UNITED
STATES

SECURITIES
AND EXCHANGE COMMISSION

WASHINGTON,
D.C. 20549



FORM
10-Q







|[X]  | Quarterly
    Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|---- | -------------------------------------------------------------------------------------------
|     |                                                                                            
|     | For
    the quarterly period ended March 31, 2018                                          
|     |                                                                                            
|[  ] | Transition
    Report pursuant to 13 or 15(d) of the Securities Exchange Act of 1934       
|     |                                                                                            
|     | For
    the transition period from __________ to __________                                
|     |                                                                                            
|     | Commission
    File Number: 000-21202                                                      







Textmunication
Holdings, Inc.

(Exact
name of registrant as specified in its charter)



|Nevada                                                                                                                                                                                                                        |  | 58-1588291                                                                                                                                                                                      
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(State
                                         or other jurisdiction of
                                                                             incorporation
                                         or organization) |  | (IRS
                                         Employer
                                                                             Identification
                                         No.)



1940
Contra Costa Blvd. Pleasant Hill, CA 94523

(Address
of principal executive offices)



925-777-2111

(Registrant’s
telephone number)










(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.

[X]
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). [X] Yes [  ]
No



Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting
company, or an emerging growth company.





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



If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [  ]



State
the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 3,975,519,454
common shares as of June 14, 2018























|TABLE
    OF CONTENTS                                                  
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|                                                                       
|                                                                       
|PART
                                         I – FINANCIAL INFORMATION
|                                                                       
|Item
    1:                                                            
|Item
    2:                                                            
|Item
    3:                                                            
|Item
    4:                                                            
|                                                                       
|PART
                                         II – OTHER INFORMATION   
|                                                                       
|Item
    1:                                                            
|Item
    1A:                                                           
|Item
    2:                                                            
|Item
    3:                                                            
|Item
    4:                                                            
|Item
    5:                                                            
|Item
    6:                                                            





2











PART
I - FINANCIAL INFORMATION



Item
1. Financial Statements



Our
consolidated financial statements included in this Form 10-Q are as follows:



|F-1 | Consolidated
    Balance Sheets as of March 31, 2018 (unaudited) and December 31, 2017;                      
|--- | -------------------------------------------------------------------------------------------------------------
|F-2 | Consolidated
    Statements of Operations for the three months ended March 31, 2018 and 2017 (unaudited);    
|F-3 | Consolidated
    Statements of Cash Flows for the three months ended March 31, 2018 and 2017 (unaudited); and
|F-4 | Notes
    to Consolidated Financial Statements.                                                              



These
consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United
States of America for interim financial information and the SEC instructions to Form 10-Q. In the opinion of management, all adjustments
considered necessary for a fair presentation have been included. Operating results for the interim period ended March 31, 2018
are not necessarily indicative of the results that can be expected for the full year.



3







TEXTMUNICATION
HOLDINGS, INC.

CONSOLIDATED
BALANCE SHEETS

(UNAUDITED)



|                                                                                                                                                                                    |  | March 31, 2018 |             |   | December 31, 2017 |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------- | ----------- | - | ----------------- | -
|ASSETS                                                                                                                                                                              |  |                |             |   |                   |  
|Current assets                                                                                                                                                                      |  |                |             |   |                   |  
|Cash and cash equivalents                                                                                                                                                           |  | $              | 4,012       |   |                   | $
|Receivables                                                                                                                                                                         |  |                | 14,635      |   |                   |  
|Total current assets                                                                                                                                                                |  |                | 18,647      |   |                   |  
|                                                                                                                                                                                    |  |                |             |   |                   |  
|Software                                                                                                                                                                            |  |                | 72,288      |   |                   |  
|Investment in equity method investee                                                                                                                                                |  |                | 452,064     |   |                   |  
|                                                                                                                                                                                    |  |                |             |   |                   |  
|Total assets                                                                                                                                                                        |  |                | 542,999     |   |                   |  
|                                                                                                                                                                                    |  |                |             |   |                   |  
|LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)                                                                                                                                      |  |                |             |   |                   |  
|Current liabilities                                                                                                                                                                 |  |                |             |   |                   |  
|Accounts payable and accrued liabilities                                                                                                                                            |  | $              | 337,814     |   |                   | $
|Due to related parties                                                                                                                                                              |  |                | 11,750      |   |                   |  
|Convertible notes payable, net of discount                                                                                                                                          |  |                | 53,215      |   |                   |  
|Derivitive liability                                                                                                                                                                |  |                | 72,415      |   |                   |  
|Total current liabilities                                                                                                                                                           |  |                | 475,194     |   |                   |  
|                                                                                                                                                                                    |  |                |             |   |                   |  
|Total liabilities                                                                                                                                                                   |  |                | 475,194     |   |                   |  
|                                                                                                                                                                                    |  |                |             |   |                   |  
|Stockholders’ equity (deficit)                                                                                                                                                      |  |                |             |   |                   |  
|                                                                                                                                                                                    |  |                |             |   |                   |  
|Preferred stock, 5,933,333 shares authorized, $0.0001 par value, 4,000,000
    issued and outstanding                                                                               |  |                | 400         |   |                   |  
|Series B - Preferred stock, 66,667 shares authorized, $0.0001 par value,
    66,667 issued and outstanding                                                                          |  |                | 7           |   |                   |  
|Series C - Preferred stock, 2,000,000 shares authorized, $0.0001 par value,
    2,000,000 issued and outstanding                                                                    |  |                | 200         |   |                   |  
|Common stock; $0.0001 par value; 250,000,000 shares authorized; 3,975,519 and 2,435,179 shares
    issued and outstanding as of March 31, 2018 and December 31, 2017, respectively. |  |                | 399         |   |                   |  
|Additional paid-in capital                                                                                                                                                          |  |                | 15,173,070  |   |                   |  
|Accumulated deficit                                                                                                                                                                 |  |                | (15,106,271 | ) |                   |  
|Total stockholders’ equity (deficit)                                                                                                                                                |  |                | 67,805      |   |                   |  
|                                                                                                                                                                                    |  |                |             |   |                   |  
|Total liabilities and stockholders’ equity (deficit)                                                                                                                                |  | $              | 542,999     |   |                   | $



