UNITED
STATES

SECURITIES
AND EXCHANGE COMMISSION

WASHINGTON,
D.C. 20549



FORM
10-K



(Mark
One)



xANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



For
the fiscal year ended December 31, 2014



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



For
the transition period from ______to______.



Commission
file number  000-51886



|MAX
    SOUND CORPORATION                                                                            
|-----------------------------------------------------------------------------------------------------
|(Exact
    name of registrant as specified in its charter)                                           
|                                                                                                     
|Delaware                                                                                             
|State
    or other jurisdiction of incorporation or organization                                     
|                                                                                                     
|2902A
                                         Colorado Avenue
        Santa
        Monica, CA 90404
|(Address
    of principal executive offices)                                                         
|                                                                                                     
|Registrant’s
    telephone number, including area code: 888-777-1987                                 



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



Securities
registered pursuant to Section 12(g) of the Act:



Common
Stock, par value $.00001 per share

(Title
of class)



Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes  Nox



Indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes 
Nox



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

YesNo 



Indicate
by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if

any,
every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

YesNo 





Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not
contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this

Form
10-K. 



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



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



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



The
Aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant as of June  30,
2014 as approximately $14,241,146.



As
of March 24, 2015, the registrant had 285,044,350 shares issued and outstanding.



Documents
Incorporated by Reference:

None.





TABLE
OF CONTENTS



|PART
    I   |                               |   
|------------ | ----------------------------- | --
|ITEM
    1.  | BUSINESS                      | 1 
|ITEM
    1A. | RISK
    FACTORS              | 9 
|ITEM
    1B. | UNRESOLVED
    STAFF COMMENTS | 9 
|ITEM
    2.  | PROPERTIES                    | 9 
|ITEM
    3.  | LEGAL
    PROCEEDINGS         | 9 
|ITEM
    4.  | MINE
    SAFETY DISCLOSURES   | 11



|             |                                                                                                                  |   
|------------ | ---------------------------------------------------------------------------------------------------------------- | --
|PART
    II  |                                                                                                                  |   
|ITEM
    5.  | MARKET
    FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES | 12
|ITEM
    6.  | SELECTED
    FINANCIAL DATA                                                                                      | 22
|ITEM
    7.  | MANAGEMENT’S
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS                        | 23
|ITEM
    7A. | QUANTITATIVE
    AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                                   | 35
|ITEM
    8.  | FINANCIAL
    STATEMENTS AND SUPPLEMENTARY DATA                                                                  | 36
|ITEM
    9.  | CHANGES
    IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE                         | 18
|ITEM
    9A. | CONTROLS
    AND PROCEDURES                                                                                      | 18
|             |                                                                                                                  |   
|PART
    III |                                                                                                                  |   
|ITEM
    10. | DIRECTORS,
    EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE                                                       | 63
|ITEM
    11. | EXECUTIVE
    COMPENSATION                                                                                       | 65
|ITEM
    12. | SECURITY
    OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS               | 67
|ITEM
    13. | CERTAIN
    RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE                                    | 67
|ITEM
    14. | PRINCIPAL
    ACCOUNTING FEES AND SERVICES                                                                       | 68
|             |                                                                                                                  |   
|PART
    IV  |                                                                                                                  |   
|ITEM
    15. | EXHIBITS,
    FINANCIAL STATEMENT SCHEDULES                                                                      | 68
|             |                                                                                                                  |   
|SIGNATURES   | 69                                                                                                              





CAUTIONARY
STATEMENT ON FORWARD-LOOKING INFORMATION



This
Annual Report on Form 10-Q (this “Report”) contains “forward-looking statements” within the meaning of
Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange
Act of 1934, as amended (the “Exchange Act”). Forward-looking statements discuss matters that are not historical facts.
Because they discuss future events or conditions, forward-looking statements may include words such as “anticipate,”
“believe,” “estimate,” “intend,” “could,” “should,” “would,”
“may,” “seek,” “plan,” “might,” “will,” “expect,” “predict,”
“project,” “forecast,” “potential,” “continue” negatives thereof or similar expressions.
Forward-looking statements speak only as of the date they are made, are based on various underlying assumptions and current expectations
about the future and are not guarantees. Such statements involve known and unknown risks, uncertainties and other factors that
may cause our actual results, level of activity, performance or achievement to be materially different from the results of operations
or plans expressed or implied by such forward-looking statements.



We
cannot predict all of the risks and uncertainties. Accordingly, such information should not be regarded as representations that
the results or conditions described in such statements or that our objectives and plans will be achieved and we do not assume
any responsibility for the accuracy or completeness of any of these forward-looking statements. These forward-looking statements
are found at various places throughout this Report and include information concerning possible or assumed future results of our
operations, including statements about potential acquisition or merger targets; business strategies; future cash flows; financing
plans; plans and objectives of management; any other statements regarding future acquisitions, future cash needs, future operations,
business plans and future financial results, and any other statements that are not historical facts.



These
forward-looking statements represent our intentions, plans, expectations, assumptions and beliefs about future events and are
subject to risks, uncertainties and other factors. Many of those factors are outside of our control and could cause actual results
to differ materially from the results expressed or implied by those forward-looking statements. In light of these risks, uncertainties
and assumptions, the events described in the forward-looking statements might not occur or might occur to a different extent or
at a different time than we have described. You are cautioned not to place undue reliance on these forward-looking statements,
which speak only as of the date of this Report. All subsequent written and oral forward-looking statements concerning other matters
addressed in this Report and attributable to us or any person acting on our behalf are expressly qualified in their entirety by
the cautionary statements contained or referred to in this Report.



Except
to the extent required by law, we undertake no obligation to update or revise any forward-looking statements, whether as a result
of new information, future events, a change in events, conditions, circumstances or assumptions underlying such statements, or
otherwise.



CERTAIN
TERMS USED IN THIS REPORT



When
this report uses the words “we,” “us,” “our,” and the “Company,” they refer to
Max Sound Corporation, and “SEC” refers to the Securities and Exchange Commission.





PART
I



ITEM
1.          BUSINESS



Overview



Max
Sound Corporation (“we,” “us,” “our,” or the “Company”) was incorporated in the
State of Delaware on December 9, 2005 as 43010, Inc. to engage in any lawful corporate undertaking, including, but not limited
to, locating and negotiating with a business entity for combination in the form of a merger, stock-for-stock exchange or stock-for-assets
exchange. On October 7, 2008, pursuant to the terms of a stock purchase agreement, Mr. Greg Halpern purchased a total of 100,000
shares of our common stock from Michael Raleigh for an aggregate of $30,000 in cash. The total of 100,000 shares represents 100%
of our issued and outstanding common stock at the time of the transfer. As a result, Mr. Halpern became our sole shareholder.
As part of the acquisition, and pursuant to the Stock Purchase Agreement, Michael Raleigh, our then President, CEO, CFO, and Chairman
resigned from all the positions he held in the company, and Mr. Halpern was appointed as our President, CEO CFO and Chairman.
The original business model was developed by Mr. Halpern in September of 2008 and began when he joined the Company on October
7, 2008. In October 2008, we became a development stage company focused on creating an Internet search engine and networking web
site.



From
October 2008 until January 17, 2011, Mr. Halpern was our CEO, and during that time the Company was focused on developing their
Internet search engine and networking web site. In January of 2010, the Company launched their Internet search engine and
networking website.  In 2011, the Company decided to abandon its social networking website.  On May 11, 2010,
the Company acquired the worldwide rights, title, and interest to all fields of use for MAX-D.



On
January 17, 2011, Mr. Halpern resigned as the Company’s CEO and John Blaisure was appointed as CEO.  In February
of 2011, the Company elected to change its business operations and focus primarily on developing and launching the MAX-D technology.  Our
current website (www.maxsound.com) is used to showcase the MAX-D technology.  On March 8, 2011, the Company changed
its name to Max Sound Corporation, and its trading symbol on the OTC Bulletin Board to MAXD.



MAX
Sound Corporation owns the worldwide rights to all fields of use to MAX-D HD Audio, which was invented by Lloyd Trammell, a top
sound designer and audio engineer who helped develop and sell the first working Surround Sound System to Hughes Aircraft.  Mr.
Trammell, who is now the CTO of MAX-D, also developed MIDI for Korg and owns five patents in dimensional sound processing.  We
believe that MAX-D is to Audio what High Definition is to Video.  MAX-D works by converting all audio files to their
highest possible acoustically perfect equivalent without increasing files size or bandwidth usage.



The
Company shall act as the exclusive agent to facilitate and negotiate any opportunities on behalf of EA Technology to Companies,
Organizations and other qualified entities. Upon any closing, EA shall receive 50% of gross dollars and the Company shall receive
the other 50% at the time of a completion of any transaction opportunity, including legal settlements after subtracting applicable
contingent legal fees. In the event the Company sublicenses EA to other entities, profits shall be split 50/50.



On
May 22, 2014, MaxD entered into a representation agreement with architect Eli Attia giving MAXD the exclusive rights to sue violators
of Eli Attia’s intellectual property rights. MAXD has since filed suit against Google, Inc., Flux Factory, and various executives
of these companies for misappropriation of trade secrets.



On
May 28, 2014, the Company entered into a license agreement with Akyumen Technologies Corp. (“Akyumen”), an original
equipment manufacturer of mobile devices, for the non-exclusive, non-transferable, indivisible worldwide license rights to the
use of Company’s API technology in Akyumen’s mobile devices.  The license is for five years and is renewable,
with the Company’s approval, at Akyumen’s request.



1





As
consideration for the above-referenced license rights, Akyumen agreed to pay the Company royalties of $2.50 per Akyumen device
that utilizes the API technology, to be payable on a monthly basis within 15 days after the close of the calendar month.  Akyumen
also agreed to pay, within three months of first sale, 50% of non-recurring engineering costs to port the Technology onto the
operating systems of the Akyumen devices, inclusive of any local fees, taxes, or other charges.



In
December 2014, the CEO of Akyumen notified the Company that Akyumen entered into a contract in Asia representing five million
mobile device units, and further that the company is engaged in high level discussions with major cellular carriers in Europe
and the Middle East, estimating that another ten million mobile device units should come from those regions in the year 2015.
Moreover, Akyumen announced in November 2014 the building of a five million state of the art manufacturing and assembly facility
in Bahrain allowing the company the ability to produce over ten million units for that region.



The
Company continues to work with Akyumen executives and developers to assist in getting the MAX-D-HD Audio ported onto their mobile
devices and into the consumer marketplace. While the Akyumen product continues to improve the company still needs to increase
positive consumer reviews and excitement.



On
June 16, 2014, MAXD entered into a license and revenue share agreement with LOOKHU, an online subscription service that delivers
movies, music, television shows, apps and games. The agreement grants LOOKHU non-exclusive, non-transferable, indivisible worldwide
license rights to the distribution and use of the Company’s Application Programming Interface (“API”) audio
processor technology. The license is for five years and is renewable, with the Company’s approval, at LOOKHU’s request.
The Company is continuing to work closely with the LOOKHU program developers, and is building the LOOKHU/MAX-D HD powered version,
which product the Company expects with no assurances to be available in late first quarter 2015.



As
consideration for the above-referenced license rights, LOOKHU agreed to pay the Company royalties of $0.25 per month per paid
subscription to the technology, to be payable on a monthly basis.  Additionally, LOOKHU agreed to pay the Company 4% of the
net advertising revenue derived from advertising that utilizes the technology, to be payable on a quarterly basis.



Additionally,
for the term of the agreement, the parties agreed to split, on a 50/50 basis, net revenue derived from sales of digital music
or songs played from a LOOKHU software player, to be payable on a monthly basis.



No
later than June 20, 2014, MAXD entered into a representation agreement with VSL Communications, Inc., making MAXD the exclusive
agent to VSL to enforce all rights with respect to patented technology owned by VSL subsidiary Vedanti Systems Limited. In particular,
last summer, the Company announced that it had acquired a worldwide license and representation rights to a patented video and
data technology “Optimized Data Transmission System and Method” which enables end-user licensees to transport 100%
of data bandwidth content in only 3% of the bandwidth with the identical lossless quality. Significantly, this represents thirty
three times reduction associated with transport cost and the time it takes for the video or digital content to be viewed by an
end-user. As described more fully in the Legal Proceedings Section, The Company has since filed suit against Google, Inc., YouTube,
LLC, and On2 Technologies, Inc., alleging willful infringement of the patent.







2





Description
of Our Business



Max
Sound (MAX-D) is engaged in activities to sell and license products and services based on its patent-pending MAX-D HD
Audio Technology for sound recording and playback that dramatically improves the listener’s experience. The MAXD-D HD Audio
Technology delivers high definition audio without increasing file size.



The Company is marketing MAX-D on the basis
that it is to audio what HD is to video.  MAX-D technology improves all types of audio; moreover, it is intended to
be particularly valuable in improving the ever-growing use of compressed audio and video as used in mp3 files, iPods, internet,
and satellite/terrestrial broadcasting.  For example, a listener using a portable mp3 player with MAX-D will experience
sound quality that is comparable to the original CD before it was converted into an mp3 file.  In another example, cell
phone users using a cell phone equipped with MAX-D will hear the other person's voice as if they are speaking directly in front
of them. The Company believes that the MAX-D HD is better for a consumers hearing than today’s highly compressed audio and
anticipate that continued research and development will support the Company’s position. In numerous consumer audio tests,
MAXD-D HD sounded better to consumers than high resolution WAV files. Importantly, MAX-D HD remains one tenth the size of a WAV
file, and in the Company’s opinion offers more clarity, dimension, articulation and impact in every range of the audio spectrum
to the listener  The Company’s current business model is to license the technology to content creators, manufacturers,
and network broadcasters.  The Company’s patent-pending technology stands customer ready today.  The
Company’s market pursuits include motion picture, music recording, video game, broadcasting, internet video and audio, automobile
infotainment systems and consumer electronics.



The
Company has grown this year to a staff of 18, including employees and sub-contractors. We now have an infrastructure that is allowing
us to expand and execute quickly. In addition we have established business relationships with the leading companies in the Smartphone,
Tablet, Chip, Music and Consumer Retail business. The Company is now executing its “Go To Market” strategy and sales
programs as a first market mover solving the degraded compressed audio issues plaguing the audio currently being consumed. These
companies dominate the multi-media and electronics technology arena providing audio delivery across all channels of the exploding
smartphone tablet device phenomenon.



Qualcomm



We
have entered into a license agreement with Qualcomm that enables our MAX-D technology to be on Qualcomm’s Snapdragon DSP.  The
license agreement is automatically renewable for one-year periods unless terminated by either party with 30 days prior written
notice.  By residing on the Qualcomm Snapdragon DSP, the MAX-D HD Audio Technology will have the ability to control
and convert to HD Audio up to 8 audio processes simultaneously. This will include Cellular Voice transmission and termination,
streaming video, streaming audio and all content stored on the device in memory. Qualcomm currently has a significant portion
of the entire global chip market for all smartphones and tablets and they believe their growth rate mirrors the industry. We anticipate
a strong adoption from the OEMs licensing the MAX-D technology. Now that MAX-D is part of the Snapdragon Chip, we believe MAX-D
can be successfully deployed on the chip, and will have the ability to be offered to up to 86 of Qualcomm’s OEM’s
on potentially hundreds of millions of devices every quarter.



Since
the Company’s debut at the Qualcomm Upling conference in San Diego over a year ago, we remain engaged with some of the largest
OEM’s in the smart phone device market. Our sales and marketing team are continuing in advanced high-level strategic meetings
with industry leaders in the chip manufacturing and device hardware sectors. The Company is operating under several NDA’s
and R&D Test Agreements with today’s most well-known industry to implement and license the MAX-D HD onto their platforms.





3





About
MAX-D:



The
MAX-D software improves the sound heard from any device. Consumers have unknowingly sacrificed better audio quality for
portable convenience and MAX-D rectifies this problem by:



| |  | analyzing
    what content is missing from the compressed audio signal;                                             
| | - | --------------------------------------------------------------------------------------------------------------------
| |  | dynamically
    resynthesizing lost harmonics and natural sound fields in real time;                                
| |  | maximizing
    the output potential of any device without increasing original file size; and                        
| |  | without
                                         requiring consumers or OEM’s to change equipment or infrastructure.





MAX-D
Benefits:



| |  | Increases
    dynamic range, eliminates destructive effects of audio compression with no increase in file size or transmission bandwidth;                                                                  
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | High-resolution
    audio reproduction with an omni-directional sound field using only two speakers;                                                                                                       
| |  | “Real”
    three-dimensional sound field, versus artificial sound field created by competing technologies; and                                                                                             
| |  | More
                                         realistic “live performance” quality of all recordings with optimal dynamic
                                         range, bass response and overall clarity

4











| |  | 
| |  | 



MAX-D
Markets:



MAX-D
can be used in a variety of venues and applications that provide audio capability, as categorized below:



| |  | MOBILE
    -Communication | Voice – Data | Entertainment                             
| | - | -------------------------------------------------------------------------------------
| |  | ENTERTAINMENT
    -Music | Movies | Audiobooks | Streaming Content | Live Events     
| |  | MULTI-MEDIA
    -Computing | Gaming                                                  
| |  | CONSUMER
    -Home Theater | Portable Audio Players | Live Concert Sound | Automotive



We
intend to license the MAX-D technology to creators of film, music, broadcast, and gaming content and selling them the service
of applying the MAX-D technology to their end product. MAX-D is fully compatible with existing playback technology. We believe
that no current competitor can provide the level of sound quality and end user experience that MAX-D delivers. MAX-D technology
is ready for these markets now.  We also intend to license the technology to manufacturers of consumer electronics products
such as portable mp3 players, TV’s, Set Top Boxes, Car Stereo, Home Theatre, Smartphones and Tablets.



The
Company is making positive inroads in the motion picture industry. Many of the post-production facilities are now requesting a
MAX-D HD Box. The Max-D HD box is a small Windows-based computer that allows audio engineers to apply our patent pending MAX-D
HD Audio technology to protect the original audio quality as it is compressed and distributed downstream throughout the internet
in all compressed formats. We now have internal testing boxes completed, and anticipate delivering the first boxes to several
markets in Q2 2015, and one of the

5





top
post film production houses is now engaged with us negotiating their first feature film deal to employ MAX-D HD Audio.



MAX-D
Revenue Model:



The
Company expects to derive its revenue through the licensing of its MAX-D technology.  The Company is negotiating the
licensing of its HD Audio Technology onto hardware and software across the primary vertical markets in Entertainment, Multi-media
and Mobile Communications technology.  It is also negotiating the “White Labeling,” or the adding of a customizable
feature to the Liquid Spins Music Store, into all of these sectors and national retailers as well.



In
2014, the Company nearly tripled its Mobile App user base (with no dedicated marketing budget being employed –until we expect
later in 2015). We currently have over 80,000 subscribers on the free version of our HD Audio App for MP3’s on Android.
We also are in the final weeks of Beta testing our latest MAX-D HD Apple iOs App that will support current iPhones and iPads.
We anticipate a Q2 2015 launch onto the Apple store.



In
addition, the Company is now exploring a subscription based revenue model, which would offer millions of consumers a Max-D HD
Audio experience on a 30 day free trial basis, and following the free trial the opportunity to upgrade to a paid annual subscription.



MAX-D
Embedded Chip Solution: The MAX-D Embedded Chip technology is being designed to restore the natural sound field, causing compressed
audio to sound like the original audio at playback time in any device. The audio does not have to be pre-processed or encoded.
The Chip is being designed to be imbedded into TV Receivers, Digital Projection TVs, LCD TVs, Plasma TVs, Component DVD Players/Recorders,
DVD Recorders, Set-Top Boxes, Personal Video Recorders (PVRs), Direct Broadcast Satellite (DBS) Receivers, Personal Computers,
Satellite Radio Receivers, Mobile Video Devices, Domestic Factory Installed Auto Sound, Camcorders, MP3 Players, Electronic Gaming
Hardware, Wireless Telephones, Cell Phones, and Personal Digital Assistants (PDAs).



MAX-D
Dynamic Software Module: Max Sound has delivered and is working to implement an application programming interface (“API”)
for all Internet applications to process all audio/video content streamed or downloaded by consumers. Viable target candidates
within the next 24 months include streaming movie and music services such as Netflix and Spotify. Companies selling downloaded
MP3’s are also expected to find immense value in our technology due to their dominance in web-based audio and video. This
Module is a lossless dynamic process requiring no destructive encoding or decoding and needs no additional hardware or critical
monitoring stage after processing.  In addition, no specialized decoder is necessary on any audio system.



Technology



MAX-D
is a unique approach to processing sound, based on the physics of acoustics rather than electronics. Remarkably simple to deploy,
MAX-D is a new technology that dramatically raises the standard for sound quality,with no corresponding increase
in file size or transmission channel bandwidth.   This is accomplished by processing audio with our proprietary, patent-pending
process. This embedded and duplicating format either remains the same, or can be converted to whatever format the user desires,
while retaining unparalleled fidelity and dynamic range.



MAX-D
restores the original recorded acoustical space inany listening environment. MAX-D is the only technology that both
aligns phase and corrects phase distortion in a completed recording. MAX-D supplies missing audio content by adding acoustics
and frequency response lost in the original recording or in the compression and transmission processes. MAX-D corrects and optimizes
harmonic content and low frequency responses, greatly enhancing acoustic accuracy and we believe reduces ear fatigue.





6





MAX-D
integrates time, phase, harmonics, dynamics, and sub-harmonic region optimizations in a fully dynamic fashion. MAX-D is a lossless
dynamic process, requiring no destructive encoding/decoding process, or any specialized decoder at all. MAX-D needs no additional
hardware or critical monitoring stage after processing. The end result is that every aspect of audio processed
with MAX-D  - voice, instrument, or special effects - sounds refreshingly clear, realistic, and natural. The MAX-D HD
Audio Technology creates an optimum sound field throughout every listening environment – from the corners of a theater;
on your living room couch; to the back seat of your car.



MAXD-D
HD Audio Technology requires no equipment changeover and can be embedded into any product (e.g. speakers, headphones, mobile devices),
or online content delivery systems (e.g. streaming, cable, video games) to provide better sounding audio.



Market



MAX-D
products and services are designed and intended to solve problems and add value to audio components of several separate industries,
including consumer electronics, motion picture, broadcasting, video game, recording, cell phone, internet, and VOIP applications.



2014
was a year of creating relationships with companies across all vertical markets understanding the value of those industries and
what it would mean to Max-D. It became clear that the device market was the largest for potential revenue and profits for the
Company. Our license agreement with Qualcomm has established the foundation for entry into this market. The MAX-D HD Audio player
App provided the consumer the ability to experience MAX-D. The acquisition of Liquid Spins provided a music gateway directly to
the retail consumer and the record labels and the ability to provide MAX-D HD Audio.



List
of 2014 contracted companies:



|Qualcomm | (Leader
                                         in Chips for Smartphones & Tablets)
|-------- | ------------------------------------------------------------------------------------

The
Company is now positioned to pursue the following expansion strategies:



| |  | Launch
    MAX-D audio on the Qualcomm Snapdragon DSP, which stands to make MAX-D audio available on potentially hundreds of millions
    of devices that can be licensed by up to 86 OEMs around the world.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Grow
    the MAX-D HD Audio Apps user base and begin selling a paid version of the App.                                                                                                                     
| |  | Deploy
    MAX-D APIs for use in streaming online Video/Audio and stand alone Audio services.                                                                                                               



Competition



The
Company’s management believes there are no current competitors capable of delivering the high quality of audio products
and services produced by the company. Although other companies, like DTS or Dolby, have technologies that enhance sound; we do
not believe these technologies negatively affect the Company because the MAX-D process can enhance the other audio company’s
technology.



We
believe we will be considered friendly competition in the future for three reasons; (1) we believe that MAX-D technology delivers
the best sound quality available today, (2) MAX-D does not require any additional equipment; and (3) MAX-D makes any competition’s
audio processes sound better.



Intellectual
Property



Max-D
and HD Audio technologies and designs are Patent Pending and Trademarked. On February 8, 2011, the words “Max Sound”
was issued to the Company by the U.S. Patent and Trademark office under Serial Number85050705, and the words “HD
Audio” are pending under Serial Number 85232456 for the following applications: Computer application software for mobile
phones, namely, software for HD audio; Computer

7





hardware
and software systems for delivery of improved HD audio; Computer hardware for communicating audio, video and data between computers
via a global computer network, wide-area computer networks, and peer-to-peer computer networks; Computer software for manipulating
digital audio information for use in audio media applications; Computer software to control and improve computer and audio equipment
sound quality; Digital materials, namely, CD's, DVD's, MP3's, streaming media, movies, videos, music, concerts, news, pre-recorded
video, downloadable audio and video and high definition audio and video featuring improved HD audio; Digital media, namely, pre-recorded
DVDs, downloadable audio and video recordings, and CDs featuring and promoting improved HD audio; Digital media, namely, pre-recorded
video cassettes, digital video discs, digital versatile discs, downloadable audio and video recordings, DVDs, and high definition
digital discs featuring improved HD audio; Digital media, namely, CD's, DVD's, MP3's, movies, videos, music, concerts, news, pre-recorded
video, downloadable and streaming audio and video and high definition audio and video featuring improved HD audio; Downloadable
MP3 files, MP3 recordings, on-line discussion boards, webcasts, webinars and podcasts featuring music, audio books in the field
of entertainment and general subjects, and news broadcasts; Software to control and improve audio equipment sound quality; Sound
recordings featuring improved HD audio.



The
Company is in the process of filing 70 additional patents for its technology.



Research
and Development



The
Company throughout 2014 has continued to focus on research and development initiatives concerning the MAX-D HD Audio Technologies
now that the Company is entering into the licensing phase. The Company is working with strategic partners who are now integrating
or assisting with the development of the Company’s application on their respective platforms. The Company’s development
team is concentrating on enhancing the existing MAX-D HD, and is also developing additional API interfaces. The MAX-D API can
be deployed across all streaming platforms along with most audio/video web-based services including audio hardware such as speakers
and audio receivers including car smart head units. In 2014, the Company completed testing for industry the MAX-D HD Audio boxes
and the MAXD –D Accurate Voice. Significantly, in 2014 the Company achieved breakthroughs in the software development of
MAX-D HD for Android OS, Windows OS, Apple OS and a universal MAX-D API. In the fiscal years ended December 31, 2014 and 2013,
the Company spent $304,300 and $370,225 respectively, on research and development activities relating to the build-out for the
Company’s App for Windows Linix and IOS, as well as the MAX-D’s 300 KB API.



Employees



As
of December 31, 2014, we had 14 employees, of which all were full-time.



Anticipated
Milestones for the Next Twelve Months



For
the next twelve months, our most important goal is to become cash flow positive by growing Max Sound HD Audio sales through licensing
and recurring revenue streams. Our goal is to have this growth improve our stock value and investor liquidity. We expect
our financial requirements to increase with the additional expenses needed to promote the MAX-D HD Audio Technology. We plan
to fund these additional expenses by equity loans from our existing lines of credit and we are also considering various private
funding opportunities until such time that our revenue stream is adequate enough to provide the necessary funds.



Over
the next twelve months, our focus will be in the achieving and implementing the following:



| | 1. | The
    marketing of the MAX-D Android and Windows APP for tablets and smartphones in addition to an APP that will run on the Apple
    OS into the direct consumer market.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 2. | The
    include the ability to stream content through the MAX-D Apps.
| | -- | ---------------------------------------------------------------------



8







| | 3. | MAX-D
    is in the Qualcomm Snapdragon DSP through the Hexagon program. We will seek adoption of the MAX-D HD Audio Technology by Qualcomm’s
    OEMs.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------



| | 4. | Deployment
    of Max Sound HD Audio appliances for key industry engineers and internet streaming companies allowing them to broadcast
    in MAX-D.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------



| | 5. | Early
    adoption from the movie industry producing “Mastered in MAX-D” content.
| | -- | ---------------------------------------------------------------------------------



Long-Term
Goals



| | 1. | Increase
                                         Max Sound’s customer base substantially producing large consumer adoption and branding.                                                                                                                     
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 2. | Make
                                         a financial return on the investments of the last year, with increased sales and reduction
                                         of indirect costs, to become cash flow positive and then profitable in 2015.
| | 3. | Increased
                                         adoption by industry leaders and differentiated as a deliverer of game-changing audio
                                         technology.                                                                 
| | 4. | Explore
    the applicability of Liquid Spins in future agreements with MAX-D.                                                                                                                                                                                



Where
You Can Find More Information



We
are a publicly reporting company under the Exchange Act and are required to file periodic reports with the Securities and Exchange
Commission.  The public may read and copy any materials we file with the Commission at the SEC's Public Reference Room
at 100 F Street, NE., Washington, DC 20549, on official business days during the hours of 10 a.m. to 3 p.m.  The public
may obtain information on the operation of the Public Reference Room by calling the Commission at 1-800-SEC-0330.  The
Commission maintains an Internet site that contains reports, proxy and information statements, and other information regarding
issuers that file electronically with the Commission and state the address of that site (http://www.sec.gov).  In addition,
you can obtain all of the current filings at our Internet website at www.maxsound.com.



ITEM
1A.      RISK  FACTORS



Not
applicable for smaller reporting companies.



ITEM
1B.      UNRESOLVED STAFF COMMENTS



Not
applicable for smaller reporting companies.



ITEM
2.         PROPERTIES.



Office
Arrangements and Operational Activities



In
November 2010, we leased our MAX-D post production facility at 2902A Colorado Ave., Santa Monica, CA, 90404. The lease is
for two years with one-year renewable options.



ITEM
3.         LEGAL PROCEEDINGS.



From
time to time, the Company may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of
business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise
from time to time that may harm its business.





On
February 21, 2012, the Company filed a suit for breach of contract, intentional misrepresentation, negligent

9





misrepresentation,
fraud, false advertising, and unfair competition with a former consultant.   It seeks damages due to their alleged
failure to meet the contractual requirements regarding promotions.   The defendant has been served.   In
September of 2014, the Company received a Default Judgment against the Defendant.    The Company is vigorously
pursuing collection on this judgment.



On
August 14, 2012, the Company, along with two shareholders of the Company, were named as a defendant in an action filed in the
Superior Court for the State of California and the County of San Diego. The plaintiff alleges he was terminated by his former
employer “Acoustics Control Sciences, LLC” (which is a company that is not affiliated with Max Sound Corporation)
in August 2008 without receiving wages and other compensation allegedly due him. The plaintiff further claims that two of the
members or “shareholders” of Acoustics Control Sciences, LLC, wrongfully transferred a patent owned by his former
employer and this transfer prevented his former employer from paying the wages alleged due. According to the plaintiff, when the
assets of his former employer were sold to the Company, Max Sound Corporation became a successor-in-interest to the plaintiff’s
former employer. Plaintiff thus seeks unpaid wages and other compensation from each alleged successor-in-interest named in his
complaint. This case will be vigorously prosecuted and has a good likelihood of success.



On
August 11, 2014, the Company and VSL simultaneously filed trade secret and patent infringement actions against Google, Inc., and
its subsidiaries YouTube, LLC, and On2 Technologies, Inc., relating to proprietary and patented technology owned by Vedanti Systems
Limited (“Vedanti”), a subsidiary of VSL.  The patent infringement complaint was originally filed in the U.S.
District Court for the District of Delaware; the trade secret suit was filed in Superior Court of California, County of Santa
Clara.  On September 30, 2014, the Company filed notices of voluntary dismissal without prejudice as to both lawsuits. On
October 1, 2014, the Company amended the patent complaint and filed it in the U.S. District Court for the Northern District of
California. In this patent lawsuit, which remains pending, the Company contends that, in 2010, while Google was in discussions
with Vedanti about the possibility of acquiring Vedanti's patented digital video streaming techniques and other proprietary methods,
Google gained access to and received technical guidance regarding Vedanti’s proprietary codec, a computer program capable
of encoding and decoding a digital data stream or signal.  The lawsuit further alleges that soon after Google and Vedanti
initiated negotiations, Google willfully infringed Vedanti's patent by incorporating Vedanti's patented technology into Google's
own VP8, VP9, WebM, YouTube, Google Adsense, Google Play, Google TV, Chromebook, Google Drive, Google Chromecast, Google Play-per-view,
Google Glasses, Google+, Google’s Simplify, Google Maps, and Google Earth, without compensating Vedanti for such use. 
Plaintiffs are seeking a permanent injunction against Google, compensatory damages, as well as treble damages. As exclusive agent
to VSL to enforce all rights with respect to the subject technology, the Company has hired Grant & Eisenhofer PA and Buether
Joe & Carpenter LLC to represent the Company in the suit on a contingency fee basis. The case will be vigorously prosecuted,
and the Company believes it has a good likelihood of success.



