expect” or “anticipate” or the negative of these terms or other similar expressions. These forward-looking statements generally relate to our plans and objectives for future operations and are based upon management’s reasonable estimates of future results or trends. In evaluating these statements, you should specifically consider the risks that the anticipated outcome is subject to, including the factors discussed under "RISK FACTORS" in previous filings and elsewhere. These factors may cause our actual results to differ materially from any forward-looking statement. Actual results may differ from projected results due, but not limited to, unforeseen developments, including those relating to the following:

We fail to raise capital;

We fail to implement our business plan;

We fail to compete at producing cost effective products;

Risks related to delays and expenses of technology development;

The inability to complete acquisitions or successfully integrate acquired companies;

The availability of additional capital at reasonable terms to support our business plan and acquisition strategy;

Economic, competitive, demographic, business and other conditions in our markets;

Changes or developments in laws, regulations or taxes in the energy or waste industry;

Actions taken or not taken by third-parties, including our suppliers and competitors;

The failure to acquire or the loss of any license or patent;

Changes in our business strategy or development plans;

The availability and adequacy of our cash flow to meet its requirements; and

Other factors discussed under the section entitled “RISK FACTORS” in previous filings or elsewhere herein.

You should read this Quarterly Report completely and with the understanding that actual future results may be materially different from what we expect. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, future financings, performance, or achievements. Moreover, we do not assume any responsibility for accuracy and completeness of such statements in the future. We do not plan to update any of the forward-looking statements after the date of this Quarterly Report to conform such statements to actual results.

JUMPSTART OUR BUSINESS STARTUPS ACT DISCLOSURE

We qualify as an “emerging growth company,” as defined in Section 2(a)(19) of the Securities Act by the Jumpstart Our Business Startups Act (the “JOBS Act”). An issuer qualifies as an “emerging growth company” if it has total annual gross revenues of less than $1.0 billion during its most recently completed fiscal year, and will continue to be deemed an emerging growth company until the earliest of:


	•	the last day of the fiscal year of the issuer during which it had total annual gross revenues of $1.0 billion or more;


	•	the last day of the fiscal year of the issuer following the fifth anniversary of the date of the first sale of common equity securities of the issuer pursuant to an effective registration statement;


	•	the date on which the issuer has, during the previous three-year period, issued more than $1.0 billion in non-convertible debt; or


	•	the date on which the issuer is deemed to be a “large accelerated filer,” as defined in Section 240.12b-2 of the Exchange Act.

As an emerging growth company, we are exempt from various reporting requirements. Specifically, we are exempt from the following provisions:


	•	Section 404(b) of the Sarbanes-Oxley Act of 2002, which requires evaluations and reporting related to an issuer’s internal controls;


	•	Section 14A(a) of the Exchange Act, which requires an issuer to seek shareholder approval of the compensation of its executives not less frequently than once every three years; and


	•	Section 14A(b) of the Exchange Act, which requires an issuer to seek shareholder approval of its so-called “golden parachute” compensation, or compensation upon termination of an employee’s employment.

Under the JOBS Act, emerging growth companies may delay adopting new or revised accounting standards that have different effective dates for public and private companies until such time as those standards apply to private companies.

Smaller Reporting Company

We are subject to the reporting requirements of Section 13 of the Exchange Act, and subject to the disclosure requirements of Regulation S-K of the SEC, as a “smaller reporting company.” That designation will relieve us of some of the informational requirements of Regulation S-K.

Sarbanes/Oxley Act

Except for the limitations excluded by the JOBS Act discussed under the preceding heading “Emerging Growth Company,” we are also subject to the Sarbanes-Oxley Act of 2002. The Sarbanes/Oxley Act created a strong and independent accounting oversight board to oversee the conduct of auditors of public companies and strengthens auditor independence. It also requires steps to enhance the direct responsibility of senior members of management for financial reporting and for the quality of financial disclosures made by public companies; establishes clear statutory rules to limit, and to expose to public view, possible conflicts of interest affecting securities analysts; creates guidelines for audit committee members’ appointment, compensation and oversight of the work of public companies’ auditors; management assessment of our internal controls; prohibits certain insider trading during pension fund blackout periods; requires companies and auditors to evaluate internal controls and procedures; and establishes a federal crime of securities fraud, among other provisions. Compliance with the requirements of the Sarbanes/Oxley Act will substantially increase our legal and accounting costs.

Exchange Act Reporting Requirements

Section 14(a) of the Exchange Act requires all companies with securities registered pursuant to Section 12(g) of the Exchange Act like we are to comply with the rules and regulations of the SEC regarding proxy solicitations, as outlined in Regulation 14A. Matters submitted to shareholders at a special or annual meeting thereof or pursuant to a written consent will require us to provide our shareholders with the information outlined in Schedules 14A (where proxies are solicited) or 14C (where consents in writing to the action have already been received or anticipated to be received) of Regulation 14, as applicable; and preliminary copies of this information must be submitted to the SEC at least 10 days prior to the date that definitive copies of this information are forwarded to our shareholders. We are also required to file annual reports on Form 10-K and quarterly reports on Form 10-Q with the SEC on a regular basis, and will be required to timely disclose certain material events (e.g., changes in corporate control; acquisitions or dispositions of a significant amount of assets other than in the ordinary course of business; and bankruptcy) in a Current Report on Form 8-K.

Reports to Security Holders

You may read and copy any materials that we file with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. You may also find all of the reports that we have filed electronically with the SEC at their Internet site www.sec.gov.

PART I – FINANCIAL INFORMATION

ITEM 1: FINANCIAL STATEMENTS

Q2POWER TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

NOTE 10 – STOCK OPTIONS AND RESTRICTED STOCK UNITS

On July 31, 2014, the Board of Directors of Q2P approved the Founders Stock Option Plan (“Founders Plan") and the 2014 Employee Stock Option Plan (the “2014 Plan”), collectively the “Option Plans”. The Option Plans were developed to provide a means whereby directors and selected employees, officers, consultants, and advisors of the Company may be granted incentive or non-qualified stock options to purchase restricted common stock of the Company. On February 25, 2016, to accommodate the appointment of new Board members and additional incentive stock options and stock grants to key employees of the Company, the Board approved the 2016 Omnibus Equity Incentive Plan (“2016 Plan”), which allowed for an additional 4 million shares of common stock, stock options, stock rights (restricted stock units), or stock appreciation rights to be granted by the Board in its discretion.

