~~The~~ Our ability ~~of the Company~~ to continue as a going concern is an issue raised as a result of the Company operating with an industry that is illegal under federal law, we have yet to achieve profitable operations, we have a significant accumulated deficit and are dependent on ~~its~~our ability to raise ~~adequate~~ capital from stockholders or other sources to fund operating losses until it is able to engage in profitable business operations. To the extent financing is not available, the Company may not be able to, or may be delayed in, developing its services and meeting its obligations. The Company will continue to evaluate its projected expenditures relative to its available cashsustain operations and to ~~evaluate additional means of financing~~ultimately achieve viable profitable operations. These factors raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in ~~order~~regard to ~~satisfy its working capital and other cash requirements. To this end,~~these matters are described in Note 1 in the Company has discontinued the furthered development and expenditures related its social networking operations and is currently operating its TPV Business at a small cash flow positive state however not at sufficient amounts to timely satisfy its current debt obligations. Management intends to work with its existing debt holders to negotiate payment terms. The accompanying consolidated financial ~~statements do not reflect any adjustments that might result from the outcome of these uncertainties.~~statements.

- 10 -

Off-Balance Sheet Arrangements

We ~~have~~had no ~~off balance~~off-balance sheet ~~arrangements.~~
arrangements of any kind for the transaction period ended June 30, 2014.

ITEM 7A: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not required for smaller reporting companies.

ITEM 8.8: FINANCIAL STATEMENTS AND ~~SUPPLEMENATRY~~SUPPLEMENTARY DATA

~~The financial statements of the Company are set forth immediately following the signature page to this Form 10-K.~~

~~ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE~~

~~The Company has had no disagreements with its independent registered public accounting firm with respect to accounting practices or procedures or financial disclosure.~~

~~ITEM 9A. CONTROLS AND PROCEDURES~~

~~Evaluation of Disclosure Controls and Procedures~~

We conducted an evaluation under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, as amended (“Exchange Act”), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by the company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures also include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of December 31, 2012 that our disclosure controls and procedures were effective at the reasonable assurance level over disclosure controls.

~~Management’s Report on Internal Control Over Financial Reporting~~

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States. Our internal control over financial reporting includes those policies and procedures that:

~~(1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;~~

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that our receipts and expenditures are being made only in accordance with the authorization of our management and directors; and

~~(3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.~~

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2012 and determined that our controls and procedures were effective at the reasonable assurance level. This annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by our independent registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permits us to provide only management's report in this annual report.

We have assessed the effectiveness of our internal control over financial reporting as of December 31, 2012, the period covered by this Annual Report on Form 10-K, as discussed above. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in ~~Internal Control—Integrated Framework. Based on these criteria and our assessment, we have determined that, as of December 31, 2012, our internal control over financial reporting was effective.~~

~~Changes in internal control over financial reporting~~

There have been no changes in internal control over financial reporting that occurred during the fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the internal control over financial reporting.

~~ITEM 9B. OTHER INFORMATION~~

~~None.~~

~~PART III~~

~~ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE~~

The following table sets forth information with respect to the officers and directors of Calibrus. Calibrus’ directors serve for a term of one year and thereafter until their successors have been duly elected by the shareholders and qualified. Calibrus’ officers serve for a term of one year and thereafter until their successors have been duly elected by the Board of Directors and qualified.

~~Name~~	~~Age~~	~~Positions~~
~~Jeff W. Holmes~~	59	~~CEO, Director~~
~~Greg Holmes~~	49	~~President~~
~~Kirk Blosch~~	58	~~Director~~
~~Charles House~~	72	~~Director~~
~~Michael Myers~~	44	~~Director~~
~~Kevin Asher~~	37	~~CFO~~
~~Tom Harker~~	39	~~CTO~~

~~Jeff W. Holmes – Chairman and C.E.O~~. Jeff Holmes is a founder of Calibrus and has been active in the roles of President, C.E.O. and Chairman of the Board of Directors since Calibrus’ inception in 1999. For the past 26 years Mr. Holmes has been active in developing technologies that improve the efficiencies of business processes in the Healthcare, Internet, Computer (hardware and software) and Telecommunications industries. He graduated in 1976 with a B.S. in Marketing and Management from the University of Utah. The Company believes that because of Mr. Holmes’ role as a founder and his experience with microcap public companies he is qualified to be a director.

~~Greg W. Holmes – President~~. Greg Holmes is a founder of Calibrus and has served in several positions during his Calibrus tenure which began in 1999. Most recently, Mr. Holmes served as Director of Business Development, working on developing new business opportunities and strategic relationships. In 2003, Mr. Holmes served as Production Manager over Calibrus’ Papago Facility, managing activities related to client call volumes, staffing levels, scheduling and Quality Assurance issues for Fortune 1000 clients at Calibrus Corporate headquarters in Tempe, AZ. From January 2001 to February 2003, Mr. Holmes was the Director of Human Resources for Calibrus. He was also responsible for managing accounts receivable, accounts payable and invoicing. From 1996 to 1999, Mr. Holmes was head of Internet Business Development & Research for J.W. Holmes & Associates and The Scottsdale Equity Growth Fund. Responsibilities included conducting research and analysis for existing portfolio companies and companies seeking investment capital. From 1995 to 1996, Mr. Holmes was Director of Finance & Director of Human Resources for Pro Tour Tennis in which he handled the accounts payable, payroll, budget forecasting, financial statements and human resource duties. He earned his Bachelors degree in Geography and a minor in Finance from the University of Utah in 1995.

~~Kirk Blosch – Director.~~ ~~Mr. Blosch is a general partner and founder of Blosch and Holmes LLC, a business consulting~~ and private venture funding general partnership established in 1984. Mr. Blosch is and has been, since October 1999, a member of the board of directors of Calibrus, Inc. From the first quarter of 1997 through the second quarter of 2000, Mr. Blosch was a director of Zevex International, a medical product company specializing in medical devices and ultrasound technology. Zevex (ZVXI) was traded on NASDAQ prior to its sale. Mr. Blosch also served on the board of directors of OCIS, Inc. from 2003 through July 2007. Mr. Blosch graduated from the University of Utah in 1977 with a B.S. degree in Speech Communications. The Company believes that because of Mr. Blosch’s role as a founder and his experience with microcap public companies he is qualified to be a director.

~~Charles House – Director~~. Mr. House is currently Executive Director of InnovaScapes Institute located in Menlo Park, CA. Prior to joining Innova Scapes, Mr. . House served as Chancellor of Cogswell College in Sunnyvale, CA until August 2012. Mr. House was Executive Director for Media X at Stanford University, as well as Senior Research Scholar in the H-STAR (Human Science and Technologies Advanced Research) Division between November, 2006 and July, 2011. Before joining Stanford, he was at Intel Corporation, as co-founding Director of their Research Collaboratory in 2003. He joined Intel when they bought Dialogic Corporation in 1999 where House headed Corporate Engineering. From 1995 to 1997, House was President of Spectron Microsystems, a wholly-owned subsidiary of Dialogic that was sold to Texas Instruments. Prior, House was President of the Vista Division of Veritas Software (1993-1995), and the R&D Vice President for Informix (1991-1993) after many years in a variety of roles for Hewlett-Packard (1962-1991). House is an IEEE Fellow and ACM Fellow, a past President of ACM, and chair for many years of the Information Council for CSSP in Washington D.C. He holds numerous technology awards for his work, including the Computer Hall of Fame, the Entrepreneur’s Hall of Fame, and the Smithsonian “Wizards of Computing”. The Company believes that Mr. House’s broad technical expertise and experience qualify him to serve as a director.

~~Michael Myers – Director.~~ Mr. Myers became a Director in November 2010 and is a consultant with Local Matters, Inc. in Denver, Colorado. Additionally, Mr. Myers has been an adjunct professor at University of Denver’s Daniels College of Business since 2009, where he teaches MBA courses on information technology strategy. From 2008 through 2010, Mr. Myers worked for Ontargetjobs, Inc. as a manger and business analyst. From 2006 through 2008, Mr. Myers worked for Freshcurrent, Inc. as vice president of strategic marketing. From 2004 through 2005, Mr. Myers worked for Spiremedia, Inc. as vice president of professional services and from 1998 through 2004, Mr. Myers was operations manager for Experian eMarketing Solutions, Inc. Mr. Myers has an MBA from the Daniels College of Business of the University of Denver and a Bachelor of Science from the University of Colorado. The Company believes that Mr. Myers’ broad technical expertise and experience qualify him to serve as a director.

~~Kevin J. Asher~~ - ~~Chief Financial Officer~~. Mr. Asher has held the position of Chief Financial Officer since February 2008. Prior to joining Calibrus, from March 2006 to February 2008, he was the Principal, General Manager and CFO of an operator of five medical spa clinics in the greater Phoenix metropolitan area. Mr. Asher was responsible for all aspects of the business including finance, accounting, human resources and daily operations. From February 2005 through March 2006, Mr. Asher was Vice President of Finance for AirLink Mobile, Inc., an industry leading MVNO (mobile virtual network operator) and provider of prepaid wireless telephone service where he was responsible for all aspects of accounting and finance including financial reporting, treasury management, financial analysis, financial projections, payroll, regulatory reporting and daily accounting. From September 2003 to February 2005, Mr. Asher was a director of MCA Financial Group Ltd. of Phoenix, Arizona which provides advisory services to businesses, financial institutions and investor groups in the areas of financial restructuring, mergers and acquisitions, business oversight, and corporate and capital formation. His responsibilities included representation of debtors and creditors in the areas of business turnarounds, financial restructuring, chapter 11 ~~business reorganizations, divestures, mergers and acquisitions, business~~

valuations, financial management, and performance improvement. He advised clients in a variety of industries including aviation, aerospace and defense, retail, homebuilding, construction and manufacturing. Prior to his position at MCA Financial, Mr. Asher worked in the public accounting industry primarily as an audit manager. Mr. Asher has a Bachelor of Science degree in accountancy from Northern Arizona University at Flagstaff, Arizona and is a Certified Public Accountant.

~~Tom Harker – Chief Technology Officer~~. Mr. Harker has served as Director of Software Development and CTO at Calibrus since 2000. Tom’s responsibilities are to oversee all aspects of design and implementation of IT systems. Prior to coming to Calibrus, Tom served as Division Software Manager at ACS (Affiliated Computer Services) for 2 years. Mr. Harker has been involved deeply in the Third Party Verification (TPV) process for the past 9 years with an understanding of the TPV process and FCC requirements.

~~Key Employees:~~

~~Michael J. Brande, MCSE~~ - ~~Vice President of Network Operations~~. For the past 6 years, Michael Brande has served as the Director of Network Operations and Facilities at Calibrus. His team is responsible for all aspects of the data and telecom networks at Calibrus - from cabling to wiring, and switches and routers, to the servers, PBX’s and PC workstations. Mr. Brande directs and cultivates many key business relationships for Calibrus and its Vendor Partners. His responsibilities range from procurement, to services, to facilities and equipment maintenance. Prior to his employment with Calibrus, Michael was employed by ACS (Affiliated Computer Services) TeleSolutions as the Division Network Manager and was part of a team that designed a new and better process for Third Party Verification. He has over 12 years experience in the call center industry.

~~Kelly M. Robinson – Director of TPV Operations~~. Mr. Robinson joined the Calibrus team in 2003. His background includes developing and managing Third Party Verification operations for major telecommunications companies including BellSouth, Verizon and SBC/AT&T Communications, Cox Communications, CenturyTel, Frontier and others. He has also directed Customer Service and Lead Generation programs for Oakwood Corporate Housing, Grainger Tools, Lucent Technologies/Avaya and others. He has worked within the TPV industry for the last 11 years at Calibrus and previously at ACS (Affiliated Computer Services) and understands the nuances of Third Party Verification processes and its importance to the overall sales process.

~~Family Relationships~~

~~Except for Jeff Holmes and Greg Holmes, who are brothers, there are no family relationships between our officers and directors.~~

None of the officers and directors has filed for bankruptcy, been convicted in a criminal proceeding or been the subject of any order, judgment, or decree permanently, temporarily, or otherwise limiting activities (1) in connection with the sale or purchase of any security or commodity, or in connection with any violation of Federal or State securities laws or Federal commodities laws, (2) engaging in any type of business practice, or (3) acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, any other person regulated by the Commodity Futures Trading Commission or an associated person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of an investment company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct or practice in connection with such activity.

~~Board of Directors Independence~~

The Board of Directors is currently comprised of four members, two of which are independent and two that are not. Charles House and Michael Myers are considered independent members of the Board and Kirk Blosch and Jeff Holmes are not considered independent.

~~Board Meetings and Committees and Annual Meeting Attendance~~

During 2012, the board of directors of Calibrus met four times. Additionally, the Compensation Committee met once and the Audit Committee met three times. All members of the board of directors were either present in person or by proxy at all the meetings.

~~Audit Committee~~

The Audit Committee of the board of directors is made up of Charles House and Kirk Blosch. Kirk Blosch is the Chairman of the Audit Committee. The Audit Committee met four times in 2011 and all members were present. The Audit Committee of the Board’s responsibility to oversee management’s conduct of the corporation’s financial reporting process, the financial reports and other financial information provided by the corporation to the Securities and Exchange Commission and the public, the Corporation’s system of internal accounting and financial controls, and the annual independent audit of the Corporation’s financial statements. Members of the Committee are reelected annually.

~~Compensation Committee~~

The Compensation Committee of the Board of Director’s is currently made up of Kirk Blosch, who is Chairman of the Committee. Prior to April 22, 2013, Christian J. Hoffmann III was also a member of the committee. Members are reelected on an annual basis by the Board. The Committee reviews annually compensation related to key employees and Officers of the Company. The Compensation Committee met two times in 2012 and all members were present.

~~Stockholder Communications with the Board of Directors~~

Stockholders may communicate with the Board of Directors by writing to us as follows: Calibrus, Inc., attention: Corporate Secretary, 1225 West Washington Street, Suite 213, Tempe, AZ 85281. Stockholders who would like their submission directed to a particular member of the Board of Directors may so specify and the communication will be forwarded as appropriate.

~~Process and Policy for Director Nominations~~

Our full Board will consider candidates for Board membership suggested by Board members, management and our stockholders. In evaluating the suitability of potential nominees for membership on the Board, the Board members will consider the Board's current composition, including expertise, diversity, and balance of inside, outside and independent directors. The Board considers the general qualifications of the potential nominees, including integrity and honesty; recognized leadership in business or professional activity; a background and experience that will complement the talents of the other board members; the willingness and capability to actively participate in board and committee meetings; the extent to which the candidate possesses pertinent technological, business or financial expertise and experience; the absence of realistic possibilities of conflict of interest or legal prohibition; the ability to work well with the other directors; and the extent of the candidate's familiarity with issues affecting our business.

While the Board considers diversity and variety of experiences and viewpoints to be important factors, it does not believe that a director nominee should be chosen solely or mainly because of race, color, gender, national origin or sexual identity or orientation. Thus, although diversity may be a consideration in the Board's process, it does not have a formal policy regarding the consideration of diversity in identifying director nominees.

~~Stockholder Recommendations for Director Nominations.~~

Our Board of Directors does not have a formal policy with respect to consideration of any director candidate recommendation by stockholders. While the Board of Directors may consider candidates recommended by stockholders, it has no requirement to do so. To date, no stockholder has recommended a candidate for nomination to the Board. Given that we have not received director nominations from stockholders in the past and that we do not canvass stockholders for such nominations, we believe it is appropriate not to have a formal policy in that regard. We do not pay a fee to any third party to identify or evaluate or assist in indentifying or evaluating potential nominees.

Stockholder recommendations for director nominations may be submitted to the Company at the following address: Calibrus, Inc., attention: Corporate Secretary, 1225 West Washington, Suite 213, Tempe, AZ 85281. Such recommendations will be forwarded to the Board for consideration, provided that they are accompanied by sufficient information to permit the Board to evaluate the qualifications and experience of the nominees, and provided that they are in time for the Board to do an adequate evaluation of the candidate before the annual meeting of stockholders. The submission must be accomplished by a written consent of the individual to stand for election if nominated by the Board of Directors and to serve if elected and to cooperate with a background check.

~~Stockholder Nominations of Directors.~~

The Company provides that in order for a stockholder to nominate a director at an annual meeting, the stockholder must give timely, written notice to the Secretary of the Company and such notice must be received at the principal executive offices of the Company not less than 120 days before the date of its release of the proxy statement to stockholders in connection with its previous year’s annual meeting of stockholders. Such stockholder’s notice shall include, with respect to each person whom the stockholder proposes to nominate for election as a director, all information relating to such person, including such person’s written consent to being named in the proxy statement as a nominee, serving as a director, that is required under the Securities Exchange Act of 1934, as amended, and cooperating with a background investigation. In addition, the stockholder must include in such notice his name and address, as they appear on the Company’s records, of the stockholder proposing the nomination of such person, and the name and address of the beneficial owner, if any, on whose behalf the nomination is made, the class and number of shares of capital stock of the Company that are owned beneficially and of record by such stockholder of record and by the beneficial owner, if any, on whose behalf the nomination is made, and any material interest or relationship that such stockholder of record and/or the beneficial owner, if any, on whose behalf the nomination is made may respectively have in such business or with such nominee. At the request of the Board of Directors, any person nominated for election as a director shall furnish to the Secretary of the Company the information required to be set forth in a stockholder’s notice of nomination which pertains to the nominee.

To be timely in the case of a special meeting or if the date of the annual meeting is changed by more than thirty (30) days from such anniversary date, a stockholder’s notice must be received at the principal executive offices of the Corporation no later than the close of business on the tenth day following the earlier of the day on which notice of the meeting date was mailed or public disclosure of the meeting date was made.

~~Board of Directors’ Role in the Oversight of Risk Management~~

We face a variety of risks, including credit, liquidity and operational risks. In fulfilling its risk oversight role, our Board of Directors focuses on the adequacy of our risk management process and overall risk management system. Our Board of Directors believes that an effective risk management system will (i) adequately identify the material risks that we face in a timely manner; (ii) implement appropriate risk management strategies that are responsive to our risk profile and specific material risk exposures; (iii) integrate consideration of risk and risk management into our business decision-making; and (iv) include policies and procedures that adequately transmit necessary information regarding material risks to senior executives and, as appropriate, to the Board or relevant committee.

Our Board of Directors oversees risk management for us. Accordingly, the Board schedules time for periodic review of risk management, in addition to its other duties. In this role, the Board receives reports from management, certified public accountants, outside legal counsel, and to the extent necessary, from other advisors, and strives to generate serious and thoughtful attention to our risk management process and system, the nature of the material risks we face, and the adequacy of our policies and procedures designed to respond to and mitigate these risks.

