UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549



Form 10-Q



(Mark One)



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



For the quarterly period ended June 30,
2012



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



For the transition period from __________
to ____________



Commission File Number:  333-168066



|LUXEYARD, INC.                                        
|------------------------------------------------------
|(Exact name of registrant as specified in its charter)



|Delaware                                                               |  | 30-0473898                          
|---------------------------------------------------------------------- |  | ------------------------------------
|(State or other jurisdiction of
        incorporation or organization) |  | (I.R.S. Employer Identification No.)
|                                                                       |  |                                     
|8884 Venice Blvd., Los Angeles, CA                                     |  | 90034                               
|(Address of principal executive offices)                               |  | (Zip Code)                          



|(323) 488-3574                                                                    
|----------------------------------------------------------------------------------
|(Registrant’s telephone number, including area code)                              
|                                                                                  
|N/A                                                                               
|(Former name, former address and former fiscal year, if changed since last report)



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

YesxNo ̈



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).

YesxNo ̈



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



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



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

Yes ̈Nox



As of August 17, 2012, there were 70,274,634
outstanding shares of common stock, par value $0.0001 per share, of the registrant.











LUXEYARD, INC.



TABLE OF CONTENTS



|Part I—Financial Information                                                                   
|-----------------------------------------------------------------------------------------------
|                                                                                               
|Item 1.  Financial Statements.                                                                 
|                                                                                               
|Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations.
|                                                                                               
|Item 3. Quantitative and Qualitative Disclosures About Market Risk.                            
|                                                                                               
|Item 4.  Controls and Procedures.                                                              
|                                                                                               
|Part II – Other Information                                                                    
|                                                                                               
|Item 1.  Legal Proceedings.                                                                    
|                                                                                               
|Item 1A.  Risk Factors.                                                                        
|                                                                                               
|Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds.                          
|                                                                                               
|Item 3.  Defaults upon Senior Securities.                                                      
|                                                                                               
|Item 4.  Mine Safety Disclosures.                                                              
|                                                                                               
|Item 5.  Other Information.                                                                    
|                                                                                               
|Item 6.  Exhibits.                                                                             
|                                                                                               
|Signatures                                                                                     



2







PART I - FINANCIAL INFORMATION





Item 1. Financial Statements



Luxeyard, Inc.

CONSOLIDATED BALANCE SHEETS

Unaudited



|                                                                                                                                                                                                                         |  | June 30, 2012 |            |   | December 31, 2012 |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ------------- | ---------- | - | ----------------- | -
|                                                                                                                                                                                                                         |  |               |            |   |                   |  
|ASSETS                                                                                                                                                                                                                   |  |               |            |   |                   |  
|                                                                                                                                                                                                                         |  |               |            |   |                   |  
|Current Assets:                                                                                                                                                                                                          |  |               |            |   |                   |  
|Cash                                                                                                                                                                                                                     |  | $             | 1,065,692  |   |                   | $
|Restricted cash                                                                                                                                                                                                          |  |               | -          |   |                   |  
|Accounts receivable                                                                                                                                                                                                      |  |               | 174,592    |   |                   |  
|Inventory                                                                                                                                                                                                                |  |               | 112,543    |   |                   |  
|Prepaid expenses and other current assets                                                                                                                                                                                |  |               | 186,980    |   |                   |  
|Total current assets                                                                                                                                                                                                     |  |               | 1,539,807  |   |                   |  
|                                                                                                                                                                                                                         |  |               |            |   |                   |  
|Property and equipment, net of accumulated depreciation of $29,904 and $695 as of June 30, 2012 and December 31, 2011, respectively                                                                                      |  |               | 208,017    |   |                   |  
|Deferred financing costs net of amortization of $13,382 as of June 30, 2012                                                                                                                                              |  |               | 132,068    |   |                   |  
|Note receivable -related party                                                                                                                                                                                           |  |               | 308,000    |   |                   |  
|Other asset                                                                                                                                                                                                              |  |               | 50,000     |   |                   |  
|TOTAL ASSETS                                                                                                                                                                                                             |  |               | 2,237,892  |   |                   |  
|                                                                                                                                                                                                                         |  |               |            |   |                   |  
|LIABILITIES AND STOCKHOLDERS' DEFICIT                                                                                                                                                                                    |  |               |            |   |                   |  
|Current Liabilities:                                                                                                                                                                                                     |  |               |            |   |                   |  
|Accounts payable                                                                                                                                                                                                         |  |               | 321,446    |   |                   |  
|Accrued liabilities                                                                                                                                                                                                      |  |               | 122,060    |   |                   |  
|Advances from shareholder                                                                                                                                                                                                |  |               | 50,000     |   |                   |  
|Accrued interest                                                                                                                                                                                                         |  |               | 80,434     |   |                   |  
|Deferred revenue                                                                                                                                                                                                         |  |               | -          |   |                   |  
|Total current liabilities                                                                                                                                                                                                |  |               | 573,940    |   |                   |  
|                                                                                                                                                                                                                         |  |               |            |   |                   |  
|Derivative liabilities                                                                                                                                                                                                   |  |               | 9,986,617  |   |                   |  
|Convertible debentures, net of debt discount of $1,881,695 and $ 0 on June 30, 2012 and December 31, 2011 respectively                                                                                                   |  |               | 788,305    |   |                   |  
|Total liabilities                                                                                                                                                                                                        |  |               | 11,348,862 |   |                   |  
|                                                                                                                                                                                                                         |  |               |            |   |                   |  
|Commitments and contingencies                                                                                                                                                                                            |  |               | -          |   |                   |  
|                                                                                                                                                                                                                         |  |               |            |   |                   |  
|Stockholders' Deficit:                                                                                                                                                                                                   |  |               |            |   |                   |  
|Preferred A stock, $0.0001 par value, 50,000,000 authorized shares and 8,904,287 and 0 shares outstanding as of June 30, 2011 and December 31, 2011, respectively                                                        |  |               | 890        |   |                   |  
|Common stock, $0.0001 par value, 500,000,000 (2011 - 100,000,000) authorized shares;
    70,274,634     and     63,290,000     issued and outstanding shares as of June 30, 2012 and December 31, 2011,
    respectively |  |               | 7,028      |   |                   |  
|Additional paid in capital                                                                                                                                                                                               |  |               | (9,591,483 | ) |                   |  
|Retained earnings (deficit)                                                                                                                                                                                              |  |               | 472,595    |   |                   |  
|                                                                                                                                                                                                                         |  |               |            |   |                   |  
|Total Stockholders'  Deficit                                                                                                                                                                                             |  |               | (9,110,970 | ) |                   |  
|                                                                                                                                                                                                                         |  |               |            |   |                   |  
|TOTAL LIABILITIES AND STOCKHOLDERS'  DEFICIT                                                                                                                                                                             |  | $             | 2,237,892  |   |                   | $