Additionally,
on December 5, 2014, the Company, along with renowned architect Eli Attia, filed a lawsuit in the Superior Court of California,
County of Santa Clara, against Google, its co-founders Sergey Brin and Larry Page, Google’s spinoff company Flux Factory,
and senior executives of Flux. Plaintiffs’ allege misappropriation of trade secrets, breach of contract and other contract-related
claims, breach of confidence, slander of title, violation of California’s Unfair Competition Law (California Business and
Professionals Code §§ 17200 et seq.), and fraud, and also bring a claim for declaratory relief. The lawsuit contends
that Google and the other Defendants stole Mr. Attia’s trade secrets, proprietary information, and know-how regarding a
revolutionary architecture design and building process that he alone had invented, known as Engineered Architecture. Defendants
are alleged to have engaged Mr. Attia in 2010 and 2011 to translate his architectural technology into software for a proof of
concept, with the goal of determining at that point whether to continue with full-scale development with Mr. Attia. Instead, the
lawsuit claims that once Mr. Attia had disclosed the trade secrets and proprietary information Defendants needed to bring the
technology to market, they severed ties with Mr. Attia, and continued to use his technology without a license and without compensation,
in order to bring the technology to market themselves. Plaintiffs seek a permanent injunction against Google, damages (including
punitive damages), and restitution. As exclusive agent to Eli Attia to enforce all rights with respect to the subject technology,
the Company has retained

10





Buether
Joe & Carpenter LLC to represent the Company in the suit, on a contingency fee basis. The case will be vigorously prosecuted,
and the Company believes it has a good likelihood of success.



On
September 8 and 9, 2014, respectively, the Company and VSL were granted preliminary injunctions by the District Court of Berlin,
Germany, against the Chinese company Shenzhen KTC Technology Co. Ltd. and the French company Pact Informatique S.A. Both companies
have been offering products at the International Consumer Electronics Trade Show 2014 in Berlin, which, according to the company’s
claim and the Preliminary Injunctions issued by the Court, infringed the rights to a patent. This patent is the German is the
German part of the patent on optimized data transmission, owned by Vedanti, which is already asserted the United States infringement
proceedings. The products in question are tablet computers and smart phones with Android OS and with the ability to encode videos
in the format H.264. The injunctions were issued ex-parte and can be appealed by the Defendants. However, currently there are
no indications that any prospective appeals will be interposed. The Company can still enforce claims for cost reimbursement with
regard to these legal proceedings.



On
December 2, 2014, the Company filed a patent infringement action against Google, Inc., Germany GmBH, Google Commerce Ltd. and
YouTube LLC with the District Court of Mannheim, Germany. The asserted patent infringement concerns the same patent infringement
asserted in the in the prior Germany Preliminary Injunctions described herein. The Complaint alleges that Google Inc. and it above-named
subsidiaries are offering and selling products which can also decode and show videos, which have been encoded in a patent protected
and proprietary way. The complaint also avers that YouTube LLC offers to German customers, which are encoded and transmitted in
a manner claimed and protected by the patent. The Company mainly seeks a permanent injunction against the Defendants, damages
and information regarding past infringements.



On
January 21, 2015, the Company filed a patent infringement action against Netflix Inc., Netflix Luxembourg S.a.r.l. and Netflix
International B.V. with the District Court of Mannheim, Germany. The asserted patent is the same patent as in the German proceedings
against Google Inc. and its subsidiaries. The Complaint alleges that Netflix Inc. and its subsidiaries are offering and transmitting
video streams to German customers as part of their video-on-demand business model; the videos being encoded and transmitted in
a manner claimed and protected by the patent. The Company primarily seeks a permanent injunction against the Defendants, plus
damages and information regarding past infringements.



The
Company intends to vigorously prosecute these various patent infringement litigations. The Company believes it has a good likelihood
of success associated with these patent infringement lawsuits. However, no assurance can be given by the Company as to the ultimate
outcome of these actions or its effect on the Company. The law firm is prosecuting these action on a pure contingency fee basis.



On
January 26, 2015, the Company was named as a defendant in an action filed in the Superior Court for the State of California and
the County of Los Angeles captioned Bibicoff Family Trust v. Max Sound Corporation (Case No. SC123679). In the complaint
the plaintiff alleges a cause of action for breach of contract associated with the non-payment by the Company for certain services
plaintiff agreed to provide to the Company. The Company interposed a cross-complaint against plaintiffs averring causes of action
for breach of contract, fraud, and negligent misrepresentation by defendants with respect to defendants’ fraudulent and
intentional undisclosed inability to perform the services that plaintiffs’ agreed to perform that are the subject of this
dispute. This lawsuit will be vigorously defended and prosecuted. While this lawsuit is in its nacency, the Company believes there
is a strong likelihood of success on the merits with respect to the defending and prosecuting this action.



No
assurance can be given as to the ultimate outcome of these actions or its effect on the Company.



ITEM
4.         MINE SAFETY DISCLOSURES.



Not
applicable.



PART
II

11







ITEM
5.         MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES.



Market
Information



Our
shares of common stock are traded on the OTC Bulletin Board under the symbol “MAXD.” The following table sets
forth, for the period indicated, the high and low bid quotations for the Company’s common stock.  These quotations
represent inter-dealer quotations, without adjustment for retail markup, markdown or commission, and may not represent actual
transactions.



Price



|                   |  | High |     |  | Low |  
|------------------ |  | ---- | --- |  | --- | -
|2013               |  |      |     |  |     |  
|First
    quarter  |  | $    | .39 |  |     | $
|Second
    quarter |  | $    | .32 |  |     | $
|Third
    quarter  |  | $    | .30 |  |     | $
|Fourth
    quarter |  | $    | .28 |  |     | $
|                   |  |      |     |  |     |  
|2014               |  |      |     |  |     |  
|First
    quarter  |  | $    | .22 |  |     | $
|Second
    quarter |  | $    | .18 |  |     | $
|Third
    quarter  |  | $    | .28 |  |     | $
|Fourth
    quarter |  | $    | .13 |  |     | $



Holders



As
of March 31, 2015, in accordance with our transfer agent records, we had 1,576 record holders of our Common Stock. This number
excludes individual stockholders holding stock under nominee security position listings.



Dividends



To
date, we have not declared or paid any dividends on our common stock. We currently do not anticipate paying any cash dividends
in the foreseeable future on our common stock, when issued pursuant to this offering. Although we intend to retain our earnings,
if any, to finance the exploration and growth of our business, our Board of Directors will have the discretion to declare and
pay dividends in the future.



Payment
of dividends in the future will depend upon our earnings, capital requirements, and other factors, which our Board of Directors
may deem relevant.



Securities
Authorized For Issuance Under Equity Compensation Plans.



None.



Stock
Option Grants



On
January 17, 2011, the Company executed an employment agreement with an executive to be the President and CEO for five years.    As
compensation for services, the executive will receive a monthly compensation of $8,000 beginning after the completion of at least
one million dollars of new funding to the Corporation or can be paid as commissions from sales brought to the Company, whichever
comes first. In addition to the base salary, the employee is entitled to receive a 20% commission of all sales the executive is
directly responsible for bringing to

12





the
Company.    The agreement also calls for the executive to receive, upon execution of the agreement, three
million shares of Rule 144 common stock and twelve million options, which are good for three years, to buy shares of Rule 144
common stock at $0.12/share.    As a supplement to the agreement, on February 4, 2011, the executive received
an additional twenty million common shares directly from the Chairman of the Company.    On August 25, 2011,
the agreement was updated to increase the monthly compensation to $12,000 per month beginning September 1, 2011, terminate the
initial 20% commission on sales and to add a commission on sales equal to 10% of gross quarterly profits.    On
December 31, 2012, the agreement was updated to eliminate his previous annual bonus entitlement, which was previously 10% of revenues.
In exchange for this consideration, the Company agreed that his bonus will be decreased to 7% of net profits which may be received
in cash or Rule 144 stock or any combination. The agreement also called for the employee to receive health benefits.    In
May of 2013, the Company amended the agreement for the President and CEO to receive monthly compensation of $18,000 beginning
May 1, 2013.



On
October 1, 2011, the Company executed an employment agreement with its Chief Technical Officer (“CTO”).   The
term of the agreement is for five years.   As compensation for services, the CTO will receive a monthly compensation
of $10,000, monthly commission equal to 5% of all profits derived from the sales of all products and services related to Max Sound,
and an annual bonus of 5% of all profits derived from the sales of all products and services related to Max Sound that is over
one million dollars.   In addition to the base salary, the employee is entitled to receive health benefits.  Effective
January 1, 2012, the Company increased the monthly compensation to $12,000.   On December 31, 2012 the Company
amended the agreement that effective January 1, 2013 the CTO will receive 300,000 shares of common stock and 700,000 three year
options at 50 cents per share. On December 31, 2012, the agreement was also updated to eliminate his previous commission and annual
bonus entitlement. Executive shall now be entitled to a commission on all sales of the Company equal to 6% of net profits. For
the year ended 2013, the Company issued 300,000 common shares valued at $90,000.



On
January 9, 2013, the Company executed an employment agreement with its Director of New Business Development. The term of the agreement
is for three years.   As compensation for services, the Director will receive a monthly compensation of $10,000.   Upon
the first million dollars in gross sales the salary will increase to $12,000 per month.  In addition, the Director will
receive up to 1,000,000 shares of common stock payable in lots of 125,000 per quarter beginning on January 1, 2013.    Also,
employee for the first eight quarters of employment has a right to earn 125,000 additional 3 year stock options with a strike
price of $0.50 per share as follows:



| |  | For
    each million of new gross sales - 125,000 additional 3-year stock options with a strike price of $.50 per share.
| | - | ------------------------------------------------------------------------------------------------------------------------



For
the year ended December 31, 2014 and year ended December 31, 2013, the employee received 375,000 and 500,000 shares with a fair
value of $95,625 and $127,500, respectively.



On
July 7, 2014, the Company issued 2,866,652 options to buy common shares of the Company’s stock at $.10
per share, good for three years to the Company’s CFO.



Recent
Sales of Unregistered Securities



Note
Conversions



On
January 3, 2014, the Company entered into a conversion agreement with Dominion Capital, LLC relating to a convertible promissory
note dated May 5, 2013, with the original principal amount of $277,778 for 352,734 shares based on a conversion price of $0.142125
per share (See Note 6 to the Accompanying Financial Statements).



On
January 7, 2014, the Company entered into a conversion agreement with Redwood Management, LLC relating to a convertible promissory
note dated June 17, 2013, with the original principal amount of $166,667 for 360,490 shares based on a conversion price of $0.1388
per share (See Note 6 to the Accompanying Financial Statements).



On
January 7, 2014, the Company entered into a conversion agreement with JMJ Financial relating to a convertible promissory note
dated June 27, 2013, with the original principal amount of $50,000 for 300,000

13





shares
based on a conversion price of $0.1295 per share (See Note 6 to the Accompanying Financial Statements).



On
January 8, 2014, the Company entered into a conversion agreement with BOU Trust relating to a convertible promissory note dated
June 17, 2013, with the original principal amount of $111,111 for 80,109 shares based on a conversion price of $0.1268 per share
(See Note 6 to the Accompanying Financial Statements).



On
January 15, 2014, the Company entered into a conversion agreement with Redwood Management, LLC relating to a convertible promissory
note dated June 17, 2013, with the original principal amount of $166,667 for 505,050 shares based on a conversion price of $0.1325
per share (See Note 6 to the Accompanying Financial Statements).



On
January 21, 2014, the Company entered into a conversion agreement with Dominion Capital, LLC relating to a convertible promissory
note dated May 23, 2013, with the original principal amount of $277,778 for 646,465 shares based on a conversion price of $0.1268
per share (See Note 6 to the Accompanying Financial Statements).



On
January 29, 2014, the Company entered into a conversion agreement with Vista Capital Investments, LLC relating to a convertible
promissory note dated May 3, 2013, with the original principal amount of $25,000 for 93,591 shares based on a conversion price
of $0.1127 per share (See Note 6 to the Accompanying Financial Statements).



On
February 5, 2014, the Company entered into a conversion agreement with JMJ Financial relating to a convertible promissory note
dated June 27, 2013, with the original principal amount of $50,000 for 266,599 shares based on a conversion price of $0.0996 per
share (See Note 6 to the Accompanying Financial Statements).



On
February 11, 2014, the Company entered into a conversion agreement with Dominion Capital, LLC relating to a convertible promissory
note dated May 23, 2013, with the original principal amount of $277,778 for 496,278 shares based on a conversion price of $0.1008
per share (See Note 6 to the Accompanying Financial Statements).



On
February 12, 2014, the Company entered into a conversion agreement with BOU Trust relating to a convertible promissory note dated
June 17, 2013, with the original principal amount of $111,111 for 67,340 shares based on a conversion price of $0.099 per share
(See Note 6 to the Accompanying Financial Statements).



On
February 12, 2014, the Company entered into a conversion agreement with BOU Trust relating to a convertible promissory note dated
June 17, 2013, with the original principal amount of $111,111 for 44,893 shares based on a conversion price of $0.099 per share
(See Note 6 to the Accompanying Financial Statements).



On
February 14, 2014, the Company entered into a conversion agreement with Asher Enterprises, Inc. relating to a convertible promissory
note dated August 8, 2013, with the original principal amount of $103,500 for 477,897 shares based on a conversion price of $0.0847
per share (See Note 6 to the Accompanying Financial Statements).



On
February 18, 2014, the Company entered into a conversion agreement with Dominion Capital, LLC relating to a convertible promissory
note dated June 3, 2013, with the original principal amount of $277,778 for executed by a note holder for 511,771 shares based
on a conversion price of $0.0978 per share (See Note 6 to the Accompanying Financial Statements).



On
February 18, 2014, the Company entered into a conversion agreement with Tonaquint, Inc. relating to a convertible promissory note
dated May 2, 2013, with the original principal amount of $166,000 for 110,943 shares based on a conversion price of $0.13 per
share (See Note 6 to the Accompanying Financial Statements).  Given the conversion occurred subsequent to the maturity date of the note, the Company recorded
a $4,423 loss on conversion.



On
February 19, 2014, the Company entered into a conversion agreement with Vista Capital Investments, LLC relating to a convertible
promissory note dated August 9, 2013, with the original principal amount of $25,000 for 147,929 shares based on a conversion price
of $0.0910 per share (See Note 6 to the Accompanying Financial Statements). Conversion related to penalty fees incurred totaling $6,583.



On
February 24, 2014, the Company entered into a conversion agreement with Asher Enterprises, Inc. relating to

14





a
convertible promissory note dated August 8, 2013, with the original principal amount of $103,500 for 580,645 shares based on a
conversion price of $0.0818 per share (See Note 6 to the Accompanying Financial Statements).



On
February 27, 2014, the Company entered into a conversion agreement with Tonaquint, Inc. relating to a convertible promissory
note dated May 2, 2013, with the original principal amount of $166,000 for 196,592 shares based on a conversion price of $0.12
per share (See Note 6 to the Accompanying Financial Statements).  Given the conversion occurred subsequent to the maturity date of the note, the Company recorded
a $8,591 loss on conversion.



On
February 28, 2014, the Company entered into a conversion agreement with Vista Capital Investments, LLC relating to a convertible
promissory note dated August 9, 2013, with the original principal amount of $25,000 for 250,000 shares based on a conversion price
of $0.0763 per share (See Note 6 to the Accompanying Financial Statements).  Conversion related to penalty fees incurred totaling $6,113.



On
March 3, 2014, the Company entered into a conversion agreement with Dominion Capital, LLC relating to a convertible promissory
note dated June 3, 2013, with the original principal amount of $277,778 for 612,745 shares based on a conversion price of $0.0817
per share (See Note 6 to the Accompanying Financial Statements).



On
March 4, 2014, the Company entered into a conversion agreement with Asher Enterprises, Inc. relating to a convertible promissory
note dated August 8, 2013, with the original principal amount of $103,500 for 339,940 shares based on a conversion price of $0.0686
per share (See Note 6 to the Accompanying Financial Statements).



On
March 6, 2014, the Company entered into a conversion agreement with Dominion Capital, LLC relating to a convertible promissory
note dated May 23, 2013, with the original principal amount of $277,778 for 631,313 shares based on a conversion price of $0.0792
per share (See Note 6 to the Accompanying Financial Statements).



On
March 12, 2014, the Company entered into a conversion agreement with Dominion Capital, LLC relating to a convertible promissory
note dated June 3, 2013, with the original principal amount of $277,778 for 851,426 shares based on a conversion price of $0.0784
per share (See Note 6 to the Accompanying Financial Statements).



On
March 13, 2014, the Company entered into a conversion agreement with Vista Capital Investments, LLC relating to a convertible
promissory note dated August 9, 2013, with the original principal amount of $25,000 for 352,801 shares based on a conversion price
of $0.07 per share (See Note 6 to the Accompanying Financial Statements).  Conversion related to penalty fees incurred totaling $9,580.



On
March 19, 2014, the Company entered into a conversion agreement with Tonaquint, Inc. relating to a convertible promissory note
dated May 2, 2013, with the original principal amount of $166,000 for 229,753 shares based on a conversion price of $0.09 per
share (See Note 6 to the Accompanying Financial Statements).  Given the conversion occurred subsequent to the maturity date of the note, the Company recorded
a $6,795 loss on conversion.



On
March 24, 2014, the Company entered into a conversion agreement with Dominion Capital, LLC relating to a convertible promissory
note dated June 3, 2013, with the original principal amount of $277,778 for 1,260,835 shares based on a conversion price of $0.0705
per share (See Note 6 to the Accompanying Financial Statements).



On March 25, 2014, the Company issued
8,000 shares of common stock for accrued interest having a fair value of $1,020 ($.01275 / share).



On
March 31, 2014, the Company entered into a conversion agreement with JMJ Financial relating to a convertible promissory note dated
August 21, 2013, with the original principal amount of $50,000 for 1,002,999 shares based on a conversion price of $0.0658 per
share (See Note 6 to the Accompanying Financial Statements).





On
April 1, 2014, the Company entered into a conversion agreement with Redwood Management, LLC relating to a convertible promissory
note dated October 3, 2013 with the original principal amount of $221,000 for 3,134,751 shares based on a conversion price of
$0.0705 per share (See Note 6 to the Accompanying Financial Statements).



On
April 3, 2014, the Company entered into a conversion agreement with Tonaquint, Inc. relating to a convertible

15





promissory
note dated August 19, 2013 with the original principal amount of $227,222 for 1,503,382 shares based on a conversion price of
$0.0665 per share (See Note 6 to the Accompanying Financial Statements).



On
April 7, 2014, the Company entered into a conversion agreement with Vista Capital Investments, LLC relating to a convertible promissory
note dated October 7, 2013 with the original principal amount of $25,000 for 621,227 shares based on a conversion price of $0.0611
per share (See Note 6 to the Accompanying Financial Statements).



On
April 18, 2014, the Company entered into a conversion agreement with Asher Enterprises, Inc. relating to a convertible promissory
note dated October 10, 2013 with the original principal amount of $78,500 for 652,529 shares based on a conversion price of $0.0613
per share (See Note 6 to the Accompanying Financial Statements).



On
April 23, 2014, the Company entered into a conversion agreement with Redwood Management, LLC relating to a convertible promissory
note dated October 3, 2013 with the original principal amount of $221,000 for 118,062 shares based on a conversion price of $0.0681
per share (See Note 6 to the Accompanying Financial Statements).



On
April 24, 2014, the Company entered into a conversion agreement with Tonaquint, Inc. relating to a convertible promissory note
dated August 19, 2013 with the original principal amount of $227,222 for 864,304 shares based on a conversion price of $0.05785
per share (See Note 6 to the Accompanying Financial Statements).



On
April 24, 2014, the Company entered into a conversion agreement executed with Asher Enterprises, Inc. relating to a convertible
promissory note dated October 10, 2013 with the original principal amount of $78,500 for 719,171 shares based on a conversion
price of $0.0579 per share (See Note 6 to the Accompanying Financial Statements).



On
May 8, 2014, the Company entered into a conversion agreement with Vista Capital Investments, LLC relating to a convertible promissory
note dated October 7, 2013 with the original principal amount of $25,000 for 222,064 shares based on a conversion price of $0.0563
per share (See Note 6 to the Accompanying Financial Statements).



On
May 14, 2014, the Company entered into a conversion agreement with Tonaquint, Inc. relating to a convertible promissory note dated
August 19, 2013 with the original principal amount of $227,222 for 540,655 shares based on a conversion price of $0.0555 per share
(See Note 6 to the Accompanying Financial Statements).



On
May 15, 2014, the Company entered into a conversion agreement with Dominion Capital, LLC relating to a convertible promissory
note dated June 3, 2013 with the original principal amount of $277,778 executed by a note holder for 763,942 shares based on a
conversion price of $0.06545 per share (See Note 6 to the Accompanying Financial Statements).





On
May 20, 2014, the Company entered into a conversion agreement with Vista Capital Investments, LLC relating to a convertible promissory
note dated October 7, 2013 with the original principal amount of $25,000 for 507,292 shares based on a conversion price of $0.0561
per share (See Note 6 to the Accompanying Financial Statements).



On
May 22, 2014, the Company entered into a conversion agreement with Tonaquint, Inc. relating to a convertible promissory note dated
August 19, 2013 with the original principal amount of $227,222 for 535,628 shares based on a conversion price of $0.056 per share
(See Note 6 to the Accompanying Financial Statements).



On
May 28, 2014, the Company entered into a conversion agreement with Dominion Capital, LLC relating to a convertible promissory
note dated June 3, 2013 with the original principal amount of $277,778 executed by a note holder for 103,842 shares based on a
conversion price of $0.0642 per share (See Note 6 to the Accompanying Financial Statements).



On
May 30, 2014, the Company entered into a conversion agreement with Tonaquint, Inc. relating to a convertible promissory note dated
August 19, 2013 with the original principal amount of $227,222 for 350,177 shares based on a conversion price of $0.057114 per
share (See Note 6 to the Accompanying Financial Statements).



On
June 9, 2014, the Company entered into a conversion agreement with Tonaquint, Inc. relating to a convertible

16





promissory
note dated August 19, 2013 with the original principal amount of $227,222 for 314,842 shares based on a conversion price of $0.0611
per share (See Note 6 to the Accompanying Financial Statements).



On
June 10, 2014, the Company entered into a conversion agreement with JMJ Financial relating to a convertible promissory note dated
December 9, 2013 with the original principal amount of $100,000 executed by a note holder for 550,000 shares based on a conversion
price of $0.062627 per share (See Note 6 to the Accompanying Financial Statements).



On
June 10, 2014, the Company entered into a conversion agreement with Vista Capital Investments, LLC relating to a convertible promissory
note dated December 6, 2013 with the original principal amount of $25,000 for 162,338 shares based on a conversion price of $0.0616
per share (See Note 6 to the Accompanying Financial Statements).



On
June 16, 2014, the Company entered into a conversion agreement with Tonaquint, Inc. relating to a convertible promissory note
dated October 7, 2013 with the original principal amount of $282,778 for 469,366 shares based on a conversion price of $0.063916
per share (See Note 6 to the Accompanying Financial Statements).



On
June 17, 2014, the Company entered into a conversion agreement with Asher Enterprises, Inc. relating to a convertible promissory
note dated December 11, 2013 with the original principal amount of $153,500 for 635,930 shares based on a conversion price of
$0.0629 per share (See Note 6 to the Accompanying Financial Statements).



On
June 19, 2014, the Company entered into a conversion agreement with Asher Enterprises, Inc. relating to a convertible promissory
note dated December 11, 2013 with the original principal amount of $153,500 for 818,331 shares based on a conversion price of
$0.0611 per share (See Note 6 to the Accompanying Financial Statements).



On
June 23, 2014, the Company entered into a conversion agreement with Asher Enterprises, Inc. relating to a convertible promissory
note dated December 11, 2013 with the original principal amount of $153,500 for 725,000 shares based on a conversion price of
$0.06 per share (See Note 6 to the Accompanying Financial Statements).



On
June 30, 2014, the Company entered into a conversion agreement with Asher Enterprises, Inc. relating to a convertible promissory
note dated December 11, 2013 with the original principal amount of $153,500 for 465,954 shares based on a conversion price of
$0.0561 per share (See Note 6 to the Accompanying Financial StatementsSee Note 6).



On
July 14, 2014, the Company entered into a conversion agreement with Tonaquint, Inc. relating to a convertible promissory note
dated October 7, 2013 with the original principal amount of $282,778 for 1,105,481 shares based on a conversion price of $0.054275
per share (See Note 6 to the Accompanying Financial Statements).





On
July 16, 2014, the Company entered into a conversion agreement with Tonaquint, Inc. relating to a convertible promissory note
dated October 7, 2013 with the original principal amount of $282,778 for 1,092,399 shares based on a conversion price of $0.054925
per share (See Note 6 to the Accompanying Financial Statements).



On
July 1, 2014, the Company entered into a conversion agreement with Tonaquint, Inc. relating to a convertible promissory note
dated October 7, 2013 with the original principal amount of $282,778 for 549,451 shares based on a conversion price of
$0.0546 per share (See Note 6 to the Accompanying Financial Statements).



On
August 1, 2014, the Company entered into a conversion agreement with Tonaquint, Inc. relating to a convertible promissory note
dated October 7, 2013 with the original principal amount of $282,778 for 673,446 shares based on a conversion price of $0.089094
per share (See Note 6 to the Accompanying Financial Statements).



On
August 4, 2014, the Company entered into a conversion agreement with Tonaquint, Inc. relating to a convertible promissory note
dated October 7, 2013 with the original principal amount of $282,778 for 881,419 shares based on a conversion price of $0.089094
per share (See Note 6 to the Accompanying Financial Statements).



On
July 3, 2014, the Company entered into a conversion agreement with JMJ Financial relating to a convertible

17





promissory
note dated December 9, 2013 with the original principal amount of $100,000 for 600,000 shares based on a conversion price of $0.058823
per share (See Note 6 to the Accompanying Financial Statements).



On
July 22, 2014, the Company entered into a conversion agreement with JMJ Financial relating to a convertible promissory note dated
December 9, 2013 with the original principal amount of $100,000 for 953,405 shares based on a conversion price of $0.057983 per
share (See Note 6 to the Accompanying Financial Statements).



On
July 11, 2014, the Company entered into a conversion agreement with Vista Capital Investments, LLC relating to a convertible promissory
note dated December 6, 2013 with the original principal amount of $25,000 for 169,463 shares based on a conversion price of $0.0590
per share (See Note 6 to the Accompanying Financial Statements).



On
July 15, 2014, the Company entered into a conversion agreement with Vista Capital Investments, LLC relating to a convertible promissory
note dated December 6, 2013 with the original principal amount of $25,000 for 178,360 shares based on a conversion price of $0.0590
per share (See Note 6 to the Accompanying Financial Statements).



On
August 5, 2014, the Company entered into a conversion agreement with Iliad Research and Trading, LP relating to a convertible
promissory note dated December 30, 2013 with the original principal amount of $282,778 for 1,399,619 shares based on a conversion
price of $0.08931 per share (See Note 6 to the Accompanying Financial Statements).



On
September 12, 2014, the Company entered into a conversion agreement with Iliad Research and Trading, LP relating to a convertible
promissory note dated December 30, 2013 with the original principal amount of $282,778 for 307,692 shares based on a conversion
price of $0.0975 per share (See Note 6 to the Accompanying Financial Statements).



On
September 23, 2014, the Company entered into a conversion agreement with Iliad Research and Trading, LP relating to a convertible
promissory note dated December 30, 2013 with the original principal amount of $282,778 for 357,782 shares based on a conversion
price of $0.08385 per share (See Note 6 to the Accompanying Financial Statements).



On
August 25, 2014, the Company entered into a conversion agreement with JMJ Financial relating to a convertible promissory note
dated February 20, 2014 with the original principal amount of $50,000 for 350,000 shares based on a conversion price of $0.102550
per share (See Note 6 to the Accompanying Financial Statements).



On
September 9, 2014, the Company entered into a conversion agreement with JMJ Financial relating to a convertible promissory note
dated February 20, 2014 with the original principal amount of $50,000 for 260,744 shares based on a conversion price of $0.102083
per share (See Note 6 to the Accompanying Financial Statements).





On
July 30, 2014, the Company entered into a conversion agreement with Vista Capital Investments, LLC relating to a convertible promissory
note dated January 28, 2014 with the original principal amount of $25,000 for 505,297 shares based on a conversion price of $0.0604
per share (See Note 6 to the Accompanying Financial Statements).



On
September 15, 2014, the Company entered into a conversion agreement with Asher Enterprises, Inc. relating to a convertible promissory
note dated March 7, 2014 with the original principal amount of $103,500 for 307,692 shares based on a conversion price of $0.0975
per share (See Note 6 to the Accompanying Financial Statements).



On
September 16, 2014, the Company entered into a conversion agreement with Asher Enterprises, Inc. relating to a convertible promissory
note dated March 7, 2014 with the original principal amount of $103,500 for 344,296 shares based on a conversion price of $0.0973
per share (See Note 6 to the Accompanying Financial Statements).



On
September 22, 2014, the Company entered into a conversion agreement with Asher Enterprises, Inc. relating to a convertible promissory
note dated March 7, 2014 with the original principal amount of $103,500 for 526,103 shares based on a conversion price of $0.0839
per share (See Note 6 to the Accompanying Financial Statements).



On
October 9, 2014, the Company entered into a conversion agreement with Vista Capital Investments, LLC

18





relating
to a convertible promissory note dated January 28, 2014 with the original principal amount of $25,000 for 150,000 shares based
on a conversion price of $0.0666 per share (See Note 6 to the Accompanying Financial Statements).



On
October 9, 2014, the Company entered into a conversion agreement with Iliad Research and Trading, LP relating to a convertible
promissory note dated December 30, 2013 with the original principal amount of $282,778 for 483,668 shares based on a conversion
price of $0.0620 per share (See Note 6 to the Accompanying Financial Statements).



On
October 16, 2014, the Company entered into a conversion agreement with KC Gamma Opportunity Fund LLP relating to a convertible
promissory note dated October 2, 2013 with the original principal amount of $110,000 for 1,386,667 shares based on a conversion
price of $0.0825 per share (See Note 6 to the Accompanying Financial Statements).



On
October 22, 2014, the Company entered into a conversion agreement with Iliad Research and Trading, LP relating to a convertible
promissory note dated December 30, 2013 with the original principal amount of $282,778 for 484,974 shares based on a conversion
price of $0.0619 per share (See Note 6 to the Accompanying Financial Statements).



On
October 23, 2014, the Company entered into a conversion agreement with KBM Worldwide relating to a convertible promissory note
dated April 17, 2014 with the original principal amount of $78,500 for 354,267 shares based on a conversion price of $0.0621 per
share (See Note 6 to the Accompanying Financial Statements).



On
October 27, 2014, the Company entered into a conversion agreement with KBM Worldwide relating to a convertible promissory note
dated April 17, 2014 with the original principal amount of $78,500 for 960,386 shares based on a conversion price of $0.0621 per
share (See Note 6 to the Accompanying Financial Statements).