~~Board Leadership Structure~~

Our Board of Directors does not have a policy on whether or not the roles of Chief Executive Officer and Chairman of the Board of Directors should be separate and, if they are to be separate, whether the Chairman of the Board should be selected from the non-employee directors or be an employee. Our Board of Directors believes that it should be free to make a choice from time to time in any manner that is in the best interests of us and our shareholders. The Board of Directors believes that Mr. Holmes's service as CEO and Chairman of the Board is in the best interest of us and our shareholders. He possesses detailed knowledge of the issues, opportunities and challenges we face and is thus best positioned to develop agendas that ensure the Board's time and attention will be focused on the most critical matters. Our Board has determined that our Board leadership structure is appropriate given the size of our Board and the nature of our business.

~~Code of Ethics and Conduct~~

~~Our Board of Directors has adopted a~~ ~~Code of Ethics and Conduct~~ ~~that is applicable to all of our employees, officers and directors. Our~~ ~~Code of Ethics and Conduct~~ ~~is intended to ensure that our employees act in accordance with the highest ethical standards. A copy of our~~ ~~Code of Ethics and Conduct~~ ~~may be obtained by sending a written request to us at 1225 West Washington Street, Suite 213, Tempe, AZ 85281, Attn: Corporate Secretary and the~~ ~~Code of Ethics and Conduct~~ ~~is filed as an exhibit to this Annual Report on Form 10-K.~~

~~COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT~~

~~The Company is not aware of any reports not filed by officers, directors and ten percent stockholders.~~

~~ITEM 11. EXECUTIVE COMPENSATION~~

The following table sets forth, for the fiscal years indicated, all compensation awarded to, earned by or paid to Calibrus’ chief executive officer and each of the other executive officers that were serving as executive officers at December 31, 2012 (collectively referred to as the "Named Executives"). No other executive officer serving during 2012 received compensation greater than $100,000.

~~SUMMARY COMPENSATION TABLE~~

Name and Principal Position Year Salary Bonus Stock Awards Option Awards Non-Equity Incentive Plan Compensation Nonqualified Deferred Compensation All Other Compensation Total
(a) (b) (c) (d) (e) (f) (1) (g) (h) (i) (2) (j)
Jeff W. Holmes, CEO 12/31/2012 $96,875 $0 $0 $0 $0 $0 $4,659 $101,534
12/31/2011 $79,250 $0 $0 $0 $0 $0 $4,363 $83,613
Greg W. Holmes, President 12/31/2012 $74,792 $0 $0 $0 $0 $0 $4,729 $79,521
12/31/2011 $54,163 $0 $0 $0 $0 $0 $4,393 $58,556
Thomas Harker, CTO 12/31/2012 $105,833 $0 $0 $0 $0 $0 $4,659 $110,492
12/31/2011 $102,400 $0 $0 $0 $0 $0 $4,460 $106,860
Kevin J. Asher, CFO 12/31/2012 $108,750 $0 $0 $0 $0 $0 $4,660 $113,410
12/31/2011 $100,000 $0 $0 $0 $0 $0 $4,372 $104,372

~~(1)~~ The Company had adopted two Stock Option Plans, the 2001 Non-Qualified Stock Option Plan and the 2001 Incentive Stock Option Plan, both of which have expired. During the year ended December 31, 2010 the Company increased the number of options available for grant under the 2001 Incentive Stock Option Plan by 550,000 options. Under the 2001 Non-Qualified Plan, the Company may grant options for up to 2,850,000 shares of common stock and has granted 780,000 options that are outstanding as of April 1, 2013, all with an exercise price of $1.00. The maximum term of the options was five years, and they vested at various times according to the Option Agreements. Under the 2001 Incentive Stock Option Plan, the Company may have granted options for up to 2,000,000 shares of common stock and has granted 1,318,334 as of April 1, 2013, all with an exercise price of $1.00. The maximum term of the options was five years and they vested at various times according to the Option Agreements. All forfeited and expired options were added back into the plan and became immediately available for issuance. Both of the above stock option plans have expired and no further options are available for grant under the expired plans.

~~(2) The amounts shown include Company-paid portion of health insurance for the fiscal years ended 2012 and 2011.~~

~~Outstanding Equity Awards At Fiscal Year-End~~

Stock Awards Stock Awards
Name Number of securities underlying unexercised Options (#) Exercisable Number of Securities Underlying Unexercised Options (#) Unexercisable Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) Option Exercise Price ($) Option Expiration Date Number of Shares or Units of Stock That Have Not Vested (#) Market Value of Shares or Units of Stock That Have Not Vested ($) Equity Incentive Plan Awards: Number of Unearned Shares Units or Other Rights That Have Not Vested (#) Equity Incentive Plan Awards Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested (#)
Jeff W. Holmes        70,000 - - $1.00 12/17/2013 - - - -
CEO      300,000 - - $1.00 9/10/2015 - - - -
Greg W. Holmes        50,000 - - $1.00 12/17/2013 - - - -
President      225,000 - - $1.00 9/10/2015 - - - -
Tom Harker        50,000 - - $1.00 12/17/2013 - - - -
CTO        79,167 - - $1.00 9/10/2015 - - - -
Kevin Asher        50,000 - - $1.00 11/18/2013 - - - -
CFO        25,000 - - $1.00 12/17/2013 - - - -
     150,000 - - $1.00 9/10/2015 - - - -

~~Compensation of Directors~~

~~Name~~	~~Year~~	~~Fees Earned or Paid in Cash ($)~~	~~Stock Awards ($)~~	~~Option Awards ($)(1)~~	~~Non-Equity Incentive Plan Compensation ($)~~	~~Nonqualified Deferred Compensation Earnings ($)~~	~~All Other Compensation ($)~~	~~Total ($)~~
~~(a)~~	~~(b)~~	~~(c)~~	~~(d)~~	~~(e)~~	~~(f)~~	~~(g)~~	~~(h)~~	~~(i)~~
~~Kirk Blosch (2)~~	~~12/31/2012~~	-	-	$0	-	-	-	-
	~~12/31/2011~~	-	-	$0	-	-	-	-
~~Charles House (2)~~	~~12/31/2012~~	-	-	$0	-	-	-	-
	~~12/31/2011~~	-	-	$0	-	-	-	-
~~Christian J. Hoffmann, III (2)~~	~~12/31/2012~~	-	-	$0	-	-	-	-
	~~12/31/2011~~	-	-	$0	-	-	-	-
~~Michael Myers (2)~~	~~12/31/2012~~	-	-	$0	-	-	-	-
	~~12/31/2011~~	-	-	$0	-	-	-	-

(1) This column represents the aggregate grant date fair value of the awards granted in 2012 and 2011, respectively. Therefore, the values shown here are not representative of the amounts that may eventually be realized by a director. Pursuant to the rules of the Securities and Exchange Commission, we have provided a grant date fair value for option awards in accordance with the provisions of FASB ASC 718 ~~Share-based Payments~~. For option awards, the fair value is estimated as of the date of grant using the Black-Scholes option pricing model, which requires the use of certain assumptions, including the risk-free interest rate, dividend yield, volatility, expected term and forfeitures. Expected term is determined using an average of the contractual term and vesting period of the award. Expected volatility of award grants made under the Company’s plans is measured using the historical daily changes in the market price of similar industry indices, which are publicly traded, over the expected term of the award. Risk-free interest rate is equivalent to the implied yield on zero-coupon U.S. Treasury bonds with a remaining maturity equal to the expected term of the awards and forfeitures are based on the history of cancellations of awards granted by the Company and management's analysis of potential forfeitures. For further information on these calculations, please refer to the notes to our financial statements, Notes 1 and 11 included in Item 8 of this Form 10-K.

(2) As of December 31, 2012, Kirk Blosch had 235,000 options outstanding, Charles House had 235,000 options outstanding, Christian J. Hoffmann, III had 285,000 options outstanding and Michael Myers had 25,000 options outstanding. No director had any stock awards outstanding. Mr. Hoffman resigned as a director effective April 22, 2013

~~Option/SAR Grants in Last Fiscal Year~~

~~In fiscal 2012 and 2011 no options were granted.~~

The Company had adopted two Stock Option Plans, the 2001 Non-Qualified Stock Option Plan and the 2001 Incentive Stock Option Plan, both of which have expired. During the year ended December 31, 2010 the Company increased the number of options available for grant under the 2001 Incentive Stock Option Plan by 550,000 options. Under the 2001 Non-Qualified Plan, the Company may grant options for up to 2,850,000 shares of common stock and has granted 780,000 options that are outstanding as of April 1, 2013, all with an exercise price of $1.00. The maximum term of the options was five years, and they vested at various times according to the Option Agreements. Under the 2001 Incentive Stock Option Plan, the Company may have granted options for up to 2,000,000 shares of common stock and has granted 1,318,334 as of April 1, 2013, all with an exercise price of $1.00. The maximum term of the options was five years and they vested at various times according to the Option Agreements. All forfeited and expired options were added back into the plan and became immediately available for issuance. Both of the above stock option plans have expired and no further options are available for grant under the expired plans.

The Company also issued a total of 500,000 options outside of the existing plans to members of the Company’s Advisory Board. The Options were issued on December 31, 2011 and have a term of three years and an exercise price of $.25.

~~Stock Option Exercise~~

~~In fiscal 2012, none of the named executives exercised any options to purchase shares of common stock.~~

~~Long-Term Incentive Plan (“LTIP”)~~

~~There were no awards granted during fiscal years 2012 or 2011.~~

~~Board of Directors Compensation~~

Each director may be paid his expenses, if any, of attendance at each meeting of the board of directors, and may be paid a stated salary as director or a fixed sum for attendance at each meeting of the board or directors or both. No such payment shall preclude any director from serving the corporation in any other capacity and receiving compensation therefore. For 2012 and 2011, no Directors received compensation.

~~Employment Contracts and Termination of Employment and Change-in-Control Arrangements~~

Calibrus has agreements with all officers and those employees identified herein as key employees. All of our agreements contain language assigning all inventions over to Calibrus, they also contain non-compete agreements. Additionally, on termination, if not for cause and Calibrus is cash flow and earnings positive, our officers and key employees will receive up to three months salary as severance. On a change of control of Calibrus, which results in termination of the officer or key employee and Calibrus is cash flow positive and has positive earnings per share at the time of the change of control, the officer or key employee will receive three months salary as severance based on the officers or employees’ current salary. Employment contracts are entered into for two, three or four year periods with automatic two, three or four one year extensions depending on the officer or key employee. Except for terms and salary, all of our employment contracts contain the same material terms. A summary of the officers’ employment contracts are below:

Employee Beginning Date Annual Salary
Jeff W. Holmes 1/1/2005 $ 220,000
Greg W. Holmes 1/1/2005 $ 150,000
Kevin J. Asher 2/5/2008 $ 130,000
Tom Harker 1/10/2007 $ 140,000
Michael Brande 1/10/2007 $ 105,000
Kelly Robinson 6/28/2004 $ 90,000

During the years ended December 31, 2012 and 2011, each of the employees listed above took salary decreases due to limited cash flow in the Company. Each of the employees has agreed to waive and forgive the unpaid amounts per their respective employment agreements. In September 2012, the Company reinstated a portion of the salary decreases to the executives.

The Company has agreed to indemnify its officers and directors for certain events or occurrences arising as a result of the officer or director serving in such capacity. The term of the indemnification period is for the officer’s or director’s lifetime. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited.

~~Report on Repricing of Options/SARs~~

~~We have not adjusted or amended the exercise price of stock options or SARs previously awarded to any executive officers.~~

~~Report on Executive Compensation~~

The Compensation Committee of the Board of Directors determines the compensation of Calibrus’ executive officer and president and sets policies for and reviews with the chief executive officer and president the compensation awarded to the other principal executives, if any. The board of directors has two committees, the audit and compensation committee which are made up of non-employee directors. Our Compensation Committee is composed of Kirk Blosch and Charles House. Our Audit Committee is composed of Kirk Blosch, Charles House and Christian J. Hoffmann, III.

The compensation policies utilized by the Board of Directors are intended to enable Calibrus to attract, retain and motivate executive officers to meet our goals using appropriate combinations of base salary and incentive compensation in the form of stock options. Generally, compensation decisions are based on contractual commitments, if any, as well as corporate performance, the level of individual responsibility of the particular executive and individual performance. During the fiscal year ended December 31, 2012, Calibrus’ chief executive officer was Jeff W. Holmes, our President was Greg W. Holmes and Kevin J. Asher was CFO.

Base salaries for Calibrus’ executive officers are determined initially by evaluating the responsibilities of the position held and the experience of the individual, and by reference to the competitive marketplace for management talent, including a comparison of base salaries for comparable positions at comparable companies within Calibrus’ industry.

Annual salary adjustments are determined by evaluating the competitive marketplace, the performance of Calibrus, the performance of the executive, particularly with respect to the ability to manage the growth of Calibrus, the length of the executive's service to Calibrus and any increased responsibilities assumed by the executive.

During the years ended December 31, 2012 and 2011, each of the Company’s executives took salary decreases due to limited cash flow in the Company. Each of the employees has agreed to waive the unpaid amounts per their respective employment agreements. In September 2012, the Company reinstated a portion of the salary decreases to the executives.

~~Option Plans~~

Calibrus had 4,850,000 shares reserved for issuance under stock option plans with 2,098,334 stock options issued and outstanding. Both of the Company’s prior stock option plans have expired. The board of directors had the authority to issue the options at their sole discretion.

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

The following table sets forth certain information regarding the beneficial ownership of our common stock at April 1, 2013 with respect to (i) each person or group known to us to beneficially own more than 5% of the outstanding shares of our common stock; (ii) each of our directors; (iii) each of our executive officers; and (iv) all of our directors and all of our executive officers as a group.

For purposes of this table, information as to the beneficial ownership of shares of common stock is determined in accordance with the rules of the Securities and Exchange Commission and includes general voting power and/or investment power with respect to securities. Except as otherwise indicated, all shares of our common stock are beneficially owned, and sole investment and voting power is held, by the person named. For purposes of this table, a person or group of persons is deemed to have “beneficial ownership” of any shares of common stock, which such person has the right to acquire within 60 days after the date hereof. The inclusion herein of such shares listed as beneficially owned does not constitute an admission of beneficial ownership.

All percentages are calculated based upon a total number of 13,871,080 shares of common stock outstanding as of April 1, 2013, plus, in the case of the individual or entity for which the calculation is made, that number of options or warrants owned by such individual or entity that are currently exercisable or exercisable within 60 days.

Shares Beneficially
Owned (1) (2)
Name Number Percent
Jeff W. Holmes (3)
2,407,064 16.78%
Kirk Blosch (4)
2081 S. Lakeline Drive
Salt Lake City, UT 84109
1,630,334 11.56%
Greg Holmes (5)
806,060 5.49%
Kevin Asher (6)
225,000 1.60%
Charles House (7)
235,000 1.67%
Michael Myers (8)
25,000 *
Tom Harker (9)
129,167 *
All directors and executive officers as a group
(9 persons) (10)
5,457,625 35.28%

* Less than one percent

~~(1)~~

For purposes of this table, "beneficial ownership" is determined in accordance with the rules of the Securities and Exchange Commission ("SEC") and generally includes voting or investment power with respect to securities. In accordance with SEC rules, shares which may be acquired by a person upon exercise of stock options or any other right within 60 days of the date of the table are deemed beneficially owned by such person. Except as indicated by footnote, and subject to community property laws where applicable, the persons or entities named in the table above have sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them.

~~(2)~~

~~The address of these stockholders is c/o Calibrus, Inc., 1225 West Washington, Suite 213, Tempe, AZ 85281.~~

~~(3)~~

Includes 370,000 stock options which are exercisable now at $1.00 per share. Shares also include 50,000 warrants issued to Mr. Holmes which are now exercisable at $0.50 per share. Shares also include 437,093 shares and 54,637 warrants issued to Scottsdale Equity Growth Fund, LLC in which Mr. Holmes is the Managing Member, which are exercisable now at $0.325 per share.

~~(4)~~

~~Includes 235,000 stock options which are exercisable now at a price of $1.00 per share. Mr. Blosch owns 1,395,334 shares, exclusive of the options.~~

~~(5)~~

~~Includes 275,000 stock options which are exercisable currently at $1.00 per share. Mr. Greg Holmes owns 531,060 shares, exclusive of the options.~~

~~(6)~~

~~Includes 225,000 stock options which are exercisable currently at $1.00 per share. Mr. Asher owns no shares. The shares shown are the options he can exercise.~~

~~(7)~~

~~Shares include 235,000 stock options which are exercisable currently at $1.00 per share. Mr. House owns no shares. The shares shown are options he can exercise.~~

~~(8)~~

~~Includes 25,000 stock options which are exercisable currently at $1.00 per share. Mr. Myers owns no shares, The shares shown are options he can exercise.~~

~~(9)~~

~~Includes 129,167 stock options which are exercisable currently at $1.00 per share. Mr. Harker owns no shares. The shares shown are the options he can exercise.~~

~~(10)~~

~~Includes 1,908,804 shares directors and executive officers have a right to acquire upon exercise of stock options and 129,637 shares exercisable upon exercise of warrants.~~

~~Control by Existing Shareholders~~

Given the large percentage of stock owned by current management, they most likely will be able to control any shareholder vote. As a result, the persons currently in control of Calibrus will most likely continue to be in a position to elect at least a majority of the Board of Directors of Calibrus, to dissolve, merge or sell the assets of Calibrus, and generally, to direct the affairs of Calibrus.

~~Dividends~~

We have not declared any cash dividends with respect to our common stock, and do not intend to declare dividends in the foreseeable future. Our future dividend policy cannot be ascertained with any certainty. There are no material restrictions limiting, or that are likely to limit, our ability to pay dividends on our securities.

~~Securities Authorized for Issuance under Equity Compensation Plans~~

Plan Category

Number of Securities to be issued upon exercise of outstanding options, warrants and rights

Weighted-average exercise price of outstanding options, warrants and rights
Number of securities remaining available for future issuance under equity compensation plans excluding securities reflected in column (a)
(a) (b) (c)
Equity compensation plans approved by security holders 2,098,334 $ 1.00 3,000,000
Total 2,098,334 $ 1.00 3,000,000

~~The Company also has 500,000 options issued outside of the compensation plans with a weighted average exercise price of $.25. These options have a three-year term.~~

~~ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE~~

We believe that all purchases from or transactions with affiliated parties were on terms and at prices substantially similar to those available from unaffiliated third parties other than the short term, non-interest bearing cash advances received from the CEO, President and Mother of the CEO and President as discussed below.

Other than listed below, there were no material transactions, or series of similar transactions, during our Company’s last fiscal year, or any currently proposed transactions, or series of similar transactions, to which our Company was or is to be a party, in which the amount involved exceeded the lesser of $120,000 or one percent of the average of our total assets at year-end for the last three completed fiscal years and in which any director, executive officer or any security holder who is known to us to own of record or beneficially hold more than five percent of any class of our common stock, or any member of the immediate family of any of the foregoing persons, had an interest.