In recognition of and compensation for services rendered by employees for the six months ended June 30, 2016, the Company issued 710,000 common stock options under the Founders Plan on February 25, 2016, 350,000 of which contained vesting provisions that provide for vesting in full on August 25, 2016, 150,000 of which contain provisions for immediate vesting of 50,000 and 100,000 and fully vest on August 25, 2016, and 210,000 of which contain semi-annual vesting provisions over the next year. One option grant of 40,000 shares to an employee was cancelled due to termination of employment.

In recognition of and compensation for services rendered by the Company’s Board Chairman, the Company issued 400,000 common stock options under the 2014 Plan on February 25, 2016, which contained vesting provisions that provide for immediate vesting of 200,000, and 200,000 on August 25, 2016.

In recognition of and compensation for services rendered by employees and members of the Company’s board of directors, the Company issued 2,200,000 common stock options, 450,000 restricted stock units and 450,000 shares of common stock under the 2016 Plan. On February 25, 2016, the Company issued 1,800,000 common stock options to the Company’s Board Chairman, which contain provisions for vesting upon the achievement of specific milestones. As of June 30, 2016, 150,000 had vested upon one milestone achievement. The 450,000 restricted stock units were issued on February 25, 2016 and provide for vesting in full on February 21, 2017, and the 450,000 shares of common stock were issued on February 25, 2015 and provide for immediate vesting. On March 21, 2016, the Company issued 400,000 common stock options to a member of the board of directors, which provides for immediate vesting of 200,000 shares and 200,000 shares vest on September 21, 2016.

In June 2016, the Company issued 150,000 common stock options under the 2016 Plan to one new Board of Advisor Member. The options vest one-half in six months and the balance in 12 months, with a 10-year term and exercisable at a price of $0.30 per share. The options were valued at $15,300 (pursuant to the Black Scholes valuation model, and as shown in the table detailing the calculation of fair value below), based on an exercise price of $0.30 per share and with a maturity life of 3.5 years.

Options awarded under the Option Plans and the 2016 Plan for the six months ended June 30, 2016 were valued at $378,300 (pursuant to the Black Scholes valuation model, and as shown in the table detailing the calculation of fair value below), based on a weighted average exercise price of $0.48 per share and with a maturity life of 3.5 years.

For the six months ended June 30, 2016, the charge to the consolidated statement of operations for the amortization of stock option grants awarded under the Option Plans and the 2016 Plan was $260,080. On May 27, 2016, the majority of the employees of the Subsidiary were terminated in an effort to reduce expenses, and were allowed to retain their options, which were immediately vested. The expense related to the outstanding options previously granted to these terminated employees was recognized in full in this period as they were no longer subject to a service requirement with respect to vesting of the award.

A summary of the common stock options issued under the Option Plans and the 2016 Plan for the period from December 31, 2015 through June 30, 2016 follows:


	Number Outstanding		Weighted Avg. Exercise Price		Weighted Avg. Remaining Contractual Life (Years)
Balance, December 31, 2015		1,745,480		0.30	9.1
Options issued		3,460,000		0.30	4.5
Options exercised		--		--	--
Options cancelled		(40,000)		(0.30)	--
Balance, June 30, 2016		5,165,480	$	0.43	6.7

The vested and exercisable options at period end follows:

Exercisable/

Vested

Options

Outstanding

Weighted

Avg.

Exercise Price

Weighted

Avg.

Remaining

Contractual

Life (Years)

Balance, June 30, 2016

2,502,148

0.38

8.1

The fair value of new stock options granted using the Black-Scholes option pricing model was calculated using the following assumptions:

Six Months Ended

June 30, 2016

Risk free interest rate

1.01

%

-

1.22

%

Expected volatility

77.53

%

-

82.39

%

Expected dividend yield

0%

Expected term in years

3.5

Average value per options

$0.100

-

$0.102

Expected volatility is based on historical volatility of two securities which the Company believes best match the characteristics of the Company for purposes of measuring volatility in the absence of a market trading history of the Company’s common stock. Short Term U.S. Treasury rates were utilized as the risk free interest rate. The expected term of the options was calculated using the alternative simplified method codified as ASC 718 “Accounting for Stock Based Compensation,” which defined the expected life as the average of the contractual term of the options and the weighted average vesting period for all issuances.

NOTE 11 – COMMITMENTS AND CONTINGENCIES

The Company has employment agreements with Christopher Nelson, CEO and Sudheer Pimputkar, CTO (collectively, the “Executives”).

Christopher Nelson’s agreement provides for a term of three (3) years from its Effective Date (July 31, 2014), with automatically renewing successive one-year periods starting on the end of the third anniversary of the Effective Date. If the Executive is terminated “without cause” or pursuant to a “change in control” of the Company, as both defined in the respective agreements, the Executive shall be entitled to (i) any unpaid Base Salary accrued through the effective date of termination, (ii) the Executive’s Base Salary at the rate prevailing at such termination through 24 months from the date of termination or the end of his Term then in effect, whichever is longer, and (iii) all of the Executive’s stock options shall vest immediately.

On June 2, 2015, in connection with the Right Offering, the Company’s CEO agreed to an amendment to his employment agreement reducing his base salary from $180,000 per year to $138,000, and cancelled $28,000 in debt owed to him by the Company. Also concurrently with the closing of the Rights Offering, our CEO satisfied a promissory note he owed to the Company in the amount of $99,900 created in connection with the 2014 exercise of his warrants, which were issued in 2010 related to his services previously rendered, by returning to the Company 370,000 shares of common stock. The Company forgave $5,250 in accrued interest. All other provisions detailed in the July 31, 2014 employment agreement remain unchanged.