On
October 31, 2014, the Company entered into a conversion agreement with Iliad Research and Trading, LP relating to a convertible
promissory note dated December 30, 2013 with the original principal amount of $282,778 for 520,336 shares based on a conversion
price of $0.0577 per share (See Note 6 to the Accompanying Financial Statements).



On
November 10, 2014, the Company entered into a conversion agreement with LG Capital relating to a convertible promissory note
dated May 1, 2014 with the original principal amount of $105,000 for 541,435 shares based on a conversion price of $0.0577
per share (See Note 6 to the Accompanying Financial Statements).



On
November 11, 2014, the Company entered into a conversion agreement with Iliad Research and Trading, LP relating to a convertible
promissory note dated December 30, 2013 with the original principal amount of $282,778 for 834,371 shares based on a conversion
price of $0.0577 per share (See Note 6 to the Accompanying Financial Statements).





On
November 18, 2014, the Company entered into a conversion agreement with Adar Bays, LLC relating to a convertible promissory note
dated May 12, 2014 with the original principal amount of $105,000 for 17,056 shares based on a conversion price of $0.0586 per
share (See Note 6 to the Accompanying Financial Statements).



On
November 10, 2014, the Company entered into a conversion agreement with LG Capital relating to a convertible promissory note
dated May 1, 2014 with the original principal amount of $105,000 for 631,580 shares based on a conversion price of $0.0578
per share (See Note 6 to the Accompanying Financial Statements).



On
November 21, 2014, the Company entered into a conversion agreement with Adar Bays, LLC relating to a convertible promissory note
dated May 12, 2014 with the original principal amount of $105,000 for 173,055 shares based on a conversion price of $0.0578 per
share (See Note 6 to the Accompanying Financial Statements).



On
November 24, 2014, the Company entered into a conversion agreement with Adar Bays, LLC relating to a convertible promissory note
dated May 12, 2014 with the original principal amount of $105,000 for 138,444 shares based on a conversion price of $0.0578 per
share (See Note 6 to the Accompanying Financial Statements).



On
December 1, 2014, the Company entered into a conversion agreement with Iliad Research and Trading, LP

19





relating
to a convertible promissory note dated February 27, 2014 with the original principal amount of $282,778 for 583,987 shares based
on a conversion price of $0.0514per share (See Note 6 to the Accompanying Financial Statements).



On
December 1, 2014, the Company entered into a conversion agreement with Adar Bays, LLC relating to a convertible promissory note
dated May 12, 2014 with the original principal amount of $105,000 for 144,956 shares based on a conversion price of $0.0517 per
share (See Note 6 to the Accompanying Financial Statements).



On
December 2, 2014, the Company entered into a conversion agreement with Adar Bays, LLC relating to a convertible promissory note
dated May 12, 2014 with the original principal amount of $105,000 for 179,122 shares based on a conversion price of $0.0502 per
share (See Note 6 to the Accompanying Financial Statements).



On
December 4, 2014, the Company entered into a conversion agreement with Adar Bays, LLC relating to a convertible promissory note
dated May 12, 2014 with the original principal amount of $105,000 for 156,733 shares based on a conversion price of $0.0479 per
share (See Note 6 to the Accompanying Financial Statements).



On
December 9, 2014, the Company entered into a conversion agreement with Adar Bays, LLC relating to a convertible promissory note
dated May 12, 2014 with the original principal amount of $105,000 for 161,943 shares based on a conversion price of $0.0432 per
share (See Note 6 to the Accompanying Financial Statements).



On
December 10, 2014, the Company entered into a conversion agreement with Vista Capital Investments, LLC relating to a convertible
promissory note dated January 28, 2014 with the original principal amount of $25,000 for 225,000 shares based on a conversion
price of $0.0450 per share (See Note 6 to the Accompanying Financial Statements).



On
December 1, 2014, the Company entered into a conversion agreement with Iliad Research and Trading, LP relating to a convertible
promissory note dated February 27, 2014 with the original principal amount of $282,778 for 732,601 shares based on a conversion
price of $0.0409 per share (See Note 6 to the Accompanying Financial Statements).



On
December 11, 2014, the Company entered into a conversion agreement with Adar Bays, LLC relating to a convertible promissory note
dated May 12, 2014 with the original principal amount of $105,000 for 332,226 shares based on a conversion price of $0.0391 per
share (See Note 6 to the Accompanying Financial Statements).



On
December 11, 2014, the Company entered into a conversion agreement with LG Capital relating to a convertible promissory note
dated May 1, 2014 with the original principal amount of $105,000 for 535,314 shares based on a conversion price of $0.0391
per share (See Note 6 to the Accompanying Financial Statements).



On
December 15, 2014, the Company entered into a conversion agreement with Adar Bays, LLC relating to a convertible promissory note
dated May 12, 2014 with the original principal amount of $105,000 for 191,669 shares based on a conversion price of $0.0391 per
share (See Note 6 to the Accompanying Financial Statements).



On
December 16, 2014, the Company entered into a conversion agreement with Adar Bays, LLC relating to a convertible promissory note
dated May 12, 2014 with the original principal amount of $105,000 for 194,040 shares based on a conversion price of $0.0361 per
share (See Note 6 to the Accompanying Financial Statements).



On
December 18, 2014, the Company entered into a conversion agreement with Adar Bays, LLC relating to a convertible promissory note
dated May 12, 2014 with the original principal amount of $105,000 for 234,046 shares based on a conversion price of $0.0320 per
share (See Note 6 to the Accompanying Financial Statements).



On
December 19, 2014, the Company entered into a conversion agreement with LG Capital relating to a convertible promissory note
dated May 1, 2014 with the original principal amount of $105,000 for 654,764 shares based on a conversion price of $0.0320
per share (See Note 6 to the Accompanying Financial Statements).



On
December 22, 2014, the Company entered into a conversion agreement with Adar Bays, LLC relating to a convertible promissory note
dated May 12, 2014 with the original principal amount of $105,000 for 774,536

20





shares
based on a conversion price of $0.0258 per share (See Note 6 to the Accompanying Financial Statements).



On
December 26, 2014, the Company entered into a conversion agreement with LG Capital relating to a convertible promissory note dated
November 21, 2014 with the original principal amount of $105,000 for 1,100,592 shares based on a conversion price of $0.0320 per
share (See Note 6 to the Accompanying Financial Statements).



Compensation-based
Issuances



On
November 16, 2014, the Company issued 1,000,000 shares of common stock for services having a value of $90,000 ($0.09/share).



During the three months ended September 30, 2014, the Company issued 250,000 shares of common stock valued at $77,500 in
connection with employment agreements entered into.



On
August 6, 2014, the Company entered into an advisory board agreement for a period of three years. In consideration for these services,
during the nine months ended September 30, 2014, the Consultant was granted 100,000 fully vested shares of common stock valued
at $16,500 ($0.17/share). (See note 7(B)).



On
September 23, 2014, the Company entered into service agreement for a period of two years with the Company’s transfer agent.
In consideration for these services, during the nine months ended September 30, 2014, 300,000 shares of fully vested common stock
valued at $49,500 ($0.17/share) were granted and expensed.



On
September 10, 2014, the Company entered into an advisory board agreement. In consideration for these services, during the nine
months ended September 30, 2014, the Consultant was granted 100,000 shares of fully vested common stock valued at $16,000 ($0.16/share).
(See note 7(B)).



On
July 29, 2014, the Company entered into an investor relations agreement. In connection with this agreement, the Company is to
issue 100,000 shares of common stock monthly and $5,500 in monthly fees. As of September 30, 2014, the agreement was terminated.
The consultant was issued 100,000 shares of fully vested common stock valued at $16,000 ($0.16/share) and was paid $5,500. (See
note 7(B)).



On
April 24, 2014 the Company issued 200,000 shares of common stock having a fair value of $31,000 ($0.1099/share) in exchange for
consulting services.



On
April 25, 2014, the Company issued 50,000 shares of common stock for services having a fair value of $5,500 ($0.11/share).



On
August 18, 2014 the Company issued 200,000 shares of common stock having a fair value of $31,875 ($0.16/share) in exchange for
consulting services.



On
June 30, 2014, the Company issued 125,000 shares of common stock for services having a fair value of $31,250 ($0.25/share).



On
June 30, 2014, the Company issued 125,000 shares of common stock for services having a fair value of $31,875 ($0.26/share).



On
June 30, 2014, the Company issued 750,000 shares of common stock for services having a fair value of $191,250 ($0.26/share).



On
June 30, 2014, the Company issued 125,000 shares of common stock for services having a fair value of $45,625 ($0.37/share).



On
June 30, 2014, the Company issued 125,000 shares of common stock for services having a fair value of $45,625 ($0.37/share).



On
June 30, 2014, the Company issued 125,000 shares of common stock for services having a fair value of

21





$45,625
($0.37/share).



On
June 30, 2014, the Company issued 125,000 shares of common stock for services having a fair value of $45,625 ($0.37/share).



On
March 31, 2014, the Company issued 125,000 shares of common stock for services having a fair value of $31,250 ($0.25/share).



On
March 31, 2014, the Company issued 125,000 shares of common stock for services having a fair value of $31,875 ($0.255/share).



On
March 31, 2014, the Company issued 100,000 shares of common stock for services having a fair value of $9,300 ($0.093/share).





On
January 15, 2013, the Company entered into an agreement for legal services pursuant to which the Company will pay $2,000 and issue
50,000 shares of common stock corresponding to the preparation, filing costs and fees of each provisional and regular patent application.  Through
March 31, 2015, a total of 44 applications have been filed.  In connection with this agreement:



On
March 15, 2013, the Company issued 700,000 shares of common stock for legal services having a fair value of $182,000 ($0.26/share).



On
February 15, 2013, the Company issued 700,000 shares of common stock for legal services having a fair value of $173,600 ($0.25/share).





For
the year ended December 31, 2013, the Company issued 500,000 shares of common stock for services having a fair value of $125,000
($0.25/share).



For
the year ended December 31, 2013, the Company issued 500,000 shares of common stock for services having a fair value of $127,500
($0.26/share).



For
the year ended December 31, 2013, the Company issued 31,250 shares of common stock for services having a fair value of $7,813
($0.25/share).



For
the year ended December 31,2013, the Company issued 400,000 shares of common stock for services having a fair value of
$94,000 ($0.23 - $.37/share).



The Company determined that the securities described above were issued in transactions that were
exempt from the registration under the Securities Act of 1933, as amended (the “Securities Act”), pursuant to
Section 4(a)(2) thereunder.   This determination was based on the non-public manner in which we offered the securities
and on the representations of the recipients of the securities, which included, in pertinent part, that they
were “accredited investors” within the meaning of Rule 501 of Regulation D promulgated under the Securities Act,
that they were acquiring such securities for investment purposes for their own account and not with a view toward resale
or distribution, and that they understood such securities may not be sold or otherwise disposed of without registration
under the Securities Act or an applicable exemption therefrom.



ITEM
6.         SELECTED FINANCIAL DATA.



Not
applicable.



22





ITEM
7.         MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS



The
following plan of operation provides information which management believes is relevant to an assessment and understanding of our
results of operations and financial condition. The discussion should be read along with our financial statements and notes thereto.
This section includes a number of forward-looking statements that reflect our current views with respect to future events and
financial performance. Forward-looking statements are often identified by words like believe, expect, estimate, anticipate, intend,
project and similar expressions, or words which, by their nature, refer to future events. You should not place undue certainty
on these forward-looking statements. These forward-looking statements are subject to certain risks and uncertainties that
could cause actual results to differ materially from our predictions.



Overview



We
were incorporated in the State of Delaware as of December 9, 2005 as 43010, Inc. to engage in any lawful corporate undertaking,
including, but not limited to, locating and negotiating with a business entity for combination in the form of a merger, stock-for-stock
exchange or stock-for-assets exchange. On October 7, 2008, pursuant to the terms of a stock purchase agreement, Mr. Greg Halpern
purchased a total of 100,000 shares of our common stock from Michael Raleigh for an aggregate of $30,000 in cash. The total of
100,000 shares represents 100% of our issued and outstanding common stock at the time of the transfer. As a result, Mr. Halpern
became our sole shareholder. As part of the acquisition, and pursuant to the Stock Purchase Agreement, Michael Raleigh, our then
President, CEO, CFO, and Chairman resigned from all the positions he held in the company, and Mr. Halpern was appointed as our
President, CEO CFO and Chairman. The current business model was developed by Mr. Halpern in September of 2008 and began when he
joined the company on October 7, 2008. In October 2008, we became a development stage company focused on creating an Internet
search engine and networking web site.



In
May of 2010, we acquired the world-wide rights to all fields of use for Max Sound HD Audio Technology. In November of 2010,
we opened our post-production facility for Max Sound HD Audio in Santa Monica California. In February of 2012, after several successful
demonstrations to multi-media industry company executives, we decided to shift the focus of the Company to the marketing of the
Max Sound HD Audio Technology and commenced the name change from So Act Network, Inc. to Max Sound Corporation and the symbol
from SOAN to MAXD.



On
December 3, 2012, the Company completed the purchase of the assets of Liquid Spins, Inc., a Colorado corporation (“Liquid
Spins”).  Pursuant to the Asset Purchase Agreement, the assets of Liquid Spins were exchanged for 24,752,475 shares
of common stock of the Company (the “Shares”), equal to $10,000,000 and a purchase price of $.404 per share.  The
assets of Liquid Spins purchased included: record label distribution agreements; Liquid Spins technology inventory; independent
arts programs; retail contracts for music distribution; physical inventory and office equipment; design and retail ready concepts;
brand value; records; publishing catalog; and web assets.



The
Company is in negotiations with several multi-media companies that will utilize our HD Audio solution in the future.



Videos
and news relating to the Company is available on the company website at http://www.maxsound.com. The MAX-D Technology Highlights
Video summarizes the HD AudioTM process and shows the need for high definition (HD) Audio in several key vertical markets.
The video explains MAX-D as what we believe to be the only dynamic HD AudioTM that is being offered to various markets.



Plan
of Operation



We
began our operations on October 8, 2008, when we purchased the Form 10 Company from the previous owners.  Since that
date and through 2014, we have conducted financings to raise initial start-up money for the

23





building
of our internet search engine and social networking website and to start our operations.  In 2011, the Company shifted
the focus of its business operations from their social networking website to the marketing of the Max Sound HD Audio Technology.



The
Company believes that Max Sound HD Audio Technology is a game changer for several vertical markets whose demand will create revenue
opportunities in 2014.



We
expect our financial requirements to increase with the additional expenses needed to market and promote the MAX-D Audio technology.  We
plan to fund these additional expenses through financings and through loans from our stockholders and/or officers based on existing
lines of credit and we are also considering various private funding opportunities until such time that our revenue stream is adequate
enough to provide the necessary funds.





Results
of Operations



The
following tables set forth key components of our results of operations for the periods indicated, in dollars, and key components
of our revenue for the period indicated, in dollars.





|                                                          |  | For
    the Years Ended,
|--------------------------------------------------------- |  | ------------------------
|                                                          |  | December
    31, 2014   
|                                                          |  |                         
|                                                          |  |                         
|Revenue                                                   |  | $                       
|                                                          |  |                         
|                                                          |  |                         
|Operating
    Expenses                                    |  |                         
|General and administrative                                |  |                         
|Endorsement fees                                          |  |                         
|Consulting                                                |  |                         
|Professional fees                                         |  |                         
|Compensation                                              |  |                         
|Total
    Operating Expenses                              |  |                         
|                                                          |  |                         
|Loss
    from Operations                                  |  |                         
|                                                          |  |                         
|Other
    Income / (Expense)                              |  |                         
|Other income                                              |  |                         
|Gain on sale of intellectual
    property                 |  |                         
|Gain (Loss) on extinguishment
    of debt                 |  |                         
|Interest expense                                          |  |                         
|Derivative Expense                                        |  |                         
|Amortization of debt offering
    costs                   |  |                         
|Loss on conversions                                       |  |                         
|Amortization of debt discount                             |  |                         
|Change
    in fair value of embedded derivative liability |  |                         
|Total
    Other Income / (Expense)                        |  |                         
|                                                          |  |                         
|Provision
    for Income  Taxes                           |  |                         
|                                                          |  |                         
|Net
    Loss                                              |  | $                       
|                                                          |  |                         
|Net
    Loss Per Share  - Basic and Diluted               |  | $                       
|                                                          |  |                         
|Weighted average number
    of shares outstanding         |  |                         
|during
    the year Basic and Diluted                     |  |                         





24









For
the Fiscal Year Ended December 31, 2014 and for the Fiscal Year Ended December 31, 2013



General
and Administrative Expenses: Our general and administrative expenses for the years ended December 31, 2014 and 2013, were
$3,090,128 and $3,215,834, respectively. The decrease of $125,706 or approximately 4%, was a result of our decreased advertising
and promotional expenses, which include the cost of public relations and product promotion activities



Consulting
Fees:  Our consulting fees for the years ended December 31, 2014 and 2013, were $505,597 and $636,718, respectively.
The decrease of $131,121 or approximately (21%) was a result of a decrease in expenses associated with the additional consulting,
promotional and marketing services related to our social networking website during 2013.



Professional
Fees: Our professional fees for the years ended December 31, 2014 and 2013, were $1,025,241 and $916,873, respectively. The
increase of $108,368, or approximately 12%, was a result of an increase in the expenses associated with the preparation of our
financial statements and regulatory filings required for publicly traded companies.



Compensation:Our
compensation expenses for the years ended December 31, 2014 and 2013, were $1,004,800 and $1,116,300,
respectively. The decrease of $111,500, or approximately 10%, was a result of our increased stock based
compensation and additional employee salaries during 2013.



Net
Loss: Our net loss for the year ended December 31, 2014, was $9,863,929, compared to $8,804,887 for the year ended
December 31, 2013. The increase in net loss was the result of the expensing in stock based compensation, an increase in
expenses associated with the promotion and marketing of the Max Sound HD Audio Technology, increased professional fees and
salaries.



Liquidity
and Capital Resources



Revenues
for the fiscal years ended December 31, 2014, and 2013, were $2,491 and $2,498, respectively. We have an accumulated deficit of
$37,136,982 for the period from December 9, 2005 (inception) to December 31, 2014, and have negative cash flow from operations
of $2,956,189 for the year ended December 31, 2014.



Our
financial statements have been presented on the basis that it is a going concern, which contemplates the realization of revenues
from our subscriber base and the satisfaction of liabilities in the normal course of business. We have incurred losses from inception.
These factors raise substantial doubt about our ability to continue as a going concern.



From
our inception through December 31, 2014, our primary source of funds has been the proceeds of private offerings of our common
stock, private financing, and loans from stockholders.  Our need to obtain capital from outside investors is expected
to continue until we are able to achieve profitable operations, if ever. There is no assurance that management will be successful
in fulfilling all or any elements of its plans.



Below
is a summary of our capital-raising activities in the fiscal years ended December 31, 2014 and 2013.



Private
Financings



On
January 28, 2014, the Company entered into an agreement whereby the Company will issue up to $25,000 in a convertible note.    The
note matures on January 27, 2015 and bears an interest rate of 10%.    The conversion price equals the “Variable
Conversion Price”, which is 70% of the “Market Price”, which is the average the closing bid prices for the lowest
three (3) trading prices of the common stock during the twenty (20) trading day period prior to the conversion. The holder of
the note has a right to convert all or any part of the outstanding an unpaid principal amount into shares of common stock after
six months.    The Company received $25,000 proceeds, on January 28, 2014.



On
February 20, 2014, the Company entered into an agreement whereby the Company will issue up to $50,000 in a convertible note.    The
note matures on February 19, 2015 and bears a onetime interest charge of 5% after 90 days.    The conversion
price equals the “Variable Conversion Price”, which is 70% of the “Market Price”, which is the average
of the lowest three (3) trading prices for the common stock during the fifteen (15) trading day period prior to the conversion.
The holder of the note has a right to convert all or any part of the outstanding an unpaid principal amount into shares of common
stock after six months.    The Company received $50,000 proceeds on February 20, 2014.



25





On
February 27, 2014, the Company entered into an agreement whereby the Company will issue up to $282,778 in a convertible note.    The
note matures on February 26, 2015 and bears an interest rate of 4%.    The conversion price equals the “Variable
Conversion Price”, which is 75% of the “Market Price”, which is the average the three (3) lowest closing bid
prices for the common stock during the ten (10) trading day period prior to the conversion. The holder of the note has a right
to convert all or any part of the outstanding an unpaid principal amount into shares of common stock after six months.    The
Company received $282,778 proceeds, less the $27,778 original issue discount pursuant to the terms of this convertible note, on
February 27, 2014 and finder’s fees of $5,000. In connection with this raise, the Company also issued 250,000 three
year warrants exercisable at $0.40/share.



On
March 7, 2014, the Company entered into an agreement whereby the Company will issue up to $103,500 in a convertible note.    The
note matures on December 11, 2014, and bears an interest rate of 8%.    The conversion price equals the
“Variable Conversion Price”, which is 65% of the “Market Price”, which is the average the closing bid
prices for the lowest three (3) trading prices of the common stock during the ten (10) trading day period prior to the conversion.
The holder of the note has a right to convert all or any part of the outstanding an unpaid principal amount into shares of common
stock after six months.    The Company received $103,500 proceeds, less the $3,500 finder’s fee pursuant
to the terms of this convertible note, on March 12, 2014.



On
March 19, 2014, the Company entered into an agreement whereby the Company will issue up to $25,000 in a convertible note.    The
note matures on March 18, 2015 and bears an interest rate of 10%.    The conversion price equals the “Variable
Conversion Price”, which is 70% of the “Market Price”, which is the average the closing bid prices for the lowest
three (3) trading prices of the common stock during the twenty (20) trading day period prior to the conversion. The holder of
the note has a right to convert all or any part of the outstanding an unpaid principal amount into shares of common stock after
six months.    The Company received $25,000 proceeds, on March 19, 2014.



On
April 17, 2014, the Company entered into an agreement with KBM Worldwide, Inc., whereby the Company will issue up to $78,500 in
a convertible note.  The note matures on January 21, 2015 and bears an interest rate of 8%.  The conversion
price equals the “Variable Conversion Price”, which is 65% of the “Market Price”, which is the average
the three (3) lowest closing bid prices for the common stock during the ten (10) trading day period prior to the conversion. The
holder of the note has a right to convert all or any part of the outstanding an unpaid principal amount into shares of common
stock after six months.



On
May 1, 2014, the Company entered into an agreement with LG Capital Funding, LLC to issue up to $210,000 in two convertible notes.    Each
note matures on May 1, 2015 and bears an interest rate of 8%.  The Company received $105,000 proceeds, less the $5,000
original issue discount pursuant to the terms of the first note, on May 8, 2014 and finder’s fees of $5,000.   The
Company is due to receive a secured note in the amount of $105,000 from the investor as consideration for the second note. Both
convertible notes are convertible at a “Variable Conversion Price”, which is 65% of the “Market Price”,
which is the lowest closing bid price for the common stock during the ten (10) trading day period prior to the conversion. The
holder of each note has a right to convert all or any part of the outstanding an unpaid principal amount into shares of common
stock at any time on or before the maturity date; provided, however, that the second note is not convertible until it has been
fully paid for in cash.  The Company has a right to redeem each note as follows: (i) during the first 90 days after
issuance, by paying an amount equal to 130% of the unpaid principal plus accrued unpaid interest; (ii) from the 90th to 180th
day after issuance, by paying an amount equal to 140% of the unpaid principal plus accrued unpaid interest; and (iii) at any time
upon a transfer of all or substantially all of the Company’s assets, a reclassification of the Company’s stock, a
consolidation, merger or other reorganizational event, by paying an amount equal to 150% of the unpaid principal plus accrued
unpaid interest.



Also
on May 12, 2014, the Company entered into an agreement with ADAR Bays, LLC to issue up to $210,000 in

26





two
convertible notes. Each note matures on May 12, 2015 and bears an interest rate of 8%.  The Company received $105,000
proceeds, less the $5,000 original issue discount pursuant to the terms of the first note, on May 16, 2014 and finder’s
fees of $5,000.   The Company received a secured note in the amount of $105,000 from the investor as consideration
for the second note, payable by December 30, 2014, and secured by the pledge of the second note. Both convertible notes are convertible
at a “Variable Conversion Price”, which is 65% of the “Market Price”, which is the lowest closing bid
price for the common stock during the ten (10) trading day period prior to the conversion. The holder of each note has a right
to convert all or any part of the outstanding an unpaid principal amount into shares of common stock at any time on or before
the maturity date; provided, however, that the second note is not convertible until it has been fully paid for in cash.  The
Company has a right to redeem each note as follows: (i) during the first 90 days after issuance, by paying an amount equal to
130% of the unpaid principal plus accrued unpaid interest; (ii) from the 90th to 180th day after issuance, by paying an amount
equal to 140% of the unpaid principal plus accrued unpaid interest; and (iii) at any time upon a transfer of all or substantially
all of the Company’s assets, a reclassification of the Company’s stock, a consolidation, merger or other reorganizational
event, by paying an amount equal to 150% of the unpaid principal plus accrued unpaid interest.



On
May 14, 2014, the Company entered into an agreement with Venture Champion Asia Limited to issue up to $200,000 in a convertible
note.    The note matures on May 14, 2016, and bears an interest rate of 2.50%.  The initial
conversion price equals $0.07/share. After six month from the date of this note, conversion price shall equal the lower of $0.07/share
or the “variable conversion price”, which is 75% of the average three (3) lowest closing prices during the ten (10)
trading day prior to the conversion. The holder of the note has a right to convert all or any part of the outstanding an unpaid
principal amount into shares of common stock at any time on or before the maturity date.



On
May 21, 2014, the Company entered into an agreement with Venture Champion Asia Limited to issue up to $550,000 in a convertible
note.    The note matures on May 21, 2016, and bears an interest rate of 2.50%.    The
initial conversion price equals $0.07/share. After six month from the date of this note, conversion price shall equal the lower
of $0.07/share or the “variable conversion price”, which is 75% of the average three (3) lowest closing prices during
the ten (10) trading day prior to the conversion. The holder of the note has a right to convert all or any part of the outstanding
an unpaid principal amount into shares of common stock after six months.    The Company received $550,000
proceeds on May 21, 2014.



On
May 22, 2014, the Company entered into an agreement with ICG USA, LLC to issue up to $15,000 in a convertible note.    The
note matures on May 22, 2016, and bears an interest rate of 2.50%.    The conversion price equals $0.07/share.
After six months from the date of this note, conversion price shall equal the lower of $0.07/share or the “variable conversion
price”, which is 75% of the average three (3) lowest closing prices during the ten (10) trading day prior to the conversion.
The holder of the note has a right to convert all or any part of the outstanding an unpaid principal amount into shares of common
stock at any time on or before the maturity date.    The Company received $15,000 proceeds on May 23, 2014.    As
of June 30, 2014, the convertible note balance and accrued interest is $15,051.



On
May 23, 2014, the Company received $25,000 in proceeds in connection with a drawdown on an existing convertible note with Vista
Capital Investments, LLC with total principal amount of up to $333,000.  The note matures on May 22, 2015 and bears an interest
rate of 10%.  The conversion price equals the “Variable Conversion Price”, which is 70% of the “Market
Price”, which is the average of the closing bids for the lowest three (3) trading prices of the common stock during the
twenty (20) trading day period prior to the conversion.  The holder of the note has a right to convert all or any part of
the outstanding and unpaid principal amount into shares of common stock at any time after issuance.



On
June 11, 2014, the Company entered into an agreement with Iliad Research and Trading, LP to issue up to

27





$282,778
in a convertible note.    The note matures on June 10, 2015 and bears an interest rate of 4%.    The
note is immediately convertible at a “Variable Conversion Price”, which is 75% of the “Market Price”,
which is the average the three (3) lowest closing bid prices for the common stock during the ten (10) trading day period prior
to the conversion. The Company received $282,778 proceeds, less the $27,778 original issue discount pursuant to the terms of this
convertible note, on June 12, 2014 and finder’s fees of $5,000. In connection with this raise, the Company also issued 250,000
three-year warrants exercisable at $0.40/share.



On
July 25, 2014, the Company amended the terms of its February 6, 2013 convertible note with Vista Capital Investments, LLC, pursuant
to which the total principal amount of the note was increased from up to $333,000 to up to $444,000. All other terms of and conditions
of the note remain in full force and effect.  On July 28, 2014, the Company received $50,000 in proceeds, increasing the current principal amount
under the note to $140,000 and leaving available $304,000 to be drawn down under the note.



On
August 1, 2014, the Company entered into an agreement with KBM Worldwide, Inc. to issue up to $253,500 in a convertible note.
The note matures on May 5, 2015 and bears an interest charge of 8%. The conversion price equals the “Variable Conversion
Price”, which is 65% of the “Market Price”, which is the average of the lowest three (3) trading prices for
the common stock during the ten (10) trading day period prior to the conversion. The holder of the note has a right to convert
all or any part of the outstanding unpaid principal amount into shares of common stock after six months. The Company received
$250,000 proceeds on August 4, 2014.



On
August 13, 2014, the Company entered into an agreement with Iliad Research and Trading to issue up to $282,778 in a convertible
note. The note matures on August 13, 2015 and bears an interest charge of 4%. The conversion price equals the “Variable
Conversion Price”, which is 75% of the “Market Price”, which is the average of the lowest three (3) trading
prices for the common stock during the ten (10) trading day period prior to the conversion. The holder of the note has a right
to convert all or any part of the outstanding unpaid principal amount into shares of common stock after six months. The Company
received $250,000 proceeds on August 14, 2014.



On
August 21, 2014, the Company entered into an agreement with Horberg Enterprises LP to issue up to $250,000 in a convertible note.
The note matures on August 21, 2015 and bears an interest charge of 8%. The conversion price equals the “Variable Conversion
Price”, which is 70% of the “Market Price”, which is the average of the lowest three (3) trading prices for
the common stock during the ten (10) trading day period prior to the conversion. The holder of the note has a right to convert
all or any part of the outstanding unpaid principal amount into shares of common stock after six months. The Company received
$250,000 proceeds on August 26, 2014.



On
August 21, 2014, the Company entered into an agreement with JDF Capital Inc. to issue up to $111,000 in a

28





convertible
note. The note matures on February 21, 2016 and bears an interest charge of 8%. The conversion price equals the “Variable
Conversion Price”, which is 65% of the “Market Price”, which is the average of the lowest three (3) trading
prices for the common stock during the ten (10) trading day period prior to the conversion. The holder of the note has a right
to convert all or any part of the outstanding unpaid principal amount into shares of common stock after six months. The Company
received $100,000 proceeds on August 25, 2014.





On
November 4, 2014, the Company entered into an agreement with LG Capital Funding, LLC to issue up to $220,000 in convertible notes.    Note
matures on May 1, 2015 and bears an interest rate of 8%.  The Company received $220,000 proceeds, less the $5,000 original
issue discount pursuant to the terms of the first note.    Both convertible notes are convertible at a “Variable
Conversion Price”, which is 65% of the “Market Price”, which is the lowest closing bid price for the common
stock during the ten (10) trading day period prior to the conversion. The holder of each note has a right to convert all or any
part of the outstanding an unpaid principal amount into shares of common stock at any time on or before the maturity date; provided,
however, that the second note is not convertible until it has been fully paid for in cash.  The Company has a right
to redeem each note as follows: (i) during the first 90 days after issuance, by paying an amount equal to 130% of the unpaid principal
plus accrued unpaid interest; (ii) from the 90th to 180th day after issuance, by paying an amount equal to 140% of the unpaid
principal plus accrued unpaid interest; and (iii) at any time upon a transfer of all or substantially all of the Company’s
assets, a reclassification of the Company’s stock, a consolidation, merger or other reorganizational event, by paying an
amount equal to 150% of the unpaid principal plus accrued unpaid interest.