~~As of December 31, 2012 the Company owed a total of $152,400 in short term advances from its CEO and an additional $50,000 principal balance in the form of a bridge loan.~~

As of December 31, 2012 the Company owed a total of $45,000 in short-term advances from the mother of the CEO and President and an additional $15,000 principal balance in the form of a convertible debenture.

~~As of December 31, 2012 the Company owed a total of $20,000 in short-term advances from its President and an additional $267,500 principal balance in the form of bridge loans.~~

As of December 31, 2012 the Company owed a total of $25,000 in principal balance notes to Christian J. Hoffmann, III, or entities controlled by Mr. Hoffmann. Mr. Hoffmann was a Director of the Company in 2012 and resigned as a director effective April 22, 2013.

As of December 31, 2012 the Company owed $187,701 in accrued and unpaid legal fees to Quarles & Brady, LLP. Chrisitian J. Hoffmann III, a Director of the Company, is a partner at Quarles & Brady, LLP. Mr. Hoffman resigned as a director effective April, 22, 2013.

~~ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES~~

1) Audit Fees - The aggregate fees incurred for each of the last two fiscal years for professional services rendered by our independent registered public accounting firm for the audit of our annual financial statements and review of our quarterly financial statements is approximately $56,800 and $55,000 for each of the years ending December 31, 2012 and 2011.

~~2) Audit-Related Fees. $0 and $0.~~

~~3) Tax Fees. $3,200 and $2,800.~~

~~4) Other 14C Related. $16,800 and $0.~~

5) Approval Policy. Our entire Board of Directors approves in advance all services provided by our independent registered public accounting firm. All engagements of our independent registered public accounting firm in fiscal years 2012 and 2011 were pre-approved by the Audit Committee.

~~6) Not Applicable.~~

~~ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.~~

~~(a)(1)FINANCIAL STATEMENTS. The following financial statements are included in this report:~~

~~The following financial statements, notes thereto, and the related independent registered public accounting firm’s report contained on page F-1 to our financial statements are herein incorporated:~~

~~December 31, 2012 and 2011~~

~~Report of Independent Registered Public Accounting Firm~~

~~Balance Sheets - December 31, 2012 and 2011~~

~~Statements of Operations - Years ended December 31, 2012 and 2011~~

~~Statements of Changes in Stockholders' Equity – Years ended December 31, 2012 and 2011~~

~~Statements of Cash Flows – Years ended December 31, 2012 and 2011~~

~~Notes to Financial Statements – Years ended December 31, 2012 and 2011~~

~~(a)(2)FINANCIAL STATEMENT SCHEDULES. The following financial statement schedules are included as part of this report:~~

~~None.~~

~~(a)(3)EXHIBITS. The following exhibits are included as part of this report:~~

SEC
Exhibit Reference
No. No. Title of Document
Location

3(i) 3.01 Articles of Incorporation of Calibrus Incorporated by

Reference1

3(ii) 3.02 Amendment to Articles of Incorporation Calibrus-Name Change Incorporated by

Reference1

3(iii) 3.03 Bylaws of Calibrus Incorporated by

Reference1

4 4.01 Specimen Stock Certificate Incorporated by

Reference1

TABLE OF CONTENTS FOR FINANCIAL STATEMENTS

10 10.01 Lease Agreement – Paragon Incorporated by

Reference1

10 10.02 AT&T Services, Inc.-Agreement Confidentiality
Requested

10 10.03 Magnet Warrant Incorporated by

Reference1

10 10.04 Employment Agreement-Jeff Holmes Incorporated by

Reference1

10 10.05 Employment Agreement-Greg Holmes Incorporated by

Reference1

10 10.06 Employment Agreement-Kevin Asher Incorporated by

Reference1

10 10.07 Incentive Stock Option Plan Incorporated by

Reference1

10 10.08 Non-Qualified Stock Option Plan Incorporated by

Reference1

10 10.09 Form of Options Incorporated by

Reference1

10 10.10 MeoMyo, LLC Development Contract Incorporated by

Reference1

10 10.11 Form of Convertible Debenture Incorporated by

Reference1

10 10.12 Form of Warrant Incorporated by

Reference1

10 10.13 2012 Stock Option and Restricted Stock Plan Incorporated by

Reference2

14 14.01 Code of Ethics Incorporated by

Reference1

31 31.01 CEO certification This Filing

31 31.02 CFO certification This Filing

32 32.01 CEO and CFO certification This Filing

1 Filed as an exhibit to the Company's registration statement on Form 10 filed with the Commission, SEC file no. 000-53548.
2 Filed as an exhibit to the Company’s definitive proxy statement on Form DEF 14A filed with the Commission, SEC file no. 000-53548.

	Page
Reports of Independent Registered Public Accounting Firms	13

Consolidated Balance Sheet	15

Consolidated Statement of Operations	16

Statement of Changes in Stockholders' Equity	17

Consolidated Statement of Cash Flows	18

Notes to Consolidated Financial Statements	19

40- 12 -

~~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 by signed on its behalf by the undersigned, thereunto duly authorized.

~~Calibrus, Inc.~~

~~By:~~	~~/s/ Jeff W. Holmes~~	~~Date: April 24, 2013~~
	~~Jeff W. Holmes, CEO~~

~~By:~~	~~/s/ Kevin J. Asher~~	~~Date: April 24, 2013~~
	~~Kevin J. Asher, CFO~~

~~Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant in the capacities and on the dates stated.~~

~~Signature~~	~~Title~~	~~Date~~

~~/s/~~ ~~Jeff W. Holmes~~	~~Director, CEO~~	~~April 24, 2013~~
~~Jeff W. Holmes~~

~~/s/~~ ~~Kirk Blosch~~	~~Director~~	~~April 24, 2013~~
~~Kirk Blosch~~

~~/s/ Charles House~~	~~Director~~	~~April 24, 2013~~
~~Charles House~~

~~/s/ Michael Myers~~	~~Director~~	~~April 24, 2013~~
~~Michael Myers~~

Report of Independent Registered Public Accounting Firm

Board of Directors and Stockholders

Grow Condos, Inc. and subsidiary (f/k/a Fanatic Fans Inc. and Calibrus, Inc.)

We have audited the accompanying consolidated balance ~~sheets~~sheet of Grow Condos, Inc. and subsidiary (f/k/a Fanatic Fans Inc. and Calibrus, Inc.) as of ~~December 31, 2012 and 2011~~June 30, 2014, and the related consolidated statements of operations, changes in stockholders’ ~~deficit~~equity and cash flows for the ~~years then ended.~~period from date of inception (September 9, 2013) to June 30, 2014. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our ~~audits.~~audit.

We conducted our ~~audits~~audit 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 ~~audits~~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 presentation of the financial statements. We believe that our ~~audits provide~~audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Grow Condos, Inc. and subsidiary (f/k/a Fanatic Fans Inc. and Calibrus, Inc.) at ~~December 31, 2012 and 2011,~~June 30, 2014, and the results of its operations, changes in stockholders' ~~deficit~~equity and its cash flows for the ~~years then ended~~period from date of inception (September 9, 2013) to June 30, 2014, in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company operates with an industry that is illegal under federal law, has ~~suffered recurring losses~~yet to achieve profitable operations, has a significant accumulated deficit and is dependent on its ability to raise capital from stockholders or other sources to sustain operations and ~~has a net capital deficiency that~~to ultimately achieve viable profitable operations. These factors raise substantial doubt about ~~its~~the Company's ability to continue as a going concern. ~~Management’s~~Management's plans in regard to these matters are ~~also~~ described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ Semple, Marchal & Cooper, LLP

Certified Public Accountants

Phoenix, Arizona

~~April 24, 2013~~October 14, 2014

- 13 -

~~CALIBRUS, INC.~~

~~BALANCE SHEETS~~

Scrudato & Co., PA

~~December 31, 2012 and 2011~~CERTIFIED PUBLIC ACCOUNTING FIRM

ASSETS
2012 2011
Current Assets
   Cash and cash equivalents $ 24,692 $ 11,065
   Accounts receivable - trade, net 423,319 526,413
   Prepaid expenses 4,811 13,094
   Deferred financing fees - 500

Total Current Assets 452,822 551,072

Property and equipment, net 9,138 10,303
Deposits 935 1,050
Assets held for sale 15,241 58,361

Total Assets $ 478,136 $ 620,786

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

Current Liabilities
   Convertible notes payable - current portion $ - $ 10,000
   Convertible related party notes payable - current portion 15,000 15,000
   Note payables - current portion 450,000 50,000
   Related party notes payable and short term cash advances,
      net of unamortized discount of $0 and $16,667 - current portion 559,900 367,733
   Due to factor 253,595 238,966
   Accounts payable - trade 833,987 476,699
   Accrued liabilities 360,796 216,870

Total Liabilities 2,473,278 1,375,268

Stockholders' Equity (Deficit)
   Preferred stock, $.001 par value, 5,000,000 shares authorized,
     none issued or outstanding - -
   Common stock, $.001 par value, 45,000,000 shares authorized,
     13,871,080 and  13,808,580  shares issued and outstanding 13,871 13,809
   Additional paid-in capital 9,297,446 9,277,185
   Accumulated deficit (11,306,459 ) (10,045,476 )

Total Stockholders' Equity (Deficit) (1,995,142 ) (754,482 )

Total Liabilities and Stockholders' Equity (Deficit) $ 478,136 $ 620,786
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders

Grow Condos, Inc. and subsidiary (f/k/a Fanatic Fans Inc. and Calibrus, Inc.)

We have audited the accompanying consolidated balance sheet of Grow Condos, Inc. and subsidiary (f/k/a Fanatic Fans Inc. and Calibrus, Inc.) as of June 30, 2015, and the related consolidated statements of operations, changes in stockholders’ equity and cash flows for the year then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

We conducted our audit 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 presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Grow Condos, Inc. and subsidiary (f/k/a Fanatic Fans Inc. and Calibrus, Inc.) at June 30, 2015, and the results of its operations, changes in stockholders' equity and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company operates with an industry that is illegal under federal law, has yet to achieve profitable operations, has a significant accumulated deficit and is dependent on its ability to raise capital from stockholders or other sources to sustain operations and to ultimately achieve viable profitable operations. These factors raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ John Scrudato CPA

Califon, New Jersey

October 9, 2015

7 Valley View Drive Califon, New Jersey 07830

Registered Public Company Accounting Oversight Board Firm

~~The Accompanying Notes are an Integral~~

~~Part of the Financial Statements~~

~~F-1~~

- 14 -

~~CALIBRUS, INC.~~

~~STATEMENTS OF OPERATIONS~~

~~For The Years Ended December 31, 2012 and 2011~~

2012 2011

Revenues $ - $ -

Cost of revenues - -

Gross profit - -

General and administrative expenses 922,886 1,739,759
Impairment expense 108,458 1,757,898
Research and development 1,382,100 1,472,113

(2,413,444 ) (4,969,770 )

Other Income (Expense):
   Interest income 2 23
   Interest expense (286,171 ) (3,015,156 )

(286,169 ) (3,015,133 )

Loss from continued operations (2,699,613 ) (7,984,903 )

Income from discontinued operations 1,438,630 1,652,932

Loss before income taxes (1,260,983 ) (6,331,971 )

Income taxes - -

Net Loss $ (1,260,983 ) $ (6,331,971 )

Loss per common share from continued operations
   Basic and diluted $ (0.20 ) $ (1.00 )

Income per common share from discontinued operations
   Basic and diluted 0.10 0.21

Net loss per common share
   Basic and diluted $ (0.10 ) $ (0.79 )

Weighted average common shares; basic and diluted 13,837,758 7,978,820

~~The Accompanying Notes are an Integral~~

~~Part of the Financial Statements~~

GROW CONDOS, INC. and Subsidiary
CONSOLIDATED BALANCE SHEET
June 30, 2015 and 2014

ASSETS

	2015			2014
Current Assets
Cash and cash equivalents	$	42,747		$	155,153
Lease receivables		1,161			950
Prepaid expenses		5,450			404

Total Current Assets		49,358			156,507

Property and Equipment, net		1,257,368			1,201,850
Deposits		8,618			818

Total Assets	$	1,315,344		$	1,359,175

LIABILITIES AND EQUITY

Curretn Liabilities
Accounts payable, trade		70,036			35,851
Accrued liabilities		112,058			13,506
Mortgages payable, current portion		31,303			29,841

Total Current Liabilities		213,397			79,198

Mortgages payable, less current portion		967,054			997,948
Customer deposits		4,900			3,600
Deferred option revenue		21,400			3,900

Total Liabilities		1,206,751			1,084,646

Shareholder's Equity
Preferred stock, $.001par value, 5,000,000 shares		-			-
authorized none issued or outstanding
Common stock, $.001 par value, 45,000,000 shares		41,665			41,436
authorized 41,698,479 and 41,435,709 shares issued
and outstanding
Additional paid-in capital		11,507,455			11,422,282
Accumulated deficit		(11,440,527	)		(11,189,189	)

Total Shareholder's Equity		108,593			274,529

Total Liabilities and Shockholder's Equity	$	1,315,344		$	1,359,175

The Accompanying Notes are an Integral
Part of the Consolidated Financial Statements

~~F-2~~

- 15 -

~~CALIBRUS, INC.~~

~~STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)~~

GROW CONDOS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the Years Ended June 30, 2015 and 2014

	2015			2014


Rental revenues	$	54,998		$	11,750
Total revenues		54,998			11,750

Operating expenses		256,979			927,361
Impairment of goodwill					10,266,365

Gail/(Loss) from operations		(201,981	)		(11,181,976	)

Interest expense		49,357			7,213
Loss before provision for income taxes		(251,338	)		(11,189,189	)
Provision for income taxes		-			-
Net income/(loss)	$	(251,338	)	$	(11,189,189	)

Net loss per common share:
Basic and diluted	$	0.01		$	0.61

Weighted average common shares; basic and diluted		38,927,178			18,461,343


The Accompanying Notes are an integral part
of these Condensed Consolidated Financial Statements

~~For The Years Ended December 31, 2012 and 2011~~

Additional Total
Common Stock Paid-In Accumulated Stockholders'
Shares Amount Capital Deficit Equity (Deficit)

Balance at December 31, 2010 6,794,600 $ 6,795 $ 4,765,758 $ (3,713,505 ) $ 1,059,048

Warrants issued with bridge loans - - 3,316 - 3,316

Convertible debt warrants - - 104,821 - 104,821

Warrants issued with debt conversion - - 14,191 - 14,191

Stock issued upon conversion of debt
and interest 6,976,480 6,976 1,737,144 - 1,744,120

Conversion expense - - 2,616,177 - 2,616,177

Stock issued for services 37,500 38 14,962 - 15,000

Stock based compensation - - 20,816 - 20,816

Net loss for the year ended
December 31, 2011 - - - (6,331,971 ) (6,331,971 )

Balance at December 31, 2011 13,808,580 $ 13,809 $ 9,277,185 $ (10,045,476 ) $ (754,482 )

~~The Accompanying Notes are an Integral~~

~~Part of the Financial Statements~~

~~F-3~~

- 16 -

~~CALIBRUS, INC.~~

~~STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT) (CONTINUED)~~

~~For The Years Ended December 31, 2012 and 2011~~

Additional Total
Common Stock Paid-In Accumulated Stockholders'
Shares Amount Capital Deficit Equity

Balance at December 31, 2011 13,808,580 $ 13,809 $ 9,277,185 $ (10,045,476 ) $ (754,482 )

Warrants extended - - 10 - 10

Warrants exercised 62,500 62 20,251 - 20,313

Net loss for the year ended
December 31, 2012 - - - (1,260,983 ) (1,260,983 )

Balance at December 31, 2012 13,871,080 13,871 9,297,446 (11,306,459 ) (1,995,142 )

GROW CONDOS, INC.
STATEMENT OF CHANGES IN STOCKHOLDER EQUITY
For the Years Ended June 30, 2015 and 2014

~~The Accompanying Notes are an Integral~~

~~Part of the Financial Statements~~

	Shares		Amount		Additional Paid-In Capital		Accumulated Deficit			Total Shareholders’ Equity

Balance at date of inception (Sept. 9, 2013		-	$	-	$	-	$	-		$	-

Founding contributed capital and debt forgiveness		18,369,000		18,369		142,662					161,031

Common Stock for cash and debt forgiveness		204,082		204		99,796					100,000

Common Stock for services		1,836,918		1,837		898,253					900,090

Shares issued in reverse acquisition		21,025,709		21,026		10,281,571					10,302,597

Net loss for the period ended June 20, 2014		-		-		-		(11,189,189	)		(11,189,189	)

Balance at September 30, 2014		41,435,709	$	41,436	$	11,422,282	$	(11,189,189	)	$	274,529

Balance at June 30, 2014		41,435,709	$	41,436	$	11,422,282	$	(11,189,189	)	$	274,529

Founding contributed capital and debt forgiveness		-									-

Common Stock for cash and debt forgiveness		-									-

Common Stock for services		-									-

Warrants Exercised for Common Stock		262,770		229		85,173					85,402

Net loss for the period ended September 30, 2014		-						(251,338	)		(251,338	)

Balance at June 30, 2015		41,698,479	$	41,665	$	11,507,455	$	(11,440,527	)	$	108,593

The Accompanying Notes are an Integral Part of the Consolidated Financial Statements.