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



3







Luxeyard, Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS

Unaudited



|                                                                                        |  |               |             |   | For the Period |   |            |               |  |   | For the Period |  
|--------------------------------------------------------------------------------------- |  | ------------- | ----------- | - | -------------- | - | ---------- | ------------- |  | - | -------------- | -
|                                                                                        |  | For the Three |             |   | From April 20  |   |            | For Six       |  |   | From April 20  |  
|                                                                                        |  | Months Ended  |             |   | (Inception) to |   |            | Months Ended  |  |   | (Inception) to |  
|                                                                                        |  | June 30, 2012 |             |   | June 30, 2011  |   |            | June 30, 2011 |  |   | June 30, 2011  |  
|                                                                                        |  |               |             |   |                |   |            |               |  |   |                |  
|REVENUE                                                                                 |  |               |             |   |                |   |            |               |  |   |                |  
|Total Revenue                                                                           |  | $             | 705,963     |   |                | $ | -          |               |  | $ | 861,052        |  
|                                                                                        |  |               |             |   |                |   |            |               |  |   |                |  
|COST OF GOODS SOLD                                                                      |  |               |             |   |                |   |            |               |  |   |                |  
|Cost of Sales                                                                           |  |               | 598,158     |   |                |   | -          |               |  |   | 809,936        |  
|                                                                                        |  |               |             |   |                |   |            |               |  |   |                |  
|GROSS PROFIT                                                                            |  |               | 107,805     |   |                |   | -          |               |  |   | 51,116         |  
|                                                                                        |  |               |             |   |                |   |            |               |  |   |                |  
|OPERATING EXPENSES                                                                      |  |               |             |   |                |   |            |               |  |   |                |  
|Selling, general and administrative                                                     |  |               | 7,381,172   |   |                |   | 3,790      |               |  |   | 9,245,735      |  
|Impairment loss                                                                         |  |               | -           |   |                |   | -          |               |  |   | 192,753        |  
|Stock compensation expense                                                              |  |               | 146,660     |   |                |   | -          |               |  |   | 181,861        |  
|Regisration rights penalties                                                            |  |               | 77,913      |   |                |   | -          |               |  |   | 77,913         |  
|Depreciation                                                                            |  |               | 17,254      |   |                |   | -          |               |  |   | 29,209         |  
|                                                                                        |  |               |             |   |                |   |            |               |  |   |                |  
|Total Operating Expenses                                                                |  |               | 7,622,999   |   |                |   | 3,790      |               |  |   | 9,727,471      |  
|Operating Loss                                                                          |  |               | (7,515,194  | ) |                |   | (3,790     | )             |  |   | (9,676,355     | )
|                                                                                        |  |               |             |   |                |   |            |               |  |   |                |  
|                                                                                        |  |               |             |   |                |   |            |               |  |   |                |  
|Other Income (Expenses)                                                                 |  |               |             |   |                |   |            |               |  |   |                |  
|Gain on derivatives                                                                     |  |               | 19,793,619  |   |                |   | -          |               |  |   | 13,498,925     |  
|Other income                                                                            |  |               | 9,364       |   |                |   | -          |               |  |   | 9,364          |  
|Interest expense                                                                        |  |               | (1,147,118  | ) |                |   | -          |               |  |   | (1,213,920     | )
|                                                                                        |  |               |             |   |                |   |            |               |  |   |                |  
|NET INCOME (LOSS)                                                                       |  |               | 11,140,671  |   |                |   | (3,790     | )             |  |   | 2,618,014      |  
|Deemed dividend related to incremental beneficial conversion feature on preferred stock |  |               | (1,085,797  | ) |                |   | -          |               |  |   | (1,085,797     | )
|Preferred dividends                                                                     |  |               | (21,175     | ) |                |   | -          |               |  |   | (21,175        | )
|                                                                                        |  |               |             |   |                |   |            |               |  |   |                |  
|NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS                                   |  | $             | 10,033,699  |   |                | $ | (3,790     | )             |  | $ | 1,511,042      |  
|                                                                                        |  |               |             |   |                |   |            |               |  |   |                |  
|Earnings (Loss) Per Share                                                               |  |               |             |   |                |   |            |               |  |   |                |  
|Basic                                                                                   |  | $             | 0.15        |   |                | $ | (0.00      | )             |  | $ | 0.02           |  
|Diluted                                                                                 |  | $             | 0.08        |   |                | $ | (0.00      | )             |  | $ | 0.02           |  
|                                                                                        |  |               |             |   |                |   |            |               |  |   |                |  
|Weighted Average Outstanding Shares                                                     |  |               |             |   |                |   |            |               |  |   |                |  
|Basic                                                                                   |  |               | 67,359,672  |   |                |   | 30,350,000 |               |  |   | 65,339,431     |  
|Diluted                                                                                 |  |               | 100,187,850 |   |                |   | 30,350,000 |               |  |   | 84,586,609     |  





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



4







Luxeyard, Inc.

CONSOLIDATED STATEMENT OF CHANGES IN
STOCKHOLDERS' DEFICIT

For the Six Months Ended June 30, 2012

(Unaudited)



|                                               |  | Common Stock |            |  | Series A Preferred Stock |   |       | Additional |  |  | Retained Earnings |  |  |                 |    
|---------------------------------------------- |  | ------------ | ---------- |  | ------------------------ | - | ----- | ---------- |  |  | ----------------- |  |  | --------------- | ---
|                                               |  | Shares       |            |  | Amount                   |   |       | Shares     |  |  | Amount            |  |  | Paid-in Capital |    
|                                               |  |              |            |  |                          |   |       |            |  |  |                   |  |  |                 |    
|Balance, December 31, 2011                     |  |              | 63,290,000 |  |                          | $ | 6,329 |            |  |  | -                 |  |  | $               | -  
|                                               |  |              |            |  |                          |   |       |            |  |  |                   |  |  |                 |    
|Shares issued for services                     |  |              | 5,408,178  |  |                          |   | 541   |            |  |  | -                 |  |  |                 | -  
|                                               |  |              |            |  |                          |   |       |            |  |  |                   |  |  |                 |    
|Issuance of preferred stock for cash           |  |              | -          |  |                          |   | -     |            |  |  | 8,904,287         |  |  |                 | 890
|                                               |  |              |            |  |                          |   |       |            |  |  |                   |  |  |                 |    
|Stock issued for conversion of debentures      |  |              | 826,790    |  |                          |   | 83    |            |  |  | -                 |  |  |                 | -  
|                                               |  |              |            |  |                          |   |       |            |  |  |                   |  |  |                 |    
|Stock issued due to exercise of warrants       |  |              | 378,000    |  |                          |   | 38    |            |  |  | -                 |  |  |                 | -  
|                                               |  |              |            |  |                          |   |       |            |  |  |                   |  |  |                 |    
|Stock issued for deferred financing costs      |  |              | 71,666     |  |                          |   | 7     |            |  |  | -                 |  |  |                 | -  
|                                               |  |              |            |  |                          |   |       |            |  |  |                   |  |  |                 |    
|Stock issuance costs                           |  |              | 300,000    |  |                          |   | 30    |            |  |  | -                 |  |  |                 | -  
|                                               |  |              |            |  |                          |   |       |            |  |  |                   |  |  |                 |    
|Stock option expense                           |  |              | -          |  |                          |   | -     |            |  |  | -                 |  |  |                 | -  
|                                               |  |              |            |  |                          |   |       |            |  |  |                   |  |  |                 |    
|Stock options issued for acquisition of assets |  |              | -          |  |                          |   | -     |            |  |  | -                 |  |  |                 | -  
|                                               |  |              |            |  |                          |   |       |            |  |  |                   |  |  |                 |    
|Derivative liability related to warrants       |  |              | -          |  |                          |   | -     |            |  |  | -                 |  |  |                 | -  
|                                               |  |              |            |  |                          |   |       |            |  |  |                   |  |  |                 |    
|Resolution of derivative liabilities           |  |              | -          |  |                          |   | -     |            |  |  | -                 |  |  |                 | -  
|                                               |  |              |            |  |                          |   |       |            |  |  |                   |  |  |                 |    
|Deemed dividend on preferred stock             |  |              | -          |  |                          |   | -     |            |  |  | -                 |  |  |                 | -  
|                                               |  |              |            |  |                          |   |       |            |  |  |                   |  |  |                 |    
|Preferred stock dividends                      |  |              | -          |  |                          |   | -     |            |  |  | -                 |  |  |                 | -  
|                                               |  |              |            |  |                          |   |       |            |  |  |                   |  |  |                 |    
|Net income                                     |  |              | -          |  |                          |   | -     |            |  |  | -                 |  |  |                 | -  
|                                               |  |              |            |  |                          |   |       |            |  |  |                   |  |  |                 |    
|Balance, June 30, 2012                         |  |              | 70,274,634 |  |                          | $ | 7,028 |            |  |  | 8,904,287         |  |  | $               | 890



The accompanyning notes are an integral part of thse unaudited
consolidated financial statements.