On
December 11, 2014, the Company entered into an agreement with EMA Financial, LLC to issue up to $105,500 in convertible notes.    Note
matures on December 10, 2015 and bears an interest rate of 8%.  The Company received $100,000 proceeds, less finder’s
fees of $5,000.    Convertible note is convertible at a “Variable Conversion Price”, which is 65% of
the “Market Price”, which is the lowest closing bid price for the common stock during the ten (10) trading day period
prior to the conversion. The holder of each note has a right to convert all or any part of the outstanding an unpaid principal
amount into shares of common stock at any time on or before the maturity date;



On
November 6, 2014, the Company entered into an agreement with KBM Worldwide, Inc. to issue up to $254,000 in a convertible note.
The note matures on August 10, 2015 and bears an interest charge of 8%. The conversion price equals the “Variable Conversion
Price”, which is 65% of the “Market Price”, which is the average of the lowest three (3) trading prices for
the common stock during the ten (10) trading day period prior to the conversion. The holder of the note has a right to convert
all or any part of the outstanding unpaid principal amount into shares of common stock after six months.



On
December 18, 2014, the Company entered into an agreement with JDF Capital Inc. to issue up to $106,000 in a convertible note.
The note matures on June 18, 2016 and bears an interest charge of 8%. The conversion price equals the “Variable Conversion
Price”, which is 65% of the “Market Price”, which is the average of the lowest ten (10) trading day period prior
to the conversion. The holder of the note has a right to convert all or any part of the outstanding unpaid principal amount into
shares of common stock after six months.



As
of December 31, 2013, the note remains outstanding and is currently in default. On February 1, 2014, the Company reissued the
note for $150,000 to the investor to cover the $120,000 outstanding on the note, plus $30,000 for services rendered by the holder.  The
new note becomes due on July 31, 2014.



During
the year ended December 31, 2013, the Company issued convertible notes totaling $3,843,221.



On
May 23, 2013, the Company entered into a Securities Purchase Agreement (the “Aggregate SPA”) with three institutional
investors. The Aggregate SPA provides for the sale by the Company to the investors of an aggregate principal amount of $2,222,222
of 4% Convertible Debentures, with 10% original issue discount that is due twelve months from their date of issuance (the “Debentures”).
The subscription amount shall be funded in the amount of $277,777.77 (net amount of $250,000 less debt offering costs to the Company
after the original issue discount) on the initial closing date of May 23, 2013 and thereafter, seven (7) additional installments
in the

29





amount
of $277,777.77 (net amount of $250,000 less debt offering costs to the Company after the original issue discount) shall each be
funded on or about the first day of each successive calendar month commencing on June 1, 2013.



In
addition, the Company issued debt offering costs (placement agent fees) equal to 7% of the aggregate purchase price paid by each
purchase and equity equaling 2% of the gross proceeds received by the Company valued at the investors’ conversion price.



The
Debentures have an interest rate of 4% and shall have an original issue discount of 10% from the stated principal amount. The
Debentures may be prepaid in whole or in part on not less than thirty (30) days prior written notice to the investors for an amount
equal to 115% multiplied by the sum of the then outstanding principal amount of the Debentures plus any accrued and unpaid interest.



The
Debentures shall be convertible into common stock, at the investors’ option, at a 25% discount to the average price of the
lowest three (3) closing bid prices for the common stock during the ten (10) trading days prior to the conversion date. In the
event of default, the Debentures shall be convertible into common stock at a 35% discount to the market price. In the event that
the Company fails in any material respect to comply with the reporting requirements of the Securities and Exchange Act of 1934,
as amended, with regards to the filing of Form 10-Q's and 10-K's or ceases to be subject to the Exchange Act, the Debentures shall
be convertible into common stock at a 50% discount to the market price, unless the Company has a registration statement declared
effective by the SEC, which covers for resale the shares issued in connection with the investors’ conversion.



In
connection with the Aggregate SPA, the investors were each issued warrants to purchase from the Company at any time after the
Closing Date until 5:00 p.m., E.S.T on the third anniversary of the Closing Date (the “Expiration Date”), up to 250,000
fully-paid and non-assessable shares of common stock at a per share purchase price of $0.40 (the “Warrants”). The
Company issued 750,000 three year warrants on the terms discussed above.



As
of December 31, 2013, the Company (from the Aggregate SPA) received proceeds totaling $833,333 less $83,333 original issue discount
and debt offering costs totaling $85,055, which includes 94,964 common shares of the Company’s common stock valued at $20,555
issued to the finder.



As
of December 31, 2013, the Aggregate SPA convertible note balance and accrued interest is $643,343.



Loans
and Advances



We
have entered into three Credit Line Agreements with Greg Halpern.  The first two were for $100,000 each and matured
and expired in 2011.  The third Credit Line Agreement issued by Mr. Halpern in March 2010 is for an additional $500,000
and matured and expired in 2012.  All three agreements accrue interest at the prime rate as of the date of issuance.  The
prime rate of interest is the rate of interest that major banks charge their most creditworthy customers.  For the purposes
of these agreements, we shall determine the prime rate by using the prime rate reported by the Wall Street Journal on the date
funds are extended to the Company.  Based on the prime rate as of the date of issuance, the prime rate shall be 3.25%.
On September 26, 2013, we entered into a Credit Line Agreement with Mr. Halpern for $1,000,000 that will mature and expire on
or before the second anniversary of September 26, 2013.  Interest will accrue on each advance at an annual rate of 4%.
As of December 31, 2013, the Company owed $0 in principal and $0 in accrued interest related to these loans and lines of credit.  We
believe that the $1,000,000 line of credit issued will not be sufficient to cover the additional expense arising from maintenance
of our regulatory filings with the SEC, and the marketing of our technology over the next twelve months, thus the Company will
continue to pursue additional financing and/or additional funding in 2014 to continue marketing the Max Sound HD Audio Technology
aggressively to Multi-Media Industry Users of Audio and Audio with Video products.



In
2013, the Company has received from Mr. Halpern additional net advances on the established lines of credit in the amount of $290,000,
of which it has repaid $150,000.  As of December 31, 2013, the balance on the line of

30





credit
is $140,000.  This further demonstrates our Chairman’s ongoing commitment to continue financing the Company’s
needs.  While the Company expects to have ongoing needs for additional financing, the amount of those needs are not
clearly established as the Company moves forward.



In
2014, the Company has received from Mr. Halpern additional net advances on the established lines of credit in the amount of
$153,000 of which it has repaid $35,000.  As of December 31, 2014, the balance including accrued interest on the
line of credit is $268,227.  This further demonstrates our Chairman’s ongoing commitment to continue
financing the Company’s needs.  While the Company expects to have ongoing needs for additional financing, the
amount of those needs are not clearly established as the Company moves forward.



In
the event that we are unable to obtain additional financing and/or funding or Mr. Halpern either fails to extend us more financing,
declines to loan additional cash, declines to fund the line of credit, or declines to defer his salary payments, we will no longer
be able to continue to operate and will have to cease operations unless we begin to generate sufficient revenue to cover our costs.



Recent
Accounting Pronouncements



On
June 10, 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2014-10, Development Stage
Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities
Guidance in Topic 810, Consolidation ("ASUE 2014-10"). The guidance is intended to reduce the overall cost and complexity
associated with financial reporting for development stage entities without reducing the availability of relevant information.
The Board also believes the changes will simplify the consolidation accounting guidance by removing the differential accounting
requirements for development stage entities. As a result of these changes, there no longer will be any accounting or reporting
differences in GAAP between development stage entities and other operating entities. For organizations defined as public business
entities the presentation and disclosure requirements in Topic 915 will no longer be required starting with the first annual period
beginning after December 15, 2014, including interim periods therein. Early application is permitted for any annual reporting
period or interim period for which the entity's financial statements have not yet been issued (public business entities) or made
available for issuance (other entities).



In
June 2014, FASB issued Accounting Standards Update (“ASU”) No. 2014-12, “Compensation – Stock Compensation
(Topic 718); Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved
after the Requisite Service Period”. The amendments in this ASU apply to all reporting entities that grant their employees
share-based payments in which the terms of the award provide that a performance target that affects vesting could be achieved
after the requisite service period. The amendments require that a performance target that affects vesting and that could be achieved
after the requisite service period be treated as a performance condition. A reporting entity should apply existing guidance in
Topic 718 as it relates to awards with performance conditions that affect vesting to account for such awards. For all entities,
the amendments in this ASU are effective for annual periods and interim periods within those annual periods beginning after December
15, 2015. Earlier adoption is permitted. Entities may apply the amendments in this ASU either (a) prospectively to all awards
granted or modified after the effective date or (b) retrospectively to all awards with performance targets that are outstanding
as of the beginning of the earliest annual period presented in the financial statements and to all new or modified awards thereafter.
If retrospective transition is adopted, the cumulative effect of applying this Update as of the beginning of the earliest annual
period presented in the financial statements should be recognized as an adjustment to the opening retained earnings balance at
that date. Additionally, if retrospective transition is adopted, an entity may use hindsight in measuring and recognizing the
compensation cost. This updated guidance is not expected to have a material impact on our results of operations, cash flows or
financial condition.  We are currently reviewing the provisions of this ASU to determine if there will be any impact on our
results of operations, cash flows or financial condition.



In
August 2014, the FASB issued Accounting Standards Update “ASU” 2014-15 on “Presentation of Financial Statements
Going Concern (Subtopic 205-40) – Disclosure of Uncertainties about an Entity’s Ability to Continue

31





as
a Going Concern”. Currently, there is no guidance in U.S. GAAP about management’s responsibility to evaluate whether
there is substantial doubt about an entity’s ability to continue as a going concern or to provide related footnote disclosures.
The amendments in this Update provide that guidance. In doing so, the amendments are intended to reduce diversity in the timing
and content of footnote disclosures. The amendments require management to assess an entity’s ability to continue as a going
concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. Specifically, the
amendments (1) provide a definition of the term substantial doubt, (2) require an evaluation every reporting period including
interim periods, (3) provide principles for considering the mitigating effect of management’s plans, (4) require certain
disclosures when substantial doubt is alleviated as a result of consideration of management’s plans, (5) require an express
statement and other disclosures when substantial doubt is not alleviated, and (6) require an assessment for a period of one year
after the date that the financial statements are issued (or available to be issued). We are currently reviewing the provisions
of this ASU to determine if there will be any impact on our results of operations, cash flows or financial condition.



All
other newly issued accounting pronouncements but not yet effective have been deemed either immaterial or not applicable.



Critical
Accounting Policies and Estimates



Our
financial statements and related public financial information are based on the application of accounting principles generally
accepted in the United States (“GAAP”). GAAP requires the use of estimates; assumptions, judgments and subjective
interpretations of accounting principles that have an impact on the assets, liabilities, revenues and expense amounts reported.
These estimates can also affect supplemental information contained in our external disclosures including information regarding
contingencies, risk and financial condition. We believe our use of estimates and underlying accounting assumptions adhere to GAAP
and are consistently and conservatively applied. We base our estimates on historical experience and on various other assumptions
that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different
assumptions or conditions. We continue to monitor significant estimates made during the preparation of our financial statements.



Use
of Estimates:

In
preparing financial statements in conformity with generally accepted accounting principles, management is required to make estimates
and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities
at the date of the financial statements and revenues and expenses during the reported period.  Actual results could
differ from those estimates.



Revenue
Recognition:

Revenue
is recognized when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable and collectability
is assured. We had $2,498 and $5 in revenue for the years ended December 31, 2013 and 2012, respectively.



Stock-Based
Compensation:

In
December 2004, the FASB issued FASB Accounting Standards Codification No. 718,Compensation – Stock Compensation.  Under
FASB Accounting Standards Codification No. 718, companies are required to measure the compensation costs of share-based compensation
arrangements based on the grant-date fair value and recognize the costs in the financial statements over the period during which
employees are required to provide services. Share-based compensation arrangements include stock options, restricted share plans,
performance-based awards, share appreciation rights and employee share purchase plans.  As such, compensation cost is
measured on the date of grant at their fair value.  Such compensation amounts, if any, are amortized over the respective
vesting periods of the option grant.  The Company applies this statement prospectively.



Equity
instruments (“instruments”) issued to other than employees are recorded on the basis of the fair value of the instruments,
as required by FASB Accounting Standards Codification No. 718.  FASB Accounting Standards

32





Codification
No. 505,Equity Based Payments to Non-Employees defines the measurement date and recognition period for
such instruments.  In general, the measurement date is when either a (a) performance commitment, as defined, is reached or
(b) the earlier of (i) the non-employee performance is complete or (ii) the instruments are vested. The measured value related
to the instruments is recognized over a period based on the facts and circumstances of each particular grant as defined in the
FASB Accounting Standards Codification.



Derivative
Financial Instruments

Fair
value accounting requires bifurcation of embedded derivative instruments such as conversion features in convertible debt or equity
instruments, and measurement of their fair value for accounting purposes. In determining the appropriate fair value, the
Company uses the Black-Scholes option-pricing model.  In assessing the convertible debt instruments, management determines
if the convertible debt host instrument is conventional convertible debt and further if there is a beneficial conversion feature
requiring measurement.  If the instrument is not considered conventional convertible debt, the Company will continue
its evaluation process of these instruments as derivative financial instruments.



Once
determined, derivative liabilities are adjusted to reflect fair value at each reporting period end, with any increase or decrease
in the fair value being recorded in results of operations as an adjustment to fair value of derivatives.  In addition,
the fair value of freestanding derivative instruments such as warrants, are also valued using the Black-Scholes option-pricing
model.



Impairment
of Long-Lived Assets

The
Company accounts for its long-lived assets in accordance with ASC Topic 360-10-05, Accounting for the Impairment or Disposal of
Long-Lived Assets."  ASC Topic 360-10-05 requires that long-lived assets, such as technology rights, be reviewed
for impairment annually, or whenever events or changes in circumstances indicate that the historical cost carrying value of an
asset may no longer be appropriate.  The Company assesses recoverability of the carrying value of an asset by estimating
the future net cash flows expected to result from the asset, including the eventual disposition.  If the future net
cash flows are less than the carrying value of an asset, an impairment loss is recorded equal to the difference between the asset's
carrying value and fair value or disposable value.  For the year ended December 31, 2013, the Company completed an impairment
analysis on its' long-lived assets, their technology rights, and determined that no impairment was necessary.



The
Company believes that the accounting estimate related to asset impairment is a "critical accounting estimate" because
the impairment methodology is highly susceptible to change from period to period, because it requires management to make assumptions
about future cash flows, and because the impact of recognizing impairment could have a significant effect on operations. Management's
assumptions about future cash flows require significant judgment because actual business operations of marketing the technology
rights is in its infancy stages and managements expects that their future operating levels to fluctuate. The analysis included
assumptions that are based on annual business plans and other forecasted results which are used to reflect market-based estimates
of the risks associated with the projected cash flows, based on the best information available as of the date of the impairment
test. There can be no assurance that the estimates and assumptions used in the impairment tests will prove to be accurate
predictions of the future.  If the future adversely differs from management's best estimate of key economic assumptions,
and if associated future cash flows materially decrease, the Company may be required to record impairment charges related to its
indefinite life intangible asset.



Prior
to February 2011, the Company's business operations were related to the development and launching of a social networking website.  However,
since February 2011, our business focus has been on the marketing of our Max Sound HD Audio Technology.  Since 2011,
was our initial year of marketing our technology, management considers past operational levels to be inconsistent with future
operations mainly due to the shift in business focus.  In our impairment testing, the Company made assumptions towards
the income and expenses expected in the future including, but not limited to, determining the actual expenses incurred in the
current year that were attributable to the new business focus in order to develop an annual cost benchmark, trends in the marketplace,
feedback from current and past marketing activities, and assessments upon the useful life of the technology rights.



33





The
Company's primary focus over the next three to five years will be centered on the marketing and implementation of their technology
in order to take advantage of the current trends in the marketplace for users of their technology.  In particular, the
Company expects that expenses will increase significantly from year to year over the next five years, at which time in year six
and beyond the year-to-year change will be a minimal increase.  In addition, the Company expects minimal revenue over
the next two years, while in year three to six the Company expects to realize significant year to year increases in revenue, at
which time in year seven and beyond the year to year change will be a minimal increase.



As
part of the impairment test, the Company reviewed its' initial useful life analysis, in reference to their technology, and updated
this analysis with factors that existed at the time of the impairment testing and determined that nothing had occurred in the
marketplace that would change their initial determination of the useful life of their technology. The analysis included researching
known technological advances in the marketplace and determining if those advances which are similar to the Company's products
would limit the useful life of the asset. The Company believes that the technological advances in the marketplace are geared
to developing different playback devices and the implementation of technology that is similar to the Company's technology. Thus,
the Company concluded that their technology rights continue to have an indefinite useful life. However, it is understood
that technological advancements could happen in the future that would limit the useful life of their technology.  If
a technology was created in the future that would limit the useful life of the technology, the Company would be required to update
their impairment testing to include a useful life determination of the technology and may be required to record impairment charges
at some time in the future.



Off-Balance
Sheet Arrangements



We
do not have any off-balance sheet arrangements, financings, or other relationships with unconsolidated entities or other persons,
also known as “special purpose entities” (SPEs).



Subsequent
Events



Through
the filing of these financial statements, the Company converted a total of approximately $821,316 in convertible debt comprised
of principal and accrued interest into approximately 31,381,442 common shares.



On
November 10, 2014 the Company amended its Certificate of Incorporation filed on September 20, 2010 with the Secretary of State
of Delaware by majority shareholder consent and unanimous consent of the Board of Directors to increase the authorized shares
of common stock of the Company by 50,000,000 shares of common stock with an adjusted par value of $.00001 per share.



On
March 4, 2015 the Company filed a form 8K with the SEC associated with the Company entering into a Securities Exchange Agreement
and the Company filing with the Secretary of State Delaware a Certificate of Designations, Preferences and Rights whereby, among
other things, the Company for good and valuable consideration, agreed that in consideration of a large shareholder exchanging
120,000,000 shares of common stock back to the Company, the shareholder would receive 5,000,000 shares of Series A Convertible
Preferred Stock of the Company at a Stated Value of $0.96 per share and a Conversion Price of $.0.04 per share. The Series A Convertible
Preferred Stock carries certain voting preferences and will accrue dividends at a rate of 8% per annum Stated Value, payable in
cash or in kind at the election of the Board of Directors.



On
December 24, 2014, the Company entered into an agreement whereby the Company will issue up to 225,750 in a convertible note. The
note matures on December 24, 2015 and bears an interest charge of 8%. The conversion price equals the “Variable Conversion
Price”, which is 65% of the lowest three trading prices for the common stock during the ten (10) trading day period prior
to the conversion. The holder of the note has a right to convert all or any part of the outstanding unpaid principal amount into
shares of common stock after six months. The Company received $210,000 of proceeds less $10,750 in debt issue costs on and $5,000
in legal costs on January 5, 2015.



34







On
January 21, 2015, the Company entered into an agreement whereby the Company will issue up to $50,000 in a convertible note. The
note matures on January 21, 2016 and bears an interest charge of 10. The conversion price equals the “Variable Conversion
Price”, which is 70% of the lowest three trading prices for the common stock during the twenty (20) trading day period prior
to the conversion. The holder of the note has a right to convert all or any part of the outstanding unpaid principal amount into
shares of common stock after six months. The Company received $50,000 on January 21, 2015.



On
February 27, 2015, the Company entered into an agreement whereby the Company will issue up to $115,500 in a convertible
note. The note matures on February 27, 2016 and bears an interest charge of 8%. The conversion price equals the
“Variable Conversion Price”, which is 65% of the lowest three trading prices for the common stock during the ten
(10) trading day period prior to the conversion. The holder of the note has a right to convert all or any part of the
outstanding unpaid principal amount into shares of common stock after six months. The Company received $100,000 of proceeds,
after $10,500 in debt issue costs on and $5,000 in legal costs on March  3, 2015.



On
May 12, 2014, the Company entered into an agreement whereby the Company will issue up to $105,000 in a convertible note. The note
matures on May 12, 2015 and bears an interest charge of 8%. The conversion price equals the “Variable Conversion Price”,
which is 65% of the lowest daily prices for the common stock during the ten (10) trading day period prior to the conversion. The
holder of the note has a right to convert all or any part of the outstanding unpaid principal amount into shares of common stock
after six months. The Company received $95,000 of proceeds less $10,000 in debt issue costs on January 12, 2015.



In
January  2015, the Company repaid $40,000 in principal to the principal stockholder and received $25,000 in principal from
the principle stockholder related to the line of credit.



On
January 21, 2015, the Company entered into a consulting services agreement. In connection with this agreement, the consultant
shall be paid $4,000 per month and receive up to 150,000 shares of common stock payable in lots of 50,000 per month and will be
issued 90 days after the date of the signing of the agreement.



On
January 21, 2015, the Company entered into a consulting services agreement. In connection with this agreement, the consultant
shall be paid $4,000 per month and receive up to 150,000 shares of common stock payable in lots of 50,000 per month and will be
issued 90 days after the date of the signing of the agreement.





On
February 18, 2015, the Company issued an additional 700,000 shares of  a stock to a consultant in connection with
the Agreement entered into in September 2014.



March 17, 2015, the Company entered into a services agreement. In connection with
this agreement, the consultant will receive 300,000 shares of fully vested common stock, payable in lots of 100,000 shares of
common stock per month and $5,000 per month. The agreement will continue until June 17, 2015.



On
March 4, 2015 the Company filed a form 8K with the SEC associated with the Company entering into a Securities Exchange Agreement
and the Company filing with the Secretary of State Delaware a Certificate of Designations, Preferences and Rights whereby, among
other things, the Company for good and valuable consideration, agreed that in consideration of a large shareholder exchanging
120,000,000 shares of common stock back to the Company, the shareholder would receive 5,000,000 shares of Series A Convertible
Preferred Stock of the Company at a Stated Value of $0.96 per share and a Conversion Price of $.0.04 per share. The Series A Convertible
Preferred Stock carries certain voting preferences and will accrue dividends at a rate of 8% per annum Stated Value, payable in
cash or in kind at the election of the Board of Directors.



ITEM
7A.      QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.



We
are subject to certain market risks, including changes in interest rates and currency exchange rates.  We have

35





not
undertaken any specific actions to limit those exposures.



ITEM
8.                      FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA



MAX
SOUND CORPORATION







|PAGE  | F - 2 | REPORT
    OF INDEPENDENT REGISTERED ACCOUNTING FIRM                                            
|----- | ----- | ------------------------------------------------------------------------------------------------
|      |       |                                                                                                 
|PAGE  | F - 3 | BALANCE SHEETS
    AS OF DECEMBER 31, 2014 AND AS OF DECEMBER 31, 2013.                         
|      |       |                                                                                                 
|PAGE  | F - 4 | STATEMENTS
    OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013                     
|      |       |                                                                                                 
|PAGE  | F - 5 | STATEMENT OF
    CHANGES IN STOCKHOLDERS’ EQUITY FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013.
|      |       |                                                                                                 
|PAGE  | F - 6 | STATEMENTS
    OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013.                    
|      |       |                                                                                                 
|PAGES | F - 7 | NOTES TO FINANCIAL
    STATEMENTS.                                                              





REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



To
the Board of Directors and

Stockholders
of Max Sound Corporation





We have audited the accompanying balance
sheets of Max Sound Corporation as of December 31, 2014 and 2013, and the related statements of operations, changes in stockholders’
equity, and cash flows for each of the years in the two-year period ended December 31, 2014. Max Sound Corporation’s management
is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based
on our audits.



We conducted our audits in accordance
with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The
company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our
audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate
in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control
over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable
basis for our opinion.



In our opinion, the financial statements
referred to above present fairly, in all material respects, the financial position of Max Sound Corporation as of December 31,
2014 and 2013, and the results of its operations and its cash flows for each of the years in the two-year period ended December
31, 2014, in conformity with accounting principles generally accepted in the United States of America.



The accompanying financial statements
have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements,
the Company has suffered recurring losses including a net loss of $9,863,929 for the year ended December 31, 2014, has an accumulated
deficit of $37,136,982 as of December 31, 2014, and has a negative cash flow from operations of $2,956,189 for the year ended
December 31, 2014. These factors raise substantial doubt about the Company's ability to continue as a going concern. Management's
plans concerning these matters are also described in Note 2. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.



/s/
Alan R. Swift, CPA, P.A.

Alan
R. Swift, CPA, P.A.

Certified
Public Accountants and Consultants



Palm
Beach Gardens, Florida



April01, 2015





800
VILLAGE SQUARE CROSSING, SUITE 118, PALM BEACH GARDENS,FL 33410

PHONE:(561) 656-0818 FAX (561) 658-0245

www.aswiftcpa.com







|Max Sound
    Corporation      
|-------------------------------
|Balance
    Sheets             
|                               
|ASSETS                         
|                               
|                               
|                               
|                               
|Current
    Assets             
|Cash                           
|Inventory                      
|Prepaid
    expenses           
|Debt
    offering costs - net  
|Total  Current
    Assets      
|                               
|Property
    and equipment, net
|                               



|Other
    Assets                                                                              |  |   |            |  |  |   |            | 
|--------------------------------------------------------------------------------------------- |  | - | ---------- |  |  | - | ---------- | 
|Security
    deposit                                                                          |  |   | 413        |  |  |   | 413        | 
|Intangible
    assets                                                                         |  |   | 17,850,595 |  |  |   | 16,803,954 | 
|Total  Other
    Assets                                                                       |  |   | 17,851,008 |  |  |   | 16,804,367 | 
|                                                                                              |  |   |            |  |  |   |            | 
|                                                                                              |  |   |            |  |  |   |            | 
|Total  Assets                                                                                 |  | $ | 18,171,385 |  |  | $ | 17,387,611 | 
|                                                                                              |  |   |            |  |  |   |            | 
|                                                                                              |  |   |            |  |  |   |            | 
|                                                                                              |  |   |            |  |  |   |            | 
|LIABILITIES
    AND STOCKHOLDERS' EQUITY                                                      |  |   |            |  |  |   |            | 
|                                                                                              |  |   |            |  |  |   |            | 
|Current
    Liabilities                                                                       |  |   |            |  |  |   |            | 
|Accounts
    payable                                                                          |  | $ | 656,308    |  |  | $ | 206,458    | 
|Accrued
    expenses                                                                          |  |   | 116,903    |  |  |   | 94,973     | 
|Line
    of credit - related party                                                            |  |   | 268,227    |  |  |   | 140,000    | 
|Derivative
    liabilities                                                                    |  |   | 3,234,792  |  |  |   | 1,885,770  | 
|Convertible
    note payable, net of debt discount of $1,691,065 and $1,562,390, respectively |  |   | 1,337,353  |  |  |   | 956,356    | 
|Total
    Current Liabilities                                                                 |  |   | 5,613,583  |  |  |   | 3,283,557  | 
|                                                                                              |  |   |            |  |  |   |            | 
|Commitments
    and Contingencies                                                             |  |   |            |  |  |   |            | 
|                                                                                              |  |   |            |  |  |   |            | 
|Stockholders'
    Equity                                                                      |  |   |            |  |  |   |            | 
|Preferred stock,  $0.0001
    par value; 10,000,000 shares authorized,                        |  |   |            |  |  |   |            | 
|No shares
    issued and outstanding                                                          |  |   | —          |  |  |   | —          | 
|Series,
    A Convertible Preferred stock,  $0.00001 par value; 10,000,000 shares authorized, |  |   |            |  |  |   |            | 
|No shares
    issued and outstanding                                                          |  |   | —          |  |  |   |            | 
|Common stock,  $0.00001
    par value; 450,000,000 shares authorized,                         |  |   |            |  |  |   |            | 
|373,442,040
    and 309,543,698 shares issued and outstanding, respectively                   |  |   | 37,645     |  |  |   | 31,255     | 
|Additional
    paid-in capital                                                                |  |   | 50,176,714 |  |  |   | 41,915,852 | 



|Deferred
    compensation                      |  |   | —           |   |  |   | (50,000     | )
|---------------------------------------------- |  | - | ----------- | - |  | - | ----------- | -
|Treasury
    stock                             |  |   | (519,575    | ) |  |   | (520,000    | )
|Accumulated
    deficit                        |  |   | (37,136,982 | ) |  |   | (27,273,053 | )
|Total
    Stockholders' Equity                 |  |   | 12,557,802  |   |  |   | 14,104,054  |  
|                                               |  |   |             |   |  |   |             |  
|Total
    Liabilities and Stockholders' Equity |  | $ | 18,171,385  |   |  | $ | 17,387,611  |  
|                                               |  |   |             |   |  |   |             |  



See
accompanying notes to financial statements.



|Max Sound
    Corporation   
|----------------------------
|Statements
    of Operations
|                            
|                            
|                            
|                            
|                            
|                            
|                            
|Revenue                     
|                            
|                            
|Operating
    Expenses      
|General and administrative  
|Endorsement fees            
|Consulting                  
|Professional fees           
|Compensation                
|Total
    Operating Expenses
|                            
|Loss
    from Operations    
|                            
|Other
    Income / (Expense)



|Other income                                              |  |   | 101,820     |   |  |   | 6,905       |  
|--------------------------------------------------------- |  | - | ----------- | - |  | - | ----------- | -
|Gain on sale of intellectual property                     |  |   | —           |   |  |   | 220,000     |  
|Gain (Loss) on extinguishment of debt                     |  |   | (18,596     | ) |  |   | —           |  
|Interest expense                                          |  |   | (292,835    | ) |  |   | (147,500    | )
|Derivative Expense                                        |  |   | (327,964    | ) |  |   | (442,412    | )
|Amortization of debt offering costs                       |  |   | (168,053    | ) |  |   | (395,194    | )
|Loss on conversions                                       |  |   | (183,907    | ) |  |   | (46,093     | )
|Amortization of debt discount                             |  |   | (3,070,714  | ) |  |   | (2,638,504  | )
|Change in fair value of
    embedded derivative liability |  |   | (280,405    | ) |  |   | 1,001,138   |  
|Total
    Other Income / (Expense)                        |  |   | (4,240,654  | ) |  |   | (2,441,660  | )
|                                                          |  |   |             |   |  |   |             |  
|Provision
    for Income  Taxes                           |  |   | —           |   |  |   | —           |  
|                                                          |  |   |             |   |  |   |             |  
|Net
    Income (Loss)                                     |  | $ | (9,863,929  | ) |  | $ | (8,804,887  | )
|                                                          |  |   |             |   |  |   |             |  
|Net
    Loss Per Share  - Basic and Diluted               |  | $ | (0.03       | ) |  | $ | (0.03       | )
|                                                          |  |   |             |   |  |   |             |  
|Weighted average number
    of shares outstanding         |  |   |             |   |  |   |             |  
|during
    the year Basic and Diluted                     |  |   | 341,970,037 |   |  |   | 314,486,670 |  



See
accompanying notes to financial statements.