The
accompanying notes are an integral part of these unaudited consolidated financial statements



F-1







TEXTMUNICATION
HOLDINGS, INC.

CONSOLIDATED
STATEMENTS OF OPERATIONS

(UNAUDITED)



|                                                        |  | The Three Months Ended |          
|------------------------------------------------------- |  | ---------------------- | ---------
|                                                        |  | March 31, 2018         |          
|                                                        |  |                        |          
|Revenues                                                |  | $                      | 263,864  
|                                                        |  |                        |          
|Cost of revenues                                        |  |                        | 55,438   
|                                                        |  |                        |          
|Gross profit                                            |  |                        | 208,426  
|                                                        |  |                        |          
|Operating expenses                                      |  |                        |          
|Officer compensation                                    |  |                        | 15,000   
|General and administrative expenses                     |  |                        | 318,414  
|Total operating expenses                                |  |                        | 333,414  
|                                                        |  |                        |          
|Loss from operations                                    |  |                        | (124,988 
|                                                        |  |                        |          
|Other income (expense)                                  |  |                        |          
|Interest expense                                        |  |                        | (2,792   
|Gain on change of derivative liability                  |  |                        | 103,653  
|Amortization of debt discount                           |  |                        | (28,356  
|Gain on settlement of notes payable                     |  |                        | 96,721   
|Total other income (expense)                            |  |                        | 169,226  
|                                                        |  |                        |          
|Income (loss) from investment in equity method investee |  |                        | (269     
|                                                        |  |                        |          
|Net income (loss)                                       |  | $                      | 43,969   
|                                                        |  |                        |          
|Basic weighted average common shares outstanding        |  |                        | 3,641,249
|Net loss per common share: basic and diluted            |  | $                      | 0.01     



The
accompanying notes are an integral part of these unaudited consolidated financial statements



F-2









TEXTMUNICATION, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)





|                                                                                |  | Three Months Ended |         
|------------------------------------------------------------------------------- |  | ------------------ | --------
|                                                                                |  | March 31, 2018     |         
|Cash Flows from Operating Activities                                            |  |                    |         
|Net income (loss)                                                               |  |                    | 43,969  
|Adjustments to reconcile net loss to net cash provided by operating activities: |  |                    |         
|Amortization of debt discount                                                   |  |                    | 28,356  
|(Gain) loss on derivative liability                                             |  |                    | (103,653
|Non cash interest expense                                                       |  |                    | -       
|Depreciation                                                                    |  |                    | -       
|Share based compensation                                                        |  |                    | -       
|Gain on the settlement of debt                                                  |  |                    | (96,721 
|Income from equity method investee                                              |  |                    | 272     
|Changes in assets and liabilities                                               |  |                    |         
|Receivables                                                                     |  |                    | (11,786 
|Accounts payable and accrued expenses                                           |  |                    | 185,476 
|Net cash provided by operating activities                                       |  |                    | 45,913  
|                                                                                |  |                    |         
|Capitalized cost for internal use software                                      |  |                    | (27,059 
|Net cash used in investing activities                                           |  |                    | (27,059 
|                                                                                |  |                    |         
|Cash Flows from Financing Activities                                            |  |                    |         
|Payments on loans payable                                                       |  |                    | -       
|Payments on convertible notes payable                                           |  |                    | (25,000 
|Net cash used in financing activities                                           |  |                    | (25,000 
|                                                                                |  |                    |         
|Net increase in cash                                                            |  |                    | (6,146  
|                                                                                |  |                    |         
|Cash, beginning of period                                                       |  |                    | 10,158  
|                                                                                |  |                    |         
|Cash, end of period                                                             |  | $                  | 4,012   
|                                                                                |  |                    |         
|Supplemental disclosure of cash flow information                                |  |                    |         
|Cash paid for interest                                                          |  | $                  | -       
|Cash paid for tax                                                               |  | $                  | -       
|                                                                                |  |                    |         
|Non-Cash investing and financing transactions                                   |  |                    |         
|Conversion of debt                                                              |  | $                  | 299,490 
|Conversion of convertible notes payable                                         |  | $                  | 54,541  
|Settlement of derivative liability                                              |  | $                  | 103,653 



The
accompanying notes are an integral part of these unaudited consolidated financial statements



F-3







TEXTMUNICATION
HOLDINGS, INC.

NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR
THE QUARTER ENDED MARCH 31, 2018



NOTE
1 – ORGANIZATION AND BUSINESS OPERATIONS



Textmunication
Holdings, Inc. (Company) was incorporated on May 13, 2010 under the laws of the State of California. Textmunication is an online
mobile marketing platform service that will connect merchants with their customers and allow them to drive loyalty and repeat
business in a non-intrusive, value added medium. For merchants we provide a mobile marketing platform where they can always send
the most up-to-date offers/discounts/alerts/events schedule, such as happy hours, trivia night, and other campaigns. The consumer
can also access specials and promotions that merchants choose to distribute through Textmunication by opting in to keywords designated
to the merchant’s keywords.



On
November 16, 2013, the Company entered into a Share Exchange Agreement (SEA) with Textmunication Holdings (Holdings). a Nevada
corporation, whereby the sole shareholder of the Company received 65,640 (post split) new shares of common stock of Holdings in
exchange for 100% of the Company’s issued and outstanding shares.



Basis
of Presentation



The
accompanying unaudited interim financial statements of the Company have been prepared in accordance with accounting principles
generally accepted in the United States of America and the rules of the Securities and Exchange Commission, and should be read
in conjunction with the audited financial statements and notes thereto contained in the Company’s most recent Annual Financial
Statements filed with the SEC on Form 10-K. In the opinion of management, all adjustments, consisting of normal recurring adjustments,
necessary for a fair presentation of financial position and the results of operations for the interim period presented have been
reflected herein. The results of operations for the interim period are not necessarily indicative of the results to be expected
for the full year. Notes to the financial statements which would substantially duplicate the disclosures contained in the audited
financial statements for the most recent fiscal period, as reported in the Form 10-K, have been omitted.



Going
concern



These
consolidated financial statements have been prepared in accordance with generally accepted accounting principles applicable to
a going concern, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal
course of business. As of March 31, 2018, the Company has an accumulated deficit of $15,106,271. The company’s ability to
continue as a going concern is contingent upon the successful completion of additional financing arrangements and its ability
to achieve and maintain profitable operations. While the Company is expanding its best efforts to achieve the above plans, there
is no assurance that any such activity will generate funds that will be available for operations. These conditions raise substantial
doubt about the Company’s ability to continue as a going concern. These consolidated financial statements do not include
any adjustments that might arise from this uncertainty.



NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES



Cash



The
Company considers all highly liquid instruments purchased with a maturity of three months or less to be cash equivalents.



The
Company minimizes its credit risk associated with cash by periodically evaluating the credit quality of its primary financial
institution. The balance at times may exceed federally insured limits. At March 31, 2018, no cash balances exceeded the federally
insured limit.



Accounts
receivable and allowance for doubtful accounts



Accounts
receivable are stated at the amount management expects to collect. The Company generally does not require collateral to support
customer receivables. The Company provides an allowance for doubtful accounts based upon a review of the outstanding accounts
receivable, historical collection information and existing economic conditions. As of March 31, 2018 and 2016 the allowance for
doubtful accounts was $0 and $0 and bad debt expense of $0 and $0, respectively.



F-4







TEXTMUNICATION
HOLDINGS, INC.

NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR
THE QUARTER ENDED MARCH 31, 2018



Revenue
Recognition



Revenues
are recognized when control of the promised is transferred to our customers, in an amount that reflects the consideration we expect
to be entitled to in exchange for those services.



The
Company currently derives a substantial majority of its revenue from fees associated with our subscription services, which generally
include mobile marketing platform services. Customers are billed for the subscription on a monthly basis. For all of the Company’s
customers, regardless of the method, the Company uses to bill them, subscription revenue is recorded as deferred revenue in the
accompanying consolidated balance sheets. As services are performed, the Company recognizes subscription revenue on a monthly
basis over the applicable service period. When the Company provides a free trial period, the Company does not begin to recognize
subscription revenue until the trial period has ended and the customer has been billed for the services.



Professional
services revenues are generated fromSMS and
RCS packages where client logs into a cloud based application​ to send targeted SMS messages to their subscribers base​.
Our customweb application SMS/RCS platform ​is typically billed on a fixed-price
based on the number of SMS/RCS allocated for each package our client purchases. Generally,
revenue forSMS/RCS ​services is recognizedimmediately as our clients
have instant access to their web-based application to send out messages​, the number of SMS/RCS messages allocated to a
client expires at the end of each month and renews beginning of each month. The Company
offers whereby control of the product passes to the customer when delivered and revenue is recognized at the time of delivery.



Results
for reporting periods beginning after January 1, 2018 are presented under Topic 606, while prior period amounts are not adjusted
and continue to be reported in accordance with our historic accounting under Topic 605



We
did not have a cumulative impact as of January 1, 2018 due to the adoption of Topic 606 and there was not an impact to our consolidated
statement of operations for the three months ended March 31, 2018 as a result of applying Topic 606.