5







Luxeyard, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Unaudited



|                                                                                    |  |               |             |   | For the Period |  
|----------------------------------------------------------------------------------- |  | ------------- | ----------- | - | -------------- | -
|                                                                                    |  | For the Six   |             |   | From April 20  |  
|                                                                                    |  | Months Ended  |             |   | (Inception) to |  
|                                                                                    |  | June 30, 2012 |             |   | June 30, 2011  |  
|Cash flows from operating activities                                                |  |               |             |   |                |  
|Net  income (loss)                                                                  |  | $             | 2,618,014   |   |                | $
|Adjustments to reconcile net income (loss) to net cash used in operating activities |  |               |             |   |                |  
|Depreciation                                                                        |  |               | 29,209      |   |                |  
|Amortization of deferred financing costs                                            |  |               | 13,382      |   |                |  
|Impairment loss                                                                     |  |               | 192,753     |   |                |  
|Amortization of debt dsicount                                                       |  |               | 1,046,186   |   |                |  
|Derivative gain                                                                     |  |               | (13,498,925 | ) |                |  
|Stock-based compensation                                                            |  |               | 5,431,085   |   |                |  
|Changes in operating assets and liabilities                                         |  |               |             |   |                |  
|Accounts receivable                                                                 |  |               | (173,992    | ) |                |  
|Inventory                                                                           |  |               | (107,077    | ) |                |  
|Prepaid expenses and other assets                                                   |  |               | (170,604    | ) |                |  
|Accounts payable                                                                    |  |               | 236,845     |   |                |  
|Accrued liabilities                                                                 |  |               | 47,205      |   |                |  
|Deferred revenue                                                                    |  |               | (9,701      | ) |                |  
|Net cash used in operating activities                                               |  |               | (4,345,620  | ) |                |  
|                                                                                    |  |               |             |   |                |  
|Cash flows from investing activities                                                |  |               |             |   |                |  
|Restricted cash                                                                     |  |               | 150,000     |   |                |  
|Notes receivable - related party                                                    |  |               | (308,000    | ) |                |  
|Other asset                                                                         |  |               | (50,000     | ) |                |  
|Purchase of property and equipment                                                  |  |               | (152,813    | ) |                |  
|Net cash used in investing activities                                               |  |               | (360,813    | ) |                |  
|                                                                                    |  |               |             |   |                |  
|Cash flows from financing activities                                                |  |               |             |   |                |  
|Proceeds from sale of common stock/contributions                                    |  |               | -           |   |                |  
|Proceeds from issuance of preferred stock                                           |  |               | 2,716,225   |   |                |  
|Proceeds from convertible debentures and bridge notes                               |  |               | 3,415,000   |   |                |  
|Advances from shareholder                                                           |  |               | 50,000      |   |                |  
|Deferred financing costs                                                            |  |               | (63,500     | ) |                |  
|Repayment of bridge notes                                                           |  |               | (500,000    | ) |                |  
|Net cash provided by financing activities                                           |  |               | 5,617,725   |   |                |  
|                                                                                    |  |               |             |   |                |  
|Net increase in cash and cash equivalents                                           |  |               | 911,292     |   |                |  
|                                                                                    |  |               |             |   |                |  
|Cash and cash equivalents at beginning of period                                    |  |               | 154,400     |   |                |  
|                                                                                    |  |               |             |   |                |  
|Cash and cash equivalents at end of period                                          |  | $             | 1,065,692   |   |                |  
|                                                                                    |  |               |             |   |                |  
|Supplemental disclosures of cash flow information                                   |  |               |             |   |                |  
|Cash paid for interest                                                              |  |               | 71,001      |   |                |  
|Cash paid for income taxes                                                          |  |               | -           |   |                |  
|                                                                                    |  |               |             |   |                |  
|Non cash investing and financing activities                                         |  |               |             |   |                |  
|Conversion of debentures and accrued interest into common stock                     |  |               | 247,917     |   |                |  
|Shares issued for stock issuance costs                                              |  |               | 81,950      |   |                |  
|Warrant derivatives                                                                 |  |               | 21,982,187  |   |                |  
|Resolution of derivative liabilities                                                |  |               | 1,583,284   |   |                |  
|Debt discount on convertible debentures and bridge notes                            |  |               | 2,927,881   |   |                |  
|Deemed dividend on preferred stock                                                  |  |               | 1,085,797   |   |                |  
|Preferred dividends                                                                 |  |               | 21,175      |   |                |  
|Acquisition of eOpulence assets                                                     |  |               | 67,544      |   |                |  
|Unpaid subscriptions                                                                |  |               | -           |   |                |  



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





6











|
|



LUXEYARD INC.

JUNE 30, 2012

NOTES TO FINANCIAL STATEMENTS

(Unaudited)



1. Basis of Presentation and Going Concern



Basis of Presentation



Luxeyard Inc., (the “Company”,
“we” or “our”), a Delaware Corporation, is an internet company selling luxury goods on a flash web site.
Luxeyard, Inc. is the parent company of the wholly owned subsidiaries, LY Retail, LLC (“LY Retail Texas”), incorporated
under the laws of the State of Texas on April 20, 2011 and LY Retail, LLC incorporated in the State of
California on November 8, 2011.



We have prepared the accompanying consolidated
financial statements pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for
interim financial reporting. These consolidated financial statements are unaudited and, in our opinion, include all adjustments,
consisting of normal recurring adjustments and accruals necessary for a fair presentation of our consolidated balance sheets, operating
results, and cash flows for the periods presented. Operating results for the periods presented are not necessarily indicative of
the results that may be expected for 2012 due to seasonal and other factors. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”)
have been omitted in accordance with the rules and regulations of the SEC. These consolidated financial statements should be read
in conjunction with the audited consolidated financial statements and accompanying notes of our 2011 Annual Report on Form 10-K.



Going Concern



The accompanying consolidated financial statements have been
prepared in conformity with accounting principles generally accepted in the United States, which contemplate continuation of the
Company as a going concern. For the six months ended June 30, 2012, the Company has incurred operating losses and negative operating
cash flows which raise doubt on its ability to continue as a going concern.





Management Plans to Continue as a Going Concern



The Company continues to implement plans to enhance its ability
to continue as a going concern. We have recently made web-site improvements to facilitate easier purchasing and make our site more
accessible. We have entered into operating agreements with Jaxon, LeatherGroups and Bari, so that we can obtain economies of scale
in our sales, marketing and administrative costs. We have reduced our salary expense from reduction of our work force.



The Company plans to continue its acquisitions at a rate that is compatible with its cash flow and funding
opportunities. The Company’s sources of funds in the past have included the debt or equity markets and, while the Company
has experienced revenue growth from its flash web-site and its management services agreements with Jaxon, LeatherGroups and Bari,
it has not yet established a positive cash flow on a company-wide basis. It will be necessary for the Company to obtain additional
funding from the private or public debt or equity markets in the future. However, the Company cannot offer any assurance that it
will be successful in executing the aforementioned plans to continue as a going concern. The Company’s financial statements
as of June 30, 2012 do not include any adjustments that might result from the inability to implement or execute the Company’s
plans to improve our ability to continue as a going concern.





2. Significant Accounting Policies



Principles of Consolidation



The consolidated financial statements include
the accounts of Luxeyard, Inc. and its wholly-owned subsidiaries, LY Retail Texas and LY Retail, LLC. All significant intercompany
accounts and transactions have been eliminated in consolidation.



Use of Estimates



The financial statements are prepared on
the basis of accounting principles generally accepted in the United States. 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 as of June 30, 2012 and December 31, 2011, and expenses for the six and three months ended June 30, 2012
and the period from inception to June 30, 2011. Actual results could differ from those estimates made by management.



Revenue Recognition



We recognize revenue from product sales
when the following four criteria are met: pervasive evidence of an arrangement exists, delivery has occurred or services have been
rendered, the selling price is fixed or determinable, and collectability is reasonably assured.



We provide all customer care and support
for the merchandise sold on our website and we are not acting as agents for the vendors. Our members have a relationship only with
us and we are responsible for fulfillment and customer satisfaction. We have traditional merchant-vendor relationships with our
vendors and are not acting as their agent.



7







Product sales represent revenue from the
sale of products and related shipping fees where we are the seller of record. Product sales and shipping revenues, net of promotional
discounts, rebates, and return allowances, are recorded when the products are shipped and title passes to customers. Retail sales
to customers are made pursuant to a sales contract that provides for transfer of both title and risk of loss upon our delivery
to the carrier.



We record and report revenue on the gross
amount billed to customers when the following indicators are met:

·we are the primary obligor in the transaction

·we are subject to inventory risk and credit risk for amount billed to the customer

·we have latitude in establishing prices and selecting suppliers



Sales, where we have
a revenue sharing arrangement with a vendor, are recorded net of the vendors’ share.



Refunds



At the end of the accounting period, we
record an allowance for estimated customer refunds. We accrue costs associated with refunds in accrued expenses on the consolidated
balance sheets. The cost of refunds where the amount payable to the merchant is recoverable is recorded in the consolidated statements
of operations as a reduction to revenue.



Inventories



Inventories, consisting of products available
for sale, are primarily accounted for using the first-in first-out (“FIFO”) method, and are valued at the lower of
cost or market value. This valuation requires us to make judgments, based on currently-available information about likely method
of disposition, such as through sales to individual customers, returns to product vendors, or liquidations, and expected recoverable
values of each disposition category.



Earnings (Loss) per Common Share



Basic earnings (loss) per common
share (EPS) 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 earnings per common share is computed similar to basic
EPS except that the denominator is increased to include the number of additional common shares that would have been
outstanding if potential common shares had been issued and if the additional common shares were dilutive. The dilutive effect
of our share-based awards is computed using the treasury stock method, which assumes that all share-based awards are
exercised and the hypothetical proceeds from exercise are used to purchase common stock at the average market price during
the period. The dilutive effect of our Series A convertible preferred stock and convertible debentures is computed using the
if-converted method, which assumes conversion at the beginning of the year.



The following represents a reconciliation
of the numerators and denominators of the basic and diluted earnings per share computation for the three and six months ended June
30, 2012:



|Six months ended June 30, 2012 |  | Net income attributable to common shareholders  (Numerator) |           |  | Shares  (Denominator) |  |            | Per share Amount | 
|------------------------------ |  | ----------------------------------------------------------- | --------- |  | --------------------- |  | ---------- | ---------------- | 
|Basic EPS                      |  | $                                                           | 1,511,042 |  |                       |  | 65,339,431 |                  | 
|Effect of dilutive securities  |  |                                                             |           |  |                       |  |            |                  | 
|Stock options and warrants     |  |                                                             | -         |  |                       |  | 19,247,178 |                  | 
|Diluted EPS                    |  | $                                                           | 1,511,042 |  |                       |  | 84,586,609 |                  | 



Common stock equivalents related to the
convertible debentures and the Series A convertible preferred stock of 17,804,286 were not included in the denominators of the
diluted earnings per share as their effect would be anti-dilutive.



|Three months ended June 30, 2012 |  | Net income attributable to common shareholders  (Numerator) |            |   | Shares  (Denominator) |  |             | Per share Amount | 
|-------------------------------- |  | ----------------------------------------------------------- | ---------- | - | --------------------- |  | ----------- | ---------------- | 
|Basic EPS                        |  | $                                                           | 10,033,699 |   |                       |  | 67,359,672  |                  | 
|Effect of dilutive securities    |  |                                                             |            |   |                       |  |             |                  | 
|Stock options and warrants       |  |                                                             | -          |   |                       |  | 23,928,178  |                  | 
|Convertible debentures           |  |                                                             | (2,464,657 | ) |                       |  | 8,900,000   |                  | 
|Diluted EPS                      |  | $                                                           | 7,569,042  |   |                       |  | 100,187,850 |                  | 



Common stock equivalents related to the
Series A convertible preferred stock of 8,904,286 were not included in the denominators of the diluted earnings per share as their
effect would be anti-dilutive.