Sudheer Pimputkar has an employment agreement providing $170,000 per year base salary for a term of one (1) year from its Effective Date (April 1, 2015), with automatically renewing successive one year periods starting on the end of the first anniversary of the Effective Date. If the Executive is terminated “without cause” or pursuant to a “change in control” of the Company, as both defined in the respective agreements, the Executive shall be entitled to (i) any unpaid Base Salary accrued through the effective date of termination, (ii) the Executive’s Base Salary at the rate prevailing at such termination through 2 months from the date of termination or the end of his Term then in effect, whichever is longer, and (iii) all of the Executive’s stock options shall vest immediately.

In June 2015, the Company implemented a compensation package for a director who also serves as SEC counsel of $4,000 per quarter and 250,000 stock options per year vesting quarterly with a 10-year term and exercisable at $0.27 per share. These stock options converted as part of the Merger to 84,000 shares, which were vested in full at the date of the Merger, and are exercisable at $0.30 per share. For the three months and six months ended June 30, 2016, the charge to the consolidated statement of operations was $4,000 and $8,000 respectively. The Director’s grant of 250,000 options for 2016 is effective as of July 1, 2016.

NOTE 12 - SUBSEQUENT EVENTS

On July 11, 2016, one of the Company’s debenture holders converted $27,250 of its debenture for 129,762 shares of common stock. The same debenture holder converted the following amounts as of the dates provided: on July 14, $30,500 for 145,238 shares of common stock; on July 19, $30,500 for 145,238 shares of common stock; on July 26, $10,500 for 50,000 shares of common stock; and on August 16, $49,000 for 233,333 shares of common stock. On July 26, 2016, a second debenture holder converted $20,000 of its debenture for 95,238 shares of common stock.

In July and August 2016, the Company received subscription agreements from six accredited investors (four of whom were previous shareholders) to purchase 750,000 shares of restricted common at a price of $.21 per share for an aggregate of $157,500, less $610 in financing costs.

Due to this issuance of common stock at $.21, the Company’s Convertible Preferred Stock was repriced to $.21 per share. Holders of the Company’s warrants issued in connection with convertible debentures have agreed to reduce the exercise price of 415,000 of such warrants from $2.35 to $.50, which also required the number of shares into which those warrants are exercisable to increase to 2,033,500 shares. The holders agreed to maintain the exercise price of $.50 for 1,153,845 warrants issued in connection with the Company’s Preferred Stock. As part of this agreement, the debenture holders also agreed to extend the maturity date of the Company’s debentures to July 31, 2017, for an aggregate fee of 150,000 common shares.

On August 12, 2016, the Company, ERTH Products LLC and Exceptional Products Inc. (the “ERTH Companies”), entered into a binding letter of intent (the “LOI”) contemplating the acquisition of the ERTH Companies by the Company. The ERTH Companies, based in Georgia, manufacture agricultural compost and engineered soils for the construction industry from waste water biosolids. Under the LOI, the ERTH Companies have agreed to a 90 day exclusivity period, for a nominal amount of funds, to negotiate the terms of this acquisition, which 90-day period may be extended for an additional 275 days in return for a deposit equal to approximately 5% of the presumed purchase price for the ERTH Companies. The LOI also contemplates adding Wayne King Sr., the founder of the ERTH Companies, to the Company’s Board of Advisors.

ITEM 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND PLAN OF OPERATIONS

Overview

The following discussion contains forward-looking statements that reflect the Company’s plans, estimates and beliefs, and actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Current Report.

The Company’s operating subsidiary, Q2P was originally formed by Cyclone Power Technologies Inc. (“Cyclone”) in April 2010 in the state of Florida as a limited liability company called “Cyclone-WHE LLC.” The purpose of the Company at such time was essentially the same as it is today: to pursue waste-to-power and waste heat recovery business opportunities on a global basis. Since May 2016, the Company has also begun to pursue other lines of business, such as composting from waste water biosolids, and has limited some of its previous R&D operations. The Company re-domiciled to Delaware as a corporation in April 2014, formally split from Cyclone in July 2014 pursuant to a Separation Agreement, and changed its name to “Q2Power Corp.” in February 2015. It is licensed to do business in Florida and Ohio, where it maintains offices.

On November 12, 2015, Q2P consummated its Agreement and Plan of Merger (the “Merger Agreement”) with the Company (then called Anpath Group, Inc.) and the Company’s newly formed and wholly-owned subsidiary, AnPath Acquisition Sub, Inc., a Delaware corporation (“Merger Subsidiary”), resulting in the Merger Subsidiary merging with and into Q2P. As a result, Q2P was the surviving company and a wholly-owned subsidiary of AnPath (the “Merger”).

As a result of the Merger, all outstanding shares of Q2P were exchanged for 24,034,475 shares of the Company’s common stock, representing approximately 93% of the total issued and outstanding common stock of the Company, excluding stock options, warrants and convertible notes outstanding at such time. In addition, the Company assumed both the Q2P 2014 Founders Stock Option Plan and the 2014 Employees Stock Option Plan (the “Option Plans”), and 1,095,480 options outstanding thereunder. Also pursuant to the Merger, the officers and directors of Q2P took over the management and Board of Directors of the Company.

In connection with the Merger, the Company sold the former operating entity of Anpath, ESI, to three former officers and shareholders of Anpath in exchange for the return of 470,560 shares of common stock of the Company and ESI retaining all of the old liabilities of ESI including a litigation judgment.

In December 2015, the Company officially changed its name to Q2Power Technologies, Inc. to reflect the new business direction of the Company – that of Q2P – after the Merger. In February 2016, the Company changed its fiscal year end from March 31 to December 31 to reflect the year-end of its operating Subsidiary, and up-listed its common stock to the OTCQB. The financial statements and footnotes to the financial statements reflect this change of fiscal year end.