Software
Development Costs



The
Company applies the principles of FASB ASC 985-20, Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise
Marketed (“ASC 985-20”). ASC 985-20 requires that software development costs incurred in conjunction with product
development be charged to research and development expense until technological feasibility is established. Thereafter, until the
product is released for sale, software development costs must be capitalized and reported at the lower of unamortized cost or
net realizable value of the related product.



The
Company also applies the principles of FASB ASC 350-40, Accounting for the Cost of Computer Software Developed or Obtained for
Internal Use (“ASC 350-40”). ASC 350-40 requires that software development costs incurred before the preliminary project
stage be expensed as incurred. We capitalize development costs related to these software applications once the preliminary project
stage is complete and it is probable that the project will be completed, and the software will be used to perform the function
intended.



As
of March 31, 2018 and December 31, 2017, the Company capitalized software development costs in the amount of $72,288 and $45,229
respectively.



F-5







TEXTMUNICATION
HOLDINGS, INC.

NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR
THE QUARTER ENDED MARCH 31, 2018



Fair
Value of Financial Instruments



The
carrying amounts reflected in the balance sheets for cash, accounts payable and accrued expenses approximate the respective fair
values due to the short maturities of these items.



As
required by the Fair Value Measurements and Disclosures Topic of the FASB ASC, fair value is measured based on a three-tier fair
value hierarchy, which prioritizes the inputs used in measuring fair value as follows: (Level 1) observable inputs such as quoted
prices in active markets; (Level 2) inputs, other than the quoted prices in active markets, that are observable either directly
or indirectly; and (Level 3) unobservable inputs in which there is little or no market data, which require the reporting entity
to develop its own assumptions.



The
three levels of the fair value hierarchy are described below:



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 is observable, either directly or indirectly, for substantially
the full term of the asset or liability;



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).



The
fair value of the accounts receivable, accounts payable, notes payable are considered short term in nature and therefore their
value is considered fair value.



Financial
assets and liabilities measured at fair value on a recurring basis are summarized below for the three months ended March 31, 2018:



|                                 |  | Level 1 |   |  | Level 2 |   |   | Level 3 |  |   | Total  | 
|-------------------------------- |  | ------- | - |  | ------- | - | - | ------- |  | - | ------ | 
|Liabilities                      |  |         |   |  |         |   |   |         |  |   |        | 
|Derivative Financial Instruments |  | $       | — |  |         | $ | — |         |  | $ | 72,415 | 



Financial
assets and liabilities measured at fair value on a recurring basis are summarized below for the year ended December 31, 2017:





|                                 |  | Level 1 |   |  | Level 2 |   |   | Level 3 |  |   | Total   | 
|-------------------------------- |  | ------- | - |  | ------- | - | - | ------- |  | - | ------- | 
|Liabilities                      |  |         |   |  |         |   |   |         |  |   |         | 
|Derivative Financial Instruments |  | $       | — |  |         | $ | — |         |  | $ | 319,041 | 



Net
income (loss) per Common Share



Basic
net income (loss) per share is computed by dividing the net loss attributable to the common stockholders by the weighted average
number of shares of common stock outstanding during the period. Fully diluted loss per share is computed similar to basic loss
per share except that the denominator is increased to include the number of additional common shares that would have been outstanding
if the potential common shares had been issued and if the additional common shares were dilutive.



Use
of Estimates



The
preparation of financial statements in conformity with generally accepted accounting principles 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 the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results
could differ from those estimates.



F-6







TEXTMUNICATION
HOLDINGS, INC.

NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR
THE QUARTER ENDED MARCH 31, 2018



Stock-Based
Compensation



The
Company accounts for employee stock-based compensation in accordance with the guidance of FASB ASC Topic 718, Compensation –
Stock Compensation which requires all share-based payments to employees, including grants of employee stock options, to be recognized
in the financial statements based on their fair values. The fair value of the equity instrument is charged directly to compensation
expense and credited to additional paid-in capital over the period during which services are rendered.



The
Company follows ASC Topic 505-50, formerly EITF 96-18, “Accounting for Equity Instruments that are Issued to Other than
Employees for Acquiring, or in Conjunction with Selling Goods and Services,” for stock options and warrants issued to consultants
and other non-employees. In accordance with ASC Topic 505-50, these stock options and warrants issued as compensation for services
provided to the Company are accounted for based upon the fair value of the services provided or the estimated fair market value
of the option or warrant, whichever can be more clearly determined. The fair value of the equity instrument is charged directly
to compensation expense and additional paid-in capital over the period during which services are rendered.



Investments
in Securities



Investments
in securities are accounted for using the equity method if the investment provides the Company the ability to exercise significant
influence, but not control, over an investee. Significant influence is generally deemed to exist if the Company has an ownership
interest in the voting stock of the investee between 20% and 50%, although other factors, such as representation on the investee’s
Board of Directors, are considered in determining whether the equity method is appropriate.



Recent
Accounting Pronouncements



In
November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows (Topic 230)”, requiring that the statement of
cash flows explain the change in the total cash, cash equivalents, and amounts generally described as restricted cash or restricted
cash equivalents. This guidance is effective for fiscal years, and interim reporting periods therein, beginning after December
15, 2017 with early adoption permitted. Management evaluated ASU 2016-18 and determined that the adoption of this new accounting
standard did not have a material impact on the Company’s consolidated financial statements.