8







Fair Value of Financial Instruments



Financial instruments are recorded at fair
value in accordance with the standard for “Fair Value Measurements codified within ASC 820.” Fair value is defined
as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants
at the measurement date. To increase the comparability of fair value measures, the following hierarchy prioritizes the inputs to
valuation methodologies used to measure fair value:



Level 1-Valuations based on quoted
prices for identical assets and liabilities in active markets.



Level 2-Valuations based on observable
inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets,
quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable
or can be corroborated by observable market data.



Level 3-Valuations based on unobservable
inputs reflecting our own assumptions, consistent with reasonably available assumptions made by other market participants. These
valuations require significant judgment. The following table presents the derivative financial instruments, the Company’s
only financial liabilities measured and recorded at fair value on the Company’s consolidated balance sheets on a recurring
basis, and their level within the fair value hierarchy as of June 30, 2012 and December 31, 2011:



|                            |  | June 30, 2012 |           |  | Level 1 |  |   | Level 2 |  |  | Level 3 | 
|--------------------------- |  | ------------- | --------- |  | ------- |  | - | ------- |  |  | ------- | 
|Warrants                    |  | $             | 7,036,939 |  |         |  | - |         |  |  | -       | 
|Embedded conversion options |  |               | 2,949,678 |  |         |  | - |         |  |  | -       | 
|Total                       |  | $             | 9,986,617 |  |         |  | - |         |  |  | -       | 



|                            |  | December 31, 2011 |         |  | Level 1 |   |   | Level 2 |  |   | Level 3 | 
|--------------------------- |  | ----------------- | ------- |  | ------- | - | - | ------- |  | - | ------- | 
|Warrants                    |  | $                 | 158,758 |  |         | $ | - |         |  | $ | -       | 
|Embedded conversion options |  |                   | -       |  |         |   | - |         |  |   | -       | 
|Total                       |  | $                 | 158,758 |  |         | $ | - |         |  | $ | -       | 



The following table provides a summary
of the changes in fair value, including net transfers in and/or out, of the derivative financial instruments, measured at fair
value on a recurring basis using significant unobservable inputs:



|Balance at December 31, 2011                                                                |  | $ | 158,758     |  
|------------------------------------------------------------------------------------------- |  | - | ----------- | -
|Fair value of embedded conversion derivative liability at issuance charged to debt discount |  |   | 2,927,881   |  
|Fair value of derivative liability related to warrants issued                               |  |   | 21,982,187  |  
|Settlement of derivative liabilities                                                        |  |   | (1,583,284  | )
|Derivative gains in other expense                                                           |  |   | (13,498,925 | )
|Balance at June 30, 2012                                                                    |  | $ | 9,986,617   |  



The fair value of the derivative liabilities
are calculated at the time of issuance and the Company records a derivative liability for the calculated value. Changes in the
fair value of the derivative liabilities are recorded in other expense in the consolidated statement of operations. The derivatives
related to the embedded conversion options and warrants were valued using the Black-Scholes pricing model on the issuance date
with the following assumptions:



|Risk-free interest rate | - | 0.10% to 0.77%   
|----------------------- | - | -----------------
|Stock price             | - | $0.69 to $1.32   
|Dividend yield          | - | 0%               
|Volatility factor       | - | 151% to 440%     
|Expected life (years)   | - | 1.76 to 5.0 years



At June 30, 2012, the derivatives related
to the embedded conversion options and warrants were valued using the Black-Scholes pricing model with the following assumptions:



|Risk-free interest rate | - | 0.09% to 0.72%   
|----------------------- | - | -----------------
|Stock price             | - | $0.35            
|Dividend yield          | - | 0%               
|Volatility factor       | - | 204% to 417%     
|Expected life (years)   | - | 1.59 to 4.9 years



Share-Based Payments



The Company
accounts for share-based awards to employees in accordance with FASB ASC 718 “Stock Compensation”.Under this guidance, stock compensation expense is measured at the grant date, based on the fair value of the award, and is recognized
as an expense over the requisite employee service period (generally the vesting period). The Company estimates the fair value of
share-based payments using the Black-Scholes option-pricing model.



9







Share-based
awards to non-employees are accounted for in accordance with ASC 505-50, whereinsuch awards
are expensed over the period in which the related services are rendered at their fair value.



Reclassifications



Certain accounts in the prior year have
been reclassified to conform to the current year financial statement presentation.



Recent Accounting Pronouncements



We do not expect the adoption of recently
issued accounting pronouncements to have a significant impact on our results of operations, financial position or cash flow.



3. Asset Purchase



On February 22, 2012 we acquired certain
office equipment and other related assets of eOpulence, LLC for a total purchase price of $260,297 equivalent to the fair value
of 300,000 common stock options. These options have an exercise price of $0.30 per share and will expire on November 30, 2021.
The fair value was calculated using the Black Scholes pricing model using the following assumptions:



|Risk-free interest rate | - | 2.7%     
|----------------------- | - | ---------
|Stock price             | - | $0.90    
|Dividend yield          | - | 0%       
|Volatility factor       | - | 216%     
|Expected life (years)   | - | 3.0 years



We recognized an impairment loss related to the assets acquired
of $192,753 for the six months ended June 30, 2012, because the fair market value of the acquired assets was less than the consideration
paid.



4.   Related Party Transactions



Braden Richter, the Company’s CEO
and Director is related to the sublessor of our subleased office space in Los Angeles, California.  Payments on the sub-lease
were $38,254 from March 1 (inception) to June 30, 2012. The Company paid a deposit on this lease of $29,797. In April 2012, the
Company issued 300,000 shares of common stock with a fair value of $240,000 to the CEO as consulting fees.



Steve Beauregard, our COO, is the founder
and a majority stockholder in Regard Solutions, Inc., (“Regard”). We have an agreement with Regard for Technical Services
and Project Management. The Company incurred expenses of $511,818, from Regard for the six months ended June 30, 2012. In April
2012, the Company issued 50,000 restricted shares of common stock with a fair value of $40,000 to Regard as finder’s fee.



On May 1, 2012, the Company entered into
a management agreement with Jaxon International, LLC (Jaxon), a company owned by the wife of our CEO. Pursuant to the agreement,
the Company manages Jaxon’s retail store business and pays Jaxon a monthly overhead allocation of $45,000 to cover its fixed
operating expenses. In exchange, the Company receives and recognizes all revenues generated from the retail stores as well as the
related cost of goods sold since it bears the risks and rewards related to these sales. During the six months ended June 30, 2012,
the Company recorded $223,757 of sales and $137,473 of cost of goods sold in connection with this agreement.



On May 31, 2012 the Company loaned $308,000
to Jaxon This note bears interest at the rate of 8% per annum and is payable on demand. The purpose of the loan was to buy out
the equity interest of the other member in anticipation of the Company’s acquisition of Jaxon.



On May 1, 2012, the Company entered into
a management agreement with Home Loft, Inc. to manage its LeatherGroups (LG) web site. Home Loft is owned by the Company’s
Chief Technology Officer. Pursuant to the agreement, the Company paid a $50,000 deposit to Home Loft which is reported as other
asset in the consolidated balance sheet. In exchange, the Company receives and recognizes all revenues for all products sold in
the website as well as the related cost of goods sold since it bears the risk and rewards related to these sales. During the six
months ended June 30, 2012, the Company recorded $75,394 of sales and $24,369 of cost of goods sold in connection with this agreement.



In May and June 2012, the Company received
three advances from a shareholder totaling $50,000 which remained outstanding as of June 30, 2012. These advance bear no interest
and are due on demand.



10







5. Debt



Convertible debentures



During the six months ended June 30,
2012, the Company issued and sold 10% Convertible Debentures amounting to $2,915,000. These debentures are convertible to
9,716,667 shares of the Company’s common stock at $0.30 per share and mature on January 31, 2014.  The related
debenture agreement also provides for a mandatory conversion any time prior to the maturity date if all of the following
criteria are met: a) the common shares underlying the debentures are registered in a registration statement under the
Securities Act or are available for resale pursuant to Rule 144; b) the Company’s share prices for a period of 10
consecutive days remain at or above $1 and c) the daily volume of the Company’s stock during such consecutive 10 day
period is at least 50,000. At the same time, the conversion price is adjusted downward if, at any period that the debentures
are outstanding, the Company issues any additional stock or securities convertible into shares of common stock at a price
less than the applicable conversion price.