Plan of Operation

In the second quarter of 2016, the Company announced that it had taken several important steps to expand its business model into the commercial composting and sustainable soils sector. This included starting an alliance with a leading company in this space based in Georgia, and adding a key advisor with over 40 years of experience in this industry to our team. Two of the Company’s independent Directors also have significant experience and contacts in waste water, biosolids, waste management and other areas that are synergistic and overlapping with composting.

extended for an additional 275 days in return for a deposit equal to approximately 5% of the presumed purchase price for the ERTH Companies. The LOI also contemplates adding Wayne King Sr., the founder of the ERTH Companies, to the Company’s Board of Advisors. During the second half of 2016, the Company expects to advance these plans by completing this acquisition, and possibly acquiring other established businesses in this sector.

The Company’s strategy in composting and sustainable soils is supported by a Research & Markets report published May 2016 stating that the global market for these products - specifically engineered soils, of which composting is a major component -- is projected to reach $7.8 billion by 2021, at a CAGR of 6.7% from 2016 to 2021. The growth of this market is being driven by soil productivity, water conservation and pollution concerns in the United States and worldwide. According to these and other reports, 99 million acres (28% of all cropland) in the U.S. are eroding above soil tolerance rates, meaning the long-term productivity of the soil cannot be maintained and new soil is not adequately replacing the lost soil. This erosion reduces the ability of the soil to support plant growth and hold water, adding significant pressure on this critical depleting resource. Further, soils produced with compost are being used with more frequency in construction, infrastructure and land reclamation projects to reduce costs, accelerate permitting, and create more sustainable landscapes. Management sees an opportunity in the composting and engineered soils markets to build a strong, cash flowing company, while doing good for the environment.

In connection with these new plans, the Company has also taken steps to reduce its R&D overhead in the second quarter, including scaling back a large portion of its engineering and technical personnel in order to dedicate more resources to pursuing partnerships and acquisitions in the compost industry. Management anticipates that this plan will get the Company to consistent revenue and profitability quicker, and increase shareholder value over the short and long term.

Management continues to believe that the Company’s engine and power system technology is viable as a commercial product, targeted to many of the same customers that the Company plans to work with in the composting business. These include waste water treatment plants that produce methane, and can benefit from the conversion of that otherwise flared fuel to electricity and process heat. The IP that the Company has licensed and developed over the last two years is a valuable asset which we intend on maintaining and protecting moving forward. For the short term, however, the cost of fully commercializing this technology places great strains on the Company’s limited resources, and raising funding to support these R&D activities will, in management’s opinion, be dilutive to shareholders. We intend on completing current projects for our customers, and will continue to seek strategic partnerships and alternative plans for these products in the interest of monetizing our technology over the long term.

During the next 12 months, we expect to spend approximately $1.0 million on operations, reduced from $2.0 to $2.5 million with respect to operations to support an R&D project. We will need to raise additional funds to operate at full capacity and on schedule with these plans. Our average monthly burn-rate is currently about $50,000 per month, which has been reduced by management from about $15,000 per month in the first half of 2016. However, we estimate that this will increase again in 2017 as we ramp-up partnerships and acquisitions in the compost sector, including the hiring of new operational and sales personnel. Funds to cover operational short-falls over the following 12 months may be raised through the issuance of equity securities and/or debt funding. Management is actively pursuing such financing, however, there can be no assurance that financing will be available when required in sufficient amounts, on acceptable terms, or at all.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Change in Fiscal Year and Financial Statement Presentation.

On February 12, 2016, the Board of Directors approved a change in the fiscal year end for the Company from March 31 to December 31. This change is a result of the Merger, and reflects the fiscal year end period for Q2P, the operating Subsidiary. The Company’s financial statements further reflect the operations of Q2P in 2015 up until the date of the Merger, November 12, 2015, and thereafter, the combined operations of Q2P and the public Company.

Statement of Operations for the three months ended June 30, 2016 vs. 2015

During the quarters ended June 30, 2016 and 2015, the Company recorded no revenues.

The Company recorded loss from operations of $715,082 in the quarter ended June 30, 2016, a decrease of $349,767 (33%) from our loss from operations of $1,064,849 in the same period in 2015. Additionally, the Company realized additional expenses including interest expenses and loss from disposal of assets, which were offset by a gain on derivative liability that resulted in net income of $411,166 for the three months ended June 30, 2016, an increase of $1,478,498 (139%) from our net loss of $1,067,332 for the three months ended June 30, 2015. Some of the principal factors behind these results included, higher payroll in 2016, offset by lower professional fees and R&D expenses in 2016. The difference between loss from operations and total gain for the quarter ended June 30, 2016, was primarily due to a $1,229,377 gain on derivative liabilities (a non-cash item) and interest expense in the same period of $71,433.

As noted above, included in the expenses for the quarter ended June 30, 2016 and 2015 were the following material items: Payroll increased to $226,181 in 2016 from $195,021 in the prior year (16%), which was principally due to the addition of more technical staff and management in 2016. Professional fees decreased to $294,820, from $428,878 in the prior year period (31%) due primarily to the hiring of contract professionals, and research and development decreased to $122,300 in 2016 from $361,936 in the previous year period (66%) primarily due to constriction of funds.

Statement of Operations for the six months ended June 30, 2016 vs. 2015

During the six months ended June 30, 2016 and 2015, the Company recorded $40,000 and $-0- in revenue, respectively.

The Company recorded loss from operations of $1,328,215 in the six months ended June 30, 2016, a decrease of $612,475 (32%) from our loss from operations of $1,940,690 in the same period in 2015. Additionally, the Company realized additional expenses including interest expenses and loss from disposal of assets, which were offset by a gain on derivative liability that resulted in a net loss of $795,621 for the six months ended June 30, 2016, a decrease of $1,148,107 (59%) from our net loss of $1,943,728 for the six months ended June 30, 2015. Some of the principal factors behind these results included, higher payroll in 2016, offset by lower professional fees and R&D expenses, and further offset by $40,000 in revenue in 2016. The difference between loss from operations and total gain for the six months ended June 30, 2016, was primarily due to a $676,543 gain on derivative liabilities (a non-cash item) and interest expense in the same period of $112,253.