NOTE
3 – RELATED PARTY TRANSACTIONS



As
of March 31, 2018, the Company had advances due to a related party. The loans are due on demand and have no interest. Amounts
outstanding as of March 31, 2018 and December 31, 2017 were approximately $11,750 and $11,750, respectively



NOTE
4 - CONVERTIBLE NOTE PAYABLE



Convertible
notes payable consist of the following as of March 31, 2018 and December 31, 2016:



|                                  |  | 2018 |         |   | 2017 |  
|--------------------------------- |  | ---- | ------- | - | ---- | -
|Total convertible notes payable   |  |      | 67,393  |   |      |  
|Less discounts                    |  |      | (14,178 | ) |      |  
|Convertible notes net of discount |  | $    | 53,215  |   |      | $



F-7







TEXTMUNICATION
HOLDINGS, INC.

NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR
THE QUARTER ENDED MARCH 31, 2018



The
Company accounts for the fair value of the conversion features of its convertible debt in accordance with ASC Topic No. 815-15
“Derivatives and Hedging; Embedded Derivatives” (“Topic No. 815-15”). Topic No. 815-15 requires the Company
to bifurcate and separately account for the conversion features as an embedded derivative contained in the Company’s convertible
debt. The Company is required to carry the embedded derivative on its balance sheet at fair value and account for’ any unrealized
change in fair value as a component of results of operations. The Company values the embedded derivatives using the Black-Scholes
pricing model.



The
following table presents details of the Company’s derivative liabilities associated with its convertible notes as of March
31, 2018 and December 31, 2017:



|                                                          |  | Amount |         
|--------------------------------------------------------- |  | ------ | --------
|Balance December 31, 2017                                 |  | $      | 319,041 
|Adjustment to derivative liability due to debt conversion |  |        | (142,973
|Change in fair market value of derivative liabilities     |  |        | (103,653
|Balance March 31, 2018                                    |  | $      | 72,415  



During
the three months ended March 31, 2018, the Company issued 647,458 shares of common stock with a fair value of $54,631 for the
partial conversion of convertible notes payable. The converted portion of the notes also had associated derivative liabilities
with fair values on the date of conversion of 866,361. The conversion of the derivative liabilities has been recorded through
additional paid-in capital.



The
Black-Scholes model utilized the following inputs to value the derivative liability at the date of issuance of the convertible
note and at March 31, 2018:



|Fair
    value assumptions – derivative notes: |  | March
    31, 2018 |          
|---------------------------------------------- |  | ------------------ | ---------
|Risk
    free interest rate                    |  |                    | 1.27-1.63
|Expected
    term (years)                      |  |                    | 0.01-0.01
|Expected
    volatility                        |  |                    | 397      
|Expected
    dividends                         |  |                    | 0        



Settlement
Agreements



During
the three months ended March 31, 2018, the Company entered into certain cancellation agreements with the holder of a certain notes
payable in the amounting to $96,721, including accrued interest issued from December 10, 2015 through August 27, 2017. The face
value of the canceled debt of $96,721 has been recorded as a gain on settlement of notes payable as of March 31, 2018.



NOTE
5 – INVESTMENT IN ASPIRE CONSULTING GROUP, LLC



On
January 5, 2016, the Company entered into a Share Exchange Agreement with Aspire Consulting Group, LLC, a Maryland limited liability
company and certain members of Aspire. Pursuant to the terms of the Exchange Agreement, the Company agreed to acquire 49% of all
of the issued and outstanding membership units of Aspire in exchange for the issuance of 66,667 shares of the Company’s
newly created Series B Convertible Preferred Stock to the Members valued at $460,002.



The
Company has concluded that it has the ability to exercise significant influence, but not control, over an Aspire through its acquired
49% equity interest and therefore has accounted for the acquisition of the interest under the equity method.



F-8







TEXTMUNICATION
HOLDINGS, INC.

NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR
THE QUARTER ENDED MARCH 31, 2018



The
following table presents details of the Company’s investment is Aspire as of March 31, 2018 and December 31, 2017:



|                                          |  | Amount |        
|----------------------------------------- |  | ------ | -------
|Balance December 31, 2017                 |  | $      | 452,064
|Income (loss) from equity method investee |  |        | (269   
|Distributions received from Aspire        |  |        | -      
|Balance March 31, 2018                    |  | $      | 452,064



NOTE
6 – COMMITMENTS AND CONTINGENCIES



Office
Lease



On
January 6, 2015 the Company signed an amendment to its lease originally signed on May 9, 2008. The amended lease commenced January
1, 2015 and expires on thirty days’ notice. Rent expense was approximately $5,268 for the three months ended March 31, 2018
and 2017, respectively.



Executive
Employment Agreement



The
Company has an employment agreement with the CEO/Chairman to perform duties and responsibilities as may be assigned by the Board
of Directors. The base salary is in the amount of $120,000 per annum plus an annual discretionary bonus plus benefits commencing
on December 17, 2013 and ending May 1, 2017 with an automatic renewal on each anniversary date (May 1) thereafter.



NOTE
7 – STOCKHOLDERS’ EQUITY



During
the three months ended March 31, 2018, the Company issued 892,882 shares of common stock (post-split) valued at $299,469 for the
settlement of debt related to a 3a10 settlement.