In connection with the sale of the convertible
debentures, the Company incurred costs from third parties amounting to $145,450. These costs were recognized as deferred financing
costs and amortized over the term of the debentures. Amortization for the six months ended June 30, 2012 amounted to $13,382.



The Company evaluated the terms of the
debentures under Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 815-15 and determined that
the embedded conversion option of the debentures require derivative accounting treatment due to reset provisions in the conversion
price. The fair value of the embedded conversion option amounted to $5,967,574 of which $2,427,881 was recognized as a debt discount
to the debentures and the difference of $3,539,693 as a “day 1” derivative loss. The debt discount is accreted to interest
expense over the term of the debentures. Amortization expense for the six months ended June 30, 2012 amounted to $546,186.



During the six months ended June 30, 2012,
debentures plus accrued interest of $247,917 were converted into 826,790 shares of common stock. Upon conversion of the debentures,
the Company recognized the unamortized the discount to interest expense, the derivative liability related to the embedded conversion
option was marked to market at the date of conversion and the fair value of $1,050,935 was reclassified to additional paid in capital.



Bridge notes



During the six months ended June 30,
2012, the Company issued bridge notes to two lenders totaling to $500,000. In connection with these notes, the Company paid
fixed interest and loan origination fees totaling to $71,000 and issued 630,000 warrants with an exercise price of $0.50
years and a term of 5 years. The warrant agreements provide that for a period of 1 year from issuance, the exercise price
of the warrants shall be adjusted downward if the Company issues any additional common stock or securities convertible into
shares of common stock at a price less than the applicable exercise price. These notes were fully paid as of June
30, 2012.



The Company evaluated the terms of the
warrants under FASB ASC 815-15 and determined that the warrants require derivative accounting treatment due to reset provisions
in the exercise price. The fair value of the warrants amounted to $816,599 of which $500,000 was recognized as a debt discount
to the bridge notes and the difference of $316,599 as a “day 1” derivative loss. Upon full payment of the notes, the
debt discount was fully amortized to interest expense.



In June 2012, the warrants were exercised
and the Company issued 378,000 shares of common stock to the lenders. The related derivative liability was marked to market at
the date of exercise and the fair value of $532,349 was reclassified to additional paid in capital.



6. Equity



Common stock



The Company enters into several consulting
agreements with vendors who accept stock payments in lieu of cash or who are awarded restricted common shares of the Company’s
stock based on certain performance milestones. During the six months ended June 30, 2012, the Company issued 5,058,178 shares of
common stock with a fair market value of $4,969,224 for services.



During the six months ended June 30, 2012,
the Company issued 826,790 shares of common stock due to conversion of the convertible debentures (see Note 5).



During the six months ended June 30, 2012,
the Company issued 378,000 shares of common stock from the cashless exercise of warrants.



During the six months ended June 30, 2012,
the Company issued 371,666 shares of common stock, with a fair value of 345,950, to placement agents and these accounted for as
stock issuance costs.



Series A Convertible Preferred Stock



On May 24, 2012, the Company entered into
a Securities Purchase Agreement (the "Purchase Agreement") with several investors whereby the Company sold units consisting
of (i) 8,904,287 shares of its 8% Series A Convertible Preferred Stock, (ii) 8,904,287 Series C warrants, (iii) 4,452,143 Series D warrants and (iv) 4,452,144 Series E warrants. The price per unit was $0.35 for an aggregate purchase price
of $3,116,500.



11







In connection with the Purchase Agreement,
the Company is subject to certain limitations, namely: a) the Company is allowed to do subsequent placements up to $5 million with
the consent of the preferred stockholders; b) the Company cannot file a registration statement covering the securities sold in
such placements until 150 days after the registration statement is declared effective; c) the Company has to offer investors, who
purchased at least $200,000 in the offering, 50% of the securities being offered in the subsequent placement; d) the Company cannot
offer securities that are convertible into common stock at a price which varies or may vary with the market price of the common
stock (unless the conversion price cannot be less than $0.35 without the consent of the preferred stockholders.



The Series A
Convertible Preferred Stock pays cumulative dividends at 8% per annum, payable in cash or shares of common stock every quarter,
as long as, among other things, the preferred stock is registered. The preferred stock is convertible into common stock at any
time at the option of the holder at a conversion price equal to the lower of $0.35 or the market price but the market price shall
never be less than $0.10. The market price is determined as 90% of weighted average prices of the common stock for 5 trading days
preceding the conversion.



In connection
with the Purchase Agreement, the Company also entered into a registration rights agreement with the investors pursuant to which
the Company was required to file a registration statement within 15 days and to have the registration statement declared effective
within 105 days of the closing of the offering. Failure to meet the deadline will require the Companyto make pro rata payments
to each investor, as liquidated damages, an amount equal to 1% of the aggregate amount invested by such investor for each 30-day
period or pro rata for any portion thereof ; provided, however, such damages shall cease to accrue on the 180th day
following the closing date of the offering. As of June 30, 2012, the Company determined that it is probable that it will incur
such damages and have accrued $77,913 as of June 30, 2012 in connection with this registration rights agreement.



The Company evaluated the embedded conversion
option under FASB ASC 815-15 and the determined that it is clearly and closely related to the host contract, the preferred stock,
and does not require to be bifurcated. The Company evaluated the preferred stock for a beneficial conversion feature. The Company
determined that a beneficial conversion feature of $1,085,797 existed which was recognized as a deemed dividend on the preferred
stock with a corresponding credit to additional paid in capital.



Warrants





As disclosed above, the Company issued
Series C, D and E warrants in connection with the sale of its Series A Convertible Preferred Stock. The Series C warrants have
a five-year term and an exercise price of $0.50 per share, subject to adjustment while the Series D and E warrants have a 90-day
term (from the effectiveness of the Form S-1 filed on June 18, 2012) and five-year term, respectively, with an exercise price of
$0.35 per share, subject to adjustment. The exercise prices are adjusted downward if, at any period that Series C, D and E warrants
are outstanding, the Company issues any shares of common stock at a price less than the applicable exercise price.





The Company evaluated the terms of the
warrants under FASB ASC 815-15 and the determined that the warrants require derivative accounting treatment due to reset provisions
in the exercise price. The fair value of the warrants amounted to $21,982,187 and was debited against additional paid in capital
at issuance and marked to market at every reporting period (see Note 2).



The following is a summary of warrant transactions
for six months ended June 30, 2012



|                                 |  | Number of  warrants |            |   | Weighted average exercise price |   |      | Weighted average remaining contractual life (years) |  |  | Intrinsic value | 
|-------------------------------- |  | ------------------- | ---------- | - | ------------------------------- | - | ---- | --------------------------------------------------- |  |  | --------------- | 
|Outstanding at December 31, 2011 |  |                     | 5,400,000  |   |                                 | $ | 0.30 |                                                     |  |  | 4.86            | 
|Granted                          |  |                     | 28,233,290 |   |                                 |   | 0.45 |                                                     |  |  |                 | 
|Exercised                        |  |                     | (630,000   | ) |                                 |   | 0.50 |                                                     |  |  |                 | 
|Forfeited/cancelled              |  |                     | -          |   |                                 |   | -    |                                                     |  |  |                 | 
|Outstanding at June 30 , 2012    |  |                     | 33,003,290 |   |                                 | $ | 0.42 |                                                     |  |  | 3.54            | 
|                                 |  |                     |            |   |                                 |   |      |                                                     |  |  |                 | 
|Exercisable at June 30 , 2012    |  |                     | 33,003,290 |   |                                 | $ | 0.42 |                                                     |  |  | 3.54            | 



Stock options



During the six months ended June 30, 2012,
the Company granted 2,573,575 options to employees, consultants, and board members with exercise prices ranging from $0.30 to $1.85
per share and a term of 5-10 years. Of the total options granted in 2012, 85,186 vested immediately and 2,488,389 options vests
over a period of 36 months. No options are exercisable until the expiration of the Lock-Up agreement on November 15, 2012.