36









Max
Sound Corporation

Statement of Changes in Stockholder’s Equity

Years
ended December 31, 2014 and 2013













|                                                                                |  | Series A |                                                          |  |  |   |                                                          |  |  |  |                                                          |  |  |   |                                                          |  |  |  |                                                       |   |  |  
|------------------------------------------------------------------------------- |  | -------- | -------------------------------------------------------- |  |  | - | -------------------------------------------------------- |  |  |  | -------------------------------------------------------- |  |  | - | -------------------------------------------------------- |  |  |  | ----------------------------------------------------- | - |  | -
|                                                                                |  |          | Preferred
                                         Stock |  |  |   | Preferred
                                         stock |  |  |  | Preferred
                                         stock |  |  |   | Preferred
                                         stock |  |  |  | Common
                                         Stock |   |  |  
|                                                                                |  |          |                                                          |  |  |   |                                                          |  |  |  |                                                          |  |  |   |                                                          |  |  |  |                                                       |   |  |  
|                                                                                |  |          | Shares                                                   |  |  |   | Amount                                                   |  |  |  | Shares                                                   |  |  |   | Amount                                                   |  |  |  | Shares                                                |   |  |  
|                                                                                |  |          |                                                          |  |  |   |                                                          |  |  |  |                                                          |  |  |   |                                                          |  |  |  |                                                       |   |  |  
|Balance, December 31, 2012                                                      |  |          | —                                                        |  |  | $ | —                                                        |  |  |  | —                                                        |  |  | $ | —                                                        |  |  |  | 287,366,648                                           |   |  | $
|                                                                                |  |          |                                                          |  |  |   |                                                          |  |  |  |                                                          |  |  |   |                                                          |  |  |  |                                                       |   |  |  
|Convertible debt and accrued interest conversion into common stock              |  |          |                                                          |  |  |   |                                                          |  |  |  |                                                          |  |  |   |                                                          |  |  |  | 19,146,156                                            |   |  |  
|                                                                                |  |          |                                                          |  |  |   |                                                          |  |  |  |                                                          |  |  |   |                                                          |  |  |  |                                                       |   |  |  
|Shares issued as a finders fee                                                  |  |          | —                                                        |  |  |   | —                                                        |  |  |  | —                                                        |  |  |   | —                                                        |  |  |  | 94,964                                                |   |  |  
|                                                                                |  |          |                                                          |  |  |   |                                                          |  |  |  |                                                          |  |  |   |                                                          |  |  |  |                                                       |   |  |  
|Exercise of stock warrants                                                      |  |          | —                                                        |  |  |   | —                                                        |  |  |  | —                                                        |  |  |   | —                                                        |  |  |  | 540,901                                               |   |  |  
|                                                                                |  |          |                                                          |  |  |   |                                                          |  |  |  |                                                          |  |  |   |                                                          |  |  |  |                                                       |   |  |  
|Common stock issued for services ($0.19 - $0.37/sh)                             |  |          |                                                          |  |  |   |                                                          |  |  |  |                                                          |  |  |   |                                                          |  |  |  | 6,145,029                                             |   |  |  
|                                                                                |  |          |                                                          |  |  |   |                                                          |  |  |  |                                                          |  |  |   |                                                          |  |  |  |                                                       |   |  |  
|Return of shares                                                                |  |          | —                                                        |  |  |   | —                                                        |  |  |  | —                                                        |  |  |   | —                                                        |  |  |  | (750,000                                              | ) |  |  
|                                                                                |  |          |                                                          |  |  |   |                                                          |  |  |  |                                                          |  |  |   |                                                          |  |  |  |                                                       |   |  |  
|Reclassification of derivative liability associated with convertible
    debt   |  |          | —                                                        |  |  |   | —                                                        |  |  |  | —                                                        |  |  |   | —                                                        |  |  |  | —                                                     |   |  |  
|                                                                                |  |          |                                                          |  |  |   |                                                          |  |  |  |                                                          |  |  |   |                                                          |  |  |  |                                                       |   |  |  
|Warrants issued for services                                                    |  |          | —                                                        |  |  |   | —                                                        |  |  |  | —                                                        |  |  |   | —                                                        |  |  |  | —                                                     |   |  |  
|                                                                                |  |          |                                                          |  |  |   |                                                          |  |  |  |                                                          |  |  |   |                                                          |  |  |  |                                                       |   |  |  
|Stock opitons issued for services                                               |  |          | —                                                        |  |  |   | —                                                        |  |  |  | —                                                        |  |  |   | —                                                        |  |  |  | —                                                     |   |  |  
|                                                                                |  |          |                                                          |  |  |   |                                                          |  |  |  |                                                          |  |  |   |                                                          |  |  |  |                                                       |   |  |  
|Defered compensation realized                                                   |  |          | —                                                        |  |  |   | —                                                        |  |  |  | —                                                        |  |  |   | —                                                        |  |  |  | —                                                     |   |  |  
|                                                                                |  |          |                                                          |  |  |   |                                                          |  |  |  |                                                          |  |  |   |                                                          |  |  |  |                                                       |   |  |  
|Repurchased shares                                                              |  |          | —                                                        |  |  |   | —                                                        |  |  |  | —                                                        |  |  |   | —                                                        |  |  |  | (3,000,000                                            | ) |  |  
|                                                                                |  |          |                                                          |  |  |   |                                                          |  |  |  |                                                          |  |  |   |                                                          |  |  |  |                                                       |   |  |  
|Net loss for the year ended December 31, 2013                                   |  |          | —                                                        |  |  |   | —                                                        |  |  |  | —                                                        |  |  |   | —                                                        |  |  |  | —                                                     |   |  |  
|                                                                                |  |          |                                                          |  |  |   |                                                          |  |  |  |                                                          |  |  |   |                                                          |  |  |  |                                                       |   |  |  
|Balance December 31, 2013                                                       |  |          | —                                                        |  |  |   | —                                                        |  |  |  | —                                                        |  |  |   | —                                                        |  |  |  | 309,543,698                                           |   |  |  
|                                                                                |  |          |                                                          |  |  |   |                                                          |  |  |  |                                                          |  |  |   |                                                          |  |  |  |                                                       |   |  |  
|Convertible debt, accrued interest and penalty conversion into common
    stock |  |          | —                                                        |  |  |   | —                                                        |  |  |  | —                                                        |  |  |   | —                                                        |  |  |  | 48,998,342                                            |   |  |  
|                                                                                |  |          |                                                          |  |  |   |                                                          |  |  |  |                                                          |  |  |   |                                                          |  |  |  |                                                       |   |  |  
|Common stock issued for services ($0.09 - $0.37/sh)                             |  |          | —                                                        |  |  |   | —                                                        |  |  |  | —                                                        |  |  |   | —                                                        |  |  |  | 3,150,000                                             |   |  |  
|                                                                                |  |          |                                                          |  |  |   |                                                          |  |  |  |                                                          |  |  |   |                                                          |  |  |  |                                                       |   |  |  
|Return of shares                                                                |  |          | —                                                        |  |  |   | —                                                        |  |  |  | —                                                        |  |  |   | —                                                        |  |  |  | (4,250,000                                            | ) |  |  
|                                                                                |  |          |                                                          |  |  |   |                                                          |  |  |  |                                                          |  |  |   |                                                          |  |  |  |                                                       |   |  |  
|Reclassification of derivative liability associated with convertible
    debt   |  |          | —                                                        |  |  |   | —                                                        |  |  |  | —                                                        |  |  |   | —                                                        |  |  |  | —                                                     |   |  |  
|                                                                                |  |          |                                                          |  |  |   |                                                          |  |  |  |                                                          |  |  |   |                                                          |  |  |  |                                                       |   |  |  
|Defered compensation realized                                                   |  |          | —                                                        |  |  |   | —                                                        |  |  |  | —                                                        |  |  |   | —                                                        |  |  |  | —                                                     |   |  |  
|                                                                                |  |          |                                                          |  |  |   |                                                          |  |  |  |                                                          |  |  |   |                                                          |  |  |  |                                                       |   |  |  
|Stock options issued for services                                               |  |          | —                                                        |  |  |   | —                                                        |  |  |  | —                                                        |  |  |   | —                                                        |  |  |  | —                                                     |   |  |  
|                                                                                |  |          |                                                          |  |  |   |                                                          |  |  |  |                                                          |  |  |   |                                                          |  |  |  |                                                       |   |  |  
|Loss on debt extinguishment                                                     |  |          | —                                                        |  |  |   | —                                                        |  |  |  | —                                                        |  |  |   | —                                                        |  |  |  | —                                                     |   |  |  
|                                                                                |  |          |                                                          |  |  |   |                                                          |  |  |  |                                                          |  |  |   |                                                          |  |  |  |                                                       |   |  |  
|Common stock issued in exchange for assets ($0.10 - $0.12/sh)                   |  |          | —                                                        |  |  |   | —                                                        |  |  |  | —                                                        |  |  |   | —                                                        |  |  |  | 15,000,000                                            |   |  |  
|                                                                                |  |          |                                                          |  |  |   |                                                          |  |  |  |                                                          |  |  |   |                                                          |  |  |  |                                                       |   |  |  
|Common stock issued to settle payables                                          |  |          | —                                                        |  |  |   | —                                                        |  |  |  | —                                                        |  |  |   | —                                                        |  |  |  | 1,000,000                                             |   |  |  
|                                                                                |  |          |                                                          |  |  |   |                                                          |  |  |  |                                                          |  |  |   |                                                          |  |  |  |                                                       |   |  |  
|Net loss for the year ended December 31, 2014                                   |  |          | —                                                        |  |  |   | —                                                        |  |  |  | —                                                        |  |  |   | —                                                        |  |  |  | —                                                     |   |  |  
|                                                                                |  |          |                                                          |  |  |   |                                                          |  |  |  |                                                          |  |  |   |                                                          |  |  |  |                                                       |   |  |  
|Balance, December 31, 2014                                                      |  |          | —                                                        |  |  | $ | —                                                        |  |  |  | —                                                        |  |  | $ | —                                                        |  |  |  | 373,442,040                                           |   |  | $







See
accompanying notes to financial statements.



|Max Sound
    Corporation                                           
|--------------------------------------------------------------------
|Statements
    of Cash Flows                                        
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Cash
    Flows From Operating Activities:                           
|Net
    Loss                                                        
|Adjustments
    to reconcile net loss to net cash used in operations
|Depreciation/Amortization                                           
|Stock
    and stock options issued for services                     
|Warrants
    issued for services                                    



|Gain
    on settlement of accounts payable through issuance of common stock |  |  | (64,320   | ) |  |  | —          |  
|--------------------------------------------------------------------------- |  |  | --------- | - |  |  | ---------- | -
|Loss
    on debt conversion settled through the issuance of stock           |  |  | 183,907   |   |  |  | 46,093     |  
|Amortization
    of intangible assets                                       |  |  | 1,017,359 |   |  |  | 343,898    |  
|Amortization
    of stock based compensation                                |  |  | 50,000    |   |  |  | 615,000    |  
|Amortization
    of original issue discount                                 |  |  | 178,424   |   |  |  | 148,936    |  
|Amortization
    of debt offering costs                                     |  |  | 88,053    |   |  |  | 210,257    |  
|Amortization
    of debt discount                                           |  |  | 2,892,289 |   |  |  | 2,594,504  |  
|Change
    in fair value of derivative liability                            |  |  | 280,405   |   |  |  | (1,001,138 | )
|Loss
    on debt extinguishment                                             |  |  | 18,596    |   |  |  | —          |  
|Derivative
    Expense                                                      |  |  | 327,964   |   |  |  | 442,412    |  
|Warrants
    issued for services treated as derivative liabilities          |  |  | 11,973    |   |  |  | 43,809     |  
|Gain
    on sale of intellectual property                                   |  |  | —         |   |  |  | (220,000   | )
|Changes
    in operating assets and liabilities:                            |  |  |           |   |  |  |            |  
|(Increase)/Decrease
    in prepaid expenses                                 |  |  | 34,862    |   |  |  | (13,515    | )
|Increase/(Decrease)
    in inventory                                        |  |  | —         |   |  |  | (29,275    | )
|Increase/(Decrease)
    accounts payable                                    |  |  | 647,710   |   |  |  | 173,672    |  
|Increase/(Decrease)
    in accrued expenses                                 |  |  | 288,409   |   |  |  | 147,287    |  



|Net
    Cash Used In Operating Activities                                              |  |   | (2,956,189 | ) |  |   | (3,568,107 | )
|-------------------------------------------------------------------------------------- |  | - | ---------- | - |  | - | ---------- | -
|                                                                                       |  |   |            |   |  |   |            |  
|Cash
    Flows From Investing Activities:                                              |  |   |            |   |  |   |            |  
|Cash
    paid in connection with acquisition of assets and intellectual property       |  |   | (550,000   | ) |  |   | 8,011      |  
|Purchase
    of property equipment                                                     |  |   | (17,002    | ) |  |   | (10,003    | )
|Net
    Cash Used In Investing Activities                                              |  |   | (567,002   | ) |  |   | (1,992     | )
|                                                                                       |  |   |            |   |  |   |            |  
|Cash
    Flows From Financing Activities:                                              |  |   |            |   |  |   |            |  
|Proceeds
    from stockholder loans / lines of credit                                  |  |   | 153,000    |   |  |   | 318,000    |  
|Repayment
    from stockholder loans / lines of credit                                 |  |   | (35,000    | ) |  |   | (178,000   | )
|Repayment
    of convertible note                                                      |  |   | (28,340    | ) |  |   | —          |  
|Proceeds
    from issuance of convertible note, less offering costs and OID costs paid |  |   | 3,302,500  |   |  |   | 3,418,499  |  
|Proceeds
    from warrants exercised                                                   |  |   | —          |   |  |   | 43,080     |  
|Net
    Cash Provided by Financing Activities                                          |  |   | 3,392,160  |   |  |   | 3,601,579  |  
|                                                                                       |  |   |            |   |  |   |            |  
|Net
    Decrease in Cash                                                               |  |   | (131,031   | ) |  |   | 31,480     |  
|                                                                                       |  |   |            |   |  |   |            |  
|Cash
    at Beginning of Period                                                        |  |   | 166,778    |   |  |   | 135,298    |  
|                                                                                       |  |   |            |   |  |   |            |  
|Cash
    at End of Period                                                              |  | $ | 35,747     |   |  | $ | 166,778    |  
|                                                                                       |  |   |            |   |  |   |            |  
|Supplemental
    disclosure of cash flow information:                                  |  |   |            |   |  |   |            |  
|                                                                                       |  |   |            |   |  |   |            |  
|Cash
    paid for interest                                                             |  | $ | —          |   |  | $ | —          |  
|Cash
    paid for taxes                                                                |  | $ | —          |   |  | $ | —          |  
|                                                                                       |  |   |            |   |  |   |            |  



|Supplemental
    disclosure of non-cash investing and financing activities:                          |  |   |           | 
|---------------------------------------------------------------------------------------------------- |  | - | --------- | 
|Shares
    issued in connection with assets and intellectual property                                |  | $ | 1,514,000 | 
|Shares
    issued in conversion of convertible debt and accrued interest                             |  | $ | 3,236,092 | 
|Shares
    issued for accrued interest                                                               |  | $ | 1,020     | 
|Reclassification
    of derivative liability to additional paid in capital                           |  | $ | 2,355,376 | 
|Reclassification
    of accounts payable and penalties to convertible note                           |  | $ | 76,094    | 
|Stock
    issued for future services (Deferred Compensation)                                         |  | $ | —         | 
|Shares
    issued for direct offering costs                                                          |  | $ | —         | 
|Accrued
    interest reclassified to principal                                                       |  | $ | 255,232   | 
|Shares
    purchased in connection with sale of intellectual property                                |  | $ | —         | 
|Return
    of shares related to cancelled contract                                                   |  | $ | 425       | 
|Settlement
    of accounts payable through issuance of common stock                                  |  | $ | 90,000    | 
|Debt
    discount recorded on convertible and unsecured debt accounted for as a derivative liability |  | $ | 3,084,057 | 





See
accompanying notes to financial statements.





| |  |  |  |  |  |  |  |  |  |  | 
| |  |  |  |  |  |  |  |  |  |  | 

37







Max
Sound Corporation

Note
to Financial Statements

As
of December 31, 2014







NOTES





NOTE
1           SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION



(A)
Organization and Basis of Presentation



Max
Sound Corporation (the "Company") was incorporated in Delaware on December 9, 2005, under the name 43010, Inc. The Company
business operations are focused primarily on developing and launching audio technology software.



Effective
March 1, 2011, the Company filed with the State of Delaware a Certificate of Amendment of Certificate of Incorporation changing
our name from So Act Network, Inc. to Max Sound Corporation.



(B)
Use of Estimates



In
preparing financial statements in conformity with generally accepted accounting principles, management is required to make estimates
and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities
at the date of the financial statements and revenues and expenses during the reported period. Actual results could differ from
those estimates.



(C)
Cash and Cash Equivalents



For
purposes of the cash flow statements, the Company considers all highly liquid investments with original maturities of three months
or less at the time of purchase to be cash equivalents. As of December 31, 2014 and 2013, the Company had no cash equivalents.



(D)
Property and Equipment



Property
and equipment are stated at cost, less accumulated depreciation. Expenditures for maintenance and repairs are charged to expense
as incurred. Depreciation is provided using the straight-line method over the estimated useful life of three to five years.



(E)
Research and Development



The
Company has adopted the provisions of FASB Accounting Standards Codification No. 350,Intangibles - Goodwill & Other(“ASC
Topic 350”). Costs incurred in the planning stage of a website are expensed as research and development while costs
incurred in the development stage are capitalized and amortized over the life of the asset, estimated to be three years. Expenses
subsequent to the launch have been expensed as website development expenses.



(F)
Concentration of Credit Risk

The
Company at times has cash in banks in excess of FDIC insurance limits. The Company had $0 in excess of FDIC insurance limits as
of December 31, 2014 and 2013.



(G)
Revenue Recognition



The
Company recognized revenue on arrangements in accordance with FASB Codification Topic 605,“Revenue Recognition”(“ASC Topic 605”). Under ASC Topic 605, revenue is recognized only when the price is fixed and determinable, persuasive
evidence of an arrangement exists, the service is performed and collectability of the resulting receivable is reasonably assured.
We had revenues of $2,491 and $2,498 for the years ended December 31, 2014 and 2013, respectively.





(H)
Advertising Costs



Advertising
costs are expensed as incurred and include the costs of public relations activities. These costs are included in consulting and
general and administrative expenses and totaled $238,086 and $59,642 for the years ended December 31, 2014 and 2013, respectively.

38









Max
Sound Corporation

Note
to Financial Statements

As
of December 31, 2014





(I)
Identifiable Intangible Assets



As
of December 31, 2014 and 2013, $7,500,275 of costs related to registering a trademark and acquiring technology rights (audio technology
known as Max Audio Technology (MAXD) have been capitalized. It has been determined that the trademark and technology rights have
an indefinite useful life and are not subject to amortization. However, the trademark and technology rights will be reviewed for
impairment annually or more frequently if impairment indicators arise.



On
November 15, 2012, the Company acquired the rights to assets and audio technology known as Liquid Spins, Inc. through a share
exchange, whereby the Company issued 24,752,475 shares of common stock for their rights in Liquid Spins technology (See Note 8
(H)). As of December 31, 2014 and 2013, $8,338,121 and $9,303,679, respectively, of costs related to this intangible remain capitalized.
The technology was placed in service on August 23, 2013 with a useful life of 10 years. However, the technology will be reviewed
for impairment annually or more frequently if impairment indicators arise.



On
May 19, 2014, the Company entered into an agreement with VSL Communications to acquire the rights to intellectual property titled
“Optimized Data Transmission System and Method” (“ODT”) through a cash payment of $500,000 in addition
to a share issuance, whereby the Company issued 10,000,000 shares of common stock, valued at $1,000,000 ($0.10/share). In exchange,
the Company received a perpetual, exclusive, worldwide license to the ODT technology for all fields of use. In addition, the Company
issued 1,000,000 shares of common stock, valued at $120,000 ($0.12/share), as compensation for the introduction and identification
of a seller based on the agreement dated April 10, 2014.



As
of December 31, 2014, $1,620,000 of costs related to the “ODT” intangible asset remains capitalized. The technology
will be reviewed for impairment annually or more frequently if impairment indicators arise. In connection with this agreement,
the Company is obligated to make an additional five (5) payments totaling $1,000,000 to be made every 30 days, with the thirty
(30) day periods to be waived if fund raising occurs on an anticipated faster time line. The payments of additional cash are contingent
on the following funding criteria:



| | ● | The
    Company shall pay set increments of cash based on a percentage of gross funds received through funds raised.
| | - | --------------------------------------------------------------------------------------------------------------------
| | ● | The
    Company shall pay 20% of such monies as soon as they are received.                                          



In
connection with funds raised through December 31, 2014, the Company recorded a liability and expensed $325,556 as royalty cost,
related to the 20% fee, as of December 31, 2014, $30,000 has been paid . The remaining liability as of December 31, 2014, is $295,556
and is included in accounts payable.



The
Company shall act as the exclusive agent to facilitate and negotiate any opportunities on behalf of ODT to Companies, Organizations
and other qualified entities. Upon any closing, ODT shall receive 50% of gross dollars and the Company shall receive the other
50% at the time of a completion of any transaction opportunity, including legal settlements after subtracting applicable contingent
legal fees. The term of the agreement is for the life of the acquired intellectual property.



On
August 11, 2014, the Company and VSL simultaneously filed trade secret and patent infringement actions against Google, Inc. and
its subsidiaries, YouTube, LLC and On2 Technologies, Inc., relating to proprietary and patented technology owned by Vedanti Systems
Limited, a subsidiary of VSL.  The patent infringement complaint was brought in U.S. District Court for the District of Delaware
and the trade secret suit was filed in Superior Court of California, County of Santa Clara.  The lawsuits contend that, in
2010, while Google was in discussions with Vedanti about the possibility of acquiring Vedanti's patented digital video streaming
techniques and other proprietary methods, Google gained access to and received technical guidance regarding Vedanti’s proprietary
codec, a computer program capable of encoding and decoding a digital data stream or signal.  The complaints allege that soon
after the two companies initiated negotiations, Google began implementing Vedanti's

39









Max
Sound Corporation

Note
to Financial Statements

As
of December 31, 2014





technology
into its own WebM/VP8 video codec without informing Vedanti, and without compensating Vedanti for its use.  Plaintiffs are
seeking a permanent injunction against Google, compensatory damages, as well as treble damages. As exclusive agent to VSL to enforce
all rights with respect to the subject technology, the Company has hired Grant & Eisenhofer, PA to represent the Company and
VSL in the suits. These cases will be vigorously prosecuted and the Company believes it has a good likelihood of success.



On
May 22, 2014, the Company entered into a five (5) year agreement to acquire the rights to intellectual property titled “Engineered
Architecture” (“EA Technology”) through a cash payment of $50,000 in addition to a share issuance, whereby the
Company issued 4,000,000 shares of common stock, valued at $394,000 ($0.0985/share). In exchange, the Company received for the
term of the agreement, the exclusive worldwide right to use the EA Technology. As of December 31, 2014, $392,200 of costs related
to this intangible remains capitalized. The technology will be reviewed for impairment annually or more frequently if impairment
indicators arise. In connection with this agreement, the Company is obligated to make an additional five (5) payments totaling
$500,000 to be made every 30 days, with the thirty (30) day periods to be waived if fund raising occurs on an anticipated faster
time line. The payments of additional cash are contingent on the following funding criteria:



| | ● | The
    Company shall pay set increments of cash based on a percentage of gross funds received through funds raised.
| | - | --------------------------------------------------------------------------------------------------------------------
| | ● | The
    Company shall pay 10% of such monies as soon as they are received.                                          



In
connection with funds raised through December 31, 2014, the Company recorded a liability and expensed $162,778 as royalty cost,
related to the 10% fee, as of December 31, 2014, $25,000 has been paid . The remaining liability as of December 31, 2014, is $137,778
and is included in accounts payable.



The
Company shall act as the exclusive agent to facilitate and negotiate any opportunities on behalf of EA Technology to Companies,
Organizations and other qualified entities. Upon any closing, EA shall receive 50% of gross dollars and the Company shall receive
the other 50% at the time of a completion of any transaction opportunity, including legal settlements after subtracting applicable
contingent legal fees. In the event the Company sublicenses EA to other entities, profits shall be split evenly 50%/50%.





(J)
Impairment of Long-Lived Assets



The
Company accounts for its long-lived assets in accordance with ASC Topic 360-10-05, “Accounting for the Impairment or Disposal
of Long-Lived Assets.” ASC Topic 360-10-05 requires that long-lived assets, such as technology rights, be reviewed for impairment
annually, or whenever events or changes in circumstances indicate that the historical cost carrying value of an asset may no longer
be appropriate. The Company assesses recoverability of the carrying value of an asset by estimating the future net cash flows
expected to result from the asset, including eventual disposition. If the future net cash flows are less than the carrying value
of the asset, an impairment loss is recorded equal to the difference between the asset’s carrying value and fair value or
disposable value. No impairments were recorded for the years ended December 31, 2014 and 2013, respectively.



(K)
Loss Per Share



In
accordance with accounting guidance now codified as FASB ASC Topic 260,“Earnings per Share,” Basic earnings
per share (“EPS”) is computed by dividing net loss available to common stockholders by the weighted average number
of common shares outstanding during the period, excluding the effects of any potentially dilutive securities. Diluted EPS gives
effect to all dilutive potential of shares of common stock outstanding during the period including stock options or warrants,
using the treasury stock method (by using the average stock price for the period to determine the number of shares assumed to
be purchased from the exercise of stock options or warrants), and convertible debt or convertible preferred stock, using the if-converted
method. Diluted EPS excludes all dilutive potential of shares of common stock if their effect is anti-dilutive. Because of the
Company’s

40









Max
Sound Corporation

Note
to Financial Statements

As
of December 31, 2014





net
losses, the effects of stock warrants and stock options would be anti-dilutive and accordingly, is excluded from the computation
of earnings per share.



The
computation of basic and diluted loss per share for the nine months ended December 31, 2014 and 2013, excludes the common stock
equivalents of the following potentially dilutive securities because their inclusion would be anti-dilutive:





| |                                                                                                    | December
    31, 2014 |  | December
    31, 2013
| | -------------------------------------------------------------------------------------------------- | --------------------- |  | ---------------------
| |                                                                                                    |                       |  |                      
| | Stock
                                         Warrants (Exercise price - $0.25 - $.50/share)      |                       |  |                      
| | Stock
                                         Options (Exercise price - $0.10 - $.50/share)       |                       |  |                      
| | Convertible
                                         Debt  (Exercise price - $0.07 - $.0817/share) |                       |  |                      
| |                                                                                                    |                       |  |                      
| | Total                                                                                              |                       |  |                      







(L)
Income Taxes



The
Company accounts for income taxes under FASB Codification Topic 740-10-25 (“ASC 740-10-25”) Income Taxes. Under ASC
740-10-25, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets
and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. Under ASC 740-10-25, the effect on deferred tax assets and liabilities of
a change in tax rates is recognized in income in the period that includes the enactment date.



The
net deferred tax liability in the accompanying balance sheets includes the following amounts of deferred tax assets and liabilities:

|                                     |   | 2014 |             | 2013
|------------------------------------ | - | ---- | ----------- | ----
|                                     |   |      |             |     
|Deferred tax
    liability:          | $ |      | $           |     
|Deferred
    tax asset               |   |      |             |     
|Stock
    options for services       |   |      | 511,951     |     
|Net
    Operating Loss Carry forward |   |      | 5,394,804   |     
|Valuation
    allowance              |   |      | (5,906,755) |     
|Net
    deferred tax asset           |   |      | —           |     
|Net
    deferred tax liability       |   | $    | —           |     





The
provision for income taxes has been computed as follows:



|                                                                                                                              |  | 2014 |             | 2013
|----------------------------------------------------------------------------------------------------------------------------- |  | ---- | ----------- | ----
|Expected
    income tax recovery (expense) at the statuary rate of 34%                                                        |  | $    | 3,353,736   |     
|Tax
    effect of expenses that are not deductible for income tax purposes (net of other amounts deductible for tax purposes) |  |      | (19,120)    |     
|Tax
    effect of differences in the timing of deductibility of items for income tax purposes:                                |  |      | (5,035,628) |     

41









Max
Sound Corporation

Note
to Financial Statements

As
of December 31, 2014





|Utilization of non-capital tax losses to offset current
    taxable income |  | - |             | -
|-------------------------------------------------------------------------- |  | - | ----------- | -
|Change
    in valuation allowance                                          |  |   | (1,635,122) |  
|                                                                           |  |   |             |  
|Provision
    for income taxes                                             |  | $ | —           |  



The
valuation allowance was established to reduce the deferred tax asset to the amount that will more likely than not be realized. This
is necessary due to the Company’s continued operating losses and the uncertainty of the Company’s ability to offset
future taxable income through 2034.



The
net change in the valuation allowance for the year ended December 31, 2014 and 2013 was an increase of $1,635,122 and $1,800,887, respectively.





The
Company's federal income tax returns are no longer subject to examination by the IRS for the years prior to 2011, and the related
state income tax returns are no longer subject to examination by state authorities for the years prior to 2011.



(M)
Business Segments



The
Company operates in one segment and therefore segment information is not presented.



(N)
Recent Accounting Pronouncements



On
June 10, 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2014-10, Development Stage
Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities
Guidance in Topic 810, Consolidation ("ASUE 2014-10"). The guidance is intended to reduce the overall cost and complexity
associated with financial reporting for development stage entities without reducing the availability of relevant information.
The FASB also believes the changes will simplify the consolidation accounting guidance by removing the differential accounting
requirements for development stage entities. As a result of these changes, there no longer will be any accounting or reporting
differences in GAAP between development stage entities and other operating entities. For organizations defined as public business
entities, the presentation and disclosure requirements in Topic 915 will no longer be required, starting with the first annual
period beginning after December 15, 2014, including interim periods therein. Early application is permitted for any annual reporting
period or interim period for which the entity's financial statements have not yet been issued (public business entities) or made
available for issuance (other entities). The Company has elected early application of this ASU and implemented the changes in
their financial statement for the year ended December 31, 2014.



42









Max
Sound Corporation

Note
to Financial Statements

As
of December 31, 2014





In
June 2014, FASB issued Accounting Standards Update (“ASU”) No. 2014-12, “Compensation – Stock Compensation
(Topic 718); Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved
after the Requisite Service Period”. The amendments in this ASU apply to all reporting entities that grant their employees
share-based payments in which the terms of the award provide that a performance target that affects vesting could be achieved
after the requisite service period. The amendments require that a performance target that affects vesting and that could be achieved
after the requisite service period be treated as a performance condition. A reporting entity should apply existing guidance in
Topic 718 as it relates to awards with performance conditions that affect vesting to account for such awards. For all entities,
the amendments in this ASU are effective for annual periods and interim periods within those annual periods beginning after December
15, 2015. Earlier adoption is permitted. Entities may apply the amendments in this ASU either (a) prospectively to all awards
granted or modified after the effective date or (b) retrospectively to all awards with performance targets that are outstanding
as of the beginning of the earliest annual period presented in the financial statements and to all new or modified awards thereafter.
If retrospective transition is adopted, the cumulative effect of applying this update as of the beginning of the earliest annual
period presented in the financial statements should be recognized as an adjustment to the opening retained earnings balance at
that date. Additionally, if retrospective transition is adopted, an entity may use hindsight in measuring and recognizing the
compensation cost. This updated guidance is not expected to have a material impact on our results of operations, cash flows or
financial condition.  We are currently reviewing the provisions of this ASU to determine if there will be any impact on our
results of operations, cash flows or financial condition.



In
August 2014, the FASB issued Accounting Standards Update “ASU” 2014-15 on “Presentation of Financial Statements
Going Concern (Subtopic 205-40) – Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern”.
Currently, there is no guidance in U.S. GAAP about management’s responsibility to evaluate whether there is substantial
doubt about an entity’s ability to continue as a going concern or to provide related footnote disclosures. The amendments
in this Update provide that guidance. In doing so, the amendments are intended to reduce diversity in the timing and content of
footnote disclosures. The amendments require management to assess an entity’s ability to continue as a going concern by
incorporating and expanding upon certain principles that are currently in U.S. auditing standards. Specifically, the amendments
(1) provide a definition of the term substantial doubt, (2) require an evaluation every reporting period including interim periods,
(3) provide principles for considering the mitigating effect of management’s plans, (4) require certain disclosures when
substantial doubt is alleviated as a result of consideration of management’s plans, (5) require an express statement and
other disclosures when substantial doubt is not alleviated, and (6) require an assessment for a period of one year after the date
that the financial statements are issued (or available to be issued). We are currently reviewing the provisions of this ASU to
determine if there will be any impact on our results of operations, cash flows or financial condition.



All
other newly issued accounting pronouncements but not yet effective have been deemed either immaterial or not applicable.



(O)
Fair Value of Financial Instruments



The
carrying amounts on the Company’s financial instruments including prepaid expenses, accounts payable, accrued expenses,
derivative liability, convertible note payable, and loan payable-related party, approximate fair value due to the relatively short
period to maturity for these instruments.