During
the three months ended March 31, 2018, the Company issued 647,459 shares of common stock (post-split) for the settlement of $54,541
in notes payable.



NOTE
8 – SUBSEQUENT EVENTS



Subsequent
to March 31, 2018, the Company’s Board of Directors approved a one to one thousand (1:1000) reverse stock split. The Company
financial statements have been retroactively restated to the reflect the effect of the stock split



F-9















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



Forward-Looking
Statements



Certain
statements, other than purely historical information, including estimates, projections, statements relating to our business plans,
objectives, and expected operating results, and the assumptions upon which those statements are based, are “forward-looking
statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act
of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements generally are identified by the
words “believes,” “project,” “expects,” “anticipates,” “estimates,”
“intends,” “strategy,” “plan,” “may,” “will,” “would,”
“will be,” “will continue,” “will likely result,” and similar expressions. We intend such
forward-looking statements to be covered by the safe-harbor provisions for forward-looking statements contained in the Private
Securities Litigation Reform Act of 1995, and are including this statement for purposes of complying with those safe-harbor provisions.
Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which
may cause actual results to differ materially from the forward-looking statements. Our ability to predict results or the actual
effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse effect on our operations
and future prospects on a consolidated basis include, but are not limited to: changes in economic conditions, legislative/regulatory
changes, availability of capital, interest rates, competition, and generally accepted accounting principles. These risks and uncertainties
should also be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements.
We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information,
future events or otherwise. Further information concerning our business, including additional factors that could materially affect
our financial results, is included herein and in our other filings with the SEC.



Company
Overview



We
are a developing player in the mobile marketing and loyalty industry, providing cutting-edge mobile marketing solutions, rewards
and loyalty to our clients. With a powerful yet intuitive suite of services, clients are able to reach more customers faster and
reward them for repeat business. We help clients reach their marketing and revenue goals by educating clients with the most effective
tools in mobile marketing, rewards, paperless redemption and loyalty.



In
the past 4 years, we have grown to over 500 clients and more than 800 different locations in the United States and Canada. We
have achieved this with an expanded focus on a variety of industries, including restaurants, retailers, entertainment venues and
other partnership opportunities. We have decided to focus our energy on the gym, health and fitness club market. However, we are
also working with Quick Service Restaurants (QSR), Beauty/Tanning salons, hospitality, entertainment, digital marketing and sporting
events



We
have also entered into the IT consulting business through our acquisition of a minority interest in Aspire Consulting, LLC. We
plan to assist our controlling partner in the development of this consulting business in addition to improving the market position
of our mobile marketing business.



Our
principal executive office is located at 1940 Contra Costa Blvd. Pleasant Hill, CA 94523 and our telephone number is (925-777-2111).



Results
of Operation for Three Months Ended March 31, 2018 and 2017



Revenues



For
the three months ended March 31, 2018, we earned revenues in the amount of 263,864, as compared with revenues of $228,760 for
the three months ended March 31, 2017.



The
increase in revenues for the three months ended March 31, 2018 over the prior year period is due to more customer accounts achieved
from a change in our pricing model to become more competitive. We expect to achieve greater revenues for the rest of 2018 over
2017.





4









Cost
of Revenues



Cost
of revenues was $55,438 for the three months ended March 31, 2018, as compared with $73,419 for the same period ended March 31,
2017. Our gross profit was $208,426 for the three months ended March 31, 2018 or approximately 79% of revenues, as compared with
$155,341 for the same period ended March 31, 2017, or approximately 68% of revenues. Our cost of revenues decreased for 2018 compared
with the 207 and was mainly attributable to less spent on subcontracted labor and servers. We expect a similar or increased cost
of revenues for the rest of 2018.



Operating
Expenses



Our
operating expenses were $333,414 for the three months ended March 31, 2018, as compared with $6,163,251 for the three months ended
March 31, 2017.



The
main reason for our increased operating expenses in 2018 was a result of stock-based compensation to our CEO, Wais Asefi. We expect
that our operating expenses for the rest of 2018 will decrease, provided that we do not have to issue stock for services. Given
our lack of operating capital, we have been forced to issue shares for services rendered to the company. We hope that increase
revenues will lessen that trend for 2018 and beyond.



Other
Income/Expenses



We
had other income of $169,226 for the three months ended March 31, 2018 compared with other expenses of $4,756,720 for the same
period ended March 31, 2017.



Other
income for the three months ended March 31, 2018 consisted mainly of a $103,653 change in the fair value of derivative liabilities
based on Black Scholes, along with a $96,721 gain on the settlement of notes payable, offset mainly by the amortization of debt
discount of $28,356. Other expenses for the three months ended March 31, 2017 consisted of $4,645,571 due to the loss on change
of derivative liabilities, $84,711 in amortization of debt discount and $32,6583 in interest expenses, offset by $6,245 for the
loss on the settlement of notes payable.



Net
Income/Loss



We
had net income of $43,969 for the three months ended March 31, 2018, as compared with a net loss of $10,766,154 for the three
months ended March 31, 2017.