As noted above, included in the expenses for the six months ended June 30, 2016 and 2015 were the following material items: Payroll increased to $442,167 in 2016 from $302,678 in the prior year (45%), which was principally due to the addition of more technical staff and management in 2016. Professional fees decreased to $516,054, from $791,669 in the prior year period (35%) due primarily to the hiring of contract professionals, and research and development decreased to $309,429 in 2016 from $684,391 in the previous year period (55%) primarily due to constriction of funds.

Balance Sheet

Material changes in the Company’s balance sheet at June 30, 2016 over December 31, 2015 included: an increase of $180,389 in accounts payable and accrued expenses; the addition of a $150,000 term note (offset by $29,000 of debt issuance costs), $90,000 of notes payable from two board members and four investors, and another $10,500 note from the Company’s director, plus accrued interest; a decrease of $723,479 in derivative liabilities as a result of $103,000 worth of convertible debentures converted to common stock and an decrease in valuation from December 31, 2015; a decrease of $70,495 in software, property and equipment related to the transfer of those assets to Precision CNC in settlement of accounts payable; and an increase of $50,000 in deferred revenue from a technology sales contract. Total liabilities as of June 30, 2016 were $1,983,814, as compared to $2,465,292 as of the end of 2015.

Primarily as a result of the $795,621 net loss for the six months ended June 30, 2016, accumulated deficit was $6,161,002 at June 30, 2016, resulting in total stockholders’ deficit at the period end of $2,298,951.

Cash Flow

The net loss for the six months ended June 30, 2016, of $795,621 was off-set by non-cash operating expenses of: $289,154 in stock issued for services and related amortization expense, $305,408 in stock options and restricted stock units issued to employees, $676,543 in derivative liability gains, $48,408 of depreciation and amortization, and $283,320 increase in accounts payable and accrued expenses. As a result, net cash used in operating activities amounted to $349,195 in the first six months of 2016.

On January 11, 2016, the Company issued 100 shares of Preferred Stock to an accredited investor (the “Preferred Stock”) for $100,000. The Preferred Stock is convertible at $0.26 per share of the Company’s common stock (the “Conversion Price”). The Preferred Stock bears a 6% dividend per annum, calculable and payable per quarter in cash or additional shares of common stock as determined in the Certificate of Designation. The Preferred Stock has no voting rights until converted to common stock, and has a liquidation preference equal to the Purchase Price.

On April 29, 2016, the Company’s three independent Directors loaned to the Company a total of $60,200 pursuant to three Convertible Notes which are automatically convertible into the equity securities issued in the Company’s next financing of at least $1,000,000 at the same price and same terms. The Convertible Notes bear 8% interest and have a 10% Original Issuance Discount. The total principal amount of all three Notes was $66,000. The Notes mature in six months, and can be converted to common stock at $0.26 per share if a qualified financing event has not occurred by such time. In June 2016, three other shareholders of the Company provided an additional $30,000 to the Company on the same loan terms.

Financial Condition, Liquidity and Capital Resources

The Company’s limited funds raise substantial doubt about the Company’s ability to operate as a going concern. See “Note 2 – Basis of Presentation and Going Concern” in the Company’s condensed consolidated financial statements.

Since July 2014, the Company through Q2P has primarily devoted its efforts to commercializing the Q2P engine and CHP system, developing its business model and recruiting executive management and key employees. As a new entity, the Company has limited current business operations and nominal assets. The Company currently operates at a loss with minimal revenue. Since the change in business direction to focus on strategic partnerships and acquisitions in the compost space, the Company has reduced its operating expenses from approximately $150,000 per month to approximately $50,000 per month by laying-off some employees and restricting our R&D budget. Currently, we have two employees on payroll and four more as consultants, two of whom are continuing engine development efforts and two others in administration. Other expenses include legal and accounting, marketing, and other general expenses. We have also used equity, including common stock and stock options, to pay some expenses over the last year; and we reduced approximately $50,000 in payables through the transfer of some furniture, equipment and other assets to an affiliated vendor. Our monthly burn is expected to increase as our plan for growth in the composting sector starts to materialize, and initial acquisitions are in process.

Since July 2014, Q2P has raised approximately $4.2 million in capital over several financings, inclusive of cash invested and some debt and payables converted to stock. With these funds, the Company has been able to

complete the prototype stage of its technology, place our first operating pilot unit in the field, recruit a solid engineering and business team, and secure strong Directors with significant industry experience. Many of these investments in people and contacts will assist us in the development of our new business line. With respect to our technology, we will attempt to deliver on our commercial sales contracts with reduced staff, and look for other opportunities to monetize this intellectual property. We will attempt to raise additional funding in 2016 to advance the Company’s growth plans, although there can be no assurances as to whether such funds can be raised and if they can, at what terms. Details of the Company’s prior financings follows:

During the year ended December 31, 2014, Q2P raised $353,501 in its initial Seed Round Funding, excluding transaction costs of $51,000, in a convertible debt security, which automatically converted to common stock at a post-Merger equivalent of approximately $0.35 per share on September 30, 2014.

Q2P raised $1,416,367 at a post-Merger stock price equivalent of approximately $0.79 per share in its Series A Funding Round during the year ended December 31, 2014. Direct offering costs related to the Series A Funding Round were $30,000. In January 2015, Q2P closed a continuation round of its Series A Funding, whereby it raised an additional $362,360 at the same price and terms.

On May 14, 2015, Q2P’s Board of Directors authorized a Rights Offering whereby each shareholder of Q2P received one Subscription Right for each share of common stock owned as of that date. The Subscription Rights allowed participating shareholders to purchase shares of common stock in Q2P at a post-Merger stock price equivalent of approximately $0.18 per share. The Rights Offering closed on June 3, 2015, at which time Subscriptions from approximately 90% of the Q2P shareholders totaling $1,061,975 had been received, inclusive of $821,516 in cash, the cancellation of $83,158 and $103,251 of payables and accrued expenses incurred in 2014 for outside and employee services, respectively, and $54,050 of subscriptions receivable. Transaction costs associated with the Rights Offering totaled $10,000.