~~F-4~~

- 17 -

~~CALIBRUS, INC.~~

~~STATEMENTS OF CASH FLOWS~~

~~For The Years Ended December 31, 2012 and 2011~~

GROW CONDOS, INC. and Subsidiary (f/k/a Fantastic Fans Inc. and Calibrus, Inc.)
CONSOLIDATED STATEMENT OF CASH FLOWS
From Date of Inception (September 9, 2013) through June 30, 2015

	For the twelve months ended
	June 30,			June 30,
	2015			2014
Cash flows from operating activities:
Net loss	$	(251,338	)	$	(11,189,189	)

Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		27,872			20,043
Stock issued for services					900,090
Impairment of goodwill					10,266,365
Changes in assets and liabilities:
Deposits		(7,800	)
Lease receivable		(211	)		(950	)
Prepaids		(5,046	)		(404	)
Accounts payable		34,975			3,805
Accrued expenses		(7,238	)		3,842
Security deposit		1,300			3,600
Deferred options revenue		17,500			3,900

Net cash used by operating activities		(189,986	)		11,102

Cash flows from investing activities:
Purchase of property and improvements		(83,390	)		(294,946	)
Cash acquired in reverse acquitition					76,774

Net cash used by investing activities		(83,390	)		(218,172	)

Cash flows from financing activities:
Proceeds from stockholders' loans		105,000			292,128
Repayments of stockholders' loans					(81,097	)
Repayments of mortgage		(29,420	)		(18,808	)
Proceeds from mortgages					120,000
Security deposit
Sale of common stock					50,000
Exercise of warrants		85,390

Net cash provided by financing activities		160,970			362,223

Net increase (decrease) in cash and cash equivalents		(112,406	)		155,153

Cash and cash equivalents at beginning of period		155,153			-

Cash and cash equivalents at end of period	$	42,747		$	155,153

Supplemental disclosure of cash flow information:

Cash paid during the period for:
Interest	$	49,357		$	3,371
Taxes	$	7,551		$	-

Supplemental disclosure of non-cash investing and financing items				$	926,597
Building purchase and assumption of mortgage				$	211,031
Stockholders' loans converted to equity


The Accompanying Notes are an integral part
of these Condensed Consolidated Financial Statements

2012 2011

Increase (decrease) in cash and cash equivalents:

Cash flows from operating activities:
Net Loss $ (1,260,983 ) $ (6,331,971 )

     Adjustments to reconcile net loss to net cash (used) provided by
     operating activities:
Depreciation and amortization 19,104 946,375
Amortization of financing costs 500 2,816
Amortization of debt discount 19,167 33,333
Options expense - 20,816
Conversion expense - 2,735,189
Interest converted to equity - 204,120
Stock issued for services - 15,000
Warrants issued 10 -
Impairment expense 108,458 1,757,898
     Changes in assets and liabilities:
Accounts receivable - trade 103,094 (153,423 )
Prepaid expenses (72,576 ) (6,961 )
Deposits 115 743
Accounts payable - trade 357,288 (207,871 )
Accrued liabilities 143,926 (49,236 )
Net cash (used) provided by operating activities (581,897 ) (1,033,172 )

Cash flows from investing activities:
Purchase of fixed assets (2,418 ) (22,919 )
Net cash used by investing activities (2,418 ) (22,919 )

Cash flows from financing activities:
Proceeds from warrant exercises 20,313 -
Proceeds from issuance of debt and short term advances 605,000 1,320,400
Repayment of debt and short term advances (42,000 ) (381,000 )
Proceeds from factoring line 2,498,307 2,590,867
Repayments of factoring line (2,483,678 ) (2,484,630 )
Net cash provided by financing activities 597,942 1,045,637

Net increase (decrease) in cash and cash equivalents 13,627 (10,454 )

Cash and cash equivalents at beginning of year 11,065 21,519

Cash and cash equivalents at end of year $ 24,692 $ 11,065

Supplemental disclosure of cash flow information:

Non-cash Disclsoures
Conversion of debt and interest to equity $ - $ 1,744,120
Warrants issued as a discount on debt $ - $ 3,316

~~The Accompanying Notes are an Integral~~

~~Part of the Financial Statements~~

~~F-5~~

- 18 -

~~CALIBRUS,~~GROW CONDOS, INC.

~~STATEMENTS OF CASH FLOWS (CONTINUED)~~

~~For The Years Ended December 31, 2012~~ and ~~2011~~

2012 2011

Supplemental disclosure of cash flow information:

Cash paid during the year for:
Interest $ 164,214 $ 112,417
Income taxes $ 50 $ 50

~~The Accompanying Notes are an Integral~~

~~Part of the Financial Statements~~

~~F-6~~

~~CALIBRUS, INC.~~Subsidiary (f/k/a Fanatic Fans Inc. and Calibrus, Inc.)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

~~Note~~NOTE 1

~~Summary of Significant Accounting Policies, Nature of Operations and Use of Estimates~~

– SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Operations

Grow Condos, Inc. (“GCI” or the “Company”) GCI (f/k/a Fanatic Fans Inc. and Calibrus, Inc. ~~(the “Company”~~) was incorporated on October 22, 1999, in the State of Nevada. ~~The Company’s principal business purpose has been to operate~~Recently, GCI through Fanatic Fans Inc. had made a customer contact center for a variety of clients, who are located throughout the United States. The Company provides customer contact support services for various companies wishing to outsource these functions. On June 15, 2012, the Company entered into a purchase agreement to sell substantially all of the assets related to the Company’s Third Party Verification business to Calibrus Hosted Business Solutions, LLC (Note 8). The Company made this decision to focus on its Social Networking operations which ~~currently include~~includes Fanatic Fans, a mobile smartphone application centered around live sporting and entertainment events, and JabberMonkey, a social expression website centered around gathering public opinion on current events. Then Fanatic Fans Inc. management decided to combine operations with WCS Enterprises, LLC (“WCS”).

Our subsidiary, WCS is an Oregon limited liability company which was formed on September 9, 2013. WCS is a real estate purchaser, developer and manager of specific use industrial properties providing “Condo” style turn-key aeroponic grow facilities to support cannabis farmers. WCS intends to own, lease, sell and manage multi-tenant properties so as to reduce the risk of ownership and reduce costs to tenants and owners.

On ~~September 7, 2012, Calibrus Hosted Business Solutions terminated~~June 30, 2014, GCI entered into a definitive agreement (the “Agreement”) with the ~~asset purchase agreement.~~members of WCS for the acquisition of all of the outstanding membership interests of WCS in exchange for 20,410,000 restricted shares of GCI’s common stock. The shares were issued to a total of three persons pursuant to the exemption from registration set forth in Section 4(2) of the Securities Act of 1933. In connection with the Agreement, one member of WCS gained control of GCI by virtue of his stock ownership in the Company ~~is currently seeking~~received in the acquisition. This member acquired 18,369,000 shares of GCI common stock on June 30, 2014, in exchange for his ownership share of WCS. The shares received under the Agreement gave this member effective control of GCI by virtue of holding approximately 44% of GCI’s voting stock. In addition, on June 30, 2014, the GCI CEO, President and CFO resigned and the WCS officers were appointed to fill these position by the board of directors of GCI. In total, the WCS members hold 51.67% of the post-acquisition common stock of GCI and GCI’s officers are the former officers of WCS, making the transaction a ~~new buyer for its TPV Business. The Company has presented assets related to its TPV Business as held-for-sale and has presented~~reverse acquisition.

As of the ~~TPV Business~~consummation of the transaction on June 30, 2014, the financial statements of ~~operations as discontinued operations.~~

~~Fanatic Fans~~

~~Fanatic Fans informs fans about upcoming live events in~~WCS are consolidated with the Sports and Music industries by giving users the ability to interact with live events, share their experiences, and earn rewards for attending live events. Users can browse a calendar of upcoming events which can be segmented by region and artist. Users can get detailed information on the event and discuss the event with other fans. While at an event users can share their experiences with social networks Facebook and Twitter, and communicate with other people at the event. Users can unlock virtual awards and earn virtual points in recognition of attending events. Within their profile users can browse and view the items they have unlocked and receive news on their favorite artists. Finally, users can redeem their virtual points for food/drinks, apparel and purchase event tickets in the application award section.

Fanatic Fans rewards fans for their support of their favorite sports team, music artist or band. National and local businesses market to fans that attend the events by listing promotions (goods and services) on our application (“app”). Businesses list their promotions and users can view and redeem these promotions and offers that are specific to their interests. Fanatic Fans offers contests and provides recognition to the most Fanatic Fans.

~~JabberMonkey.com~~

JabberMonkey is a social expression site that features questions on issues and topics that are current and relevant to its members. JabberMonkey questions will be on pertinent issues that in many instances may evoke an emotional response from its members. Many of the questions on JabberMonkey will provide the individuals voting with a voice to cause an action or effect a result.

In addition to being able to conduct polls and questions, JabberMonkey offers a unique user experience by being able to offer interactive communication and high definition video. While most social networking sites offer only a static page for the user. JabberMonkey offers video communications between multiple users at once, the ability to quickly load video, and the ability to set up groups or companies into secure sites. JabberMonkey also takes advantage of other companies’ storage by allowing links to other web sites such as YouTube or Google.

~~Categories include Entertainment, Music, Business, etc. Each category will also contain subcategories to encompass a wide range of topics and interests.~~

~~Reclassifications~~

~~Certain prior year balances in the accompanying~~ financial statements ~~were reclassified~~of GCI under the name of GCI but the financial statements are the continuation of WCS with the adjustment to ~~conform to~~reflect the ~~current year’s presentation.~~legal capital of GCI. The ~~reclassifications have had no effect on the net income or the totals of~~ assets and liabilities ~~previously reported.~~of WCS are measured at their pre-combination carrying amounts and the assets and liabilities of GCI are accounted for at fair value as required under the purchase method of accounting under a reverse acquisition. The results of operations of GCI (formerly Fanatic Fans, Inc. f/k/a Calibrus, Inc.) are included in the consolidated financial statements from the closing date of the acquisition.

Basis of Presentation

The accompanying consolidated financial statements have been prepared by the Company in accordance with accounting principles generally accepted in the United States (“GAAP”), and pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC").

~~F-7~~Consolidation

These consolidated financial statements include the accounts of Grow Condos, Inc., and its wholly-owned subsidiary, WCS. All significant intercompany accounting transactions have been eliminated as a result of consolidation.

- 19 -

~~CALIBRUS,~~GROW CONDOS, INC. and Subsidiary (f/k/a Fanatic Fans Inc. and Calibrus, Inc.)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

~~Note 1~~

~~Summary of Significant Accounting Policies, Nature of Operations and Use of Estimates (Continued)~~

Operating Segments

~~Use~~Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated on a regular basis by the chief operating decision maker, or decision making group, in deciding how to allocate resources to an individual segment and in assessing the performance of the segment. Given the nature of the reverse acquisition consummated on June 30, 2014 with WCS, the financial statements represent the operating activities of WCS for the period from the date of inception (September 9, 2013) to June 30, 2014 and primarily the operating assets of WCS, which operates as one segment.

Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. ~~Actual results could differ from those estimates.~~We believe that it is at least reasonably possible that the effect on the financial statements of a condition, situation, or set of circumstances that existed at the date of the financial statements will change in the near term due to one or more future confirming events and the effect of the change would be material to the financial statements. Significant estimates include, but are not limited to, the estimate of the allowance for doubtful accounts, ~~income taxes, recoverability~~equity compensation, allocation of ~~software development, the estimated fair value of stock based compensation, warrants,~~purchase price for acquired assets, and depreciable lives of long lived ~~assets, and allocation of assets and liabilities held for sale.~~assets.

Cash and Cash Equivalents

For financial accounting purposes, cash and cash equivalents are considered to be all highly liquid investments ~~purchased~~ with ~~an initial~~a maturity of three (3) months or less at the time of purchase.

~~Accounts Receivable~~Lease Receivables

~~The Company provides~~Lease receivables are recognized when rents are due, and for ~~potentially~~the straight-line adjustment to rents over the term of the lease less an allowance for expected uncollectible ~~accounts receivable by use~~amounts. Inherent in the assessment of the allowance ~~method. The allowance is provided based upon a review~~for doubtful accounts are certain judgments and estimates including, among others, the customer's willingness or ability to pay, the Company's compliance with lease terms, the effect of ~~the individual accounts outstanding,~~general economic conditions and the ~~Company's prior history of~~ongoing relationship with the customer. Accounts with outstanding balances longer than the payment terms are considered past due. We do not charge interest on past due balances. The Company writes off lease receivables when it determines that they have become uncollectible ~~accounts receivable. The Compnay charges off uncollectible accounts receivable when~~after all reasonable collection efforts have been ~~exhausted.~~made. If we record bad debt expense, the amount is reflected as a component of operating expenses in the statements of operations. As of ~~December 31, 2012 and 2011, a provision~~June 30, 2015, an allowance for ~~uncollectible trade~~doubtful accounts ~~receivable has been established~~was recorded in the amount of ~~$50,000. The Company does not accrue interest charges or fees on delinquent accounts receivable. The accounts are generally unsecured.~~$ 2,861.00.

~~Property~~

- 20 -

GROW CONDOS, INC. and ~~Equipment~~Subsidiary (f/k/a Fanatic Fans Inc. and Calibrus, Inc.)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

~~Property~~Investment In and ~~equipment~~Valuation of Real Estate Assets

Real estate assets are ~~recorded~~stated at ~~cost. Depreciation~~cost, less accumulated depreciation and amortization. Amounts capitalized to real estate assets consist of the cost of acquisition (excluding acquisition related expenses), construction costs, and mortgage interest during the period the facilities are under construction and prior to readiness for occupancy, and any tenant improvements, major improvements and betterments that extend the useful life of the real estate assets and leasing costs. All repairs and maintenance are expensed as incurred.

The Company is ~~provided for~~required to make subjective assessments as to the useful lives of its depreciable assets. The Company considers the period of future benefit of each respective asset to determine the appropriate useful life of the assets. Real estate assets, other than land, are depreciated on ~~the~~a straight-line ~~method~~basis over the estimated useful life of the asset. The estimated useful lives of the ~~assets.~~Company’s real estate assets by class are generally as follows:

Land Indefinite

Buildings 40 years

Tenant improvements Lesser of useful life or lease term

Intangible lease assets Lease term

Allocation of Purchase Price of Real Assets

Upon the acquisition of real properties, we allocate the purchase price of such properties to acquired tangible assets, consisting of land, buildings, improvements, and identified intangible assets and liabilities, consisting of the value of above market and below market leases and the value of in-place leases, based in each case on their respective fair values. We may utilize independent appraisals to assist in the determination of the fair values of the tangible assets of an acquired property (which includes land and building). The ~~average lives range from three (3)~~information available to ~~five (5) years. Leasehold improvements~~our management, is used in estimating the amount of the purchase price that is allocated to land. Other information, such as building value and market rents, is used by our management in estimating the allocation of purchase price to the building and to intangible lease assets and liabilities. If an appraisal firm is used, the firm would have no involvement in management’s allocation decisions other than providing this market information.

The fair values of above market and below market lease values are ~~amortized~~recorded based on the ~~straight-line method~~present value (using a discount rate which reflects the risks associated with the leases acquired) of the difference between (1) the contractual amounts to be paid pursuant to the in-place leases and (2) an estimate of fair market lease rates for the corresponding in-place leases, which will generally be obtained from independent appraisals, measured over a period equal to the ~~lesser~~remaining non-cancelable term of the lease including any bargain renewal periods, with respect to a below market lease. The above market and below market lease values are capitalized as intangible lease assets or liabilities, respectively. Above market lease values are amortized as a reduction to rental income over the remaining terms of the respective leases. Below market lease values are amortized as an increase to rental income over the remaining terms of the respective leases, including any bargain renewal periods. In considering whether or not we will expect a tenant to execute a bargain renewal option, we will evaluate economic factors and certain qualitative factors at the time of acquisition, such as the financial strength of the tenant, remaining lease term, the tenant mix of the leased property, our relationship with the tenant and the availability of competing tenant space. If a lease were to be terminated prior to its stated expiration, all unamortized amounts of above market or below market lease values relating to that lease would be recorded as an adjustment to rental income in the ~~useful life. Maintenance~~period of termination.

The fair values of in-place leases include estimates of direct costs associated with obtaining a new tenant and ~~repairs that neither materially add~~opportunity costs associated with lost rental and other property income, which are avoided by acquiring a property with an in-place lease. Direct costs associated with obtaining a new tenant include commissions and other direct costs and are estimated in part by utilizing information obtained from independent appraisals and management’s consideration of current market costs to execute a similar lease. The intangible values of opportunity costs are calculated using the contractual amounts to be paid pursuant to the in-place leases over a market absorption period for a similar lease. The building acquired in 2013 had no leases in place as of the date of acquisition; therefore, the entire amount of the fair value of the ~~property nor appreciably prolong its life are charged~~mortgage assumed was allocated to ~~expense as incurred. Betterments or renewals are~~land and buildings. The improvements made by us for the current tenants were capitalized ~~when incurred. For the years ended December 31, 2012 and 2011, depreciation expense was $19,104 and $29,211, respectively.~~to building improvements.

~~Software Development~~

~~The Company capitalizes certain software costs in accordance with FASB ASC 350-40~~ ~~Internal-Use Software~~. The JabberMonkey website was under development through November 2010 and reached availability for general commercial use in December, 2010. Capitalized costs will be amortized over the estimated economic life of the product which is estimated to be 3 years. Amortization expense for the years ended December 31, 2012 and 2011 was $0 and $917,164, respectively.

On December 31, 2011 the Company reviewed the carrying value of its capitalized software development and decided to record an impairment against the remaining value. This determination was predicated by the fact that the Company currently lacks sufficient funds to actively market the product. Given the lead time necessary to market the product, develop a client base and generate a revenue stream, it could not generate sufficient cash flows to offset the remaining two years of its estimated life. Therefore, management determined that an impairment

~~was justified at this time. The Company recorded impairment expense of $1,757,898 related to this impairment.~~

~~Advertising~~

We expense advertising and marketing costs as incurred. Advertising costs include trade show fees, online advertising, etc. Advertising expenses were approximately $5,090 and $68,100 for the years ended December 31, 2012 and 2011, respectively.

~~F-8~~

- 21 -

~~CALIBRUS,~~GROW CONDOS, INC. and Subsidiary (f/k/a Fanatic Fans Inc. and Calibrus, Inc.)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

We estimate the fair value of assumed mortgage notes payable based upon indications of current market pricing for similar types of debt financing with similar maturities. Assumed mortgage notes payable will initially be recorded at their estimated fair value as of the assumption date, and any difference between such estimated fair value and the mortgage note’s outstanding principal balance will be amortized to interest expense over the term of the respective mortgage note payable.

The determination of the fair values of the real estate assets and liabilities acquired requires the use of significant assumptions with regard to the current market rental rates, rental growth rates, capitalization and discount rates, interest rates and other variables. The use of alternative estimates may result in a different allocation of our purchase price, which could impact our results of operations.

Capitalized Interest

The Company capitalizes interest costs to buildings on expenditures made in connection with construction projects for buildings that are not subject to current depreciation. Interest is capitalized only for the period that activities are in progress to bring these facilities to their intended use. The Company capitalized $39,286 of mortgage interest during the period of the build out of our current facility. Interest capitalization ceased and depreciation began when the facility was available for rent.

Revenue Recognition

We recognize revenue only when all of the following criteria have been met:

	persuasive evidence of an arrangement exists;
	use of the real property has taken place or services have been rendered;

	the fee for the arrangement is fixed or determinable; and
	collectability is reasonably assured.

~~Note 1~~Persuasive Evidence of an Arrangement – We document all terms of an arrangement in a real property lease signed by the tenant prior to recognizing revenue.

~~Summary of Significant Accounting Policies, Nature of Operations and~~ Use of ~~Estimates (Continued)~~the Real Property or Services Have Been Performed – Tenants occupy our facility or we perform all services prior to recognizing revenue. Services are deemed to be performed when the services are complete.