(P)
Stock-Based Compensation



In
December 2004, the FASB issued FASB Accounting Standards Codification No. 718, Compensation - Stock Compensation. Under FASB Accounting
Standards Codification No. 718, companies are required to measure the compensation costs of share-based compensation arrangements
based on the grant-date fair value and recognize the costs in the financial statements over the period during which employees
are required to provide services. Share-based compensation arrangements include stock options, restricted share plans, performance-based
awards, share appreciation rights and employee share purchase plans. As such, compensation cost is measured on the date

43









Max
Sound Corporation

Note
to Financial Statements

As
of December 31, 2014





of
grant at their fair value. Such compensation amounts, if any, are amortized over the respective vesting periods of the option
grant. The Company applies this statement prospectively.



Equity
instruments (“instruments”) issued to other than employees are recorded on the basis of the fair value of the instruments,
as required by FASB Accounting Standards Codification No. 718. FASB Accounting Standards Codification No. 505, Equity Based Payments
to Non-Employees defines the measurement date and recognition period for such instruments. In general, the measurement date is
when either a (a) performance commitment, as defined, is reached or (b) the earlier of (i) the non-employee performance is complete
or (ii) the instruments are vested. The measured value related to the instruments is recognized over a period based on the facts
and circumstances of each particular grant as defined in the FASB Accounting Standards Codification.



(Q)
Reclassification



Certain
amounts from prior periods have been reclassified to conform to the current period presentation. These reclassifications had no
impact on the Company's net loss or cash flows.



(R)
Derivative Financial Instruments



Fair
value accounting requires bifurcation of embedded derivative instruments such as conversion features in convertible debt or equity
instruments, and measurement of their fair value for accounting purposes. In determining the appropriate fair value, the Company
uses the Black-Scholes option-pricing model. In assessing the convertible debt instruments, management determines if the convertible
debt host instrument is conventional convertible debt and further if there is a beneficial conversion feature requiring measurement.
If the instrument is not considered conventional convertible debt, the Company will continue its evaluation process of these instruments
as derivative financial instruments.



Once
determined, derivative liabilities are adjusted to reflect fair value at each reporting period end, with any increase or decrease
in the fair value being recorded in results of operations as an adjustment to fair value of derivatives. In addition, the fair
value of freestanding derivative instruments such as warrants, are also valued using the Black-Scholes option-pricing model.



(S)
Original Issue Discount



For
certain convertible debt issued, the Company provides the debt holder with an original issue discount. The original issue discount
is recorded to debt discount, reducing the face amount of the note and is amortized to interest expense over the life of the debt.



(T)
Debt Issue Costs and Debt Discount



The
Company may pay debt issue costs, and record debt discounts in connection with raising funds through the issuance of convertible
debt. These costs are amortized to interest expense over the life of the debt. If a conversion of the underlying debt occurs,
a proportionate share of the unamortized amounts is immediately expensed.



(U)
Licensing & Distribution



On
May 28, 2014, the Company entered into a license agreement with Akyumen Technologies Corp. (“Akyumen”), an original
equipment manufacturer of mobile devices, for the non-exclusive, non-transferable, indivisible worldwide license rights to the
use of Company’s API technology in Akyumen’s mobile devices.  The license is for five years and is renewable,
with the Company’s approval, at Akyumen’s request.



As
consideration for the above-referenced license rights, Akyumen agreed to pay the Company royalties of $2.50 per Akyumen device
that utilizes the API technology, to be payable on a monthly basis within 15 days after the

44









Max
Sound Corporation

Note
to Financial Statements

As
of December 31, 2014





close
of the calendar month.  Akyumen also agreed to pay, within three months of first sale, 50% of non-recurring engineering
costs to port the Technology onto the operating systems of the Akyumen devices, inclusive of any local fees, taxes, or other charges.



On
June 16, 2014, MAXD entered into a license and revenue share agreement with LOOKHU, an online subscription service that delivers
movies, music, television shows, apps and games. The agreement grants LOOKHU non-exclusive, non-transferable, indivisible worldwide
license rights to the distribution and use of the Company’s Application Programming Interface (“API”) audio
processor technology. The license is for five years and is renewable, with the Company’s approval, at LOOKHU’s request.



As
consideration for the above-referenced license rights, LOOKHU agreed to pay the Company royalties of $0.25 per month per paid
subscription to the technology, to be payable on a monthly basis.  Additionally, LOOKHU agreed to pay the Company 4% of the
net advertising revenue derived from advertising that utilizes the technology, to be payable on a quarterly basis.



Additionally,
for the term of the agreement, the parties agreed to split, on a 50/50 basis, net revenue derived from sales of digital music
or songs played from a LOOKHU software player, to be payable on a monthly basis.



NOTE
2           GOING CONCERN



As
reflected in the accompanying audited financial statements, the Company had a net loss of $9,863,929 for the year ended
December 31, 2014, and an accumulated deficit of $37,136, 982 as of December 31, 2014, and has negative cashflow from
operations of $2,956,189 as of and for the year ended December 31, 2014.



As
the Company continues to incur losses, transition to profitability is dependent upon the successful commercialization of its products
and achieving a level of revenues adequate to support the Company’s cost structure.



The
Company may never achieve profitability, and unless and until it does, the Company will continue to need to raise additional cash.
Management intends to fund future operations through additional private or public debt or equity offerings. Based on the Company’s
operating plan, existing working capital at December 31, 2014 was not sufficient to meet the cash requirements to fund planned
operations through January 31, 2015 without additional sources of cash. This raises substantial doubt about the Company’s
ability to continue as a going concern.  The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern and do not include adjustments that might result from the outcome of this uncertainty.





NOTE
3           DEBT



Debt
consists of the following:



|                                   |  | As
    of             |            | As
    of            
|---------------------------------- |  | --------------------- | ---------- | ---------------------
|                                   |  | December
    31, 2014 |            | December
    31, 2013
|                                   |  |                       |            |                      
|Line of credit
    - related party |  | $                     | 268,227    |                      
|                                   |  |                       |            |                      
|Convertible debt                   |  |                       | 3,028,418  |                      
|Less:
    debt discount            |  |                       | (1,691,065 | )                    
|Convertible debt - net             |  |                       | 1,337,353  |                      
|                                   |  |                       |            |                      
|Total
    current debt             |  | $                     | 1,605,580  |                      







| | (A) | Line
    of credit – related party
| | --- | ----------------------------------



Line
of credit with the principal stockholder consisted of the following activity and terms:





|                                                       |  | Principal |          | Interest
    Rate |  | Maturity
|------------------------------------------------------ |  | --------- | -------- | ----------------- |  | --------
|                                                       |  |           |          |                   |  |         
|Balance - December 31, 2012                            |  | $         | —        |                   |  |         
|Borrowings during the year ended
    December 31, 2013 |  |           | 318,000  |                   |  |         
|Repayments                                             |  |           | (178,000 | )                 |  |         
|Balance - December 31, 2013                            |  |           | 140,000  |                   |  |         
|Borrowings during the year ended December 31, 2014     |  |           | 153,000  |                   |  |         
|Interest accrual                                       |  |           | 10,227   |                   |  |         
|Repayments                                             |  |           | (35,000  | )                 |  |         
|Balance - December
    31, 2014                        |  | $         | 268,227  |                   |  |         





(B)
Convertible Debt



During
the years ended December 31, 2014 and 2013, the Company issued convertible notes totaling $3,475,334 and $3,843,221, respectively.
The Convertible notes issued in the year ended December 31, 2014 and, 2013, consist of the following terms:





|                      |  |                                                                                                                                                                                                                                                                 |  |   | Year ended                        |  |  |   | Year ended                           | 
|--------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | - | --------------------------------- |  |  | - | ------------------------------------ | 
|                      |  |                                                                                                                                                                                                                                                                 |  |   | December 31, 2014                 |  |  |   | December 31, 2013                    | 
|                      |  |                                                                                                                                                                                                                                                                 |  |   | Amount of                         |  |  |   | Amount of                            | 
|                      |  |                                                                                                                                                                                                                                                                 |  |   | Principal Raised                  |  |  |   | Principal Raised                     | 
|Interest Rate         |  |                                                                                                                                                                                                                                                                 |  |   | 2.5% - 10%                        |  |  |   | 4% - 10%                             | 
|Default interest rate |  |                                                                                                                                                                                                                                                                 |  |   | 14% - 22%                         |  |  |   | 14% - 22%                            | 
|Maturity              |  |                                                                                                                                                                                                                                                                 |  |   | February 26, 2015 - June 18, 2016 |  |  |   | October 24, 2013 - December 29, 2014 | 
|                      |  |                                                                                                                                                                                                                                                                 |  |   |                                   |  |  |   |                                      | 
|Conversion terms 1    |  | 65% of the “Market Price”, which is the average of the lowest three (3) trading prices for the common stock during the fifteen (15) trading day period prior to the conversion.                                                                                 |  | $ | —                                 |  |  | $ | 100,000                              | 
|Conversion terms 2    |  | 65% of the “Market Price”, which is the average of the lowest three (3) trading prices for the common stock during the ten (10) trading day period prior to the conversion.                                                                                     |  |   | 689,500                           |  |  |   | 501,500                              | 
|Conversion terms 3    |  | 65% of the “Market Price”, which is the lowest trading prices for the common stock during the ten (10) trading day period prior to the conversion.                                                                                                              |  |   | 747,500                           |  |  |   | —                                    | 
|Conversion terms 4    |  | 70% of the “Market Price”, which is lower of the average closing bid price for the common stock during the ten (10) trading day period                                                                                                                          |  |   | —                                 |  |  |   | 183,333                              | 
|Conversion terms 5    |  | 70% of the “Market Price”, which is the average of the lowest three (3) trading prices for the common stock during the fifteen (15) trading day period prior to the conversion.                                                                                 |  |   | —                                 |  |  |   | 50,000                               | 
|Conversion terms 6    |  | 70% of the “Market Price”, which is the average of the lowest three (3) trading prices for the common stock during the ten (10) trading day period prior to the conversion.                                                                                     |  |   | 250,000                           |  |  |   | 498,500                              | 
|Conversion terms 7    |  | 70% of the “Market Price”, which is the average of the lowest three (3) trading prices for the common stock during the twenty (20) trading day period prior to the conversion.                                                                                  |  |   | 125,000                           |  |  |   | 125,000                              | 
|Conversion terms 8    |  | 70% of the lower of the average of the three (3) lowest trading prices for the fifteen (15) day trading period 1 day prior to conversion.                                                                                                                       |  |   | 50,000                            |  |  |   | 150,000                              | 
|Conversion terms 9    |  | 75% of the “Market Price”, which is the average of the lowest three (3) trading prices for the common stock during the ten (10) trading day period prior to the conversion.                                                                                     |  |   | 848,334                           |  |  |   | 2,234,888                            | 
|Conversion terms 10   |  | Convertible into $0.07/share.  After six month from the date of this note, conversion price shall equal the lower of $0.07/share or the variable conversion price - 75% of the average three (3) lowest closing priceds during the ten (10) trading day period. |  |   | 765,000                           |  |  |   | —                                    | 
|                      |  |                                                                                                                                                                                                                                                                 |  |   |                                   |  |  |   |                                      | 
|                      |  |                                                                                                                                                                                                                                                                 |  | $ | 3,475,334                         |  |  | $ | 3,843,221                            | 







The
debt holders are entitled, at their option, to convert all or part of the principal and accrued interest into shares of the Company’s
common stock at conversion prices and terms discussed above.    The Company classifies embedded conversion
features in these notes as a derivative liability due to management’s assessment that the Company may not have sufficient
authorized number of shares of common stock required to net-share settle or due to the existence of a ratchet due to an anti-dilution
provision. See Note 4 regarding accounting for derivative liabilities.



During
the year ended December 31, 2014, the Company converted debt and accrued interest, totaling $3,421,019 into 48,998,342 shares
of common stock.    Conversions of debt to equity occurring after the maturity date and penalties incurred
resulted in a loss on settlement of $183,907.



During
the year ended December 31, 2013, the Company converted debt and accrued interest, totaling $2,736,376 into 19,146,156 shares
of common stock.



Convertible
debt consisted of the following activity and terms:



45









Max
Sound Corporation

Note
to Financial Statements

As
of December 31, 2014





|Convertible
    Debt Balance as of December 31, 2012                                                                                                                                                                |  |  | 1,247,052  |   |  |  | 0%
                                         - 10%   |  |  |  |                                                                               | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  |  | ---------- | - |  |  | --------------------------------------------------- |  |  |  | ----------------------------------------------------------------------------- | 
|                                                                                                                                                                                                                    |  |  |            |   |  |  |                                                     |  |  |  |                                                                               | 
|Borrowings during the year
    ended December 31, 2013                                                                                                                                                              |  |  | 3,843,221  |   |  |  | 2.5%
                                         - 10% |  |  |  | October
                                         24, 2013 - December 29, 2014 | 
|                                                                                                                                                                                                                    |  |  |            |   |  |  |                                                     |  |  |  |                                                                               | 
|Non-Cash Reclassification
    of accrued interest converted                                                                                                                                                         |  |  | 113,386    |   |  |  |                                                     |  |  |  |                                                                               | 
|                                                                                                                                                                                                                    |  |  |            |   |  |  |                                                     |  |  |  |                                                                               | 
|Conversion  of
    debt to into 19,146,156 shares of common stock with a valuation of $2,736,376 ($0.09 - $0.27/share) including the accrued
    interest of $113,386                                               |  |  | (2,684,915 | ) |  |  |                                                     |  |  |  |                                                                               | 
|                                                                                                                                                                                                                    |  |  |            |   |  |  |                                                     |  |  |  |                                                                               | 
|Convertible Debt Balance
    as of December 31, 2013                                                                                                                                                                |  |  | 2,518,744  |   |  |  | 2.5%
                                         - 10% |  |  |  | February
                                         2, 2014 - December 29, 2014 | 
|                                                                                                                                                                                                                    |  |  |            |   |  |  |                                                     |  |  |  |                                                                               | 
|Borrowings during the year
    ended December 31, 2014                                                                                                                                                              |  |  | 3,475,334  |   |  |  | 2.5%
                                         - 10% |  |  |  | February
                                         26, 2015 - June 18, 2016    | 
|                                                                                                                                                                                                                    |  |  |            |   |  |  |                                                     |  |  |  |                                                                               | 
|Non-Cash Reclassification
    of accounts payable to debt and addition of penalties                                                                                                                                 |  |  | 76,094     |   |  |  |                                                     |  |  |  |                                                                               | 
|                                                                                                                                                                                                                    |  |  |            |   |  |  |                                                     |  |  |  |                                                                               | 
|Non-Cash Reclassification
    of accrued interest converted                                                                                                                                                         |  |  | 255,232    |   |  |  |                                                     |  |  |  |                                                                               | 
|                                                                                                                                                                                                                    |  |  |            |   |  |  |                                                     |  |  |  |                                                                               | 
|Repayments                                                                                                                                                                                                          |  |  | (28,340    | ) |  |  |                                                     |  |  |  |                                                                               | 
|                                                                                                                                                                                                                    |  |  |            |   |  |  |                                                     |  |  |  |                                                                               | 
|Conversion  of
    debt to into 48,998,342 shares of common stock with a valuation of $3,421,019 ($0.09 - $0.27/share) including the accrued
    interest of $255,232 and penalties/loss on conversions of $183,911 |  |  | (3,268,646 | ) |  |  |                                                     |  |  |  |                                                                               | 
|                                                                                                                                                                                                                    |  |  |            |   |  |  |                                                     |  |  |  |                                                                               | 
|Convertible
    Debt Balance as of December 31, 2014                                                                                                                                                                |  |  | 3,028,418  |   |  |  | 4%
                                         - 10%   |  |  |  | February
                                         26, 2015 - June 18, 2016    | 





On
December 11, 2012, the Company entered into an agreement whereby the Company will issue up to $120,000 in a convertible note.    The
note matured on December 11, 2013 and bears an interest rate of 8%. As of December 31, 2013 and 2012, the Company balance of the
convertible note and accrued interest is $128,810 and 120,526, respectively.      The holder of
the note has a right to convert all or any part of the outstanding an unpaid principal amount into shares of common stock after
six months.    The conversion price equals to $0.50 per share.    For the year ended December
31, 2013, the Company issued 24,000 shares of common stock for accrued interest having a fair value of $5,368 ($0.21 - $0.25/share).



As
of December 31, 2013, the note was outstanding and was in default.



During
the three months ended March 31, 2014, the Company negotiated modifications to the December 11, 2012 convertible debt.  For
the modification, the Company compared the value of both the old and new convertible debt.    The Company
determined that the present value of the cash flows associated with the new convertible debt exceeded the present value of the
old convertible debt by more than 10%, which resulted in the application of extinguishment accounting.



The
modification of the note included extension of terms through July 31, 2014, decrease in the conversion price to $0.10 per share
and an increase in the interest rate to 10%.  The Company also negotiated to convert $30,000 in accounts payable owed
to the debt holder to be included in the convertible debt increasing the principal balance to $150,000.  In accordance
with ASC 470-20-25-13, the convertible debt instrument was issued at a substantial premium which represented additional paid in
capital.  In connection with the extinguishment, the Company recorded a loss on extinguishment of $18,596 with the offset
recorded to additional paid in capital.



During
the three months ended June 30, 2014, the Company negotiated a further extension of the note through July 31, 2014. During the
year ended December 31, 2014, the Company repaid $28,340 and reclassified $13,540 of accounts payable owed to the note holder
to be included in the principal balance of the note. As of December 31, 2014, the principal balance of the note including accrued
interest totaled $145,149 of which the principal balance of $135,200 is included as a component of convertible debt. The note
is currently in default.

46







Max
Sound Corporation

Note
to Financial Statements

As
of December 31, 2014







(B)
Debt Issue Costs



During the year ended December 31, 2014, the Company paid debt issue costs totaling $57,500.



During
the year ended December 31, 2013, the Company paid debt issue costs totaling $180,388, which includes fees paid through the issuance
of common stock in the amount of $20,554.



The
following is a summary of the Company’s debt issue costs:







|                                                 |  | Year
    ended        |          | Year
    ended       
|------------------------------------------------ |  | --------------------- | -------- | ---------------------
|                                                 |  | December
    31, 2014 |          | December
    31, 2013
|                                                 |  |                       |          |                      
|Debt issue costs                                 |  | $                     | 195,055  |                      
|Accumulated amortization
    of debt issue costs |  |                       | (167,599 | )                    
|                                                 |  |                       |          |                      
|Debt
    issue costs - net                       |  | $                     | 27,456   |                      







During
the years ended December 31, 2014 and 2013, the Company amortized $88,053 and $210,257 of debt issue costs, respectively.





| | (D | Debt
    Discount & Original Issue Discount
| | -- | -------------------------------------------



During
the years ended December 31, 2014 and 2013, the Company recorded debt discounts and original issue discounts totaling $3,199,391
and $3,662,016, respectively.



The
debt discount recorded in 2014 and 2013 pertains to convertible debt that contains embedded conversion options that are required
to bifurcated and reported at fair value and original issue discounts.



The
Company amortized $3,070,714 and $2,743,440 during the year ended December 31, 2014 and 2013, respectively, to amortization of
debt discount expense.





|                                              |  | Year
    ended        |            | Year
    ended       
|--------------------------------------------- |  | --------------------- | ---------- | ---------------------
|                                              |  | December
    31, 2014 |            | December
    31, 2013
|                                              |  |                       |            |                      
|Debt discount                                 |  | $                     | 4,852,935  |                      
|Accumulated amortization
    of debt discount |  |                       | (3,161,870 | )                    
|                                              |  |                       |            |                      
|Debt
    discount - Net                       |  | $                     | 1,691,065  |                      





NOTE
4           DERIVATIVE LIABILITIES



The
Company identified conversion features embedded within convertible debt issued in 2014 and 2013 and warrants issued in 2014 and
2013. The Company has determined that the features associated with the embedded conversion option should be accounted for at fair
value as a derivative liability.



As
a result of the application of ASC No. 815, the fair value of the conversion feature is summarized as follow:



|Derivative Liability - December
    31, 2012                                                                          |  | $ | 1,166,286  |  
|--------------------------------------------------------------------------------------------------------------------- |  | - | ---------- | -
|                                                                                                                      |  |   |            |  
|Fair value at the commitment
    date for convertible instruments                                                     |  |   | 3,839,539  |  
|Fair value at the commitment
    date for warrants issued                                                             |  |   | 43,809     |  
|Change in fair value of
    embedded derivative liability for warrants issued                                         |  |   | (4,384     | )
|Change in fair value of
    embedded derivative liability for convertible instruments                                 |  |   | (996,754   | )
|Reclassification
    to additional paid in capital for financial instruments that ceased to be a derivative liability |  |   | (2,162,726 | )
|Derivative Liability - December 31, 2013                                                                              |  |   | 1,885,770  |  
|                                                                                                                      |  |   |            |  
|Fair value at the commitment
    date for convertible instruments                                                     |  |   | 3,412,020  |  
|Fair value at the commitment
    date for warrants issued                                                             |  |   | 11,973     |  
|Change in fair value of
    embedded derivative liability for warrants issued                                         |  |   | (41,470    | )
|Change in fair value of
    embedded derivative liability for convertible instruments                                 |  |   | 321,875    |  
|Reclassification
    to additional paid in capital for financial instruments that ceased to be a derivative liability |  |   | (2,355,376 | )
|Derivative Liability
    - December 31, 2014                                                                          |  | $ | 3,234,792  |  





47











Max
Sound Corporation

Note
to Financial Statements

As
of December 31, 2014







The
Company recorded the debt discount to the extent of the gross proceeds raised, and expensed immediately the remaining value of
the derivative as it exceeded the gross proceeds of the note.  The Company also recorded the value of the warrants issued
for services as derivative expense for the year ended December 31, 2014.  The Company recorded a derivative expense
for the year ended December 31, 2014 and 2013 of $327,964 and $442,412, respectively.



The
fair value at the commitment and re-measurement dates for the Company’s derivative liabilities were based upon the following
management assumptions as of December 31, 2014:





|                         |  | Commitment
    Date |                                                         | Re-measurement
    Date
|------------------------ |  | ------------------- | ------------------------------------------------------- | -----------------------
|                         |  |                     |                                                         |                        
|Expected dividends:      |  |                     | 0                                                       | %                      
|Expected volatility:     |  |                     | 109%
                                         - 304%    |                        
|Expected term:           |  |                     | 0.44
                                         - 3 Years |                        
|Risk free interest rate: |  |                     | 0.06%
                                         - 0.94%  |                        







The
fair value at the commitment and re-measurement dates for the Company’s derivative liabilities were based upon the following
management assumptions as of December 31, 2013:





|                         |  | Commitment
    Date |                                                            | Re-measurement
    Date
|------------------------ |  | ------------------- | ---------------------------------------------------------- | -----------------------
|                         |  |                     |                                                            |                        
|Expected dividends:      |  |                     | 0                                                          | %                      
|Expected volatility:     |  |                     | 118.99%
                                         - 303.64% |                        
|Expected term:           |  |                     | 0.75
                                         - 3 Years    |                        
|Risk free interest rate: |  |                     | 0.15%
                                         - 0.17%     |                        









48







Max
Sound Corporation

Note
to Financial Statements

As
of December 31, 2014





NOTE
5           PROPERTY AND EQUIPMENT



At
December 31, 2014, and December 31, 2013, respectively, property and equipment is as follows:





|                                                    |  | December
    31, 2014 |          | December
    31, 2013
|--------------------------------------------------- |  | --------------------- | -------- | ---------------------
|                                                    |  |                       |          |                      
|Website Development                                 |  | $                     | 294,795  |                      
|Furniture and Equipment                             |  |                       | 99,881   |                      
|Leasehold Improvements                              |  |                       | 6,573    |                      
|Software                                            |  |                       | 53,897   |                      
|Music Equipment                                     |  |                       | 2,247    |                      
|Office Equipment                                    |  |                       | 71,652   |                      
|Domain Name                                         |  |                       | 1,500    |                      
|Sign                                                |  |                       | 628      |                      
|Total                                               |  |                       | 531,173  |                      
|Less:
    accumulated depreciation and amortization |  |                       | (342,277 | )                    
|Property
    and Equipment, Net                     |  | $                     | 188,896  |                      









Depreciation/amortization
expense for the year ended December 31, 2014 totaled $83,423.



Depreciation/amortization
expense for the year ended December 31, 2013 totaled $82,211.



NOTE
6          STOCKHOLDERS’ EQUITY



On
November 10, 2014, the Company with the consent of the Majority Shareholder and Unanimous Written Consent of the Board of Directors
filed with the State of Delaware an Amended Certificate of Incorporation increasing the authorized shares of common stock by 50,000,000
shares of common stock, and changing the par value to $.00001 per share.



On
March 4, 2015, the Company with the consent of the Majority Shareholder and Unanimous Written Consent of the Board of Directors
created and authorized the issuance of Series A Convertible Preferred stock, with a par value of $0.00001 per share. The face
amount of state value of each Preferred Share of stock is $0.96.



(A)
	Common Stock



During
the year ended December 31, 2014, the Company issued the following common stock:





|Transaction
    Type                                    |  | Quantity |            | Valuation |  | Range
    of Value per share
|------------------------------------------------------- |  | -------- | ---------- | --------- |  | ----------------------------
|                                                        |  |          |            |           |  |                             
|Conversion of
    convertible debt and accrued interest |  |          | 48,998,342 |           |  | $                           
|Services - rendered                                     |  |          | 3,150,000  |           |  |                             
|Acquisition of intangbiles                              |  |          | 15,000,000 |           |  |                             
|Return of shares                                        |  |          | (4,250,000 | )         |  |                             
|Settlement of accounts payable                          |  |          | 1,000,000  |           |  |                             
|                                                        |  |          |            |           |  |                             
|Total shares issued                                     |  |          | 63,898,342 |           |  | $                           







The
following is a detailed description of transactions noted above:



1.	Conversion
of convertible debt and accrued interest



49







Max
Sound Corporation

Note
to Financial Statements

As
of December 31, 2014





During
the year ended December 31, 2014, the Company converted debt and accrued interest, totaling $3,421,019 into 48,998,342 shares
of common stock.    Conversions of debt to equity occurring after the maturity date and penalties incurred
resulted in a loss on settlement of $183,911.



2.
Services Rendered



During
the year ended December 31, 2014, the Company issued 1,250,000 shares of common stock valued at $386,250 in connection with employment
agreements entered into (See Note 9 (A).



On
January 15, 2013, the Company entered into an agreement for legal services, pursuant to which the Company will pay $2,000 and
issue 50,000 shares of fully vested common stock for the preparation, filing costs and fees of each provisional and regular patent
application.  Through December 31, 2014, a total of 44 applications have been filed.  In connection with this
agreement:



| |  | During
    the year ended December 31, 2014, the Company issued 800,000 shares of fully vested common stock for services having a fair
    value of $131,500 ($0.11 - $0.168/share).
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



On
March 17, 2014, the Company entered into an advisory board agreement for a period of three years. In consideration for these services,
during the year ended December 31, 2014, the Consultant was granted 100,000 shares of fully vested common stock valued at $9,300
($0.09/share). (See note 7(B)).



On
April 4, 2014, the Company entered into consulting services agreement. In consideration for these services, during the year ended
December 31, 2014, the Consultant was granted 200,000 shares of fully vested common stock valued at $21,980 ($0.11/share). (See
note 7(B)).



During
the year ended December 31, 2014, the Company entered into a consulting services agreement related to marketing and the creation
of Company awareness. In connection with this agreement, the consultant shall be paid $20,000 and was issued 200,000 fully vested
shares of common stock valued at $31,000 ($0.16/share). (See note 7(B)).



On
August 6, 2014, the Company entered into an advisory board agreement for a period of three years. In consideration for these services,
during the year ended December 31, 2014, the Consultant was granted 100,000 fully vested shares of common stock valued at $16,500
($0.17/share). (See note 7(B)).



On
September 23, 2014, the Company entered into service agreement for a period of two years with the Company’s transfer agent.
In consideration for these services, during the year ended December 31, 2014, 300,000 shares of fully vested common stock valued
at $49,500 ($0.17/share) were granted and expensed.



On
September 10, 2014, the Company entered into an advisory board agreement. In consideration for these services, during the year
ended December 31, 2014, the Consultant was granted 100,000 shares of fully vested common stock valued at $16,000 ($0.16/share).
(See note 7(B)).



On
July 29, 2014, the Company entered into an investor relations agreement. In connection with this agreement, the Company is to
issue 100,000 shares of common stock monthly and $5,500 in monthly fees. As of December 31, 2014, the agreement was terminated.
In total, the consultant was issued 100,000 shares of fully vested common stock valued at $16,000 ($0.16/share) and was paid $5,500.
(See note 7(B)).



50







Max
Sound Corporation

Note
to Financial Statements

As
of December 31, 2014





3.
Acquisition of intangibles



During
the nine months ended December 31, 2014, the Company issued 15,000,000 common shares in connection with license agreements entered
into and intangibles acquired. See Note 1(I)



4.
Return of Shares



On
August 3, 2012, the Company entered into an endorsement agreement with an unrelated third party for a period from August 3, 2012
through August 3, 2015.    In exchange for the services provided, the Company issued 3,000,000 shares of common
stock having a fair value of $960,000 ($0.30/share) based upon fair value on the date of grant. As of January 2014, the August
3, 2012 agreement has been terminated and 3,000,000 shares have been returned to the Company (See note 7(B)).



In
July of 2013, the Company entered into a financial advisor agreement for a period of six months with the advisor providing various
assistance including introductions to potential investors. The Agreement calls for a fee of $25,000 with an additional $7,500
due and payable on the 1st day of the subsequent five months. On July 8, 2013, the Company issued 1,500,000 common shares as consideration
for these services valued at $315,000. On April 15, 2014, the parties entered into a mutual termination agreement, as a result,
1,250,000 shares were returned to the Company.



5.
Settlement of accounts payable



During
the year ended December 31, 2014, the Company settled accounts payable totaling $154,320 through the issuance of $1,000,000 common
shares with a valuation of $90,000. The Company recognize a gain on settlement of $64,320.





During
the year ended December 31, 2013, the Company issued the following common stock:





|Transaction
    Type                                    |  | Quantity |            | Valuation |  | Range
    of Value per share
|------------------------------------------------------- |  | -------- | ---------- | --------- |  | ----------------------------
|                                                        |  |          |            |           |  |                             
|Conversion of
    convertible debt and accrued interest |  |          | 19,146,156 |           |  | $                           
|Services - rendered                                     |  |          | 6,145,029  |           |  |                             
|Cash and warrants                                       |  |          | 540,901    |           |  |                             
|Return of shares                                        |  |          | (750,000   | )         |  |                             
|Shares issued as finders fees                           |  |          | 94,964     |           |  |                             
|Repurchased shares                                      |  |          | (3,000,000 | )         |  |                             
|                                                        |  |          |            |           |  |                             
|Total shares issued                                     |  |          | 22,177,050 |           |  | $                           







The
following is a more detailed description of select transactions noted above:



1.	Conversion
of convertible debt and accrued interest



During
the year ended December 31, 2013, the Company converted debt and accrued interest, totaling $ 2,736,376 into 19,146,156 shares
of common stock.



2.	Services
Rendered



During
the year ended December 31, 2013, the Company issued 2,350,000 shares of common stock valued at $623,500 in connection with employment
agreements entered into (See Note 7 (A).



51









Max
Sound Corporation

Note
to Financial Statements

As
of December 31, 2014





In
July of 2013, the Company entered into a financial advisor agreement for a period of six months with the advisor providing various
assistance including introductions to potential investors. The Agreement calls for a fee of $25,000 with an additional $7,500
due and payable on the 1st day of the subsequent five months. On July 8, 2013, the Company issued 1,500,000 common shares as consideration
for these services valued at $315,000.



On
February 1, 2013, the Company entered into a professional services agreement related to research and outreach media. In connection
with this agreement, the Company issued 500,000 shares of common stock valued at $120,000 during the year ended December 31, 2013.