At the time of the Merger, Q2P had 70,689,632 shares of common stock outstanding, which converted to 24,034,475 shares of the Company pursuant to the Merger. Shares purchased in the Rights Offering accounted for approximately 75% of the shares converted for Company common stock.

Subsequent to the Merger, the Company raised an additional $600,000 in its Series A 6% Convertible Preferred Stock (the “Preferred Stock”) from two separate accredited investors in November 2015 and January 2016, respectively. The Preferred Stock was convertible at $0.26 per share at the discretion of the holders, and contains price protection provisions in the instance that the Company issues shares at a lower price, subject to certain exemptions. As a result of the July 2016 common stock offering described below, the conversation price for these Preferred Shares automatically reduced to $0.21 per share. Preferred Stock holders also received other rights and protections including piggy-back registration rights, rights of first refusal to invest in subsequent offerings, security over the Company’s assets (secondary to the Company’s debt holders), and certain negative covenant guaranties that the Company will not incur non-ordinary debt, enter into variable pricing security sales, redeem or repurchase stock or make distributions, and other similar warranties. The Preferred Stock is redeemable after two years if not converted, and has no voting rights until converted to common stock. The Preferred Stock holders also received 50% warrant coverage at an exercise price of $0.50, with a five-year term and similar price protections as in the Preferred Stock. Pursuant to an agreement with the warrant holders, this conversion price did not change as a result of the July 2016 common stock offering at $0.21; however, should the Company fail to sign its first acquisition to a letter of intent by October 2016, then the conversion price will be reduced to $0.21 and the number of shares that the warrant is convertible into will increase proportionally to maintain the same dollar value of the warrant as a whole.

On March 15, 2016, the Company entered into a 120-day term loan agreement with one accredited investor in the principal amount of $150,000. The loan bears 20% interest with interest payments due monthly. The holders received a 100,000 share equity kicker valued at $26,000, $3,000 cash and a second security interest in the assets of the Company. The loan balance was $150,000, and accrued interest related to the loan totaled $1,250 at June 30, 2016. As of July 15, 2016, this loan was in default, and the Company was obligated to pay a 10% penalty charge. The loan holder and the Company are in negotiations to extend the maturity date.

On April 29, 2016, the Company’s three independent Directors loaned to the Company a total of $60,200 pursuant to three Convertible Notes which are automatically convertible into the equity securities issued in the Company’s next financing of at least $1,000,000 at the same price and same terms. The Convertible Notes bear 8% interest and have a 10% Original Issuance Discount. The total principal amount of all three Notes was $66,000. The Notes mature in six months, and can be converted to common stock at $0.26 per share if a qualified financing event has not occurred by such time. In June 2016, three investors of the Company provided an additional $26,709 to the Company on the same loan terms.

All promissory notes and shares in these offerings were sold pursuant to an exemption from the registration requirements of the Securities Exchange Commission under Regulation D to accredited or sophisticated investors who completed questionnaires confirming their status. Unless otherwise described in this Current Report, reference to “restricted” common stock means that the shares have not been registered and are restricted from resale pursuant to Rule 144 of the Securities Act of 1933, as amended.

Separation from Cyclone and Related License Agreement

On July 28, 2014, Q2P (which at such time was called WHE Generation Corp., and renamed Q2Power Corp. on January 26, 2015) commenced operations as an independent company after receiving its initial round of seed funding and signing a formal separation agreement (the “Separation Agreement”) from Cyclone. The Separation Agreement between Q2P and Cyclone provided for a formal division of certain assets, liabilities and contracts related to Q2P’s business, as well as establishing procedures for exchange of information, indemnification of liability, and releases and waivers for the principals moving forward. As part of the separation from Cyclone, Q2P also purchased for $175,000 certain licensing rights to use Cyclone’s patented technology on a worldwide, exclusive basis for 20 years with two 10-year renewal terms for Q2P’s waste heat and waste-to-power business (the “License Agreement”). The License Agreement contains a royalty provision equal to 5% of gross sales payable to Cyclone on sales of engines derived from technology licensed from Cyclone.

Also, as part of the separation from Cyclone, Q2P assumed a license agreement between Cyclone and Phoenix Power Group, which included deferred revenue of $250,000 from payments previously made to Cyclone for undelivered products. The net balances as of June 30, 2016 and December 31, 2015 for the Cyclone licensing rights were $91,146 and $113,021, respectively; and the net balances as of June 30, 2016 and December 31, 2015 for the Phoenix deferred revenue were $250,000 and $250,000, respectively, which are included as a component of deferred revenue on the condensed consolidated balance sheets. Under the terms of the revised agreement with Phoenix Power Group, revenue associated with these deferrals will be recognized subject to the achievement of certain milestones, as follows: (1) on the completion of certain performance testing of the engine, deferred revenue of $150,000 will be recognized; and (2) on the delivery of the first 10 “Generation 1 Engines”, other deferred revenue will be recognized at a rate of $10,000 per delivered engine.

The Company also assumed a contract with Clean Carbon of Australia and a corresponding $10,064 prepayment for services or other value to be provided in the future. This deposit has been presented as deferred revenue on the June 30, 2016 and December 31, 2015 condensed consolidated balance sheets.

The licensing rights are amortized over its estimated useful life of 4 years. Accumulated amortization for the periods ended June 30, 2016 and December 31, 2015 was $83,854 and $61,979, respectively.

Stock Repurchase Agreement

On April 8, 2016, the Company and Cyclone resolved a dispute regarding a 2014 Stock Purchase Agreement, whereby the parties agreed to terminate that agreement and all amounts owed by either party to the other, including a release of all claims, and Cyclone retained 212,500 shares of common stock of the Company and the Company has no obligation to buy back these shares. The Company paid a consultant 100,000 shares of restricted common stock valued at $26,000 in connection with the negotiation and signing of that agreement.