The Fee for the Arrangement is Fixed or Determinable – Prior to recognizing revenue, a customer’s fee is either fixed or determinable under the terms of the signed real property lease.

Collectability Is Reasonably Assured – We assess collectability on a customer by customer basis based on criteria outlined by management.

Our real property lease agreements, which are governed by the laws of the state of Oregon, usually are non-cancellable and range from six to thirty-six months with a cash security deposit and personal guarantee required. We account for our leases in accordance with Accounting Standard Codification (“ASC”) Topic 840, Leases, as operating leases. Leases may include escalating rental rates, an option to extend the term of the lease at a fixed rental rate, and an option to purchase the portion of the building being leased at the end of the lease term. Leases may be assigned with our approval. Common area maintenance and water are paid by the Company with the tenant responsible for maintenance, repairs and liability insurance associated with their specific unit within the building. Cash received for purchase options is recorded as deferred option revenue in the accompanying consolidated financial statements. These amounts are recorded to revenue upon the exercise of the option by the tenant or the expiration of the unused option. Rental revenue includes $1,800 of revenue from forfeited option payments received in cash during the period ended June 30, 2014.

- 22 -

GROW CONDOS, INC. and Subsidiary (f/k/a Fanatic Fans Inc. and Calibrus, Inc.)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Future minimum lease payments to be received under non-cancelable real property leases are as follows as of June 30, 2014 for the fiscal year ending in:

2016 $36,900

2017 29,700

2018 42,000

Total $ 108,600

Properties may have leases where minimum rental payments increase during the term of the lease. We record rental income for the full term of each lease on a straight-line basis. When we acquire a property, the terms of existing leases are considered to commence as of the acquisition date for the purpose of this calculation. We defer the recognition of contingent rental income, such as percentage rents, until the specific target that triggers the contingent rental income is achieved. Expected reimbursements from tenants for recoverable real estate taxes and operating expenses are included in tenant reimbursement income in the period when such costs are incurred.

Advertising Costs

Advertising costs are expensed as incurred. Advertising expense was de minimis for the fiscal year ended June 30, 2015.

Fair Value of Financial Instruments

We adopted ASC Topic 820 for financial instruments measured at fair value on a recurring basis. ASC Topic 820 defines fair value, establishes a framework for measuring fair value in accordance with accounting principles generally accepted in the United States and expands disclosures about fair value measurements.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC Topic 820 establishes a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:

	Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets;

	Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and

	Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

The estimated fair values for financial instruments are determined at discrete points in time based on relevant market information. These estimates involve uncertainties and cannot be determined with precision. The carrying amounts of lease receivables, accounts payable, accrued liabilities, and mortgages payable approximate fair value given their short term nature or effective interest rates, which constitutes level three inputs.

Business Combinations

We account for an acquisition of a business in accordance with ASC Topic 805, Business Combinations. Intangible assets that we acquire are recognized separately if they arise from contractual or other legal rights or if they are separable and are recorded at fair value. Goodwill is recorded as the excess of (i) the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition date fair value of any previous equity interest in the acquired entity over the (ii) fair value of the net identifiable assets acquired.

- 23 -

GROW CONDOS, INC. and Subsidiary (f/k/a Fanatic Fans Inc. and Calibrus, Inc.)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

~~Revenue Recognition~~The following table summarizes the aggregate consideration paid for the reverse acquisition of WCS, and the amounts of the GCI assets acquired and liabilities assumed at the fair value on the acquisition date:

Consideration:

Equity instruments (21,025,709 common shares of the Company) issued		10,302,597
Fair value of total consideration transferred	$	10,302,597
Recognized amounts of identifiable assets acquired and liabilities assumed:
Cash	$	76,774
Property, plant, and equipment		350
Deposits		818
Accounts payable and accrued liabilities assumed		(41,710	)
Total identifiable net liabilities		36,232
Goodwill		10,266,365
Total purchase price allocated	$	10,302,597

Revenue for inbound calls is recorded on a per-call or per-minute basis in accordance with the rates established in the respective contracts. Revenue for outbound calls is on a commission basis, with revenue being recognized as the commission is earned. As the Company’s customers are primarily well established, creditworthy institutions, Management believes collectability is reasonably assured at the time of performance. The Company, from time to time, executes outbound sales campaigns for customers, primarily for the sale of telecommunications services. Although this revenue source has been historically immaterial, the Company recognizes the commissions earned on these campaigns on a net basis in accordance with FASB ASC 605-45 ~~Reporting Revenue Gross as a Principal versus Net as an Agent~~.

Impairment of Long-Lived Assets

We do not amortize goodwill; however, we annually, or whenever there is an indication that goodwill may be impaired, evaluate qualitative factors to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step quantitative goodwill impairment test. The Company ~~evaluates~~measures the carrying amount of the asset against the estimated discounted future cash flows associated with it. Should the sum of the expected future net discounted cash flows be less than the carrying value of the asset being evaluated, an impairment loss would be recognized. The impairment loss would be calculated as the amount by which the carrying value of the assets ~~with definite lives for recoverability when~~exceeds implied fair value. Our test of goodwill impairment includes assessing qualitative factors and the use of judgment in evaluating economic conditions, industry and market conditions, cost factors, and entity-specific events, ~~or changes~~as well as overall financial performance. Based on our analysis as of June 30, 2014, the Company recorded goodwill impairment in ~~circumstances indicate~~the amount of $10,266,365. Any future increases in fair value would not result in an adjustment to the impairment loss that ~~these~~was recorded in our consolidated financial statements.

We analyze intangible assets ~~might be impaired. Assets with indefinite lives are tested~~ for impairment ~~annually or more frequently if~~whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable. We review the amortization method and period at least at each balance sheet date. The effects of any revision are recorded to operations when the change arises. We recognize impairment when the estimated undiscounted cash flow generated by those assets ~~might be impaired.~~is less than the carrying amounts of such assets. The ~~Company has~~amount of impairment is the ~~option to perform a qualitative analysis before comparing their respective carrying values to estimates~~excess of ~~the sum of the undiscounted future net cash flows expected to result from the assets, in determining whether assets are impaired. If~~ the carrying amount ~~of an asset exceeds the sum of the undiscounted net cash flows expected from that asset, the Company recognizes an impairment loss based on the amount by which the carrying value exceeds~~over the fair value of ~~the asset.~~such assets.

On September 12, 2012 the Company terminated its time and materials contract with MeoMyo, LLC for the continued development of its Fanatic Fans mobile application. The Company had prepaid several months of rent amounts for the development office in Dubai. Following the termination of the agreement and non-payment of several invoices to MeoMyo, LLC the development office was abandoned. The Company wrote-off prepaid rent in the amount of $80,859 as a result, management estimates that these amounts would not be recoverable. This amount is included in the asset impairment expense on the statement of operations for the year ended December 31, 2012.

During the year ended December 31, 2012 the Company expensed its $27,599 security deposit on its office space in Tempe, Arizona. During the quarter, the Company was notified that because the office building in which it was located was placed into foreclosure the security deposit was not recoverable. This amount is included in the asset impairment expense on the statement of operations for the year ended December 31, 2012.

~~justified at that time. The Company recorded impairment expense of $1,757,898 related to this impairment during the year ended December 31, 2011.~~

Income Taxes

The Company files income tax returns in the U.S. federal jurisdiction and the State of ~~Arizona.~~Oregon. The Company is subject to federal, state and local income tax examinations by tax authorities for approximately the past three years, or in some instances longer periods.

Deferred income taxes are provided using the asset and liability method, whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit ~~carryforwards~~carry forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax basis. Net deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the net deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of the changes in tax laws and rates at the date of enactment.

~~F-9~~

- 24 -

~~CALIBRUS,~~GROW CONDOS, INC. and Subsidiary (f/k/a Fanatic Fans Inc. and Calibrus, Inc.)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

~~Note 1~~

~~Summary of Significant Accounting Policies, Nature of Operations and Use of Estimates (Continued)~~

When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured, if any, is reflected as a liability for unrecognized tax benefits in the accompanying balance sheet along with any associated interest and penalties that would be payable to the taxing authorities upon examination. Interests and penalties associated with unrecognized tax benefits, if any, are classified as additional income taxes in the statement of operations. During the ~~years ended December 31, 2012 and 2011~~period from inception (September 9, 2013) through June 30, 2015, there were no interest or penalties incurred related to income taxes. The Company is no longer subject to U.S. federal, state, or non-U.S. income tax examinations by tax authorities for tax years before ~~2009,~~2010, except that earlier years can be examined for the sole purpose of challenging the net operating loss carry-forwards arising in those years.

~~Fair Value of Financial Instruments~~

The estimated fair values for financial instruments are determined at discrete points in time based on relevant market information. These estimates involve uncertainties and cannot be determined with precision. The carrying amounts of accounts receivable, notes payable, accounts payable, and accrued liabilities approximate fair value given their short term nature or effective interest rates which represent Level 3 inputs.

~~Research and Development~~

Research and development expenses include third-party development and programming costs, localization costs incurred to translate software for international markets, the amortization of purchased software code and services content, and in-process research and development. During the years ended December 31, 2012 and 2011, Research and Development Expense totaled $1,382,100 and $1,472,113, respectively. All Research and Development Expense was related to the ongoing development of the Company’s social expression website, JabberMonkey, and its location-based, social networking smart phone application, Fanatic Fans. The Company had entered into a time and materials agreement with MeoMyo, LLC to develop the JabberMonkey website and Fanatic Fans application. Contract work was performed as authorized and the contract was cancellable on 30-days written notice. On September 12, 2012 the Company terminated its time and materials contract with MeoMyo, LLC for the continued development of its Fanatic Fans mobile application.

Earnings per Share

Basic earnings per share includes no dilution and is computed by dividing income available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflect the potential dilution of securities that could share in the earnings of an entity, using the treasury stock method for stock options and warrants and the if-converted method for convertible debt.

The following table shows the amounts used in computing basic and diluted ~~earnings~~net loss per ~~share and~~share. For the ~~effect on income and the weighted average number of shares of~~period ended June 30, 2014 all potentially dilutive ~~common stock.~~securities are anti-dilutive due to the Company’s loss from operations.

~~F-10~~

~~CALIBRUS, INC.~~

~~NOTES TO FINANCIAL STATEMENTS~~

~~Note 1~~

~~Summary of Significant Accounting Policies, Nature of Operations and Use of Estimates (Continued)~~

	June 30,
	2015

Net loss	$	(251,338	)

Weighted average number of common shares
used in basic earnings per share		38,927,178

Effect of dilutive securities:
Stock options		-
Stock warrants		-

Weighted average number of common shares
and dilutive potential common stock used in
diluted loss per share		38,927,178

Year Ended December 31,
2012 2011

Net loss $ (1,260,983 ) $ (6,331,971 )

Weighted average number of common shares
used in basic earnings per share 13,837,758 7,978,820

Effect of dilutive securities:
      Stock options - -
      Stock warrants - -
      Convertible debt - -

Weighted average number of common shares
and dilutive potential comon stock used in
diluted loss per share 13,837,758 7,978,820

All dilutive common stock equivalents are reflected in our net loss per share calculations. Anti-dilutive common stock equivalents are not included in our loss per share calculations. ~~For the year ended December 31, 2012,~~At June 30, 2015, the Company had no outstanding ~~options to purchase 2,598,334 shares of common stock at~~ options.

- 25 -

GROW CONDOS, INC. and Subsidiary (f/k/a ~~per share weighted average exercise price of $.86~~Fanatic Fans Inc. and outstanding warrants to purchase 959,088 shares of common stock at a weighted average exercise price of $.39. For the year ended December 31, 2011, the Company had outstanding options to purchase 2,744,167 shares of common stock at a per share weighted average exercise price of $.89 and outstanding warrants to purchase 1,026,588 shares of common stock at a weighted average exercise price of $.39 per share. Neither amounts were included in the loss per share calculation as they were anti-dilutive. As of December 31, 2012, the Company had $15,000 of principal value of convertible debentures which are convertible into 10,000 shares of the Company’s common stock, which were also antidilutive. As of December 31, 2011, the Company had $25,000 of principal value of convertible debentures which are convertible into 16,666 shares of the Company’s common stock, which were also antidilutive.Calibrus, Inc.)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Stock-Based Compensation

The Company has no stock-based compensation ~~plans. Stock-based compensation expense for all stock-based compensation awards granted is based on~~plans in place at the grant date fair value estimated in accordance with the Black Scholes Pricing Model. The value of the compensation cost is amortized on a straight-line basis over the requisite service periods of the award (the option vesting term).

~~Assumptions used in the Black Scholes Pricing Model to estimate compensation expense are determined as follows:~~

~~Expected term is generally determined using an average of the contractual term and vesting period of the award;~~

Expected volatility of award grants made under the Company’s plans is measured using the historical daily changes in the market price of similar industry indices, which are publicly traded, over the expected term of the award;

~~Risk-free interest rate is equivalent to the implied yield on zero-coupon U.S. Treasury bonds with a remaining maturity equal to the expected term of the awards; and,~~

~~Forfeitures are based on the history of cancellations of awards granted by the Company and management's analysis of potential forfeitures.~~

~~F-11~~

~~CALIBRUS, INC.~~

~~NOTES TO FINANCIAL STATEMENTS~~

~~Note 1~~

~~Summary of Significant Accounting Policies, Nature of Operations and Use of Estimates (Continued)~~

~~Pending Accounting Pronouncements~~

~~There have been no accounting pronouncements or changes in accounting principles during the year ended December 31, 2012 that are of significance, or potential significance, to us.~~present time.

Going Concern ~~Considerations~~

The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the Company as a going concern. The Company operates within an industry that is illegal under federal law, has ~~incurred~~yet to achieve profitable operations, has a significant ~~cumulative net losses~~accumulated deficit and is dependent on our ability to raise capital from stockholders or other sources to sustain operations ~~in recent years.~~and ultimately achieve viable profitable operations. As reported in ~~the~~these consolidated financial statements, the Company has not yet achieved profitable operations and has an accumulated deficit of ~~$11,306,459. At December 31, 2012, the Company had total assets of $478,136 and liabilities totaling $2,473,278, and a working capital deficit of $2,020,456. These factors raise considerable~~$11,440,527, which we have determined raises substantial doubt ~~as to~~about the Company’s ability to continue as a going concern.

Further, marijuana remains illegal under federal law as a schedule-I controlled substance, even in those jurisdictions in which the use of medical or recreational marijuana has been legalized at the state level. A change in the federal attitude towards enforcement could cripple the industry. The medical and recreational marijuana industry is our primary target market, and if this industry was unable to operate, we would be subject to all potential remedies under federal law and lose the majority of our potential clients, which would have a negative impact on our business, operations and financial condition.

The ability of the Company to continue as a going concern is dependent on ~~its~~our ability to raise adequate capital to fund operating losses until ~~it is~~we are able to engage in profitable business ~~operations.~~operations and the continuation of the current regulatory and enforcement environment. To the extent financing is not available, the Company may not be able to, or may be delayed in, developing ~~its~~our services and meeting ~~its~~our obligations. ~~The Company will continue~~

Management’s plans to ~~evaluate its~~address these matters include maintaining an awareness of the current regulatory and enforcement environment, controlling costs, evaluating our projected expenditures relative to ~~its~~our available cash and ~~to evaluate~~evaluating additional means of financing in order to satisfy ~~its~~our working capital and other cash requirements. To this end, the Company has discontinued the furthered development of its social networking operations and is currently operating its TPV Business at a small cash positive state however not at sufficient amounts to satisfy its current debt obligations. The accompanying consolidated financial statements do not reflect any adjustments that might result from the outcome of these uncertainties.

Recently Issued Accounting Pronouncements

In 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Updates (“ASU”) 2014-15, Presentation of Financial Statements – Going Concern and 2014-10, Development Stage Entities both of which have been adopted by the Company in the accompanying consolidated financial statements.

In May 2014, the FASB issued new accounting guidance related to revenue recognition. This new standard will replace all current U.S. GAAP guidance on this topic and eliminate all industry-specific guidance. The new revenue recognition standard provides a unified model to determine when and how revenue is recognized. The core principle is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration for which the entity expects to be entitled in exchange for those goods or services. This guidance will be effective for the Company beginning July 1, 2017 and can be applied either retrospectively to each period presented or as a cumulative-effect adjustment as of the date of adoption. We are evaluating the impact of adopting this new accounting standard on our consolidated financial statements.

- 26 -

~~Note~~

GROW CONDOS, INC. and Subsidiary (f/k/a Fanatic Fans Inc. and Calibrus, Inc.)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 – PROPERTY AND EQUIPMENT, NET

~~Concentrations~~

Property and improvements consisted of ~~Risk~~the following as of June 30, 2015:

~~During~~

Buildings and improvements	$	1,149,707
Land		155,576
		1,305,283
Less: accumulated depreciation		(47,915	)
	$	1,257,368

After the ~~year ended December 31, 2012, the Company rendered a substantial portion~~building was available for its intended use, and through June 30, 2015, $47,915 of its services to its three largest customers representing 42%, 22% and 14% of total revenues. As of December 31, 2011, the amounts due from these customers were $210,808, $110,416 and $68,716, respectively.depreciation expense was recorded.

During the year ended December 31, 2011, the Company rendered a substantial portion of its services to its three largest customers representing 50%, 17% and 15% of total revenues. As of December 31, 2011, the amounts due from these customers were $199,535, $78,813 and $202,967, respectively.NOTE 3 – CONCENTRATIONS OF RISK

The Company maintains cash and cash equivalents at various financial institutions. Deposits not to exceed $250,000 at each financial institution are insured by the Federal Deposit Insurance Corporation. At ~~December 31, 2012 and 2011,~~June 30, 2014, the Company had no uninsured cash and cash ~~equivalents.~~equivalents

~~F-12~~

~~CALIBRUS, INC.~~

~~NOTES TO FINANCIAL STATEMENTS~~

~~Note 3~~

~~Property and Equipment~~

~~Property and equipment as of December 31, 2012 and 2011 consist of the following:~~

2012 2011

Computer hardware $ 2,144,873 $ 2,142,455
Furniture and fixtures 244,785 244,785
Leashold improvements 156,144 156,144
Software costs 1,195,761 1,195,761
3,741,563 3,739,145
Less: accumulated depreciation (3,717,184 ) (3,698,080 )
Less: assets held for sale, net (15,241 ) (30,762 )
$ 9,138 $ 10,303

~~Note~~NOTE 4

~~Software Development~~

~~At December 31, 2012 and 2011, software development consists of the following:~~

2012 2011

JabberMonkey website development $ - $ 2,751,492
Less: accumulated amortization - (993,594 )
Less: impairment - (1,757,898 )

$ - $ -

The Company reached technical feasibility of its social networking website JabberMonkey.com on June 1, 2009 with the release of its alpha site. Costs associated with the development beginning June 1, 2009 through the official launch of the website, December 1, 2010, were capitalized. Capitalized software costs related to the JabberMonkey project were to be amortized using the straight-line method over three years and commenced on December 1, 2010. Amortization expense related to the JabberMonkey website totaled $0 and $917,164 for the years ended December 31, 2012 and 2011, respectively.