12







The options have a weighted
average fair value of $0.93 and were valued using the Black-Scholes-pricing model. Significant assumptions used in the
valuation include the following:



|Risk-free interest rate | - | 0.69% to 2.23%    
|----------------------- | - | ------------------
|Stock price             | - | $0.03 to $1.85    
|Dividend yield          | - | 0%                
|Volatility factor       | - | 389% to 436%      
|Expected life (years)   | - | 5.84 to 10.0 years



|                                 |  |                   |            |   |                  |   |      | Weighted-average |  |  |                 | 
|-------------------------------- |  | ----------------- | ---------- | - | ---------------- | - | ---- | ---------------- |  |  | --------------- | 
|                                 |  |                   |            |   |                  |   |      | remaining        |  |  |                 | 
|                                 |  |                   |            |   | Weighted-average |   |      | contractual life |  |  |                 | 
|                                 |  | Number of options |            |   | exercise price   |   |      | (years)          |  |  | Intrinsic value | 
|Outstanding at December 31, 2011 |  |                   | 8,876,546  |   |                  | $ | 0.21 |                  |  |  | 9.77            | 
|Granted                          |  |                   | 2,873,575  |   |                  | $ | 0.59 |                  |  |  |                 | 
|Exercised                        |  |                   | (50,000    | ) |                  | $ | 0.30 |                  |  |  |                 | 
|Forfeited                        |  |                   | (448,889   | ) |                  | $ | 0.42 |                  |  |  |                 | 
|Outstanding at June 30, 2012     |  |                   | 11,251,232 |   |                  | $ | 0.30 |                  |  |  | 9.10            | 
|                                 |  |                   |            |   |                  |   |      |                  |  |  |                 | 
|Vested at June 30, 2012          |  |                   | 5,031,213  |   |                  | $ | 0.22 |                  |  |  | 9.26            | 



During the six months ended June 30, 2012,
stock compensation expense recognized amounted to $181,861 and the unamortized stock compensation expense as of June 30, 2012 was
$1,293,497



In July, 2012 the Company amended its stock compensation plan
to provide for a six month holding period for ISO options.



On August 8, 2012 the board approved a one time offer to employees
whose options had been granted with an exercise price above $0.35. The offer allowed them to elect to cancel their higher priced
options and to concurrently be granted an option to purchase shares of same quantity of common stock at $0.35. The employees retain
their original vesting schedule. 18 employees with option grant prices ranging from $0.51 to $1.55 accepted the offer and options
to purchase 992,000 shares of common stock were cancelled and options to purchase 992,000 of restricted common shares were granted.



7. Commitments and Contingencies



From time to time, the Company is party
to various litigation and administrative proceedings relating to claims arising from its operations in the normal course of business.
Based on the information presently available, management believes that resolution of these matters will not have a material adverse
effect on the Company’s business, results of operations, financial condition, or cash flows.



8. Subsequent Events



On August
6, 2012 the Company entered into a management services agreement with Ferris Holding Company, Inc., (“Ferris”) to
manage its retail business that sells furniture through its website (www.barileather.com)
(“online business”). Pursuant to the agreement, the Company will pay Ferris a monthly fee of $45,000 and in
exchange, the Company will receive all revenues generated from the onlne business but will also be responsible for the
payment of the related costs of any goods sold.



Subsequent to June 30, 2012, debentures
plus accrued interest of $72,834 were converted into 173,517 shares of restricted common stock.



13











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



The following discussion should be read
in conjunction with the Consolidated Financial Statements and Notes thereto appearing elsewhere in this Form 10-Q and with conjunction
with our annual report. The following discussion contains forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934 relating to future events or our future performance. Actual
results may materially differ from those projected in the forward-looking statements as a result of certain risks and uncertainties
set forth in this prospectus. Although management believes that the assumptions made and expectations reflected in the forward-looking
statements are reasonable, there is no assurance that the underlying assumptions will, in fact, prove to be correct or that actual
results will not be different from expectations expressed in this report.



Overview



We function
as a member-based online marketplace for luxury consumer products. We source from merchants and offer to our members through our
website via a “flash sale” or “daily deal” at deep discounts to retail prices.  In January 2012,
we launched our website www.Luxeyard.com and began operations. We launched with the product line of home goods and furniture. On
March 27, 2012, we launched LuxeStyle apparel line. Initially, we focused on household furnishings and goods such as furniture,
lighting and bedding. We recently expanded into apparel and accessories.   As our member base and merchant selection
increase, we expect to expand our offerings to include other consumer goods such as travel, gourmet food and beverages, consumer
services events and gift cards. On May 1, 2012, we entered into operating agreements with Jaxon International, LLC (Jaxon) and
Home Loft, Inc. to operate its Leather Groups (LG) website. Jaxon is a traditional “bricks and mortar” retail location
and LG is a retail web site. On August 6, 2012, we entered intoa Management Services Agreement with FerrisHolding Company, Inc., a Delaware corporation, DBA “Bari Leather Furniture” (Bari)to operate its Bari Leather
Furniture website.



Each week we conduct several “flash
sale” events on our website in which we feature merchandise at steep discounts to suggested retail prices.  At
the beginning of each event, members receive an email describing the featured products and directing
them to our website to participate.  We list events on the member homepage of our website and each event remains on our
site for three to five days, depending on demand and quantity offered.



In addition to flash sales, we also feature
a “Daily Deal” whereby we offer a single product on our website for a 24 hour period.  Similar to flash sales,
our members receive email notifications when deals commence, directing them to the member homepage for more details.  Unlike
other deal of the day models, members are not required to purchase a minimum number of products before the deal becomes active.  In
some cases, when our Group Buy feature is active, as more members participate in the deal, the purchase price decreases.



Members purchase products directly through
our website via credit card and, in most cases, products ship directly from the merchant’s location to the member.



With our Concierge Buying program, we use
a model similar to Facebook and Pinterest to determine what customers want. We then source the most popular products and offer
those to the members via a sale that features special notifications and discounts for those who contributed to the process.



In April, we began a Business to Business
program through which we source containers of goods and sell them to retailers via our business to business website. The retailers
are offered products prior to the arrival of the container shipments and any unsold items from the container shipment are then
offered on our website. The Business to Business program is operating under the TradeYard dba and offers flash sales to businesses
and daily deals to businesses.



14







We manage and operate the retail store,
Jaxon which provides us a retail outlet. We also manage the LeatherGroups and Bari Leather Furniture web-sites.



Additionally, we syndicate sales events
and product sales with other flash sale and daily deal websites wherein we provide goods to be sold on their websites.



Recent Developments



Financing

We raised approximately $1,080,000 in gross
proceeds in 2011 from two separate offerings. In addition, Bridge Notes in the principal amount of approximately $217,500 were
exchanged for units in the offering and $62,500 in Bridge Notes was paid out of the proceeds of the offering



In 2012 we have raised
approximately $2,915,000 in debentures and raised $3,116,500 from securities units offering (the “offering”).
This amount includes Bridge Notes in the amounts of $225,000 exchanged for units in the offering. Gross proceeds from the
offering was $2,891,500.  Accordingly, we had $5,806,500 in actual gross proceeds from the debentures and offering
after deducting the principal amount of Bridge Notes exchanged at the closing of the offering, but before deducting any
expenses incurred by the Company in connection with the offering.



Debentures



During the period from January to April
2012, we entered into certain Debenture Purchase Agreements (the “Purchase Agreement”) with certain investors (the
“Holder” or “Holders”) whereby we issued and sold to the Holders certain 10% Convertible Debentures which
are convertible into shares of our common stock (collectively, the “Notes”), $0.0001 par value per share (the “Shares”),
at a conversion price of $0.30 per share, subject to adjustment. The aggregate original principal amount of all Notes is $$2,915,000.
Based on the aggregate original principal amount sold by the Company, the minimum Shares we may be required to issue is 9,716,667



Securities





On May 24, 2012, the Company entered into
a Securities Purchase Agreement (the "Purchase Agreement") with several investors whereby the Company sold units consisting
of (i) 8,904,287 shares of its 8% Convertible Preferred Stock common stock (the “Shares”), (ii) Series C warrants to
purchase 8,904,287 shares of its common stock which have a five-year term and an initial per share exercise price of $0.50, subject
to adjustment (the “Series C Warrants”), (iii) Series D warrants to purchase 4,452,143 shares of common stock which
have a 90 day term from the effectiveness of the Form S-1 filed with the SEC on June 18, 2012 and an initial per share exercise
price of $0.35, subject to adjustment (the “Series D Warrants”), and (iv) 4,452,144 Series E warrants which have a
five-year term and an initial per share exercise price of $0.50, subject to adjustment and exercise of the Series D Warrants (the
“Series E Warrants”). The price per unit was $0.35 for an aggregate purchase price of $3,116,500.





Increase in Authorized Shares



Effective May 2, 2012, the Company filed
a Certificate of Amendment to its Articles of Incorporation to increase the total number of authorized shares to five hundred fifty
million (550,000,000) shares of which five hundred million (500,000,000) shares shall be common stock, par value $0.0001, and fifty
million (50,000,000) shares shall be blank check preferred stock, par value $0.0001. The Amendment was declared effective as of
May 2, 2012.



Operating Agreements



On May 1, 2012, the Company entered into
an operating agreement with Jaxon International, LLC, a California Limited Liability Company (Jaxon). Jaxon is owned by the wife
of the Company’s CEO and Director.



On May 1, 2012, the Company entered into
an operating agreement with Home Loft, Inc. to operate its LeatherGroups (LG) web site. Home Loft is owned by the Company’s
Chief Technology Officer.



15







On August
6, 2012 the Company entered a Management Services Agreement with Ferris Holding Company, Inc., a Delaware corporation, DBA
“Bari Leather Furniture” (Bari)to operate its Bari Leather Furniture website.