Liquidity
and Capital Resources



As
of March 31, 2018, we had total current assets of $18,647, consisting of cash and receivables. Our total current liabilities as
of March 31, 2018 were $475,194. We had a working capital deficit of $456,547 as of March 31, 2018.



Cash
Flows from Operating Activities



Operating
activities provided $45,913 in cash for the three months ended March 31, 2018, compared with cash provided of $24,824 for the
three months ended March 31, 2017. Our positive operating cash flow for the three months ended March 31, 2018 was largely the
result of changes in accounts payable and accrued expenses of $185,476 and our net income of $43,969 offset mainly by the loss
on derivative liability of 103,653 and the gain on the settlement of debt of 96,721. Our positive operating cash flow was largely
the result of our share based compensation of $5,004,200 and loss on derivative liabilities of $4,645,571, offset by our net loss
of $10,766,154.



Cash
Flows from Investing Activities



Investing
activities used $27,059 in cash for the three months ended March 31, 2018, compared with no cash used for the three months ended
March 31, 2017. Cash flows used in investing activities for the three months ended March 31, 2018 resulted from the capitalized
cost for internal use software.





5







Cash
Flows from Financing Activities



Cash
flows used by financing activities during the three months ended March 31, 2018 amounted to $25,000, compared with cash flows
used by financing activities of $24,099 for the three months ended March 31, 2017. Our negative cash flows for the three months
ended March 31, 2018 consisted of payments on convertible notes payable. Our negative cash flows for the three months ended March
31, 2017 consisted of payments on convertible notes payable and loans payable.



The
features of the debt instruments and payables concerning our financing activities are detailed in the footnotes to our financial
statements.



Our
optimum level of growth for success will be achieved if we are able to raise $250,000 in the next twelve months. However, funds
are difficult to raise in today’s economic environment. If we are unable to raise $250,000 our ability to implement our
business plan and achieve our goals will be significantly diminished.



We
have experienced a history of losses. With our revenues increasing, however, we are less reliant on outside capital as we have
been in the past. We will need at a minimum $120,000 in capital to operate in the next 12 months.



We
are dependent on investment capital to continue our survival. We have raised money through convertible debt, almost always on
unfavorable terms. There is no guarantee that these small convertible loans will be available to us in the future or on terms
acceptable to us.



We
do not have any formal commitments or arrangements for the sales of stock or the advancement or loan of funds at this time. There
can be no assurance that such additional financing will be available to us on acceptable terms, or at all.



Going
Concern



As
of March 31, 2018, we have an accumulated deficit of $15,106,271. Our ability to continue as a going concern is contingent upon
the successful completion of additional financing arrangements and our ability to achieve and maintain profitable operations.
While we are expanding our best efforts to achieve the above plans, there is no assurance that any such activity will generate
funds that will be available for operations. These conditions raise substantial doubt about our ability to continue as a going
concern. These financial statements do not include any adjustments that might arise from this uncertainty.



Off
Balance Sheet Arrangements



As
of March 31, 2018, there were no off balance sheet arrangements.



Critical
Accounting Policies



In
December 2001, the SEC requested that all registrants list their most “critical accounting polices” in the Management
Discussion and Analysis. The SEC indicated that a “critical accounting policy” is one which is both important to the
portrayal of a company’s financial condition and results, and requires management’s most difficult, subjective or
complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.
Our critical accounting policies are disclosed in Note 2 of our audited financial statements included in the Form 10-K filed with
the Securities and Exchange Commission.



Recent
Accounting Pronouncements



No
new accounting pronouncements issued or effective during the fiscal year has had or is expected to have a material impact on the
financial statements.



Item
3. Quantitative and Qualitative Disclosures About Market Risk



A
smaller reporting company is not required to provide the information required by this Item.





6







Item
4. Controls and Procedures



Disclosure
Controls and Procedures



We
conducted an evaluation, with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness
of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934, as amended, or the Exchange Act, as of March 31, 2018, to ensure that information required to be disclosed
by us in the reports filed or submitted by us under the Exchange Act is recorded, processed, summarized and reported, within the
time periods specified in the Securities Exchange Commission’s rules and forms, including to ensure that information required
to be disclosed by us in the reports filed or submitted by us under the Exchange Act is accumulated and communicated to our management,
including our principal executive and principal financial officer, or persons performing similar functions, as appropriate to
allow timely decisions regarding required disclosure. Based on that evaluation, our Chief Executive Officer and Chief Financial
Officer have concluded that as of March 31, 2018, our disclosure controls and procedures were not effective at the reasonable
assurance level due to the material weaknesses identified and described below.



Our
principal executive officers do not expect that our disclosure controls or internal controls will prevent all error and all fraud.
Although our disclosure controls and procedures were designed to provide reasonable assurance of achieving their objectives and
our principal executive officers have determined that our disclosure controls and procedures are effective at doing so, a control
system, no matter how well conceived and operated, can provide only reasonable, not absolute assurance that the objectives of
the system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the
benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no
evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company
have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that
breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented if there exists in an individual
a desire to do so. There can be no assurance that any design will succeed in achieving its stated goals under all potential future
conditions.