On December 31, 2011 the Company reviewed the carrying value of its capitalized software development costs and decided to record an impairment against the remaining value. This determination was predicated by the fact that the Company currently lacks sufficient funds to actively market the product. Given the lead time necessary to market the product, develop a client base and generate a revenue stream, it could not generate sufficient cash flows to offset the remaining two years of its estimated life. Therefore, management determined that an impairment was justified at this time. The Company recorded impairment expense of $1,757,898 related to this impairment.

~~F-13~~

~~CALIBRUS, INC.~~

~~NOTES TO FINANCIAL STATEMENTS~~

~~Note 5~~

~~Convertible Notes Payable~~

From October 2009 through October 31, 2011, the Company sold 315 units, at $5,000 per unit, consisting of five thousand dollars ($5,000) in Convertible Debentures (the “Debentures”) of Calibrus and twenty five hundred (2,500) common stock purchase warrants (the “Units”) for total proceeds of $1,575,000. Each Debenture was convertible into shares of common stock of Calibrus at the lower of $1.50 per share or the price of any additional private placement of Calibrus in the next twelve months and bears interest at the rate of 12% per annum. Each common stock purchase warrant entitled the holder to purchase one share of Calibrus’ common stock for each warrant held at the warrant exercise price of the lower of (i) one dollar and ninety-five cents ($1.95) per share, or (ii) one hundred thirty percent (130%) of the per share price paid by any investor in a private placement by Calibrus of shares of our common stock at any time in the next twelve months (the “Warrants”). The Warrants were only exercisable if the Debentures, which are part of the underlying Unit, are converted into shares of Calibrus’ common stock.

On August 29, 2011 the Company’s Board of Directors elected to reprice the conversion price for the Company’s convertible debt from $1.50 per share to $0.25 per share and such conversion price was only valid through October 31, 2011. The repricing was effective as of October 31, 2011 for holders electing to accept the reduced conversion price. This repricing is considered an induced conversion of debt. Therefore, the value of the additional shares received upon conversion in excess of the original conversion formula are treated as an inducement expense at the time of conversion. The Company converted a total of $1,540,000 in principal amounts of the convertible debentures in addition to $204,120 in accrued interest related to the debentures. This resulted in the issuance of 6,976,480 shares of the Company’s common stock. At December 31, 2011 the Company had $25,000 in principal amount debentures outstanding. The Company recognized induced conversion expense, included in interest expense, at the time of the conversion of $2,616,177. In addition the Company valued a total of 770,000 warrants which became exercisable at the time of conversion and recorded $104,821 of conversion expense related to this. The Company also issued 102,088 warrants for accrued interest converted resulting in additional conversion expense of $14,191. Total conversion expense related to the warrants and convertible debt conversion was $2,735,189 and was included in interest expense.

In January 2012, the Company paid off the $10,000 debenture along with accrued interest. As of December 31, 2012 the Company has $15,000 in principal balance convertible debentures remaining at a conversion price of $1.50 per share which can be converted into 10,000 shares of common stock. – MORTGAGES PAYABLE

As of ~~December 31, 2012~~June 30, 2015, we had two mortgages payable, both to the People’s Bank of Commerce in Medford, Oregon, secured by all of our land, buildings and ~~2011 convertible notes~~improvements. The mortgages payable were comprised of the following:

2012 2011

Note payable to convertible debentureholder, interest rate of 12% accrued monthly
principal and interest due November 16, 2010, unsecured $ - $ 10,000

Note payable to related party convertible debenture holder, interest rate
of 12% accrued monthly, principal and interest due November 16, 2010, unsecured 15,000 15,000
15,000 25,000

Less: current portion (15,000 ) (25,000 )

$ - $ -

~~The remaining $15,000 in principal is due to the Mother of the Company’s CEO and President. The Company has received a verbal extension on this debt through June 30, 2013.~~

Bank term loan, prime rate plus 1.75%, currently 5%, P&I payments of $5,946 due monthly, balloon payment of $802,294 due June 28, 2018, secured by property	$	884,910

Bank term loan, prime rate plus 3.00%, currently 6.25%, P&I payments of $833 due monthly, balloon payment of $104,329 due October 15, 2018, secured by property		113,446

Less: current portion		(31,303	)
	$	967,054

~~Interest expense related to the debentures~~

Future maturities of long term debt are as follows as of June 30, 2015 for the ~~years ended December 31, 2012 and 2011 was $1,805 and $114,284, respectively. Accrued interest related to the debentures at December 31, 2012 and 2011 was $4,969 and $5,564, respectively.~~

~~F-14~~

~~CALIBRUS, INC.~~

~~NOTES TO FINANCIAL STATEMENTS~~fiscal year ending in:

2016 31,302

2017 33,588

2018 828,678

2019 ~~Note 6~~104,788

~~Notes Payable~~Total $998,356

On January 31, 2011, the Company issued a promissory note in the principal amount $50,000 to evidence a loan made to the Company by Jeff W. Holmes, the Company’s CEO and a beneficial owner. The term of the note is 1 year with interest at 12% per annum, with interest due monthly. The loan also included warrants to purchase 50,000 shares of the Company’s common stock with an exercise price of $.50 per share. The warrants have a 3 year term.

On February 16, 2011, the Company issued a promissory note in the principal amount $50,000 to evidence a loan made to the Company by an existing shareholder. The term of the note is 1 year with interest at 12% per annum, with interest due monthly. The loan also included warrants to purchase 50,000 shares of the Company’s common stock with an exercise price of $.50 per share. The warrants have a 3 year term.

On March 16, 2011, the Company issued a promissory note in the principal amount $10,000 to evidence a loan made to the Company by Christian J. Hoffmann, III, a Director. The term of the note is 1 year with interest at 12% per annum, with interest due monthly. The maturity has been extended to the earlier of the sale of the TPV Business or August 1, 2013. The loan also included warrants to purchase 10,000 shares of the Company’s common stock with an exercise price of $.50 per share. The warrants have a 3 year term. Mr. Hoffman resigned as a director effective April 22, 2013.

On March 16, 2011, the Company issued a promissory note in the principal amount $10,000 to evidence a loan made to the Company by an entity controlled by Christian J. Hoffmann, III, a Director. The term of the note is 1 year with interest at 12% per annum, with interest due monthly. The maturity has been extended to the earlier of the sale of the TPV Business or August 1, 2013. The The loan also included warrants to purchase 10,000 shares of the Company’s common stock with an exercise price of $.50 per share. The warrants have a 3 year term. Mr. Hoffman resigned as a director effective April 22, 2013.

On March 16, 2011, the Company issued a promissory note in the principal amount $5,000 to evidence a loan made to the Company by an entity controlled by Christian J. Hoffmann, III, a Director. The term of the note is 1 year with interest at 12% per annum, with interest due monthly. The maturity has been extended to the earlier of the sale of the TPV Business or August 1, 2013. The The loan also included warrants to purchase 5,000 shares of the Company’s common stock with an exercise price of $.50 per share. The warrants have a 3 year term. Mr. Hoffman resigned as a director effective April 22, 2013.

On August 31, 2011, the Company issued a promissory note in the principal amount of $200,000 to evidence a loan made to the Company by Greg W. Holmes, President of the Company. The term of the note is 6 months with a stated interest rate of 12% per annum and an effective interest rate of 71.78%, with discount, with interest due monthly. The Company received gross proceeds from the note of $150,000 with $50,000 being retained by Mr. Holmes as an origination fee. The $50,000 note discount is being amortized over the life of the loan or at the rate of $8,333 per month.

On April 4, 2012, the Company issued a promissory note in the principal amount of $67,500 to evidence a loan made to the Company by Greg W. Holmes, President of the Company. The term of the note is 6 months with a stated interest rate of 12% per annum with interest due monthly. The Company received gross proceeds from the note of $65,000 with $2,500 being retained by Mr. Holmes as an origination fee. The $2,500 note discount is being amortized over the life of the loan or at the rate of $417 per month.

~~The Company has received verbal extensions on the aforementioned notes until June 30, 2013 unless otherwise specified.~~

On April 26, 2012, the Company issued an unsecured multiple advance promissory note (“the “CHBS Note”) to Calibrus Hosted Business Solutions, LLC (“CHBS”) in the amount of $250,000 ( the “Note Agreement”). The CHBS Note called for two advances in the separate amounts of $150,000, due on execution, and a second advance of $100,000, due 30 days from execution. The CHBS Note is non-interest bearing and was due on July 26, 2012. If the principal balance is not paid in full by the due date interest will accrue retroactively at the rate of 18% per annum. On June 15, 2012, in conjunction with the signing of the asset purchase agreement between Calibrus, Inc. and CHBS (the “Asset Purchase Agreement”), the CHBS Note was amended and restated thereby adjusting the principal balance to the $150,000 received by the Company and extending the due date to September 1, 2012 or the closing date of the Asset Purchase Agreement, whichever occurs later. If for any reason the transaction was cancelled or the closing did not occur, all principal and interest become immediately due.

~~F-15~~

~~CALIBRUS, INC.~~

~~NOTES TO FINANCIAL STATEMENTS~~

~~Note 6~~

~~Notes Payable (Continued)~~

On September 7, 2012, CHBS terminated the Asset Purchase Agreement. As such, all amounts became due and payable under the Note Agreement as to the CHBS Note. The Company has retroactively accrued interest on the $150,000 CHBS Note at 18% per annum through September 15, 2012. The Company has also accrued interest at the 30% default interest rate per the note agreement from September 16, 2012 through December 31, 2012. At December 31, 2012, accrued interest on the CHBS Note totaled $23,696. On October 26, 2012 the Company received notice of a complaint filed in the Superior Court of Maricopa County, Case No. CV2012-015263 by CHBS for breach of contract of the Note Agreement. The complaint seeks repayment of the $150,000 principal balance, interest in the amount of $6,879 calculated at the rate of 18% from April 26, 2012 through September 15, 2012, and default interest calculated at the rate of 30% from September 16, 2012 through the date of payment and all costs and attorneys fees CHBS incurs as a result of failure to pay by the maturity date and event of default.

On June 15, 2012, in conjunction with the signing of the Asset Purchase Agreement between Calibrus, Inc. and CHBS, the Company issued an unsecured multiple advance promissory note to an individual (the “Individual Note”) in the amount of $250,000. The Individual Note called for two advances in separate amounts totaling $100,000, due on execution, and a second advance of $150,000 which was due on June 28, 2012. The Individual Note is non-interest bearing and was due on September 1, 2012 or the closing date of the Asset Purchase Agreement, whichever occurs later. If the principal balance is not paid in full by the due date, interest will accrue retroactively at the rate of 18% per annum. If for any reason the transaction is cancelled or the closing does not occur, all principal and interest will become immediately due.

On September 7, 2012, CHBS terminated the Asset Purchase Agreement. As such, all amounts became due and payable under the Individual Note. The Company has retroactively accrued interest on the $250,000 principal balance of the Individual Note at 18% per annum through September 15, 2012. The Company has also accrued interest at the 30% default interest rate per the Note Agreement from September 16, 2012 through December 31, 2012. At December 31, 2012, accrued interest on the Individual Note totaled $32,367. On October 26, 2012 the Company received notice of a complaint filed in the Superior Court of Maricopa County, Case No. CV2012-015308 by the individual for breach of contract of the Note Agreemement. The complaint seeks repayment of the $250,000 principal balance, interest in the amount of $11,343 calculated at the rate of 18% from April 26, 2012 through September 15, 2012, and default interest calculated at the rate of 30% from September 16, 2012 through the date of payment and all costs and attorneys fees the individual incurs as a result of failure to pay by the maturity date and event of default.

~~As of December 31, 2012 the Company owed a total of $152,400 in short-term, non-interest bearing advances to the CEO of the Company.~~

~~As of December 31, 2012 the Company owed a total of $45,000 in short-term, non-interest bearing advances to the Mother of the CEO and President of the Company.~~

~~As of December 31, 2012 the Company owed a total of $20,000 in short-term, non-interest bearing advances to the President of the Company.~~

~~F-16~~

~~CALIBRUS, INC.~~

~~NOTES TO FINANCIAL STATEMENTS~~

~~Note 6~~

~~Notes Payable (Continued)~~

~~At December 31, 2012 and 2011 Notes Payable consisted of the following:~~

2012 2011

Convertible note payable to related party, interest rate of 12% accrued monthly,
principal and accrued interest due March 31, 2011 extended to June 30, 2013 $ 15,000 $ 25,000

Note payable to related party, interest rate of 12% accrued monthly,
principal and accrued interest due January 31, 2012 extended to June 30, 2013 50,000 50,000

Note payable, interest rate of 12% accrued monthly,
principal and accrued interest due January 31, 2012 extended to June 30, 2013 50,000 50,000

Notes payable to related party, interest rate of 12% accrued monthly,
principal and accrued interest due January 31, 2012 extended to June 30, 2013 25,000 25,000

Note payable to related party, interest rate of 12% accrued monthly,
principal and accrued interest due January 31, 2012 extended to June 30, 2013 200,000 200,000

Note payable to related party, interest rate of 12% accrued monthly,
principal and accrued interest due October 13, 2012, extended to June 30, 2013 67,500 -

Note payable, interest rate of 18% accrued monthly, principal and accrued interest,
due September 15, 2012, in default and accruing interest at 30% per annum 150,000 -

Note payable, interest rate of 18% accrued monthly, principal and accrued interest
due September 15, 2012, in default and accruing interest at 30% per annum 100,000 -

Note payable, interest rate of 18% accrued monthly, principal and accrued interest
due September 15, 2012, in default and accruing interest at 30% per annum 150,000 -

Various short-term, due on demand, non-interest bearing advances from related parties 217,400 109,400
1,024,900 459,400

Less: discount - (16,667 )

Less: current portion (1,024,900 ) (442,733 )

$ - $ -

~~As of December 31, 2012 and 2011, accrued interest on the above notes was $127,077 and $24,296, respectively and includes accrued interest from the convertible debentures as mentioned above.~~

~~F-17~~

~~CALIBRUS, INC.~~

~~NOTES TO FINANCIAL STATEMENTS~~

~~Note 7~~

~~Due to Factor~~

During the year ended December 31, 2010 the Company entered into a Factoring and Security Agreement with Factors Southwest, LLC (FSW). The agreement states that FSW will advance to the Company 80% of eligible accounts receivable upon submission to FSW for funding. Factoring fees related to advances will equal 2.25% for the first 30-day period, .56% for the next 15-day period and .75% for each additional 30-day period following. The maximum credit under the factoring line is $600,000 and is secured by all assets of the Company and a first priority lien filing on accounts receivable and proceeds. All payments made by customers of the Company on factored invoices are sent directly to FSW. For the year ended December 31, 2012, FSW advanced a total of $2,498,307 of which $2,483,678 was repaid. Included in this amount is $115,000 in the form of an over-advance made to the Company by FSW of which $20,000 has been repaid at December 31, 2012. Interest on the over-advance is 5% per 30-day period outstanding. For the year ended December 31, 2011, FSW advanced a total of $2,590,867 of which $2,484,630 was repaid. Total amounts due to FSW at December 31, 2012 and 2011 was $253,595and $238,966, respectively. Factoring expense for the years ended December 31, 2012 and 2011 was $164,206 and $111,217, respectively, and was included in interest expense. All factored invoices are full-recourse after 90 days.

~~Note 8~~

~~Accrued Liabilities~~

Accrued liabilities as of December 31, 2012 and 2011 consist of:
2012 2011

Payroll and related taxes $ 72,058 $ 62,889
Deferred rent 5,465 3,947
Accrued vacation 93,290 86,900
Accrued interest 127,077 24,296
Other accrued expenses 62,906 38,838

$ 360,796 $ 216,870

~~Note 9~~

~~Income Taxes~~

~~At December 31, 2012 and 2011, deferred tax assets (liabilities) consist of the following:~~

2012 2011
Current portion:
Operating loss carryforwards $ 3,098,000 $ 2,605,000
Allowance for doubtful accounts 19,000 19,000
Accrued vacation 36,000 34,000
Deferred rent expense (2,000 ) (2,000 )

3,151,000 2,656,000
Less: valuation allowance (3,151,000 ) (2,656,000 )

Deferred tax asset-current portion $ - $ -

Long-term portion:
Depreciation and amortization $ (7,000 ) $ (14,000 )
Less: valuation allowance 7,000 14,000

Deferred tax asset-long term portion $ - $ -

~~F-18~~

- 27 -

~~CALIBRUS,~~GROW CONDOS, INC. and Subsidiary (f/k/a Fanatic Fans Inc. and Calibrus, Inc.)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

~~Note 9~~

~~Income Taxes (Continued)~~

NOTE 5 – INCOME TAXES

At June 30,2015, deferred tax assets consist of the following:

Current portion:
Net operating loss carryforwards	$	3,171,000

		3,171,000
Less: valuation allowance		(3,171,000)

Deferred tax asset-current portion	$	-

Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, uncertainties exist that some portion or all of the deferred tax assets will be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. As of ~~December 31, 2012,~~June 30, 2015, the Company has net federal operating loss ~~carryforwards~~carry forwards of approximately ~~$7.95~~$7.5 million and state net operating loss ~~carryforwards~~carry forwards of approximately ~~$6.33~~$4.75 million.

~~Below are the federal and state net operating loss carryforwards as of December 31, 2012.~~

Expiration Date Federal NOL Carryforwards Expiration Date State NOL Carryforwards
12/31/2021 $ 734,000 12/31/2013 1,120,000
12/31/2022 443,000 12/31/2014 1,428,000
12/31/2023 - 12/31/2015 1,605,000
12/31/2024 - 12/31/2016 928,000
12/31/2025 - 12/31/2017 1,250,000
12/31/2026 - $ 6,331,000
12/31/2027 436,000
12/31/2028 1,120,000
12/31/2029 1,428,000
12/31/2030 1,605,000
12/31/2031 928,000
12/31/2032 1,250,000
$ 7,944,000

~~During the year ended December 31, 2012, the Company determined that it was more likely than not that some portion or all of the deferred tax assets will not be realized.~~ The Company has established a valuation allowance as of ~~December 31, 2012 in~~June 30, 2015in the approximate amount of ~~$3,144,000.~~$3,171,000. The valuation allowance is equal to the full amount of the net deferred tax asset due primarily to the uncertainty of the utilization of operating losses in future periods. Internal Revenue Code Section 382 limits the ability to utilize net operating losses if a 50% change in ownership occurs over a three year period. Given the acquisition of WCS, such limitation of the net operating losses may have occurred, which the Company has not fully analyzed at this time as the deferred tax asset is fully reserved.