Plan of Operation



We have successfully
launched our web site and our home furnishings and apparel divisions. Additionally, we have experienced significant growth in membership,
which were728,311on August 15,
2012. We are focused on strengthening our relationships with vendors/suppliers and forming strategic alliances with other web-based
merchants who act as distribution partners.  During the next twelve months, we expect to take the following steps in connection
with the further development of our business and the implementation of our plan of operations:



| ̈ | Continue scaling our marketing campaign to attract a high volume of quality members to our website. Marketing initiatives consist of search engine optimization, social media marketing, referral and affiliate marketing programs, pay-per-click search and display advertising and public relations;                    
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| ̈ | Expand upon our member relations and communication activities, with email retention and activation campaigns, additional editorial content and celebrity Trendsetter involvement that will increase our site traffic and build our brand;                                                                                 
| ̈ | Continue to improve upon the ability for our website to deliver a high-quality consumer ecommerce experience, the hallmark of which is access to luxury products at affordable prices for our members;                                                                                                                    
| ̈ | Identify and partner with more merchants whose products we want to feature on our website.  We believe featuring a variety of merchants makes our marketplace more attractive to members;                                                                                                                                 
| ̈ | Expand our product offering to include additional vertical market segments, which may include travel, gourmet food and beverages, consumer services, events and gift cards;                                                                                                                                               
| ̈ | Acquire companies whose offerings are complementary to our categories and accretive to our revenue. We believe the flash sale category is ripe for consolidation, and as such we are in a position to pursue a strategic acquisition plan;                                                                                
| ̈ | Establish new domestic and international syndication partnerships with companies whose existing customer base can extend the distribution of our products;                                                                                                                                                                
| ̈ | Build on the momentum of our Concierge Buying and Group Buy features, which currently differentiate us and we believe hold tremendous value as consumers increasingly leverage their collective buying power to identify, share and pay for products at the intersection of social, mobile and ecommerce technologies; and
| ̈ | Expand our business-to-business operation into a key market differentiator and one that will scale on the basis of our ability to source products for thousands of smaller vendors.                                                                                                                                       
| ̈ | Expand our buying power with the addition of like kind web-site alliances through operating agreements and/or acquisitions.                                                                                                                                                                                               



Over the next twelve months, we
anticipate expenses of up to $12.4 million, including general, administrative and corporate expenses and we expect revenue of
up to $29.3 million and cost of goods sold of $20.8 million. We anticipate that we will need an additional $4 million
in financing in the next twelve months to facilitate our growth. We have implemented cost savings measures to reduce
our overhead, including reduction in staff and reduction in facilities. We intend to pursue our strategy of acquiring
the targeted companies that will increase our revenue and at the same time reduce our cost of obtaining merchandise because
we will be able to obtain greater discounts with larger orders. We will also be able to leverage our infrastructure and
obtain economies of scale and replicate our technology across the various verticals. Based on the historical results for
Jaxon, LG and Bari, combined with the expected growth for our web sales, we expect to be able to execute our business plan.



Results of Operations



For the six months ended June 30, 2012,
we had revenues of $861,052 compared to revenue of $0 for the period from inception to June30, 2011. For the three month period
ended June, 30, 2012 our revenue was $705,963 representing a 355% quarter to quarter growth. The increase is mainly brought about
by the official launch of our web site in January and the launch of our apparel line in February and our operating agreements with
Jaxon and LeatherGroups entered into May 1, 2012 and our increased sales from our website in the second quarter. Our net profit
for the six months ended June 30, 2012 was $1,511,042 and for the three month period ended June 30, 2012 was $10,033,699 compared
to a $3,790 loss for the period from inception to June 30, 2011. The income was primarily from a gain on our complex derivatives
of $13,498,925 for the six month period ended June 30, 2012 and a gain of $19,793,619 for the three month period ended June 30,
2012. These gains were triggered by a drop in the market value of our common shares. Operating loss for the six month period ended
June 30, 2012 was $9,676,355 and for the three month period ended June30, 2012 was $7,515,194. A contributing factor to this loss
was the fair market value of the 5,408,178 restricted shares issued for services provided by our CEO and various vendors in the
amount of $5,249,224 for the six and three months ended June 30, 2012. Our other significant expenses
were payroll of $1.2 Million for the six month and $742,029 for the three month period ended June 30, 2012 and marketing of $576,000
for the six month and $217,819 for three month periods ended June 30, 2012. As of June 30, 2012, we had total current assets of
$1,539,807 and total current liabilities of $573,940 compared to total current assets of $326,842 and total current liabilities
of $343,711 at December 31, 2011.



16







The Company recognizes revenue and cost
of goods sold for operating the Jaxon retail store. The Company pays a monthly overhead allocation of $45,000 to cover Jason’s
fixed operating expenses. During the six months ended June 30, 2012, the Company recorded $223,757 of sales and $137,473 of cost
of goods sold for the Jaxon store. An overhead allocation of $90,000 was paid to Jaxon during the period.



The Company paid a $50,000 non-refundable
deposit to Home Loft. For operating the web-site, the Company receives all of the revenue for products that it sells and recognizes
the cost of goods sold. During the six months ended June 30, 2012, the Company recorded $75,394 of sales and $24,369 of cost of
goods sold for the LG.



Liquidity and Capital Resources



As of June 30, 2012 we had cash of $1,065,692
compared to cash of $154,400, on December 31, 2011.  Our primary uses of cash were for marketing expenses, employee compensation,
and working capital. The main sources of cash were from the proceeds from the private offering of its securities and from the issuances
of debt in the form of debentures. The following trends are reasonably likely to result in a material decrease in our liquidity
over the near to long term:



| |  ̈ | An increase in working capital requirements,                                                                     
| | - | -----------------------------------------------------------------------------------------------------------------
| |  ̈ | Our plans to acquire additional web-sites and compatible businesses                                              
| |  ̈ | Infrastructure Improvements                                                                                      
| |  ̈ | Addition of administrative and sales personnel as the business grows,                                            
| |  ̈ | Increases in advertising, public relations and sales promotions as we commence operations,                       
| |  ̈ | Development of new members and market initiation, and                                                            
| |  ̈ | The cost of being a public company and the continued increase in costs due to governmental compliance activities.



The following summarizes the key components of the Company’s
cash flows for the first 6 months 2012 and for fiscal 2011:



|                                          |  | Six Months 
Ended 
June
    30,  2012 |            |   | For the 
Period from 
April 20 
(Inception) to  June 30, 2011 |  
|----------------------------------------- |  | ------------------------------------- | ---------- | - | ------------------------------------------------------------- | -
|Cash flows used in operating activities   |  | $                                     | (4,345,620 | ) |                                                               | $
|Cash flows used in  investing activities  |  |                                       | (360,813   | ) |                                                               |  
|Cash flows from financing activities      |  |                                       | 5,617,725  |   |                                                               |  
|                                          |  |                                       |            |   |                                                               |  
|Net increase in cash and cash equivalents |  | $                                     | 911,292    |   |                                                               | $



We plan to fund our activities during the
fiscal 2012 and beyond through the sale of debt or equity securities or bank financing. We are subject to certain restrictions
under the terms of the private placements that closed in 2011 and 2012 which could affect our ability to obtain additional financing.
We cannot be certain that such funding will be available on acceptable terms or available at all. To the extent that we raise additional
funds by issuing debt or equity securities or through bank financing, our stockholders may experience significant dilution. If
we are unable to raise funds when required or on acceptable terms, we may have to significantly scale back, or discontinue, our
operations.



17







Going Concern



Our financial statements have been prepared
on a going concern basis. As of June 30, 2012, we have generated minimal revenues since inception.  We expect to finance
our operations primarily through our existing cash, our operations and any future financing.  However, there exists substantial
doubt about our ability to continue as a going concern because we will be required to obtain additional capital in the future to
continue our operations and there is no assurance that we will be able to obtain such capital, through equity or debt financing,
or any combination thereof, or on satisfactory terms or at all. Additionally, no assurance can be given that any such financing,
if obtained, will be adequate to meet our capital needs. If adequate capital cannot be obtained on a timely basis and on satisfactory
terms, our operations would be materially negatively impacted. Therefore, there is substantial doubt as to our ability to continue
as a going concern. Our ability to complete additional offerings is dependent on the state of the debt and/or equity markets at
the time of any proposed offering, and such market’s reception of the Company and the offering terms. There is no assurance
that capital in any form would be available to us, and if available, on terms and conditions that are acceptable.





Our business is capital intensive. Our ability to grow is dependent
upon favorably obtaining outside capital and generating cash flows from operating activities necessary to fund our investment activities.
There is no assurance that we will be able to achieve profitability. Since our future operations will continue to be dependent
on successful execution of our business plan and our acquisition activities and our ability to seek and secure capital from external
sources, should we be unable to achieve sustainable profitability this could cause any equity investment in the Company to decline
in value.