Remediation
Plan to Address the Material Weaknesses in Internal Control over Financial Reporting



A
material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there
is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or
detected on a timely basis. Management identified the following three material weaknesses that have caused management to conclude
that, as of March 31, 2018, our disclosure controls and procedures, and our internal control over financial reporting, were not
effective at the reasonable assurance level:



| | 1. | We
                                         do not have written documentation of our internal control policies and procedures. Written
                                         documentation of key internal controls over financial reporting is a requirement of Section
                                         404 of the Sarbanes-Oxley Act as of the period ending March 31, 2018. Management evaluated
                                         the impact of our failure to have written documentation of our internal controls and
                                         procedures on our assessment of our disclosure controls and procedures and has concluded
                                         that the control deficiency that resulted represented a material weakness.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 2. | We
                                         do not have sufficient segregation of duties within accounting functions, which is a
                                         basic internal control. Due to our size and nature, segregation of all conflicting duties
                                         may not always be possible and may not be economically feasible. However, to the extent
                                         possible, the initiation of transactions, the custody of assets and the recording of
                                         transactions should be performed by separate individuals. Management evaluated the impact
                                         of our failure to have segregation of duties on our assessment of our disclosure controls
                                         and procedures and has concluded that the control deficiency that resulted represented
                                         a material weakness.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 3. | Effective
                                         controls over the control environment were not maintained. Specifically, a formally adopted
                                         written code of business conduct and ethics that governs our employees, officers, and
                                         directors was not in place. Additionally, management has not developed and effectively
                                         communicated to employees its accounting policies and procedures. This has resulted in
                                         inconsistent practices. Further, our Board of Directors does not currently have any independent
                                         members and no director qualifies as an audit committee financial expert as defined in
                                         Item 407(d)(5)(ii) of Regulation S-K. Since these entity level programs have a pervasive
                                         effect across the organization, management has determined that these circumstances constitute
                                         a material weakness.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





7







To
address these material weaknesses, management performed additional analyses and other procedures to ensure that the financial
statements included herein fairly present, in all material respects, our financial position, results of operations and cash flows
for the periods presented. Accordingly, we believe that the financial statements included in this report fairly present, in all
material respects, our financial condition, results of operations and cash flows for the periods presented.



To
remediate the material weakness in our documentation, evaluation and testing of internal controls we plan to engage a third-party
firm to assist us in remedying this material weakness once resources become available.



We
intend to remedy our material weakness with regard to insufficient segregation of duties by hiring additional employees in order
to segregate duties in a manner that establishes effective internal controls once resources become available.



Changes
in Internal Control over Financial Reporting



No
change in our system of internal control over financial reporting occurred during the period covered by this report, the period
ended March 31, 2018, that has materially affected, or is reasonably likely to materially affect, our internal control over financial
reporting.



PART
II – OTHER INFORMATION



Item
1. Legal Proceedings



As
of March 31, 2018, all litigation has been resolved except for the following case:



Lester
Einhaus vs. Textmunication

United
States District Court – Northern District

Filed
on 6/14/2017

Case:
1:17-cv-04478



Item
1A: Risk Factors



For
our mobile marketing business, see risk factors included in our Annual Report on Form 10-K for the year ended December 31, 2014
filed on April 15, 2015.



For
our interest in Aspire Consulting Group, LLC, see risk factors included in our Current Report on Form 8-K filed on January 1,
2016.



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



The
information set forth below relates to our issuances of securities without registration under the Securities Act of 1933.



During
the three months ended March 31, 2018, we issued 892,882 shares of common stock (post-split) valued at $299,469 for the settlement
of debt related to a 3a10 settlement.



During
the three months ended March 31, 2018, we issued 647,459 shares of common stock (post-split) for the settlement of $54,541 in
notes payable.



These
securities were issued pursuant to Section 4(2) of the Securities Act and/or Rule 506 promulgated thereunder. The holders represented
their intention to acquire the securities for investment only and not with a view towards distribution. The investors were given
adequate information about us to make an informed investment decision. We did not engage in any general solicitation or advertising.
We directed our transfer agent to issue the stock certificates with the appropriate restrictive legend affixed to the restricted
stock.



Item
3. Defaults upon Senior Securities



None



Item
4. Mine Safety Disclosures



N/A



Item
5. Other Information



None



8







Item
6. Exhibits





|Exhibit
    Number |  | Description
                                         of Exhibit                                                                                                                  
|------------------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                   |  |                                                                                                                                                                                  
|3.1                |  | Certificate of Designation, dated May 15, 2017                                                                                                                                   
|10.1               |  | Debt Settlement Agreement, dated August 4, 2017                                                                                                                                  
|31.1               |  | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                
|31.2               |  | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                
|32.1               |  | Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002    
|101**              |  | The
    following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2018 formatted
    in Extensible Business Reporting Language (XBRL).
|                   |  |                                                                                                                                                                                  
|                   |  | **Provided
                                         herewith                                                                                                                     





9









SIGNATURES



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



|Textmunication
    Holdings, Inc. |                                                       
|--------------------------------- | ------------------------------------------------------
|                                  |                                                       
|Date:                             | June
                                         26, 2018
|                                  |                                                       
|By:                               | /s/
    Wais Asefi                                    
|                                  | Wais
    Asefi                                        
|Title:                            | President,
    Chief Executive Officer, and Director  







10