- 28 -

GROW CONDOS, INC. and Subsidiary (f/k/a Fanatic Fans Inc. and Calibrus, Inc.)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The income tax provision differs from the amount of income tax determined by applying the U.S. federal and state statutory income tax rates to pretax income from operations for the ~~years ended December 31, 2012 and 2011~~period from the date of inception (September 9, 2013) to June 30, 2015 due to the following:

2012 2011

Federal Tax Benefit (Expense) at Statutory Rates $ 430,000 $ 2,150,000
State Tax Benefit (Expense) at Statutory Rates 65,000 317,000
Meals and Entertainment 7,000 (1,000 )
Induced Conversion of Debt - (1,141,000 )
Valuation Allowance Adjustment (502,000 ) (1,325,000 )

Net Deferred Tax Benefit (Expense) $ - $ -

Federal Tax Benefit at Statutory Rates	$	3,800,000
State Tax Benefit at Statutory Rates		560,000
Permanent difference - goodwill not recognized in tax free reorginization		(4,354,000	)
Valuation Allowance Adjustment		(6,000	)

Net Deferred Tax Benefit	$	-

~~F-19~~

~~CALIBRUS, INC.~~

~~NOTES TO FINANCIAL STATEMENTS~~NOTE 6 - COMMITMENTS AND CONTINGENCIES

~~Note 10~~Litigation

~~Commitments~~

In the ordinary course of business, the Company may become subject to litigation or claims. The Company is not aware of any pending legal proceedings of which the outcome is reasonably possible to have a material effect on its results of operations, financial condition or liquidity.

Liability Insurance

In connection with the ownership and ~~Contingencies~~

operation of real estate, the Company potentially may be liable for costs and damages related to environmental matters. In addition, the Company may acquire certain properties that are subject to environmental remediation. The Company carries environmental liability insurance on its properties that will provide limited coverage for remediation liability and pollution liability for third-party bodily injury and property damage claims. The Company is not aware of any environmental matters which it believes are reasonably possible to have a material effect on its results of operations, financial condition or liquidity.

Operating Leases

There are no operating leases as of June 30, 2015.

NOTE 7 – STOCKHOLDERS’ EQUITY

Common Stock

Below is a summary of transactions that occurred with GCI prior to the acquisition of WCS. The ~~Company leased office space~~Common Stock activity described below is included in ~~Tempe, Arizona, under a five (5) year operating lease agreement which expired~~the shares issued in ~~2010, at a rate~~reverse acquisition in the statement of ~~approximately $30,000 per month. During the year ended December 31, 2010~~changes in stockholders’ equity.

Between April 13, 2014 and June 25, 2014, the Company ~~signed a five year extension on its leased facility~~sold an aggregate of 2,019,307 shares of common stock at $0.325 per share.

Between May 31, 2014 and ~~reduced the rentable square feet from 13,295 to 7,767. As a result of this extension~~June 25, 2014, the Company ~~decreased~~issued an aggregate of 23,952 shares of common stock related to the ~~monthly rent from approximately $30,000 per month to $12,000 per month.~~

exercise of warrants for total proceeds of $7,784. The ~~Company leased office equipment under an operating lease agreement expiring through June 2011, at the rate~~exercise price of ~~approximately $754 per month. In August 2011, the Company signed another operating lease agreement for office equipment at the rate of approximately $411 per month, expiring in July of 2016.~~

~~The Company also leases, on a month to month basis, other various office equipment.~~

~~Total rent expense under the aforementioned operating leases~~each warrant was ~~approximately $156,847 and $155,061 for the years ended December 31, 2012 and 2011, respectively.~~

~~A schedule of future minimum lease payments is as follows:~~

Year Ending
December 31, Amount
2013 147,337
2014 149,159
2015 126,387
2016 2,880

$ 425,763
$0.325.

~~Employment Agreements~~

Calibrus has agreements with all officers and those employees identified herein as key employees. All of our agreements contain language assigning all inventions over to Calibrus, and also contain non-compete agreements. Additionally, on termination, if not for cause and Calibrus is cash flow and earnings positive, our officers and key employees will receive up to three months salary as severance. On a change of control of Calibrus, which results in termination of the officer or key employee and Calibrus is cash flow positive and has positive earnings per share at the time of the change of control, the officer or key employee will receive three months salary as severance based on the officers or employees’ current salary. Employment contracts are entered into for two, three or four year periods with automatic two, three or four one year extensions depending on the officer or key employee. Except for terms and salary, all of our employment contracts contain the same material terms. A summary of the officers’ employment contracts are below:

~~F-20~~

- 29 -

~~CALIBRUS,~~GROW CONDOS, INC. and Subsidiary (f/k/a Fanatic Fans Inc. and Calibrus, Inc.)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

~~Note 10~~

~~Commitments~~

On June 26, 2014, the Company issued an aggregate of 1,615,385 shares to officers and ~~Contingencies (Continued)~~

directors of the Company as bonuses. The shares were valued at $0.50 per share – the trading price of the shares on June 26, 2014.

On June 27, 2014, the Company issued an aggregate of 1,000,000 shares for the retirement of $250,000 of related party notes payable of GCI.

On June 30, 2014 the Company issued 497,495 shares for the settlement of $161,686 in accounts payable to two vendors. The shares were valued at $0.325 per share.

During the ~~years~~period ended ~~December 31, 2012~~June 30, 2014, the Company issued an aggregate of 858,489 shares for the conversion of $279,009 in notes payable and ~~2011, each~~accrued interest related to those notes. The conversion price of the ~~employees listed above took salary decreases due~~debt and interest was $0.325 per share.

On June 27, 2014, WCS issued an aggregate of 10% of its membership equity to ~~limited~~two members for $100,000 in cash ~~flow~~and conversion of debt to equity which is included in the ~~Company. Each~~Common Stock for cash and debt forgiveness in the statement of the employees has agreed to waive the unpaid amounts per their respective employment agreements. In September of 2012, the Company reinstated a portion of the salary decreases of the above individuals.

~~Indemnification Agreements~~

~~The Company has agreed to indemnify its officers and directors for certain events or occurrences arising as~~changes in stockholders’ equity. As a result of the ~~officer or director serving~~Company’s reverse acquisition of GCI, the shares issued for the 10% membership interest in ~~such capacity. The term~~connection with the acquisition of WCS were valued based on the quoted market price of GCI as of the ~~indemnification period is~~date of the share issuance, which resulted in compensatory expense of $900,090. Compensation expense was determined in accordance with ASC 505 subtopic 50, Equity-Based Payments to Non-Employees, by multiplying the number of GCI shares received by the two members of WCS in the reverse acquisition in exchange for their 10% membership interest multiplied by the trading price of GCI Common Stock on June 27, 2014, less the $100,000 of cash and debt redemption comprising the capital contributions made by the two members for the ~~officer’s or director’s lifetime. The maximum potential amount of future payments~~10% membership interest.

During the fiscal year ended June 30, 2015, the Company ~~could be required~~issued an aggregate of 245,170 common shares to ~~make under these indemnification agreements is unlimited. As~~ a ~~result~~total of no current or expected litigation, the Company believes the estimated fair value of these indemnification agreements is minimal and has no liabilities recorded for these agreements as of December 31, 2012 and 2011.

~~Note 11~~

~~Stockholders’ Equity~~

15 persons.

Warrants

At ~~December 31, 2012 and 2011,~~June 30, 2014, the Company had ~~959,088 and 1,026,588, respectively,~~910,636 warrants outstanding to purchase common stock. The warrants are convertible into one share of common stock at a prices ranging between ~~$.325~~$0.325 and ~~$1.95~~$0.50 per share. As of ~~December 31, 2012, 951,588 of the 959,088 were exercisable. As of December 31, 2011, 1,014,088 of the 1,026,588~~June 30, 2014, all 910,636 warrants were exercisable.

During the ~~year~~six month period ended ~~December 31, 2012,~~June 30, 2014, the Company extended the maturity dates of ~~125,000~~420,000 warrants ~~which~~that were set to expire ~~on November 12, 2012, to May 31, 2013, and 42,500 warrants, which were set to expire on December 31, 2012, to June 30, 2013. The Company recognized a total of $10 of expense related to~~at various times during the ~~extension.~~period.

~~On June 25, 2012, a former convertible debenture holder exercised 50,000 warrants at an exercise price of $.325 per share.~~

~~On September 26, 2012, a former convertible debenture holder exercised 12,500 warrants at an exercise price of $.325 per share.~~

Weighted Average Aggregate
Number of Weighted Average Remaining Intrinsic
Warrants Exercise Price Contractual Term Value
Outstanding at December 31, 2010 514,500 $ 0.40
Granted 517,088 0.39
Exercised - -
Forfeited (5,000 ) 1.95

Outstanding at December 31, 2011 1,026,588 0.39

Granted 167,500 0.33
Exercised (62,500 ) 0.33
Forfeited (172,500 ) 0.37

Outstanding at December 31, 2012 959,088 $ 0.39 0.95 $ -

Exercisable at December 31, 2012 951,588 $ 0.38 0.94 $ -

~~F-21~~

- 30 -

~~CALIBRUS,~~GROW CONDOS, INC. and Subsidiary (f/k/a Fanatic Fans Inc. and Calibrus, Inc.)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

~~Note 11~~

~~Stockholders’ Equity (Continued)~~

Between May 31, 2014 and June 25, 2014, the Company issued an aggregate of 23,952 shares of common stock related to the exercise of warrants for total proceeds of $7,784. The ~~fair value~~exercise price of each warrant ~~valued during the years ended December 31, 2012 and 2011 is estimated on the grant date by using the Black-Scholes option pricing model with the following weighted average assumptions:~~was $0.325.

						Weighted Average
						Remaining		Aggregate
	Number of			Weighted Average		Contractual Term		Intrinsic
	Warrants			Exercise Price		(in years)		Value

Outstanding at September 9, 2013		942,088			0.36

Granted		-			-
Exercised		(23,952	)		0.33
Forfeited		(7,500	)		0.33

Outstanding at June 30, 2014		910,636		$	0.35		0.34	$	127,489

Exercisable at June 30, 2014		910,636		$	0.35		0.34	$	127,489

2012 2011
Expected Volatility 12.11% - 14.74% 24.85% - 24.90%
Risk-free interest rate 0.11% - 0.13% 0.89% - 0.25%
Expected dividends - -
Expected life 6 months 2 - 3 Years
Fair value $ 0.00 - $0.00 $ 0.00 - $0.15

~~A summary of the status of the Company’s non-exercisable warrants as of December 31, 2012 and 2011 and changes during the years ended December 31, 2012 and 2011 is presented below:~~

Weighted
Average
Weighted-Average Remaining Aggregate
Grant-Date Contractual Intrinsic
Warrants Fair Value Term (in years) Value
Non-exercisable at December 31, 2010 505,000 $ 0.05

Granted 517,088 0.01

Exercisable (1,004,588 ) 0.03

Forfeited (5,000 ) 0.05

Non-exercisable at December 31, 2011 12,500 0.05

Granted - -

Exercisable - -

Forfeited (5,000 ) 0.05

Non-exercisable at December 31, 2012 7,500 $ 0.05 0.94 $ -

On October 31, 2011 the Company revalued a total of 770,000 warrants related to its convertible debenture which became exercisable upon conversion. The weighted average fair value of the warrants at the time of valuation was $.14.

Options

The Company had adopted two Stock Option Plans, the 2001 Non-Qualified Stock Option Plan and the 2001 Incentive Stock Option Plan. During the year ended December 31, 2010 the Company increased the number of options available for grant under the 2001 Incentive Stock Option Plan by 550,000 options. Under the 2001 Non-Qualified Plan, the Company may ~~have granted~~grant options for up to 2,850,000 shares of common stock. The maximum term of the options is five years, and they vested at various times according to the Option Agreements. Under the 2001 Incentive Stock Option Plan, the Company may ~~have granted~~grant options for up to 2,000,000 shares of common stock. The maximum term of the options is five years and they vested at various times according to the Option Agreements. Both of the above mentioned plans have expired and no further options are available for grant.

In July 2012 the Board of Directors adopted the 2012 Stock Option and Restricted Stock Plan and the shareholders approved it in August 2012. Under such Plan, the Company has 3,000,000 shares available for future grants. The Company has made no grants under the Plan.

~~F-22~~

- 31 -

~~CALIBRUS,~~GROW CONDOS, INC. and Subsidiary (f/k/a Fanatic Fans Inc. and Calibrus, Inc.)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

~~Note 11~~

~~Stockholders’ Equity (Continued)~~

The following is a table of activity for all options granted under these ~~Plans~~Plans:

					Weighted
					Average
			Weighted		Remaining		Aggregate
	Number of		Average		Contractual		Intrinsic
	Options		Exercise Price		Term (in years)		Value

Options outstanding at September 9, 2013	1,795,000		0.79

Granted		-		-
Exercised		-		-
Forfeited		-		-

Options outstanding at June 30, 2014		1,795,000	$	0.79		1	$	-

Options exercisable at June 30, 2014		1,795,000	$	0.79		1	$	-

NOTE 8 – RELATED PARTY TRANSACTIONS

The Chief Executive Officer (“CEO”) and Chief Financial Officer, who are siblings, provided services and the use of their facilities to the Company at no costs to the Company since our inception. Please see additional discussion of related party transactions described in the notes above.

Our CEO, through an entity that he controls, has entered into a lease for 7,500 square feet of space in our facility. The lease term begins once tenant improvements are completed and the premises are occupied, and continues for a period of 36 months. The lease agreement requires no rental payments for the first 12 months of the lease and rental payments of $54,000 per year for the second and third year of the lease. The lease term has not begun as of June 30, 2015 and no revenue associated with this lease has been recorded in the accompanying financial statements.

NOTE 9 – SUBSEQUENT EVENTS

After June 30, 2015, the Company issued 3,100,000 shares of Common Stock to Dan Rogers for his tenure serving on the Board of Directors and to Joann Cleckner, CFO for her tenure as CFO, Secretary and Treasurer of the Corporation.

Jeff Holmes resigned effective August 7, 2015 as a Director and Chairman of the Board. Daniel Rogers resigned effective September 23, 2015 as a Director. Pursuant to Section 3.11(a) of the By Laws, the Board appointed David Tobias as a Director effective September 25, 2015.

The company was awarded a judgment in Small Claims Court of Jackson County against a former lessee. The cash award was for repair of damages to the unit when it was abandoned. The former lessee appears to be “judgment proof” and the probability of collection is slight.

Effective September 17, 2015 Semple, Marchal and Cooper, LLC (SMC) agreed to sever their business relationship with both WCS Enterprise, LLC and Grow Condos, Inc. At that time there was an outstanding balance of approximately $ 71,469.00 due to SMC which SMC has agreed to liquidate upon the issuance of 900,000 shares of common stock by Grow Condos, Inc. to SMC. As of October 14, 2015 the shares have yet to be issued as Grow Condos is in the process of increasing the total amount of common shares to 100,000,000.

- 32 -

GROW CONDOS, INC. and Subsidiary (f/k/a Fanatic Fans Inc. and Calibrus, Inc.)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

On October 6, 2015 The United States Securities and Exchange Commission accepted Grow Condos, Inc. Form 14-C filing. The purpose of the filing was to give notice of an amendment to the articles of incorporation to set the number of authorized shares of capital stock to 100,000,000 common shares and 10,000,000 preferred shares. Additionally to give notice of the approval of a reverse stock split of all our authorized and outstanding common stock at a ratio of 1-for-20 to be effected on a date within one year of the date of the mailing hereof as determined by the Board of Directors with all fractional shares to be rounded up to the next whole number.

- 33 -

ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None

ITEM 9A: CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We intend to maintain disclosure controls and procedures designed to provide reasonable assurance that information required to be disclosed in reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the specified time periods and accumulated and communicated to our management, including our Chief Executive Officer (“Principal Executive Officer”) and our Chief Financial Officer (“Principal Financial Officer”), as appropriate, to allow timely decisions regarding required disclosure. Our management, with the participation of our Principal Executive and Financial Officers, conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a- 15(e) and 15d- 15(e) under the Exchange Act). Based on this evaluation, our Principal Executive and Financial Officer concluded that, as of June 30, 2014, our disclosure controls and procedures were not effective, for the reasons discussed below, to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is (i) recorded, processed, summarized, and reported within the time periods specified in the SEC rules and forms, and (ii) is accumulated and communicated to our management, including our Principal Executive and Financial Officers, as appropriate to allow timely decisions regarding required disclosure.

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with GAAP.

Due to its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate due to changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Under the supervision and with the participation of our management, including our Principal Executive and Financial Officers, we conducted an evaluation of the effectiveness of our internal control over financial reporting using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control—Integrated Framework (2013). In connection with our evaluation, we identified a material weakness in our internal control over financial reporting as of June 30, 2015.

A material weakness is a deficiency, or combination of deficiencies, that creates a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected in a timely manner. The material weakness related to our company was due to not having the adequate personnel to address the reporting requirements of a public company and to fully analyze and account for our transactions. We do not believe that this material weakness has resulted in deficient financial reporting because we have worked through the year end close process performing additional review and analysis to assure compliance with accounting principles generally accepted in the United States (“GAAP”) and SEC reporting requirements.

- 34 -

Accordingly, while we identified a material weakness in our system of internal control over financial reporting as of June 30, 2015, we believe that we have taken reasonable steps to ascertain that the financial information contained in this report is in accordance with GAAP. We are committed to remediating the control deficiencies that constitute the material weaknesses by implementing changes to our internal control over financial reporting. Management is responsible for implementing changes and improvements in the internal control over financial reporting and for remediating the control deficiencies that gave rise to the material weaknesses.

We plan to implement measures to remediate the underlying causes of the control deficiencies that gave rise to the material weaknesses through additional training efforts as well as ensuring appropriate review of the related significant accounting policies by the members of management with the requisite level of knowledge, experience and training to appropriately apply GAAP. We plan to undertake additional review processes to ensure the related significant accounting policies are implemented and applied properly on a consistent basis throughout the Company. We believe these measures will remediate the control deficiencies. However, we have not completed all of the corrective processes, procedures and related evaluation or remediation that we believe are necessary. As we continue to evaluate and work to remediate the control deficiencies that gave rise to the material weaknesses, we may determine to take additional measures to address the control deficiencies.

This Report on Form 10-K does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Our management’s report was not subject to attestation by our independent registered public accounting firm pursuant to rules of the SEC that permit us to provide only management’s report in this Report on Form 10-K.

Changes in Internal Control Over Financial Reporting

We established our internal control over financial reporting during the period from the date of inception (September 9, 2013) to June 30, 2015.