On
January 15, 2013, the Company entered into an agreement for legal services, pursuant to which the Company will pay $2,000 and
issue 50,000 shares of common stock for the preparation, filing costs and fees of each provisional and regular patent application.  Through
December 31, 2014, a total of 44 applications have been filed.  In connection with this agreement:



| |  | During
    the year ended December 31, 2013, the Company issued 1,400,000 shares of common stock for legal services having a fair value
    of $355,600 ($0.25 - $0.26/share).
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



On
January 21, 2013, the Company entered into a professional services agreement related conference presentations. In connection with
this agreement, the Company issued 120,000 shares of common stock valued at $32,400 during the year ended December 31, 2013.



During
the year ended December 31, 2013, the Company entered into a professional services agreements. In connection with these agreements,
the Company issued 275,029 shares of common stock valued at $66,813 during the year ended December 31, 2013.



3.	Cash
and warrants



On
January 31, 2013 an individual exercised 430,800 of stock warrants at an exercise price of $0.10 per share for proceeds of $43,080.



On
December 26, 2013, the Company issued 110,101 shares of common stock in connection with a cashless exercise of warrants.  The
number of warrants received was based on 190,000 warrants exercised using an average of five previous closing prices.



4.	Return
of shares



On
February 6, 2012, the Company filed a suit for declaratory judgment and rescission of contract associated with a former consultant
for failure to perform contractual requirements.  It seeks clarification that the former consultant is not owed 750,000 shares
of restricted common stock.  The defendants have been served.  This case will be vigorously prosecuted and has a good
likelihood of a favorable outcome. The case seeks in excess of the jurisdictional amount, which is $50,000 dollars.  On
March 5, 2013, the suit was settled in favor of Max Sound Corporation and 750,000 shares issued to the former consultant were
returned to the treasury.



5.	Finders
Fees



During
the year ended December 31, 2013, in connection with debt raised of $833,333, the Company issued 94,964 common shares of the Company’s
common stock valued at $20,555 issued to the finder.





52









Max
Sound Corporation

Note
to Financial Statements

As
of December 31, 2014





6.	Repurchased
shares



During
the year ended December 31, 2013, the Company entered into a settlement agreement with the seller of the software to reverse the
original transaction which included the issuance of 3,000,000 shares of common stock in exchange for the software. The Company
received back 3,000,000 shares of common stock which was recorded as treasury stock in exchange of returning the software to the
seller. Upon the return of the shares, the Company recognized a gain of $220,000 based on the quoted trading price of the
Company’s common stock, which was the best evidence of fair value.



(B)
Stock Warrants



On
January 1, 2013, the Company issued 500,000 warrants under consulting agreements. The Company recognized an expense of $84,028
for the year ended December 31, 2013.    The Company recorded the fair value of the warrants    based
on the fair value of each warrant grant estimated on the date of grant using the Black-Scholes option pricing model with the following
weighted average assumptions used for grants in 2013, dividend yield of zero, expected volatility of 140.30%; risk-free interest
rates of 0.37%, expected life of three years. The warrants vested immediately.      The warrants
expire in three years from the date of issuance and have an exercise price of $0.45 per share (See Note 7(B)).



On
August 7, 2013, the Company issued 100,000 warrants for services rendered. The Company recognized compensation expense of $43,809
on the date of issuance with the offset being recorded to derivative liabilities since the Company applied the provisions of ASC
No. 815, pertaining to the potential settlement in a variable amount of shares given the company’s shares are tainted.    The
Company recorded the fair value of the warrants    based on the fair value of each warrant grant estimated
on the date of grant using the Black-Scholes option pricing model with the following assumptions, dividend yield of zero, expected
volatility of 297%; risk-free interest rates of 0.61%, expected life of three years. The warrants vested immediately.  The
warrants expire in three years from the date of issuance and have an exercise price of $0.40 per share (See Note 9(B)).



On
November 25, 2014, the Company issued 200,000 warrants for services rendered. The Company recognized compensation expense of $11,972
on the date of issuance with the offset being recorded to derivative liabilities since the Company applied the provisions of ASC
No. 815, pertaining to the potential settlement in a variable amount of shares given the company’s shares are tainted.    The
Company recorded the fair value of the warrants    based on the fair value of each warrant grant estimated
on the date of grant using the Black-Scholes option pricing model with the following assumptions, dividend yield of zero, expected
volatility of 128%; risk-free interest rates of 0.91%, expected life of three years. The warrants vested immediately.  The
warrants expire in three years from the date of issuance and have an exercise price of $0.10 per share (See Note 9(B)).



During
the year ended December 31, 2013, the Company issued 2,000,000 warrants in connection with the entry into certain convertible
debenture agreements. Each warrant vests immediately and expire April 26, 2016 – December 29, 2016 with an exercise price
of $0.40.



During
the year ended December 31, 2014, the Company issued 750,000 warrants in connection with the entry into certain convertible debenture
agreements. Each warrant vests immediately and expire February 26, 2017 – August 12, 2017 with an exercise price of $0.40.



The
following tables summarize all warrant grants as of December 31, 2014, and the related changes during these periods are presented
below:





| |                                                                     | Number
    of Warrants |  | Weighted
    Average Exercise Price |            | Weighted
    Average Remaining Contractual Life (in Years)
| | ------------------------------------------------------------------- | ---------------------- |  | ----------------------------------- | ---------- | ----------------------------------------------------------
| |                                                                     |                        |  |                                     |            |                                                           
| | Balance,
                                         December 31, 2011 |                        |  |                                     | 2,715,800  |                                                           
| | Granted                                                             |                        |  |                                     | 200,000    |                                                           
| | Exercised                                                           |                        |  |                                     |            |                                                           
| | Cancelled/Forfeited                                                 |                        |  |                                     | (500,000   | )                                                         
| | Balance,
                                         December 31, 2012 |                        |  |                                     | 2,415,800  |                                                           
| | Granted                                                             |                        |  |                                     | 2,600,000  |                                                           
| | Exercised                                                           |                        |  |                                     | (620,800   | )                                                         
| | Cancelled/Forfeited                                                 |                        |  |                                     | (1,260,000 | )                                                         
| | Balance,
                                         December 31, 2013 |                        |  |                                     | 3,135,000  |                                                           
| | Granted                                                             |                        |  |                                     | 950,000    |                                                           
| | Exercised                                                           |                        |  |                                     | —          |                                                           
| | Cancelled/Forfeited                                                 |                        |  |                                     | (335,000   | )                                                         
| | Balance,
                                         December 31, 2014 |                        |  |                                     | 3,750,000  |                                                           











A
summary of all outstanding and exercisable warrants as of December 31, 2014 is as follows:





|         |      |             |  |             |           | Weighted
    Average |  |                    
|-------- | ---- | ----------- |  | ----------- | --------- | -------------------- |  | -------------------
|Exercise |      | Warrants    |  | Warrants    |           | Remaining            |  | Aggregate          
|Price    |      | Outstanding |  | Exercisable |           | Contractual
    Life |  | Intrinsic
    Value
|         |      |             |  |             |           |                      |  |                    
|$        | 0.10 |             |  |             | 200,000   |                      |  |                    
|$        | 0.25 |             |  |             | 200,000   |                      |  |                    
|$        | 0.40 |             |  |             | 2,850,000 |                      |  |                    
|$        | 0.45 |             |  |             | 500,000   |                      |  |                    
|         |      |             |  |             |           |                      |  |                    
|         |      |             |  |             | 3,750,000 |                      |  |                    









(C)
Stock Options



On
January 1, 2013, the Company issued 700,000 options to buy common shares of the Company's stock at $0.50 per share, good for three
years, to the Chief Technical Officer pursuant to an amended employment agreement dated December 31, 2012. The Company recognized
an expense of $115,288 for the year ended December 31, 2013. The Company recorded the fair value of the options based on the fair
value of each option grant estimated on the date of grant using the Black-Scholes option pricing model with the following weighted
average assumptions used for grants in 2013:



|Expected dividends      |  |  | 0                                                | %
|----------------------- |  |  | ------------------------------------------------ | -
|Expected volatility     |  |  | 140.30                                           | %
|Expected  term          |  |  | 3
                                         Years |  
|Risk free interest rate |  |  | 0.37                                             | %





53









Max
Sound Corporation

Note
to Financial Statements

As
of December 31, 2014





On
July 7, 2014, as a benefit for the unsecured loans granted to the Company by the Company's Chief Financial Officer
("CFO"), the Company issued 2,866,520 options to buy common shares of the Company's stock at $0.10 per share, good
for three years to the CFO. The Company recognized an expense of $190,656 for the year ended December 31, 2014. The
Company recorded the fair value of the options based on the fair value of each option grant estimated on the date of grant
using the Black-Scholes option pricing model with the following weighted average assumptions:



|Expected dividends      |  |  | 0                                                | %
|----------------------- |  |  | ------------------------------------------------ | -
|Expected volatility     |  |  | 137.82                                           | %
|Expected  term          |  |  | 3
                                         Years |  
|Risk free interest rate |  |  | 1                                                | %



The
following tables summarize all option grants as of December 31, 2014, and the related changes during these periods are presented
below:





|                                    |  | Number
    of Options |            | Weighted
    Average Exercise Price |  | Weighted
    Average Remaining Contractual Life(in Years)
|----------------------------------- |  | --------------------- | ---------- | ----------------------------------- |  | ---------------------------------------------------------
|Outstanding - December 31, 2010     |  |                       | —          |                                     |  | $                                                        
|Granted                             |  |                       | 12,000,000 |                                     |  |                                                          
|Exercised                           |  |                       | —          |                                     |  |                                                          
|Forfeited
    or Canceled           |  |                       | —          |                                     |  |                                                          
|Outstanding - December
    31, 2011 |  |                       | 12,000,000 |                                     |  |                                                          
|Granted                             |  |                       | —          |                                     |  |                                                          
|Exercised                           |  |                       | —          |                                     |  |                                                          
|Forfeited
    or Canceled           |  |                       | —          |                                     |  |                                                          
|Outstanding - December
    31, 2012 |  |                       | 12,000,000 |                                     |  |                                                          
|Granted                             |  |                       | 700,000    |                                     |  | $                                                        
|Exercised                           |  |                       | —          |                                     |  |                                                          
|Forfeited
    or Canceled           |  |                       | —          |                                     |  |                                                          
|Outstanding - December
    31, 2013 |  |                       | 12,700,000 |                                     |  |                                                          
|Granted                             |  |                       | 2,866,652  |                                     |  | $                                                        
|Exercised                           |  |                       | —          |                                     |  |                                                          
|Forfeited
    or Canceled           |  |                       | —          |                                     |  |                                                          
|Outstanding - December
    31, 2014 |  |                       | 15,566,652 |                                     |  |                                                          
|Exercisable - December
    31, 2014 |  |                       | 15,566,652 |                                     |  |                                                          
|                                    |  |                       |            |                                     |  |                                                          
|Per Detail Schedule                 |  |                       | 15,566,652 |                                     |  |                                                          
|Difference                          |  |                       | —          |                                     |  |                                                          





(D)
Share Exchange



On
May 11, 2010, the Company acquired the rights to an audio technology known as Max Audio Technology (Max) through a share exchange,
whereby the Company issued 30,000,000 shares of common stock to two individuals in exchange for their rights in Max having a value
of $7,500,000 based upon recent market value ($0.25/share) (See Note 8(B)).



On
January 17, 2011, the Company acquired the rights to software technology known as Blog Software, Social Media Vault, Social Media
Bar and Trending Topix (BSST) through a share exchange, whereby the Company issued 3,000,000 shares of common stock to two individuals
in exchange for their rights to BSST having a value of $300,000 based upon recent market value ($0.10/share).



54









Max
Sound Corporation

Note
to Financial Statements

As
of December 31, 2014





On
November 15, 2012, the Company acquired the rights to an audio technology known as Liquid Spins, Inc. through a share exchange,
whereby the Company issued 24,752,475 shares of common stock for their rights in Liquid Spins technology and other assets having
a value of $10,000,000 based upon recent market value ($0.404/share).    The following assets were acquired
in the transaction:





|                                              |  | Year Ended            |           | Year Ended           
|--------------------------------------------- |  | --------------------- | --------- | ---------------------
|                                              |  | December
    31, 2014 |           | December
    31, 2013
|                                              |  |                       |           |                      
|Goodwill at
    fair value, Opening Balance   |  | $                     | 9,303,679 |                      
|                                              |  |                       |           |                      
|Consideration transferred  at
    fair value: |  |                       |           |                      
|Common stock
    - 24,752,475 Shares          |  |                       | —         |                      
|                                              |  |                       |           |                      
|Net assets acquired:                          |  |                       |           |                      
|Current assets                                |  |                       | —         |                      
|Cash                                          |  |                       | —         |                      
|Total
    net assets acquired                 |  |                       | —         |                      
|                                              |  |                       |           |                      
|Amortization                                  |  |                       | (965,559  | )                    
|                                              |  |                       |           |                      
|Goodwill
    at fair value, Ending Balance    |  | $                     | 8,338,121 |                      



During
the year ended December 31, 2013, the Company received an additional $8,011 related to the acquisition which reduced the carrying
value of the goodwill as of December 31, 2013.



For
the year ended December 31, 2014 and 2013, the Company recorded $965,559 and $343,898, respectively, of amortization expense.



NOTE
7         COMMITMENTS



(A)
Employment Agreement



On
January 17, 2011, the Company executed an employment agreement with an executive to be the President and CEO for five years.    As
compensation for services, the executive will receive a monthly compensation of $8,000 beginning after the completion of at least
one million dollars of new funding to the Corporation or can be paid as commissions from sales brought to the Company, whichever
comes first. In addition to the base salary, the employee is entitled to receive a 20% commission of all sales the executive is
directly responsible for bringing to the Company.    The agreement also calls for the executive to receive,
upon execution of the agreement, three million shares of Rule 144 common stock and twelve million options, which are good for
three years, to buy shares of Rule 144 common stock at $0.12/share.    As a supplement to the agreement, on
February 4, 2011, the executive received an additional twenty million common shares directly from the Chairman of the Company.    On
August 25, 2011, the agreement was updated to increase the monthly compensation to $12,000 per month beginning September 1, 2011,
terminate the initial 20% commission on sales and to add a commission on sales equal to 10% of gross quarterly profits.    On
December 31, 2012, the agreement was updated to eliminate his previous annual bonus entitlement, which was previously 10% of revenues.
In exchange for this

55









Max
Sound Corporation

Note
to Financial Statements

As
of December 31, 2014





consideration,
the Company agreed that his bonus will be decreased to 7% of net profits which may be received in cash or Rule 144 stock or any
combination. The agreement also called for the employee to receive health benefits.    In May of 2013, the
Company amended the agreement for the President and CEO to receive monthly compensation of $18,000 beginning May 1, 2013.



On
October 1, 2011, the Company executed an employment agreement with its Chief Technical Officer (“CTO”).   The
term of the agreement is for five years.   As compensation for services, the CTO will receive a monthly compensation
of $10,000, monthly commission equal to 5% of all profits derived from the sales of all products and services related to Max Sound,
and an annual bonus of 5% of all profits derived from the sales of all products and services related to Max Sound that is over
one million dollars.   In addition to the base salary, the employee is entitled to receive health benefits.  Effective
January 1, 2012, the Company increased the monthly compensation to $12,000.   On December 31, 2012 the Company
amended the agreement that effective January 1, 2013 the CTO will receive 300,000 shares of common stock and 700,000 three year
options at 50 cents per share. On December 31, 2012, the agreement was also updated to eliminate his previous commission and annual
bonus entitlement. Executive shall now be entitled to a commission on all sales of the Company equal to 6% of net profits. For
the year ended December 31, 2013, the Company issued 300,000 common shares valued at $90,000.





On
January 9, 2013, the Company executed an employment agreement with its Director of New Business Development. The term of the agreement
is for three years.   As compensation for services, the Director will receive a monthly compensation of $10,000.   Upon
the first million dollars in gross sales the salary will increase to $12,000 per month.  In addition, the Director will
receive up to 1,000,000 shares of common stock payable in lots of 125,000 per quarter beginning on January 1, 2013.    Also,
employee for the first eight quarters of employment has a right to earn 125,000 additional 3 year stock options with a strike
price of $0.50 per share as follows:



| |  | For
    each million of new gross sales - 125,000 additional 3-year stock options with a strike price of $.50 per share.
| |  | ------------------------------------------------------------------------------------------------------------------------



For
the year ended December 31, 2014 and year ended December 31, 2013, the employee received 375,000 and 500,000 shares with a fair
value of $95,625 and $127,500, respectively.



On
October 1, 2013, the Company executed an employment agreement with its Senior Audio Engineer.   The term of the
agreement is for three years.   As compensation for services, the Engineer will receive a monthly compensation
of $6,000 beginning October 1, 2013.  In addition to the base salary, the employee is entitled to receive health benefits,
and the employee received 50,000 shares of common stock during the year ended December 31, 2013 valued at $13,500 ($0.27/share).



On
November 26, 2012, the Company executed an employment agreement with its VP of Music Entertainment. The term of the agreement
is for two years.   As compensation for services, the VP will receive a monthly compensation of $8,000.   In
addition, the employee will receive up to 1,000,000 shares of common stock payable in lots of 125,000 per quarter beginning on
December 1, 2012.   In addition, the employee is entitled to a monthly commission equal to 5% of all profits from
any sales of music from Liquid Spins that employee is directly responsible for bringing to the Company.   For the
three months ended March 31, 2014 and year ended December 31, 2013, the employee received 125,000 and 500,000 shares with a fair
value of $45,625 and $133,750, respectively. As of February 3, 2014, the employee was terminated with no additional compensation
owed.



On
November 26, 2012, the Company executed an employment agreement with its VP of Music Distribution. The term of the agreement is
for two years.   As compensation for services, the VP will receive a monthly compensation of $7,000.    In
addition, the employee will receive up to 1,000,000 shares of common stock payable in lots of 125,000 per quarter beginning on
December 1, 2012.    In addition, the employee is entitled to a monthly commission equal to 5% of all profits
from any sales of music from Liquid Spins that employee is directly responsible for bringing to the Company.   For
the year ended December 31, 2014 and year ended

56







Max
Sound Corporation

Note
to Financial Statements

As
of December 31, 2014





December
31, 2013, the employee received 500,000 and 500,000 shares with a fair value of $182,500 and $133,750, respectively.



On
June 11, 2012, the Company executed an employment agreement with its Senior Audio Engineer.   The term of the agreement
is for five years.   As compensation for services, the Engineer will receive a monthly compensation of $6,000 beginning
July 1, 2012.  In addition to the base salary, the employee is entitled to receive health benefits, and the employee
will receive 1,000,000 shares of common stock payable in 125,000 increments per quarter beginning on July 1, 2012.   For
the year ended December 31, 2014 and year ended December 31, 2013, the employee received 250,000 and 500,000 shares with a fair
value of $62,500 and $125,000, respectively.



On
May 17, 2011, the Company executed an employment agreement with its Chief Internet Officer (“CIO”).    The
term of the agreement is for five years.    As compensation for services, the CIO will receive a monthly compensation
of $9,000 beginning at the completion of at least one million dollars of new funding.    In addition to the
base salary, the employee is entitled to receive health benefits.    The agreement also calls for the CIO
to receive two million shares of Rule 144 common stock upon the execution of the agreement.    On August 25,
2011, the agreement was updated to increase the monthly compensation to $12,000 per month beginning October 1, 2011.



(B)
Consulting Agreement



On
June 10, 2011, the Company entered into a five year advisory board consulting agreement with three persons to provide for consulting
and business services.    In exchange for the services provided, the consultants received 100,000 shares of
common stock each.



In
September 2011, the Company entered into a five year advisory board consulting agreement with three persons to provide for consulting
and business services.    In exchange for the services provided, the consultants received 100,000 shares of
Company stock at $0.23 - 0.39 per share.    The terms of the agreements are for five years.



During
the three months ended December 31, 2011, the Company entered into a five year advisory board consulting agreement with five persons
to provide for consulting and business services.    In exchange for the services provided, the consultants
received 100,000 shares of Company stock at $0.47 - 0.88 per share.  The terms of the agreements are for five years.



On
August 3, 2012, the Company entered into an endorsement agreement with an unrelated third party for a period from August 3, 2012
through August 3, 2015.    In exchange for the services provided, the Company issued 3,000,000 shares of common
stock having a fair value of $960,000 ($0.30/share) based upon fair value on the date of grant (See Note 8(B)). The delivery of
the shares will be made in four 750,000 tranches to coincide with each of the four points listed below:



| | ● | Record
    two (2) one-minute video endorsements (English and Spanish)
| | - | ----------------------------------------------------------------------



| | ● | Release
    of Mobile Application
| | - | ---------------------------------



| | ● | Use
    of MAX-D HD technology in the next two major music projects.
| | - | --------------------------------------------------------------------



| | ● | Any
    additional projects that effectively promote the use of MAXD technology.
| | - | --------------------------------------------------------------------------------



As
December 31, 2012, the first two of the four points listed above have been completed and the Company recorded $480,000 as deferred
compensation and $480,000 in endorsement expense.    As of March 31, 2013, the second two of the four points
listed above have been completed and the Company recognized $480,000 in endorsement expense (See Note 8(B)). The Company and the
third party have completed the video endorsement and the mobile application and launched both in August 2013. In September 2013,
the parties decided that they

57









Max
Sound Corporation

Note
to Financial Statements

As
of December 31, 2014





would
not be effective working together due to a change in marketing goals. The parties reached an agreement whereby the Company will
not promote the endorsement or the mobile application and the third party will return all shares received to the Company who in
turn will return them to the Company treasury.    As of January 2014, the August 3, 2012 agreement has been
terminated and 3,000,000 shares have been returned to the Company.



On
August 22, 2012, the Company entered into a consulting agreement with an unrelated third party for a period from September 1,
2012 through August 31, 2013.    In exchange for the services provided, the Company issued 500,000 shares
of common stock having a fair value of $150,000 ($0.30/share) based upon fair value on the date of grant.



On
September 14, 2012, the Company entered into a licensing agreement with an unrelated third party for a period from September 14,
2012 through September 14, 2013.    The agreement will automatically extend on a year to year basis unless
terminated by either party.    Upon the execution of the agreement, the Company paid a non-refundable $15,000
upfront fee for the use of the license.    Any additional technical support will be provided on as needed
basis at an hourly rate of $250/hour.



On
December 1, 2012, the Company entered into a consulting agreement with an unrelated third party for a period from December 1,
2012 through November 30, 2013.    In exchange for the services provided, the Company will pay a monthly consulting
fee of $10,000.    A bonus may be provided for $26,000 after one year of service in the sole discretion of
the Company.    In addition, the Company will grant 500,000 three year warrants with an exercise price of
$0.45 per share.    Within 10 days of executing the consulting agreement the consultant will loan the Company
$120,000 in convertible note converted at 50 cents per share.



In
July 2013, the Company entered into a financial advisor agreement for a period of six months with the advisor providing various
assistance including introductions to potential investors. The Agreement calls for a fee of $25,000 with an additional $7,500
due and payable on the 1st day of the subsequent five months. On July 8, 2013, the Company issued 1,500,000 common shares as consideration
for these services valued at $315,000.



In
July 2013, the Company entered into a digital content distribution agreement for a period of 1 year.    The
agreement calls for an advance of $25,000, the fees are recorded as prepaid expenses, earned based on downloaded content for a
minimum of $120,000 per year.    The agreement also calls for a onetime fee of $50,000 for synchronization
services of which $25,000 has been paid and has been recorded as a prepaid expense.    As of December 31,
2013, the Company paid a total of $50,000 in connection with this agreement which has been recorded as prepaid expenses.



On
March 17, 2014, the Company entered into an advisory board agreement for a period of three years. In consideration for these services,
during the year ended December 31, 2014, the Consultant was granted 100,000 shares of fully vested common stock valued at $9,300
($0.09/share). Two additional blocks of 100,000 common shares shall be granted shall certain benchmarks be accomplished during
the first year.



On
April 24, 2014, the Company entered into consulting services agreement. In consideration for these services, during the year ended
December 31, 2014, the Consultant was granted 200,000 shares of fully vested common stock valued at $21,980 ($0.11/share).



During
the year ended December 31, 2014, the Company entered into a consulting services agreement related to marketing and the creation
of Company awareness. In connection with this agreement, the consultant shall be paid $20,000 and was issued 200,000 shares of
fully vested common stock valued at $31,000 ($0.16/share).



On
August 6, 2014, the Company entered into an advisory board agreement for a period of three years. In consideration for these services,
during the year ended December 31, 2014, the Consultant was granted 100,000 shares of fully vested common stock valued at $16,500
($0.17/share).



58









Max
Sound Corporation

Note
to Financial Statements

As
of December 31, 2014





On
September 23, 2014, the Company entered into service agreement for a period of two years with the Company’s transfer agent.
In consideration for these services, during the year ended December 31, 2014, 300,000 shares of fully vested common stock valued
at $49,500 ($0.17/share) were granted.



On
September 10, 2014, the Company entered into an advisory board agreement. In consideration for these services, during the year
ended December 31, 2014, the Consultant was granted 100,000 shares of fully vested common stock valued at $16,000 ($0.16/share).



On
July 29, 2014, the Company entered into an investor relations agreement. In connection with this agreement, the Company is to
issue 100,000 shares of fully vested common stock monthly and $5,500 in monthly fees. As of September 30, 2014, the agreement
was terminated. The consultant was issued 100,000 shares of common stock valued at $16,000 ($0.16/share) and was paid $5,500.



(C)
Operating Lease Agreements



On
September 20, 2012, the Company took over a month to month operating lease upon completing the asset purchase agreement with Liquid
Spins. The lease began on October 1, 2012 at a monthly rate of $1,585. The Company gave notice to end this month to month lease,
with a final end date of February 28, 2014.



On
September 1, 2010, the Company executed a three-year non-cancelable operating lease for its new corporate office space. The lease
began on October 1, 2010 and expires on September 30, 2013. Total base rent due during the term of the lease is $134,880. At the
current time the Company is continuing on with the existing office space on a month to month basis based on the previous terms
and conditions of the recently expired lease.



(C)
Research Agreement



On
July 1, 2014, the Company entered into a research agreement with University of Florida for the service period to begin July 15,
2014 and ending no later than October 31, 2014. Subsequently on December 3, 2014, the Company modified the terms of the service
period of the agreement to start on September 30,214 and ending no later than January 15, 2015. The fee for research services
is fixed at $49,910 and will be paid in four monthly installments of $12,678. For the year ended December 31, 2014 the Company
recorded a liability and expensed $12,678 as research and development cost, as of December 31, 2014, $0 has been paid. The remaining
liability as of December 31, 2014, is $12,678 and is included in accounts payable.



NOTE
8       LITIGATION



From
time to time, the Company may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of
business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise
from time to time that may harm its business.



On
February 21, 2012, the Company filed a suit for breach of contract, intentional misrepresentation, negligent misrepresentation,
fraud, false advertising, and unfair competition with a former consultant.   It seeks damages due to their alleged
failure to meet the contractual requirements regarding promotions.   The defendant has been served.   In
September of 2014, the Company received a Default Judgment against the Defendant.    The Company is vigorously
pursuing collection on this judgment.



On
August 14, 2012, the Company, along with two shareholders of the Company, were named as a defendant in an action filed in the
Superior Court for the State of California and the County of San Diego. The plaintiff alleges he was terminated by his former
employer “Acoustics Control Sciences, LLC” (which is a company that is not affiliated with Max Sound Corporation)
in August 2008 without receiving wages and other compensation allegedly due him. The plaintiff further claims that two of the
members or “shareholders” of Acoustics Control Sciences, LLC, wrongfully transferred a patent owned by his former
employer and this transfer prevented his former employer from paying the wages alleged due. According to the plaintiff, when the
assets of his former

59









Max
Sound Corporation

Note
to Financial Statements

As
of December 31, 2014





employer
were sold to the Company, Max Sound Corporation became a successor-in-interest to the plaintiff’s former employer. Plaintiff
thus seeks unpaid wages and other compensation from each alleged successor-in-interest named in his complaint. This case will
be vigorously prosecuted and has a good likelihood of success.



On
August 11, 2014, the Company and VSL simultaneously filed trade secret and patent infringement actions against Google, Inc., and
its subsidiaries YouTube, LLC, and On2 Technologies, Inc., relating to proprietary and patented technology owned by Vedanti Systems
Limited (“Vedanti”), a subsidiary of VSL.  The patent infringement complaint was originally filed in the U.S.
District Court for the District of Delaware; the trade secret suit was filed in Superior Court of California, County of Santa
Clara.  On September 30, 2014, the Company filed notices of voluntary dismissal without prejudice as to both lawsuits. On
October 1, 2014, the Company amended the patent complaint and filed it in the U.S. District Court for the Northern District of
California. In this patent lawsuit, which remains pending, the Company contends that, in 2010, while Google was in discussions
with Vedanti about the possibility of acquiring Vedanti's patented digital video streaming techniques and other proprietary methods,
Google gained access to and received technical guidance regarding Vedanti’s proprietary codec, a computer program capable
of encoding and decoding a digital data stream or signal.  The lawsuit further alleges that soon after Google and Vedanti
initiated negotiations, Google willfully infringed Vedanti's patent by incorporating Vedanti's patented technology into Google's
own VP8, VP9, WebM, YouTube, Google Adsense, Google Play, Google TV, Chromebook, Google Drive, Google Chromecast, Google Play-per-view,
Google Glasses, Google+, Google’s Simplify, Google Maps, and Google Earth, without compensating Vedanti for such use. 
Plaintiffs are seeking a permanent injunction against Google, compensatory damages, as well as treble damages. As exclusive agent
to VSL to enforce all rights with respect to the subject technology, the Company has hired Grant & Eisenhofer PA and Buether
Joe & Carpenter LLC to represent the Company in the suit on a contingency fee basis. The case will be vigorously prosecuted,
and the Company believes it has a good likelihood of success.



Additionally,
on December 5, 2014, the Company, along with renowned architect Eli Attia, filed a lawsuit in the Superior Court of California,
County of Santa Clara, against Google, its co-founders Sergey Brin and Larry Page, Google’s spinoff company Flux Factory,
and senior executives of Flux. Plaintiffs’ allege misappropriation of trade secrets, breach of contract and other contract-related
claims, breach of confidence, slander of title, violation of California’s Unfair Competition Law (California Business and
Professionals Code §§ 17200 et seq.), and fraud, and also bring a claim for declaratory relief. The lawsuit contends
that Google and the other Defendants stole Mr. Attia’s trade secrets, proprietary information, and know-how regarding a
revolutionary architecture design and building process that he alone had invented, known as Engineered Architecture. Defendants
are alleged to have engaged Mr. Attia in 2010 and 2011 to translate his architectural technology into software for a proof of
concept, with the goal of determining at that point whether to continue with full-scale development with Mr. Attia. Instead, the
lawsuit claims that once Mr. Attia had disclosed the trade secrets and proprietary information

60









Max
Sound Corporation

Note
to Financial Statements

As
of December 31, 2014





Defendants
needed to bring the technology to market, they severed ties with Mr. Attia, and continued to use his technology without a license
and without compensation, in order to bring the technology to market themselves. Plaintiffs seek a permanent injunction against
Google, damages (including punitive damages), and restitution. As exclusive agent to Eli Attia to enforce all rights with respect
to the subject technology, the Company has retained Buether Joe & Carpenter LLC to represent the Company in the suit, on a
contingency fee basis. The case will be vigorously prosecuted, and the Company believes it has a good likelihood of success.



On
September 8 and 9, 2014, respectively, the Company and VSL were granted preliminary injunctions by the District Court of Berlin,
Germany, against the Chinese company Shenzhen KTC Technology Co. Ltd. and the French company Pact Informatique S.A. Both companies
have been offering products at the International Consumer Electronics Trade Show 2014 in Berlin, which, according to the company’s
claim and the Preliminary Injunctions issued by the Court, infringed the rights to a patent. This patent is the German part of
the patent on optimized data transmission, owned by Vedanti, which is already asserted the United States infringement proceedings.
The products in question are tablet computers and smart phones with Android OS and with the ability to encode videos in the format
H.264. The injunctions were issued ex-parte and can be appealed by the Defendants. However, currently there are no indications
that any prospective appeals will be interposed. The Company can still enforce claims for cost reimbursement with regard to these
legal proceedings.