Major sources of funds in the past for us have included the
debt or equity markets. While we have achieved a significant increase in our Gross Margin from the flash web site and from our
Management Services Agreements, we do not have positive cash flow. We will have to rely on these capital markets to fund future
operations and growth. Our business model is focused on acquiring Jaxon, LeatherGroups and Bari and other verticals as well as
retail sales from our web-site and wholesale sales generated by TradeYard. Our ability to generate future revenues and operating
cash flow will depend on successful retail and wholesale sales and the ability to execute our business plan, which will require
us to continue to raise equity or debt capital from outside sources.



The Company has ongoing capital commitments to acquire Jaxon,
LeatherGroups and Bari subject to their underlying terms. Failure to meet such ongoing commitments may result in the loss of the
ability to make these acquisitions. These ongoing commitments may also cause us to seek additional capital from sources outside
of the Company. The current uncertainty in the credit and capital markets, and the economic downturn, may restrict our ability
to obtain needed capital.



In the current fiscal year, we continue to seek additional financing for our planned development and growth
activities. We plan to obtain financing through various methods, including issuing debt securities, equity securities, bank debt,
or combinations of these instruments which could result in dilution to existing security holders and increased debt and leverage.
No assurance can be given that we will be able to obtain funding under any loan commitments or any additional financing on favorable
terms, if at all.





Critical Accounting Policies



Use of Estimates



The preparation of financial statements
in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions
that affect certain reported amounts and disclosures.  Actual results could differ from those estimates.



Cash and Cash Equivalents



We consider cash on hand and demand deposits
with original maturities of six months or less as cash and cash equivalents for the purpose of the statement of cash flows. As
of June 30, 2012 we had $1,065,692 in cash compared to $154,400 in cash at December 31, 2011.



Share-Based Payments



The Company
accounts for share-based awards to employees in accordance with FASB ASC 718 “Stock Compensation”.Under this guidance, stock compensation expense is measured at the grant date, based on the fair value of the award, and is recognized
as an expense over the requisite employee service period (generally the vesting period). The Company estimates the fair value of
share-based payments using the Black-Scholes option-pricing model.



Share-based awards to non-employees
are accounted for in accordance with ASC 505-50, whereinsuch awards are expensed over the period
in which the related services are rendered at their fair value.





Revenue Recognition



Most of our vendor relationships follow
a traditional retail model and only do revenue sharing in a small segment of apparel sales, We recognize revenue from product sales
when the following four criteria are met: pervasive evidence of an arrangement exists, delivery has occurred or services have been
rendered, the selling price is fixed or determinable, and collectability is reasonably assured.



We provide all customer care and support
for the merchandise sold on our website and we are not acting as agents for the vendors. Our members have a relationship only with
us and we are responsible for fulfillment and customer satisfaction. We have traditional merchant-vendor relationships with our
vendors and are not acting as their agent.











18







Product sales represent revenue from the
sale of products and related shipping fees where we are the seller of record. Product sales and shipping revenues, net of promotional
discounts, rebates, and return allowances, are recorded when the products are shipped and title passes to customers. Retail sales
to customers are made pursuant to a sales contract that provides for transfer of both title and risk of loss upon our delivery
to the carrier.



We record and report revenue on the gross
amount billed to customers when the following indicators are met:

 ̈
we are the primary obligor in the transaction

 ̈
we are subject to inventory risk and credit risk for amount billed to the customer

 ̈
we have latitude in establishing prices and selecting suppliers



Sales, where we have
a revenue sharing arrangement with a vendor, are recorded net of the vendors’ share.





Recently Issued Accounting Pronouncements



We do not expect the adoption of recently
issued accounting pronouncements to have a significant impact on our results of operations, financial position or cash flow.



Off Balance Sheet Arrangements



We do not have any off balance sheet arrangements
that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition,
sales or expenses, results of operations, liquidity or capital expenditures, or capital resources that are material to an investment
in our securities.



Item 3. Quantitative and Qualitative Disclosures About
Market Risk.



Not Applicable.



Item 4. Controls and Procedures.



Evaluation of Disclosure Controls and Procedures



Our management, with the participation
of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures
as of June 30, 2012. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under
the Securities Exchange Act of 1934, as amended (the “Exchange Act”), means controls and other procedures of a company
that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under
the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms.
Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required
to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to
the company's management, including its principal executive and principal financial officers, as appropriate to allow timely decisions
regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated,
can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating
the cost benefit relationship of possible controls and procedures. Based on this evaluation, management concluded as of June 30,
2012 that our disclosure controls and procedures were not effective. We deemed the controls to be ineffective due to a lack of
segregation of duties and in controls over corporate governance. We have begun hiring additional accounting staff and are currently
in the process of hiring in-house council to address these control issues.



Changes in Internal Control over Financial
Reporting



During the six month period ended June
30, 2012, the Company hired additional accounting staff and was able to implement policy and procedures to provide segregation
of duties as of the end of the period. No other change in our system of internal control over financial reporting occurred during
the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control
over financial reporting.



19







PART II - OTHER INFORMATION



Item 1. Legal Proceedings.



On May 2, 2012, the Company and Pacific Capital Group, Inc.
(“PCG”) executed a Memorandum of Understanding (the “MOU”) that contemplates PCG providing consulting services
to the Company in exchange for an option to purchase shares of the Company.  In subsequent discussions and email correspondence,
the parties have considered various quantities of shares to be subject to purchase by PCG, and the most recent amount under consideration
was 2,000,000.  In emails between the Company and PCG, both parties have discussed whether “the deal is dead”
without an investment from PCG and, to date, the parties have not resolved the number of shares PCG is eligible to purchase. 
Accordingly, there are outstanding, unresolved disputes between the parties with respect to the MOU related to: (i) whether the
MOU constitutes a binding agreement and, if so, (ii) the number of option shares, if any, subject to the MOU, and (iii) the scope
of PCG’s consulting services contemplated by the MOU.



Item 1A. Risk Factors.



Not applicable because we are a smaller reporting company.



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





On April 5, 2012, the Company issued Tommy Allen 1,500,000 shares
of common stock at a price of $0.69 per share for consulting services.



On April 2, 2012, the Company issued Placements Media50,000
shares of common stock at a price of $0.62 per share for consulting services.



On April 12, 2012, the Company issued Amie Yoon (Dotted Line
Communications) 25,000 shares of common stock at a price of $0.80 per share for consulting services.



On April 12, 2012, the Company issued Braden Richter 300,000
shares of common stock at a price of $0.80 per share for consulting services.



On April 12, 2012, the Company issued
Darcy Cobb (Dotted Line Communications) 25,000 shares of common stock at a price of $0.80 per share for consulting services.



On April 12, 2012, the Company issued Aldidad Mireskandari 187,000
shares of common stock at a price of $0.80 per share for consulting services.



On April 12, 2012, the Company issued 50,000
restricted shares of common stock with a fair value of $40,000 to Regard Solutions, Inc. as a finder’s fee ($0.80).



On April 18, 2012, the Company issued Edward Sullivan 100,000
shares of common stock at a price of $0.94 per share for consulting services.



On April 30, 2012, the Company issued Firerock Capital, Inc.
500,000 shares of common stock at a price of $1.22 per share for consulting services.



These shares were issued in reliance on the exemption under
Section 4(2) of the Securities Act of 1933, as amended (the 'Act'). These shares of our Common Stock qualified for exemption under
Section 4(2) of the Securities Act of 1933 since the issuance shares by us did not involve a public offering. The offering was
not a 'public offering' as defined in Section 4(2) due to the insubstantial number of persons involved in the deal, size of the
offering, manner of the offering and number of shares offered. We did not undertake an offering in which we sold a high number
of shares to a high number of investors. In addition, these shareholders had the necessary investment intent as required by Section
4(2) since they agreed to and received share certificates bearing a legend stating that such shares are restricted pursuant to
Rule 144 of the 1933 Securities Act.  This restriction ensures that these shares would not be immediately redistributed
into the market and therefore not be part of a 'public offering.' Based on an analysis of the above factors, we have met the requirements
to qualify for exemption under Section 4(2) of the Securities Act of 1933 for this transaction.







Item 3. Defaults Upon Senior Securities.



None.



Item 4. Mine Safety Disclosures.



Not applicable.



Item 5. Other Information.



None.



Item 6. Exhibits.



|Exhibit Number |  | Description
|-------------- |  | -----------
|               |  |            
|31.1           |  |            
|31.2           |  |            
|32.1           |  |            
|32.2           |  |            
|101.INS        |  |            
|101.SCH        |  |            
|101.CAL        |  |            
|101.DEF        |  |            
|101.LAB        |  |            
|101.PRE        |  |            



* Filed herewith.

** In accordance with SEC Release 33-8238, Exhibits 32.1 and
32.2 are being furnished and not filed.

*** To be filed by amendment.



20







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.



|                       | Luxeyard, inc.
|---------------------- | --------------
|                       |               
|Date:  August 20, 2012 | By:           
|                       |               
|                       |               
|                       |               
|                       |               
|Date:  August 20, 2012 | By:           
|                       |               
|                       |               
|                       |               



21