Cash and Working Capital

We have incurred negative cash flows from operations since inception. As of June 30, 2016, the Company had an accumulated deficit of $6,161,002. Details of this are discussed above in the Balance Sheet disclosure.

Critical Accounting Policies

Our financial statements are prepared in conformity with U.S. generally accepted accounting principles (GAAP). Disclosures regarding our Critical Accounting Policies are provided in Note 3 – Summary of Significant Accounting Policies of the footnotes to our condensed consolidated financial statements.

Off-Balance Sheet Arrangements

The Company did not engage in any "off-balance sheet arrangements" (as that term is defined in Item 303(a)(4)(ii) of Regulation S-K) as of June 30, 2016.

ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not required for smaller reporting companies.

ITEM 4: CONTROLS AND PROCEDURES

In connection with the preparation of this Quarterly Report, management, under the supervision and with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this Quarterly Report. Disclosure controls and procedures are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to management, including the Chief Executive Officer and the Chief Financial Officer, to allow timely decisions regarding required disclosures.

Management’s Quarterly Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s internal control over financial reporting is a process, under the supervision of the Chief Executive Officer and the Chief Financial Officer, designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s financial statements for external purposes in accordance with generally accepted accounting principles in the United States (GAAP). Internal control over financial reporting includes those policies and procedures that:


Delaware	000-55148	20-1602779
(State or Other Jurisdiction of	(Commission File Number)	(I.R.S. Employer Identification No.)
Incorporation)


				June 30,		December 31,
				2016		2015
				(unaudited)
ASSETS

CURRENT ASSETS
	Cash		$	3,342	$	1,012
	Prepaid expenses			8,913		24,333
		TOTAL CURRENT ASSETS		12,255		25,345

SOFTWARE, PROPERTY AND EQUIPMENT, NET				7,719		100,734

OTHER ASSETS
	Licensing rights in Cyclone, net			91,146		113,021
		Total other assets		91,146		113,021

TOTAL ASSETS			$	111,120	$	239,100

LIABILITIES AND STOCKHOLDERS' DEFICIT

CURRENT LIABILITIES
	Accounts payable and accrued expenses		$	722,152	$	541,763
	Debentures			332,750		435,750
	Derivative liabilities			344,510		1,067,989
	Note payable, net of unamortized debt issuance costs			179,804		-
	Note payable - related party net of unamortized debt issuance costs			88,679		-
	Related party obligation – Cyclone			-		150,000
	Capitalized lease obligations			5,855		9,726
	Deferred revenue and license deposits			310,064		260,064
		TOTAL CURRENT LIABILITIES		1,983,814		2,465,292

		TOTAL LIABILITIES		1,983,814		2,465,292

Redeemable convertible preferred stock - Series A; $0.0001 par value, 1,500
designated Series A, 600 and 500 shares issued and outstanding at June 30, 2016
and December 31, 2015, respectively (liquidation preference of $621,797)				426,257		319,264

STOCKHOLDERS' DEFICIT
	Preferred stock, $0.0001 par value; 5,000,000
		shares authorized, no shares issued and outstanding		-		-
	Common stock, $0.0001 par value, 100,000,000 shares
		authorized, 28,002,622 and 26,624,227 shares issued and
		outstanding at June 30, 2016 and December 31, 2015, respectively		2,800		2,662
	Additional paid-in capital			3,971,371		3,106,369
	Treasury stock, 212,500 shares, at cost			-		(150,000)
	Subscription receivable			(3,787)		(3,787)
	Prepaid expenses with common stock - related parties			(108,333)		(135,321)
	Accumulated deficit			(6,161,002)		(5,365,379)
		TOTAL STOCKHOLDERS' DEFICIT		(2,298,951)		(2,545,456)

TOTAL LIABIITIES AND STOCKHOLDERS' DEFICIT			$	111,120	$	239,100


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

REVENUES	$	-	$	-	$	40,000	$	-
COST OF REVENUES		-		-		7,172		-
Gross profit		-		-		32,828		-

EXPENSES
Payroll		226,181		195,021		442,167		302,678
Professional fees		294,820		428,878		516,054		791,669
Research and development		122,300		361,936		309,429		684,391
Selling, general and administrative		71,781		79,014		93,393		161,952
Total Expenses		715,082		1,064,849		1,361,043		1,940,690

LOSS FROM OPERATIONS		(715,082)		(1,064,849)		(1,328,215)		(1,940,690)

OTHER INCOME (EXPENSE)
Interest expense		(71,433)		(2,483)		(112,253)		(3,038)
Loss on extinguishment of payables		(31,696)		-		(31,696)		-
Change in fair value of derivative Liabilities		1,229,377		-		676,543		-
Total Other Income (Expense)		1,126,248		(2,483)		532,594		(3,038)

INCOME/(LOSS) BEFORE INCOME TAXES		411,166		(1,067,332)		(795,621)		(1,943,728)

INCOME TAXES		-		-		-		-

NET INCOME/(LOSS)		411,166		(1,067,332)		(795,621)		(1,943,728)

PREFERRED STOCK
Series A convertible contractual Dividends		(8,975)		-		(17,770)		-

NET INCOME/(LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS	$	402,191	$	(1,067,332)	$	(813,391)	$	(1,943,728)

NET INCOME/(LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS:
BASIC AND DILUTED	$	0.01	$	(0.19)	$	(0.03)	$	(0.34)

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING:
BASIC AND DILUTED		27,810,399		11,182,076		27,486,902		8,397,236


				For the six months ended
				June 30,
				2016		2015
CASH FLOWS FROM OPERATING ACTIVITIES
	Net loss		$	(795,621)	$	(1,943,728)
	Adjustments to reconcile net loss to net cash used in operations:
		Depreciation and amortization		48,408		29,041
		Restricted shares issued for outside services		47,667		1,665,567
		Restricted shares issued for employee services		117,000		252,700
		Amortization of stock option and restricted stock unit grants		305,408		-
		Amortization of prepaid expenses via common stock		124,487		-
		Loss on extinguishment of payables		31,696		-
		Amortization of debt issuance costs		31,302		-
		Change in fair value of derivative liabilities		(676,543)		-
		Amortization of preferred stock discount		68,261		-
	Changes in operating assets and liabilities
		Change in prepaid expenses		15,420		4,926
		Increase in accounts payable and accrued expenses		283,320		162,535
		Increase in deferred revenue and license deposits		50,000		-
Net cash used in operating activities				(349,195)		171,041