On
December 2, 2014, the Company filed a patent infringement action against Google, Inc., Germany GmBH, Google Commerce Ltd. and
YouTube LLC with the District Court of Mannheim, Germany. The asserted patent infringement concerns the same patent infringement
asserted in the in the prior Germany Preliminary Injunctions described herein. The Complaint alleges that Google Inc. and it above-named
subsidiaries are offering and selling products which can also decode and show videos, which have been encoded in a patent protected
and proprietary way. The complaint also avers that YouTube LLC offers to German customers, which are encoded and transmitted in
a manner claimed and protected by the patent. The Company mainly seeks a permanent injunction against the Defendants, damages
and information regarding past infringements.



The
Company intends to vigorously prosecute these various patent infringement litigations. The Company believes it has a good likelihood
of success associated with these patent infringement lawsuits. However, no assurance can be given by the Company as to the ultimate
outcome of these actions or its effect on the Company. The law firm is prosecuting these action on a pure contingency fee basis.



On
December 19, 2014, the Company announced that the San Diego County Superior Court has ruled in Max Sound's favor in a long running
legal dispute with the former CEO Robert Steele of the now dissolved company Acoustic Control Sciences, LLC.



On
January 26, 2015, the Company was named as a defendant in an action filed in the Superior Court for the State of California and
the County of Los Angeles captioned Bibicoff Family Trust v. Max Sound Corporation (Case No. SC123679). In the complaint
the plaintiff alleges a cause of action for breach of contract associated with the non-payment by the Company for certain services
plaintiff agreed to provide to the Company. The Company interposed a cross-complaint against plaintiffs averring causes of action
for breach of contract, fraud, and negligent misrepresentation by defendants with respect to defendants’ fraudulent and
intentional undisclosed inability to perform the services that are the subject of this dispute. This lawsuit will be vigorously
defended and prosecuted. While this lawsuit is in its nacency, the Company believes there is a strong likelihood of success on
the merits with respect to the defending and prosecuting this action.



No
assurance can be given as to the ultimate outcome of these actions or its effect on the Company.



NOTE
9        INTANGIBLE ASSETS



As
of December 31, 2014 and December 31, 2013, the Company owns certain trademarks and technology rights.    See
Note 1 (I).



61









Max
Sound Corporation

Note
to Financial Statements

As
of December 31, 2014





Intangible
assets were comprised of the following at December 31, 2014 and December 31, 2013:



|                         |  | Useful
    Life |  | December
    31, 2014 |            | December
    31, 2013
|------------------------ |  | --------------- |  | --------------------- | ---------- | ---------------------
|                         |  |                 |  |                       |            |                      
|Distribution rights      |  | 10 Years        |  |                       | 9,647,577  |                      
|Trademarks               |  | Indefinite      |  |                       | 7,500,000  |                      
|Licensing Rights         |  | Indefinite      |  |                       | 2,064,000  |                      
|Software                 |  | 3 Years         |  |                       | —          |                      
|Other                    |  | Indefinite      |  |                       | 275        |                      
|Intellectual property    |  | 5 Years         |  |                       | —          |                      
|Intellectual property    |  | Indefinite      |  |                       | —          |                      
|Accumulated amortization |  |                 |  |                       | (1,361,257 | )                    
|                         |  |                 |  |                       |            |                      
|Net carrying value       |  |                 |  |                       | 17,850,595 |                      



| | 1) | During
    the year ended December 31, 2013, the Company entered into a settlement agreement with the seller of the software to reverse
    the original transaction which included the issuance of 3,000,000 shares of common stock in exchange for the software.    The
    Company received back 3,000,000 shares of common stock which was recorded as treasury stock in exchange of returning the software
    to the seller.    Upon the return of the shares, the Company recognized a gain of $220,000 based on the
    quoted trading price of the Company’s common stock, which was the best evidence of fair value.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 2) | During
    the year ended December 31, 2013, the Company received $8,011 as a refund in cash from the seller of the distribution rights.  The
    refund reduced the carrying value of the purchased intangible.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



For
the year ended December 31, 2014 and 2013, amortization expense related to the intangibles with finite lives totaled $1,017,359
and $343,898, respectively, and was included in general and administrative expenses in the statement of operations.



At
December 31, 2014, future amortization of intangible assets is as follows:



| | Year
                                         ending December 31: |  |  |   |           | 
| | ----------------------------------------------------------------- |  |  | - | --------- | 
| | 2015                                                              |  |  | $ | 1,054,359 | 
| | 2016                                                              |  |  |   | 1,054,359 | 
| | 2017                                                              |  |  |   | 1,054,359 | 
| | 2018                                                              |  |  |   | 1,054,359 | 
| | 2019                                                              |  |  |   | 1,002,559 | 
| | Thereafter                                                        |  |  |   | 3,510,326 | 
| |                                                                   |  |  | $ | 8,730,321 | 



NOTE
10        SUBSEQUENT EVENTS





Through
the filing of these financial statements, the Company converted a total of approximately $821,316 in convertible debt comprised
of principal and accrued interest into approximately 31,381,442 common shares.



On
December 24, 2014, the Company entered into an agreement whereby the Company will issue up to $225,750 in a convertible note. The
note matures on December 24, 2015 and bears an interest charge of 8%. The conversion price equals the “Variable Conversion
Price”, which is 65% of the lowest three trading prices for the common stock during the ten (10) trading day period prior
to the conversion. The holder of the note has a right to convert all or any part of the outstanding unpaid principal amount into
shares of common stock after six months. The Company received $210,000 of proceeds less $10,750 in debt issue costs on and $5,000
in legal costs on January 5, 2015.













On January
21, 2015, the Company entered into an agreement whereby the Company will issue up to $50,000 in a convertible note. The note matures
on January 21, 2016 and bears an interest charge of 10. The conversion price equals the “Variable Conversion Price”,
which is 70% of the lowest three trading prices for the common stock during the twenty (20) trading day period prior to the conversion.
The holder of the note has a right to convert all or any part of the outstanding unpaid principal amount into shares of common
stock after six months. The Company received $50,000 on January 21, 2015.



On February
27, 2015, the Company entered into an agreement whereby the Company will issue up to $115,500 in a convertible note. The note
matures on February 27, 2016 and bears an interest charge of 8%. The conversion price equals the “Variable Conversion Price”,
which is 65% of the lowest three trading prices for the common stock during the ten (10) trading day period prior to the conversion.
The holder of the note has a right to convert all or any part of the outstanding unpaid principal amount into shares of common
stock after six months. The Company received $100,000 of proceeds after $10,500 in debt issue costs on and $5,000 in legal costs
on March 5, 2015.



On May 12,
2014, the Company entered into an agreement whereby the Company will issue up to $105,000 in a convertible note. The note matures
on May 12, 2015 and bears an interest charge of 8%. The conversion price equals the “Variable Conversion Price”, which
is 65% of the lowest daily prices for the common stock during the ten (10) trading day period prior to the conversion. The holder
of the note has a right to convert all or any part of the outstanding unpaid principal amount into shares of common stock after
six months. The Company received $95,000 of proceeds  after $10,000 in debt issue costs on March 12, 2015.



In
January of 2015, the Company repaid $40,000 in principal to the principal stockholder and received $25,000 in principal
from the principal stockholder related to the line of credit.



On January
21, 2015, the Company entered into a consulting services agreement. In connection with this agreement, the consultant shall be
paid $4,000 per month and receive up to 150,000 shares of common stock payable in lots of 50,000 per month and will be issued
90 days after the date of the signing of the agreement.



On January
21, 2015, the Company entered into a consulting services agreement. In connection with this agreement, the consultant shall be
paid $4,000 per month and receive up to 150,000 shares of common stock payable in lots of 50,000 per month and will be issued
90 days after the date of the signing of the agreement.



On
February 18, 2015, the Company issued an additional 700,000 shares of stock to a consultant in connection with the
agreement entered into in September of 2014.



On March
17, 2015, the Company entered into a services agreement. In connection with this agreement, the consultant will receive 300,000
shares of fully vested common stock, payable in lots of 100,000 shares of common stock per month and $5,000 per month. The agreement
will continue until June 17, 2015.



On January
21, 2015, the Company filed a patent infringement action against Netflix Inc., Netflix Luxembourg S.a.r.l. and Netflix International
B.V. with the District Court of Mannheim, Germany. The asserted patent is the same patent as in the German proceedings against
Google Inc. and its subsidiaries. The Complaint alleges that Netflix Inc. and its subsidiaries are offering and transmitting video
streams to German customers as part of their video-on-demand business model; the videos being encoded and transmitted in a manner
claimed and protected by the patent. The Company primarily seeks a permanent injunction against the Defendants, plus damages and
information regarding past infringements.





62





On January
26, 2015, the Company was named as a defendant in an action filed in the Superior Court for the State of California and the County
of Los Angeles captioned Bibicoff Family Trust v. Max Sound Corporation (Case No. SC123679). In the complaint the plaintiff alleges
a cause of action for breach of contract associated with the non-payment by the Company for certain services plaintiff agreed
to provide to the Company. The Company interposed a cross-complaint against plaintiffs averring causes of action for breach of
contract, fraud, and negligent misrepresentation by defendants with respect to defendants’ undisclosed inability to perform
the services that are the subject of this dispute. This lawsuit will be vigorously defended and prosecuted. While this lawsuit
is in its infancy, the Company believes there is a strong likelihood of success on the merits with respect to the defending and
prosecuting this action.



On
March 4, 2015 the Company filed a form 8K with the SEC associated with the Company entering into a Securities Exchange Agreement
and the Company filing with the Secretary of State Delaware a Certificate of Designations, Preferences and Rights whereby, among
other things, the Company for good and valuable consideration, agreed that in consideration of a large shareholder exchanging
120,000,000 shares of common stock back to the Company, the shareholder would receive 5,000,000 shares of Series A Convertible
Preferred Stock of the Company at a Stated Value of $0.96 per share and a Conversion Price of $.0.04 per share. The Series A Convertible
Preferred Stock carries certain voting preferences and will accrue dividends at a rate of 8% per annum Stated Value, payable in
cash or in kind at the election of the Board of Directors.





On
March 27, 2015, the Company, Hong Kong Opportunities LLC ("HKO") and John Blaisure entered into an amendment
to the Securities Exchange Agreement ("Agreement") associated with the Company's Form 8K filing on March 4, 2015 (the,
"Amendment").



In
particular, the Amendment states that of the 120,000,000 shares of the Company's common stock, par value $0.0001 per share
redeemed by the Company in exchange for the issuance of 5,000,000 shares of Series A Convertible Stock to HKO, HKO has requested
and the Company and John Blaisure have agreed that 1,332,427 of such deliverable shares will be tendered to the Company by John
Blaisure for redemption and no consideration. Pursuant to the Amendment, upon such delivery by John Blaisure, HKO shall be deemed
to have satisfied the Company's conditions to closing the Agreement.







ITEM
10.       DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE



Our
executive officers and directors and their respective age as of March 29, 2014, are as follows:



|NAME              |  | AGE |  | POSITION                               
|----------------- |  | --- |  | ---------------------------------------
|                  |  |     |  |                                        
|Greg
    Halpern  |  | 56  |  | Chairman,
    Chief Financial Officer  
|John
    Blaisure |  | 56  |  | President
    & Chief Executive Officer
|Lloyd
    Trammel |  | 61  |  | Chief
    Technical Officer            



Set
forth below is a brief description of the background and business experience of our executive officers and directors for the past
five years.



Greg
Halpern, Chairman, CFO & Founder



Greg
Halpern is the founder and visionary of MAX-D, Mr. Halpern has invested over a million dollars into the Company in cash, notes,
accrued salary, office space, and debt conversions.



Greg
Halpern is the founder of Max Sound Corporation From 1997 to 2001 Mr. Halpern was the CEO of Circle Group Internet, Inc. (CRGQ:
OTCBB). From 2002 to 2005, Mr. Halpern was the Chief Executive Officer of Circle Group Holdings Inc. (AMEX: CXN, formerly CRGQ.OB)
and continued to be the CEO after it changed its name to Z-Trim Holdings Inc. (AMEX: ZTM) from 2006 - 2007. Circle Group was a
venture capital firm for emerging technology companies which provided small business infrastructure, funding and intellectual
capital to bring timely life-changing technologies to market through all early phases of the commercialization process. Mr. Halpern’s
efforts there were focused on acquiring life improving technologies and bringing these products to the marketplace. In 2003, Mr.
Halpern and his wife founded an unincorporated non-profit organization “People for Ultimate Kindness Toward All Living Creatures
on Earth” whose purpose is and has been to identify problems on earth and those who are working to solve them. The Ultimate
Kindness is a non-profit organization independent from the So Act Network. The Ultimate Kindness and the So Act Network share
no financial interest or otherwise. In 2007, Mr. Halpern resigned from his position at Z-Trim Holdings and took a one (1) year
sabbatical from business touring the Continental United States in his RV with his family. Currently, Mr. Halpern serves as the
Chairman and Chief Financial Officer of Max Sound Corporation, and devotes approximately 50 hours each week to the management
and operations of Max Sound Corporation.



63





John
Blaisure, President &Chief Executive Officer.



John
Blaisure is the President and Chief Executive officer of Max Sound Corporation.  Prior to Mr. Blaisure joining Max Sound
Corporation, he was the Founder, President, and CEO of Effective Network Systems (ENS) from 1996 to 2010.  Effective
Network Systems is a telephony software company that was debuted at the Intel Technology Summit in 1999 as one of the top 40 telephony
software companies in the world.  Prior to his work at ENS, he was the Founder, President, and CEO of Fonz By The Day
Stores from 1990 to 1996.  Fonz By The Day Stores is a cellular communication reseller and retailer in Dallas Texas.
Fonz By The Day Stores achieved success as a market leader in the Dallas Fort Worth area in retail sales. The company also achieved
success as a national leader in cellular rentals. Mr. Blaisure brings over 20 years of experience in managing and marketing of
communication technology companies from the ground up.



Lloyd
Trammell, Chief Technical Officer



Lloyd
Trammell is the Chief Technical officer of MAX-D.  Mr. Trammell has more than 30 years experience designing high-end
professional audio and musical equipment and sound design for industry leaders, such as Yamaha, Korg, Roland, Atlas Sound, Crest,
Peavey Electronics, Alesis, Kawai and Ensoniq.  In the early eighties, Mr. Trammell was instrumental in creating MIDI,
the Musical Instrument Digital Interface.  Because of his standing, Mr. Trammell aided in achieving standardized specifications
and approval from electronic keyboard manufacturers for MIDI.  In the mid-eighties, he designed one of the first working
surround sound processors, selling it to Hughes Audio, which later spun off to become SRS (NASDAQ:SRSL).  Today’s
SRS technology is still based on this design.  Mr. Trammell holds several patents, including patent # 7,136,493 for
“Sub-harmonic generator and stereo expansion processor.”  He holds numerous patents for Dimensional Sound
Processing and ACM (Analog Acoustic Modeling).  He was Senior Product Development Manager at Atlas Sound, developing
new digital and analog products for the high-end audio contractor market.  At Peavey, he invented the Kosmos audio processor,
winning the “Rack Processor of the Year Award” at the 2002 National Association of Music Merchants (NAMM).  While
at Peavey, Mr. Trammell managed the prestigious MediaMatrix product line of high-end professional digital audio systems used by
Disney, U.S. Congress, Sydney Opera House and the Olympics. In his roles as Product Manager, he has overseen all aspects of product
development from initial design and manufacturing to marketing.  Mr. Trammell also designs custom sounds for many of
the world’s top musicians and performing artists: U2, Pink Floyd, Robert Plant, Yes, Heart, Boston, Madonna, Genesis, Prince,
Cher, Bonnie Raitt, Hank Williams, Jr., Rippingtons, Emerson Lake and Palmer, Journey and Def Leppard.



Term
of Office



Our
directors are appointed for a one-year term to hold office until the next annual general meeting of our shareholders or until
removed from office in accordance with our bylaws. Our officers are appointed by our board of directors and hold office until
removed by the board



Current
Issues and Future Management Expectations



No
board audit committee has been formed as of the filing of this Annual Report.



Compliance
With Section 16(A) Of The Exchange Act.



Section
16(a) of the Exchange Act requires the Company’s officers and directors, and persons who beneficially own more than 10%
of a registered class of the Company’s equity securities, to file reports of ownership and changes in ownership with the
Securities and Exchange Commission and are required to furnish copies to the Company. To the best of the Company’s knowledge,
any reports required to be filed were timely filed in fiscal year ended December 31, 2013, except that two sales by Greg Halpern
were inadvertently reported late on a Form 4.





64





Code
of Ethics



The
Company has adopted a Code of Ethics applicable to its Chief Executive Officer and Chief Financial Officer. This Code of Ethics
is filed herewith as an exhibit.



ITEM
11.       EXECUTIVE COMPENSATION



The
following summary compensation table sets forth all compensation awarded to, earned by, or paid to the named executive officers
during the years ended December 31, 2013, and 2012 in all capacities for the accounts of our executive, including the Chief
Executive Officer (CEO) and Chief Financial Officer (CFO):



SUMMARY
COMPENSATION TABLE





|Name and Principal Position | Year |        | Salary |         | Bonus |   | Stock |   | Option Awards |   | All Other
    Compensation |  | Total
|--------------------------- | ---- | ------ | ------ | ------- | ----- | - | ----- | - | ------------- | - | -------------------------- |  | -----
|($)                         | ($)  | Awards | ($)    | ($)     | ($)  
|                            |      | ($)    |        |         |      
|Greg Halpern,(1)            | 2014 |        |        | 288,000 |       | 0 |       | 0 |               | 0 |                            |  | 0    
|CFO                         | 2013 |        |        | 268,000 |       | 0 |       |   | 0             |   | 0                          |  |      
|                            |      |        |        |         |       |   |       |   |               |   |                            |  |      
|John Blaisure,              | 2014 |        |        | 216,000 |       | 0 |       |   | 0             |   | 0                          |  |      
|CEO (2)                     | 2013 |        |        | 198,000 |       | 0 |       |   | 0             |   | 994,141                    |  |      
|                            |      |        |        |         |       |   |       |   |               |   |                            |  |      
|Lloyd Trammel,              | 2014 |        |        | 162,000 |       | 0 |       |   | 0             |   | -                          |  |      
|CTO (3)                     | 2013 |        |        | 148,500 |       | 0 |       |   | 0             |   | 115,288                    |  |      



Outstanding
Equity Interests



The following
table sets forth information concerning outstanding stock options for each named executive officer as of December 31, 2014.



Outstanding
Option Awards at Fiscal Year-End



|                   |  | Number
                                         of Securities
        Underlying
        Unexercised Options |            |  |                               |  |  
|------------------ |  | ------------------------------------------------------------------------------------------------------------ | ---------- |  | ----------------------------- |  | -
|Name               |  | Exercisable
        Options                                                                                  |            |  | Unexercisable
        Options |  |  
|John
    Blaisure  |  |                                                                                                              | 12,000,000 |  |                               |  | -
|                   |  |                                                                                                              |            |  |                               |  |  
|Lloyd
    Trammell |  |                                                                                                              | 700,000    |  |                               |  | -



Pursuant
to an employment agreement dated January 17, 2011, the Company issued options to purchase

65





12,000,000
shares of our common stock at $0.12 per share to John Blaisure.  On June 14, 2013, the Company amended the terms of
the options to extend the expiration date by two years



On January
1, 2013, the Company issued options to purchase 700,000 shares of the Company’s common stock at $0.50 per share to Lloyd
Trammel pursuant to an amended employment agreement dated December 31, 2012.  The options are immediately exercisable
for a period of three years.



Other than
as disclosed above, there were no stock options issued or exercised during the fiscal year ended December 31, 2014 by a named
executive officer, and no awards were made to a named executive officer in the last completed fiscal year under any long-term
incentive plan.



Compensation
of Directors



Directors
are permitted to receive fixed fees and other compensation for their services as directors. The Board of Directors has the authority
to fix the compensation of directors. No amounts have been paid to, or accrued to, directors in such capacity.



Employment
Agreements



Mr.
Greg Halpern, our President and CFO, entered into an employment agreement with us on October 13, 2008. Pursuant to the Employment
Agreement, the term of the employment shall be for a period of ten (10) years commencing on October 13, 2008. The term of this
employment agreement shall automatically be extended for additional terms of one (1) year each unless either party gives prior
written notice of non-renewal to the other party no later than sixty (60) days prior to the expiration of the end of the 10 years.
Subject to the terms of the employment agreement, we shall pay Mr. Halpern $18,000 per month as compensation for his services
rendered as provided in the employment agreement. In addition to the base salary, Mr. Halpern shall be entitled to a monthly commission
equal to 10% of all of our sales. On May 1, 2013, the Company amended its employment agreement with Greg Halpern to increase his
salary to $24,000 per month.



Mr.
John Blaisure, our CEO, entered into an employment agreement with us on January 17, 2011.  Pursuant to the employment
agreement, the term of employment shall be for a period of five (5) years commencing on January 7, 2011.  Subject to
the terms of the employment agreement, we agreed to pay Mr. Blaisure $8,000 per month as compensation for his services rendered
as provided in the employment agreement.  On August 25, 2012, the agreement was updated to increase the monthly compensation
to $12,000 per month beginning September 1, 2012. On May 1, 2013, the Company further amended the agreement to increase Mr. Blaisure’s
salary to $18,000 per month. In addition, to the base salary, Mr. Blaisure is entitled to and shall receive a monthly commission
equal to 20% of the gross sales of the Company derived from the efforts of Mr. Blaisure after deducting $8,000 from such amount.  Further,
as of the date of the employment agreement, the Company issued to Mr. Blaisure, 3,000,000 shares of common stock and, within
10 days of the signing of the employment agreement, 12,000,000 options to buy common stock of the Company at $.12 per share for
a period not to exceed three years from the date of the employment agreement. On June 14, 2013, such expiration date was extended
for two more years.



On
October 1, 2011, the Company executed an employment agreement with its Chief Technical Officer (“CTO”).  The
term of the agreement is for five years.  As compensation for services, the CTO will receive a monthly compensation
of $10,000, monthly commission equal to 5% of all profits derived from the sales of all products and services related to Max Sound,
and an annual bonus of 5% of all profits derived from the sales of all products and services related to Max Sound that is over
one million dollars. On December 31, 2012, the Company amended the agreement to grant Mr. Trammel options to purchase 700,000
shares of the Company’s common stock at $0.50 per share.  The options are immediately exercisable for a period
of three years.



On
December 31, 2012, Lloyd Trammell - CTO, John Blaisure – CEO and Greg Halpern - CFO amended their employment agreements
with the Company to eliminate their previous annual bonus entitlements which was previously 10% each of revenues. In exchange
for this consideration, the Company agreed that Executives

66





Trammell
and Blaisure will each be decreased as their new bonuses to 6% of net profits, and Executive Halpern will each be decreased as
his new bonus to 7% of net profits. All three Executives may elect at their option to receive such bonuses in cash or Rule 144
stock or any combination of both.



We
have not had a promoter at any time during our past five fiscal years.



ITEM
12.       SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS



The
following table provides the names and addresses of each person known to us to own more than 5% of our outstanding shares of common
stock as of April 1, 2015 and by the officers and directors, individually and as a group. Except as otherwise indicated,
all shares are owned directly.



On
April  1, 2015, there were 285,044,350 issued and outstanding shares of common stock. Unless otherwise noted, each
person identified below possesses sole voting and investment power with respect to the shares listed.  The
information contained in this table is based upon information received from or on behalf of the named individuals or from
publicly available information and filings by or on behalf of those persons with the SEC.



|Title of Class  |  | Name and Address of Beneficial Owner(1)      |  | Amount and Nature of Beneficial Owner |            | Percent of Class (2)
|--------------- |  | -------------------------------------------- |  | ------------------------------------- | ---------- | --------------------
|                |  |                                              |  |                                       |            |                     
|Preferred Stock |  | Greg Halpern                                 |  |                                       | 5,000,000  | (2)                 
|                |  |                                              |  |                                       |            |                     
|Common Stock    |  | Greg Halpern                                 |  |                                       | 2,510,933  |                     
|                |  |                                              |  |                                       |            |                     
|Common Stock    |  | John Blaisure                                |  |                                       | 33,067,573 | (3)                 
|                |  |                                              |  |                                       |            |                     
|Common Stock    |  | Lloyd Trammell                               |  |                                       | 19,000,000 | (4)                 
|                |  |                                              |  |                                       |            |                     
|Common Stock    |  | Total Shares owned by Directors and officers |  |                                       | 57,067,573 |                     









|(1) | Unless
    otherwise indicated, the address for each stockholder listed in the above table is c/o Max Sound Corporation, 2902A Colorado
    Avenue, Santa Monica, CA 90404.                                                                                                                                                                                                                                                                                                            
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Reference
    Event of Stock conversion from Common to Preferred Shares.                                                                                                                                                                                                                                                                                                                                                                                                               
|(3) | On
    January 17, 2011, we entered into an employment agreement with our CEO, John Blaisure. Pursuant to the employment agreement
    with Mr. Blaisure, we issued to Mr. Blaisure 12,000,000 immediately exercisable options to buy common stock of the Company
    at $.12 per share for an exercise period of three years from the date of the employment agreement. On June 14, 2013, the Company
    amended the terms of the options to extend the expiration date by two years.
|(4) | On
    January 1, 2013, the Company issued options to purchase 700,000 shares of the Company’s common stock at $0.50 per share
    to Lloyd Trammel pursuant to an amended employment agreement dated December 31, 2012.  The options are immediately exercisable
    for a period of three years.                                                                                                                                                                                     



ITEM 13.       CERTAIN
RELATIONSHIPS AND RELATED TRANSACTION, AND DIRECTOR INDEPENDENCE





On
March 27, 2015, the Company, Hong Kong Opportunities LLC ("HKO") and John Blaisure entered into an amendment
to the Securities Exchange Agreement ("Agreement") associated with the Company's Form 8K filing on March 4, 2015 (the,
"Amendment").



In
particular, the Amendment states that of the 120,000,000 shares of the Company's common stock, par value $0.00001 per share
redeemed by the Company in exchange for the issuance of 5,000,000 shares of Series A Convertible Stock to HKO, HKO has requested
and the Company and John Blaisure have agreed that 1,332,427 of such deliverable shares will be tendered to the Company by John
Blaisure for redemption and no consideration. Pursuant to the Amendment, upon such delivery by John Blaisure, HKO shall be deemed
to have satisfied the Company's conditions to closing the Agreement.



During
the year ended December 31, 2014, the Company received $153,000 from Mr. Halpern.  The Company repaid $35,000 in principal
to the principal stockholder under the term of this line of credit.  Pursuant to the terms of the loan, the loan is
bearing an annual interest rate of 4% and is due on demand.



During
the year ended December 31, 2013, the Company received $318,000 from Mr. Halpern.  The Company repaid $178,000 in principal
  in     2013 to the principal stockholder under the term of this line of credit.  Pursuant
to the terms of the loan, the loan is bearing an annual interest rate of 4% and is due on demand.

67







On
September 26, 2013, we entered into a Credit Line Agreement with Mr. Halpern for $1,000,000 that will mature and expire on
or before the second anniversary of September 26, 2015.  Interest will accrue on each advance at an annual rate
of 4%. As of December 31, 2014, the Company owed $268,227 in principal and accrued interest related to these loans and
lines of credit.



ITEM
14.       PRINCIPAL ACCOUNTING FEES AND SERVICES



Audit
Fees



For
the Company’s fiscal years ended December 31, 2014 and 2013, we were billed approximately $64,613, and $58,354, respectively,
for professional services rendered for the audit and review of our financial statements.



Audit
Related Fees



There
were no fees for audit related services for the years ended December 31, 2014 and 2013.



Tax
Fees



For
the Company’s fiscal years ended December 31, 2014 and 2013, we were not billed for
professional services rendered for tax compliance, tax advice, and tax planning.



All
Other Fees



The
Company did not incur any other fees related to services rendered by our principal accountant for the years ended December 31,
2014 and 2013.



Pursuant
to the requirements of Section 13 or 15(d) 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.



Effective
May 6, 2003, the Securities and Exchange Commission adopted rules that require that before our auditor is engaged by us to render
any auditing or permitted non-audit related service, the engagement be:



|● | approved
    by our audit committee; or
|- | ---------------------------------------



|● | entered
    into pursuant to pre-approval policies and procedures established by the audit committee, provided the policies and procedures
    are detailed as to the particular  service,  the  audit committee is informed of each service,
    and such policies and procedures do not include delegation of the audit committee's responsibilities to management.
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



We
do not have an audit committee.  Our entire board of directors pre-approves all services provided by our independent
auditors.



The
pre-approval process has just been implemented in response to the new rules. Therefore, our board of directors does not have  records
of what percentage of the above fees were pre-approved.  However, all of the above services and fees were reviewed
and approved by the entire board of directors either before or after the respective services were rendered.



PART
IV



ITEM
15.       EXHIBITS, FINANCIAL STATEMENT SCHEDULES.



All
Exhibits in calender year 2014 associated with all prior Form10 filings are incorporated herein by reference.





3. Exhibits







| | 1.1 |  |  | Form of 8% Convertible Debenture Note dated October 29, 2014 in the amount of $110,000 entered into with LG Capital Funding, LLC.                                                                     
| | --- |  |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1.2 |  |  | Form of 8% Convertible Debenture Note dated October 29, 2014 in the amount of $110,000 entered into with LG Capital Funding, LLC.                                                                     
| | 1.3 |  |  | Form of 8% Convertible Debenture Note dated December 24, 2014 in the amount of $225,000 entered into with Blue Citi.                                                                                  
| | 1.4 |  |  | Form of 8% Convertible Debenture Note dated December 11, 2014 in the amount of $105,500 entered into with EMA Financial, LLC.                                                                         
| | 1.5 |  |  | Form of 8% Escrow Agreement dated November 5, 2014 in the amount of $105,000 entered into with Adar Bays, LLC.                                                                                        
| | 1.6 |  |  | Form of 8% Convertible Debenture Note dated October 29, 2014 in the amount of $105,000 entered into with LG Capital Funding, LLC.                                                                     
| | 1.7 |  |  | Form of 8% Convertible Debenture Note dated November 5, 2014, in the amount of $254,000 entered into with LG Capital Funding, LLC.                                                                    
| | 1.8 |  |  | Certification of the Principal Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).                    
| | 1.9 |  |  | Certification of the Principal Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).                    
| | 2.1 |  |  | Certification of the Principal Executive and Principal Financal Officers pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).





69









SIGNATURES



Pursuant
to the requirements of Section 13 or 15(d) 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.



Dated: 
April 01, 2015



|By | /s/
    John Blaisure | 
|-- | --------------------- | 

John
Blaisure,

President
and Chief Executive Officer

(Duly
Authorized Officer and Principal Executive Officer)



|By | /s/
    Greg Halpern | 
|-- | -------------------- | 

Greg
Halpern,

Chief
Financial Officer

(Duly Authorized
Officer and Principal Financial Officer)



Pursuant
to the requirements of the Securities Exchange Act, this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.



|Signature             |  | Title                                               |  | Date              
|--------------------- |  | --------------------------------------------------- |  | ------------------
|                      |  |                                                     |  |                   
|/s/
    John Blaisure |  | President,
    Chief Executive Officer and Director |  | April
01, 2015    
|John
    Blaisure     |  | (Principal
    Executive Officer)                   |  |                   
|                      |  |                                                     |  |                   
|/s/
    Greg Halpern  |  | Chief
    Financial Officer and Director            |  | April
    01, 2015
|Greg
    Halpern      |  | (Principal
    Financial Officer)                   |  |