CASH FLOWS FROM INVESTINGING ACTIVITIES
	Expenditures for property and equipment			(4,013)		(80,778)
Net cash used in financing activities				(4,013)		(80,778)

CASH FLOWS FROM FINANCING ACTIVITIES
	Payment of capitalized leases			(3,871)		(6,099)
	Proceeds from note payable net of issuance costs			173,709		-
	Proceeds from note payable - related party, net of issuance costs			85,700		-
	Receipt of restricted cash previously held in escrow			-		10,010
	Proceeds from sale of redeemable preferred stock and common stock warrant			100,000		-
Net cash provided by financing activities				355,538		3,911

NET INCREASE IN CASH				2,330		94,174

CASH - Beginning of period				1,012		265,374

CASH - End of period			$	3,342	$	359,548

SUPPLEMENTAL CASH FLOW DISCLOSURES:
		Payment of interest in cash	$	13,123	$	3,038

NON-CASH INVESTING AND FINANCING ACTIVITIES:
		Conversion of debentures to 490,476 shares of common stock	$	103,000	$	-
		Reclassification of derivative liabilities to additional paid in capital at conversion of debentures	$	125,975	$	-
		Accrual of contractual dividends on Series A convertible preferred stock	$	17,770	$	-
		Issuance of 100,000 shares of common stock for note payable issuance costs	$	26,000	$	-
		Settlement of accounts payable with 187,919 shares of common stock	$	49,859	$	-
		Settlement of accounts payable with software, property and equipment and 50,000 shares of common stock	$	49,299	$	-
		Settlement of related party obligation – Cyclone	$	150,000	$	-


	Years
Software		2
Furniture and equipment		7
Computers		5


	June 30, 2016		December 31, 2015
Software	$	-	$	83,735
Furniture and Computers		1,328		51,643
Shop Equipment		9,540		9,540
Total		10,868		144,918
Accumulated depreciation and amortization		3,149		44,184
Net software, property and equipment	$	7,719	$	100,734


Level 1	Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
Level 2	Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability; and
Level 3	Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).


	Fair value at
	June 30, 2016		Level 1		Level 2		Level 3
Preferred stock embedded conversion feature	$	243,094	$	-	$	-	$	243,094
Anti-dilution provision in common stock warrants included with preferred stock		85,901		-		-		85,901
Debenture embedded conversion feature		-		-		-		-
Anti-dilution provision in common stock warrants included with debentures		15,515		-		-		15,515
Total derivatives	$	344,510	$	-	$	-	$	344,510


	Fair value at
	December 31, 2015		Level 1		Level 2		Level 3
Preferred stock embedded conversion feature	$	376,065	$	-	$	-	$	376,065
Anti-dilution provision in common stock warrants included with preferred stock		51,203		-		-		51,203
Debenture embedded conversion feature		560,778		-		-		560,778
Anti-dilution provision in common stock warrants included with debentures		79,943		-		-		79,943
Total derivatives	$	1,067,989	$	-	$	-	$	1,067,989


	Six Months Ended June 30, 2016
			Preferred stock embedded conversion feature	Anti-dilution provision in common stock warrants included with preferred stock	Debenture embedded conversion feature	Anti-dilution provision in common stock warrants included with debentures	Total
Fair value,
December 31, 2015		$	376,065	51,203	560,778	79,943	1,067,989
Net unrealized
(Gain)/Loss on derivatives			(157,509)	(19,803)	(434,803)	(64,428)	(676,543)
Purchases and issuances
(Sales and settlements)

			24,538	54,501	(125,975)	-	(46,936)


Fair value, June 30, 2016		$	243,094	85,901	-	15,515	344,510



Changes in unrealized
losses, included
in income on
instruments held
at end of period		$	(157,509)	(19,803)	(434,803)	(64,428)	(676,543)


	Number of warrants		Exercise price per share		Average remaining term in years		Aggregate fair value
Warrants issued in connection with issuance of Debentures		415,000	$	2.45		3.00	$	15,515
Warrants issued in connection with issuance of Preferred Stock		1,153,845	$	0.50		4.40	$	85,901


	Six Months Ended June 30, 2016
Risk free interest rate	1.01	%	-	1.22	%
Expected volatility	77.53	%	-	82.39	%
Expected dividend yield			0%
Expected term in years			3.5
Average value per options	$0.100		-	$0.102


·	Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the Company’s assets;

·	Provide reasonable assurance that transactions are recorded as necessary to permit preparation of the financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of management and the Board of Directors; and

·	Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.


·	Management has a lack of knowledge and experience with accounting for derivative liabilities, reverse mergers and redeemable preferred stock.
·	Management is understaffed to perform the necessary accounting, including preparation of the required financial disclosures, in a timely manner.
·	Management has not yet formed an audit committee.


To whom	Date	Number of shares	Consideration
Convertible Note Holder	6/22/16	150,000	$31,500
Affiliated Service Provider	6/27/16	50,000	Settlement of Payables
Convertible Note Holder	7/11/16	129,762	$27,250
Convertible Note Holder	7/14/16	145,238	$30,500
Convertible Note Holder	7/19/16	145,238	$30,500
Convertible Note Holder	7/26/16	50,000	$10,500
Convertible Note Holder	7/26/16	95,238	$20,000
Accredited Investors	7/20/16 – 8/9/16	750,000	$157,000
Convertible Note Holder	8/16/16	233,333	$49,000


Date:	8/22/16	By:	/s/ Christopher M. Nelson
			Christopher M. Nelson
			Chief Executive Officer and Director


Date:	8/22/16	By:	/s/ Michelle Murcia
			Michelle Murcia
			Chief Financial Officer