Inherent Limitations on Effectiveness of Controls and Procedures

Our management, including our Principal Executive and Financial Officers, do not expect that our disclosure controls and procedures or our internal controls over financial reporting will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, misstatements, errors, and instances of fraud, if any, within our company have been or will be prevented or detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls also can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, internal controls may become inadequate as a result of changes in conditions, or through the deterioration of the degree of compliance with policies or procedures.

This Transition Report does not include an attestation report of our registered public accounting firm regarding our internal controls over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to rules of the SEC that permit us to provide only management’s report in this Annual Report.

ITEM 9B: OTHER INFORMATION

None

- 35 -

PART III

ITEM 10: DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE

Identification of Directors and Executive Officers

The following table sets forth the names of all current directors and executive officers of the Company. These persons will serve until the next annual meeting of the stockholders or until their successors are elected or appointed and qualified, or their prior resignation or termination.

Name	Positions Held	Date of Election or Designation	Date of Termination or Resignation
Wayne A. Zallen	President, CEO and Director	July 22, 2014	*
Joann Z. Cleckner	Secretary, Treasurer and CFO	July 22, 2014	*
Carl S. Sanko	Director	July 22, 2014	*
David Tobias	Director	September 25, 2015	*

* These persons presently serve in the capacities indicated.

Background and Business Experience

Wayne A. Zallen – From 10/2013 - present Mr. Zallen bought an unfinished industrial warehouse Condominium project from the bank and developed it into a safe haven for medical marijuana growers. Mr. Zallen developed a workable lease option model that benefits the grower as well as the investor. From 4/2009 – present Mr. Zallen developed an aeroponic growing method that produces superior quality medical marijuana in a minimum amount of time. From 2006 to present Mr. Zallen was the President of Sigclo Enterprises, Inc a business incubator specializing in importing and distributing goods through a multitude of web based consumer channels. Prior to that Mr. Zallen specialized in buying, building or assisting startup companies in achieving their untapped potential then selling them to sound operators. To date these businesses continue to operate profitably. From 1986 to 2000 Mr. Zallen was a successful member of the financial services industry, owning one of Allstate’s first insurance franchises, and achieving a top 1% national ranking. Later he established a San Francisco Bay Area regional office of American National Financial, Inc., where he hired, trained and motivated sales agents to originate over $8 million per/month in wholesale and retail loans across Northern California. During the early 1980’s Mr. Zallen was a Business Manager/ Account Executive for John Rhein Advertising and was responsible for business management, budgeting, media evaluation and procurement. At John Rhein Advertising he developed exclusive advertising campaigns syndicated nationwide. In 1977 Mr. Zallen obtained a Industrial Design Bachelor of Science degree from The Ohio State University. Mr. Zallen is 60 years of age.

Joann Z Cleckner – From 1990 thru present – Joann has been the owner of Joann Z Cleckner, CPA, an accounting firm specializing in small business consulting, tax planning, tax preparation as well as providing bookkeeping services to small business clients. In addition to her accounting practice, from 2011 through 2012, Joann was an intern with the Sonoma County District Attorney, providing legal research in criminal matters, writing briefs and making court appearances. Joann is licensed to practice accountancy in the states of California and Oregon. Joann is 65 years of age.

Carl S. Sanko – Carl has been self-employed as Carl S. Sanko CPA for last 5 years, providing tax, accounting, and consulting services, including the past 1 1/2 years as contract CFO, Secretary, and Director of Kush (a Nevada corporation). Also, during the past 5 years Carl has been a real estate Broker, working under his name, Carl Sanko. Carl is 59 years of age.

David Tobias - Mr. Tobias has served as President of Wild Earth Naturals since May, 2013. He also served as the President of Hemp, Inc. from August 2011 to January 9, 2014. Prior to that, from October 2009 until May 2011, Mr. Tobias held the position of Vice President at Medical Marijuana Inc. where he was instrumental in bringing forward and culminating the merger between CannaBank and Medical Marijuana, Inc. He was earlier Sales Manager for Tulsa custom builder Xcite Homes, from October 2008 to August 2009. Among other qualifications, Mr. Tobias brings to the Board executive leader ship experience, including his service as a president of a public company, along with extensive entrepreneurial experience. Mr. Tobias also has a keen sense of the social, political, and economic environment in which the company operates. Mr. Tobias is also currently serving on the board of directors of Cannabis Sativa, Inc., a company subject to the reporting requirements of Section 13 of the Securities Act of 1933.

- 36 -

Significant Employees

Grow Condos has no employees who are not executive officers, but who are expected to make a significant contribution to its business.

Family Relationships

Our Chief Executive Officer and our Chief Financial Officer are siblings.

Involvement in Other Public Companies Registered Under the Exchange Act

See resume of David Tobias.

Section 16(a) Beneficial Ownership Reporting Compliance

Our shares of common stock are registered under the Exchange Act, and therefore our officers, directors and holders of more than 10% of our outstanding shares are subject to the provisions of Section 16(a) which requires them to file with the SEC initial reports of ownership and reports of changes in ownership of common stock and our other equity securities. Officers, directors and greater than 10% beneficial owners are required by SEC regulations to furnish us with copies of all Section 16(a) reports they file. Based solely upon review of the copies of such forms furnished to us during the fiscal year ended June 30, 2015, there were no late filings, no failures to make filings and no unreported transactions during the period.

Code of Ethics

We have adopted a Code of Conduct for our Principal Executive and Financial Officers. See Part IV, Item 15 of this Report.

Corporate Governance

Nominating Committee

We have not established a Nominating Committee because we believe that our Board of Directors is able to effectively manage the issues normally considered by a Nominating Committee. During the fiscal year period ended June 30, 2015, there were no changes to the procedures by which security holders may recommend nominees to the Company’s Board of Directors.

Audit Committee

We have adopted an audit committee separate from our Board of Directors consisting of Audit Committee Chairman, and Carl Sanko, CPA.

- 37 -

ITEM 11: EXECUTIVE COMPENSATION

The following table sets forth the aggregate compensation paid by the Company for services rendered during the periods indicated:

SUMMARY COMPENSATION TABLE

Name and Position	Year	Salary($)	All other Compensation($)(3)(4)	Total($)
Wayne A. Zallen, CEO (1)	2015	$30,000	0	$30,000
	Transition Period	0	0	0
	2013	0	0	0

Joann Z. Cleckner, CFO (1)	2015	$9,000	0	$9,000
	Transition Period	0	0	0
	2013	0	0	0

Jeff W. Holmes, CEO (2)	2015	0	0	0
	Transition Period	78,722	188,786	267,508
	2013	153,722	2,406	156,128

Greg W. Holmes, President (2)	0	0	0	0
	Transition Period	65,265	123,078	188,343
	2013	132,765	3,706	136,471

Kevin J. Asher, CFO (2)	0	0	0	0
	Transition Period	36,371	100,000	136,371
	2013	92,622	2,659	95,281

(1) Beginning in July, 2014, Mr. Zallen has been salaried at the rate of $2,500 per month. Beginning January 2015, Ms. Cleckner has been salaried at the rate of $1,500 per month.

(2) Officer resigned his position on June 30, 2014.

(3) Company paid portion of health insurance coverage for Jeff W. Holmes - $4,170.

(4) Restricted stock awards

Outstanding Equity Awards at Fiscal Year End

None

Compensation of Directors

Our directors are not compensated for their service on the board of directors.

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

Security Ownership of Certain Beneficial Owners

The following tables set forth the share holdings of those persons who were the beneficial owners of more than five percent (5%) shareholders of the Company’s common stock as of October 14, 2015:

- 38 -

Ownership of Principal Shareholders

Title Of Class	Name and Address of Beneficial Owner	Amount and Nature of Beneficial Owner	Percent of Class (1)
Common Stock	Wayne A. Zallen 722 W. Dutton Road Eagle Point, OR 97524	18,384,000 Direct	41.1 %

(1) Based on a total of 41,567,494 shares outstanding.

Security Ownership of Management

The following table sets forth the share holdings of the Company’s directors and executive officers as of September 20, 2015:

Ownership of Officers and Directors

Title of Class	Name and Address of Beneficial Owner	Amount and Nature of Beneficial Owner	Percent of Class
Common Stock	Wayne A. Zallen 2944 Delta Waters Road Medford, OR 97504	18,384,000 Direct	41.1%
Common Stock	Joann Z. Cleckner 722 W. Dutton Road Eagle Point, OR 97524	3,000,000 Direct	6.7%
Common Stock	Carl S. Sanko 18301 Ghost Town St Tehachapi, CA 93561	0	0%
Common Stock	Total Officers and Directors as a group (3 persons)	21,384,000 Direct	47.8%

(1) Based on a total of 44,780,879 shares outstanding.

Securities Authorized for Issuance under Equity Compensation Plans

There are currently no securities authorized for issuance under Equity Compensation Plans.

ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTORS INDEPENDENCE

Transactions with Related Persons

On June 30, 2014, Wayne A. Zallen, our President and CEO, exchanged his 90% ownership interest in WCS Enterprises, LLC, an Oregon limited liability company (“WCS”), for 18,369,000 common shares of the Registrant. On the same day Carl S. Sanko, a member of our board of directors, exchanged his 2% ownership interest in WCS for 408,200 common shares of the Registrant.

- 39 -

Director Independence

We do not have any independent directors serving on our Board of Directors. The definition the Company uses to determine whether a director is independent is NASDAQ Rule 4200(a)(15). The text of this rule is attached to this Transition Report as Exhibit 99.

ITEM 14: PRINCIPAL ACCOUNTING FEES AND SERVICES

The following is a summary of the fees billed to us by our principal accountants during the fiscal years ended December 31, 2012, and ~~2011:~~2013 and during the Transition Period:

Fee Category	2013		Transition Period		2015
Audit Fees	$	57,000	$	3,850	$	78,923
Audit-related Fees		-		-		-
Tax Fees		2,900		-		-
All Other Fees		-		-		-
Total Fees	$	59,900	$	3,850	$	78,923

Audit Fees - Consists of fees for professional services rendered by our principal accountants for the audit of our annual financial statements and review of the financial statements included in our Forms 10-Q or services that are normally provided by our principal accountants in connection with statutory and regulatory filings or engagements.

Weighted
Average
Weighted Remaining Aggregate
Number of Average Contractual Intrinsic
Options Exercise Price Term (in years) Value

Options outstanding at December 31, 2010 2,512,499 1.08

   Granted 500,000 0.25
   Exercised - -
   Forfeited (268,332 ) 1.52

Options outstanding at December 31, 2011 2,744,167 0.89

   Granted - -
   Exercised - -
   Forfeited (145,833 ) 1.41

Options outstanding at December 31, 2012 2,598,334 $ 0.86 2.15 $                 -

Options exercisable at December 31, 2012 2,598,334 $ 0.86 2.15 $                 -

~~During the year ended December 31, 2011 the Company issued 500,000 options to members~~Audit-related Fees - Consists of ~~its Advisory Board. The total fair value of options vested during the year ended December 31, 2011 was $20,816~~fees for assurance and ~~included $4,319 of expense~~related services by our principal accountants that are reasonably related to ~~50,000 options granted in 2010 that vested during 2011.~~

~~The fair value~~the performance of ~~each option granted is estimated on~~ the ~~grant date by using the Black-Scholes option-pricing model with the following weighted average assumptions during the year ended December 31, 2012~~audit or review of our financial statements and ~~2011:~~

2012 2011
Expected Volatility - 26.65%
Risk-free interest rate - 0.36%
Expected dividends - -
Expected life - 3 years
Value per option - $0.03
are not reported under “Audit fees.”

~~F-23~~Tax Fees - Consists of fees for professional services rendered by our principal accountants for tax compliance, tax advice and tax planning.

All Other Fees - Consists of fees for products and services provided by our principal accountants, other than the services reported under “Audit fees,” “Audit-related fees,” and “Tax fees” above.

Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditors

We have not adopted an Audit Committee; therefore, there is no Audit Committee policy in this regard. However, we do require approval in advance of the performance of professional services to be provided to us by our principal accountant. Additionally, all services rendered by our principal accountant are performed pursuant to a written engagement letter between us and the principal accountant.

- 40 -

PART IV

ITEM 15: EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)(1)(2) Financial Statements. See the audited financial statements for the Fiscal Year ended June 30, 2015 contained in Item 8 above which are incorporated herein by this reference.

(a)(3) Exhibits. The following exhibits are filed as part of this Transition Report:

Exhibits

Exhibit Number	Description (1)
3.1	Articles of Incorporation (2)
3.2	By-laws (2)
14	Code of Conduct (2)
31.1	302 Certification of Wayne A. Zallen
31.2	302 Certification of Joann Z. Cleckner
32	906 Certification
99	NASDAQ Rule 4200(a)(15)
101 INS	XBRL Instance Document*
101 PRE	XBRL Taxonomy Extension Presentation Linkbase Document*
101 LAB	XBRL Taxonomy Extension Label Linkbase Document*
101 DEF	XBRL Taxonomy Extension Definition Linkbase Document*
101 CAL	XBRL Taxonomy Extension Calculation Linkbase Document*
101 SCH	XBRL Taxonomy Extension Schema Document*

* Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed “furnished” and not “filed” or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, or deemed “furnished” and not “filed” for purposes of Section 18 of the Securities and Exchange Act of 1934, and otherwise are not subject to liability under these sections.

DOCUMENTS INCORPORATED BY REFERENCE

(1) Summaries of all exhibits contained within this Report are modified in their entirety by reference to these exhibits.

(2) Filed as an exhibit to the Company's registration statement on Form 10 filed with the Commission, SEC file no. 000-53548.

(3) Current Report on Form 8-K/A filed with the SEC on September 15, 2014.

Current Report on Form 8-K filed with the SEC on July 7, 2014.

- 41 -

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.

GROW CONDOS, INC.

/s/ Wayne A. Zallen

Wayne A. Zallen, President and CEO

Date: October 15, 2015

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

/s/ Wayne A. Zallen

Wayne A. Zallen, President, CEO and Director

Date: October 15, 2015

/s/ Joann Z. Cleckner

Joann Z. Cleckner, Secretary, CFO, and Principal Accounting Officer

Date: October 15, 2015

/s/ Carl S. Sanko

Carl S. Sanko, Director

Date: October 15, 2015

- 42 -

~~CALIBRUS, INC.~~

~~NOTES TO FINANCIAL STATEMENTS~~

~~Note 12~~

~~Litigation~~

On September 13, 2010, a former employee filed a lawsuit in the Superior Court of the State of Arizona, in and for the County of Maricopa (Case No. CV2010-027027) against the Company. The complaint was hand-written and did not itemize the specific legal claims, but could include (1) discrimination (no statute identified), (2) failure to pay minimum wage or overtime (no statute identified), (3) retaliation, (4) assault, and (5) intentional infliction of emotional distress. On May 22, 2011 the suit was dismissed with prejudice.

On October 26, 2012 the Company received notice of a complaint filed in the Superior Court of Maricopa County, Case No. CV2012-015263 by CHBS for breach of contract of the CHBS Note. The complaint seeks repayment of the $150,000 principal balance, interest in the amount of $6,879 calculated at the rate of 18% from April 26, 2012 through September 15, 2012, and default interest calculated at the rate of 30% from September 16, 2012 through the date of payment and all costs and attorneys fees CHBS incurs as a result of failure to pay by the maturity date and event of default. The suit has been suspended by the plaintiff while the Company seeks an alternative buyer for its TPV Business.

On October 26, 2012 the Company received notice of a complaint filed in the Superior Court of Maricopa County, Case No. CV2012-015308 by the individual for breach of contract of Individual Note. The complaint seeks repayment of the $250,000 principal balance, interest in the amount of $11,343 calculated at the rate of 18% from April 26, 2012 through September 15, 2012, and default interest calculated at the rate of 30% from September 16, 2012 through the date of payment and all costs and attorneys fees the individual incurs as a result of failure to pay by the maturity date and event of default. The suit has been suspended by the plaintiff while the Company seeks an alternative buyer for its TPV Business.

~~Note 13~~

~~Held-for-Sale Disclosures and Financial Statement Presentation~~

The Company classifies operations as held for sale when the sale is probable within one year and the operation is available for sale in its present condition. In connection with the signing of the Asset Purchase Agreement between Calibrus, Inc. and Calibrus Hosted Business Solutions, LLC on June 15, 2012, which was scheduled to close on August 31, 2012 and would have resulted in the disposition of all of its assets related to the Third Party Verification (“TPV”) Business, the Company has classified those assets as held-for-sale and has made the following disclosures and classifications in the presentation of its financial statements. On September 7, 2012 the Company received notice that Calibrus Hosted Business Solutions terminated the asset purchase agreement and the sale transaction did not close. The Company is in the process of seeking alternative buyers for the TPV Business. The Company is currently in discussions with an interested party and believes that a sale of the TPV Business will occur within one year.

~~The assets classified as held-for-sale are as follows:~~

December 31, 2012 December 31, 2011

Property and equipment, net $ 15,241 $ 30,762
Deposits - 27,599
Total assets held-for-sale $ 15,241 $ 58,361

~~F-24~~

~~CALIBRUS, INC.~~

~~NOTES TO FINANCIAL STATEMENTS~~

~~Note 13~~

~~Held-for-Sale Disclosures and Financial Statement Presentation~~

The Company has presented the TPV business statements of operations as discontinued operations. The results of discontinued operations related to the TPV business included in the accompanying statement of operations for the years ended December 31, 2012 and 2011, respectively.

For the Year Ended December 31, 2012 For the Year Ended December 31, 2011

Revenue $ 3,415,147 $ 3,563,265

Cost of revenue 1,315,683 1,293,801

Gross profit 2,099,464 2,269,464

Operating expenses 660,834 616,532

Income from discontinued operations $ 1,438,630 $ 1,652,932

~~Note 14~~

~~Related Parties~~

As of December 31, 2012 the Company owed a total of approximately $15,900 to officers of the company related to unpaid Company expenses. These are in addition to the amounts owed at December 31, 2012 and 2011 discussed in Notes 5 and 6.

~~Note 15~~

~~Subsequent Events~~

The Company has evaluated subsequent events from the balance sheet date through the date the financial statements were issued, and determined there are no additional events that require disclosure other than listed below.

~~Effective April 22, 2013, Christian J. Hoffmann III resigned as a member of the Board of Directors of the Company.~~

~~F-25~~

Nevada	86-0970023
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer ~~I.D.~~Identification No.)
~~incorporation or organization~~

~~1225 West Washington Street, Suite 213, Tempe, AZ~~	~~85281~~
~~(Address of principal executive offices)~~	~~(Zip Code)~~

~~Title of each class~~	~~Name of each exchange on which registered~~
~~None~~	~~N/A~~

~~Large Accelerated filer~~	o
Large accelerated filer [ ]	Accelerated ~~filer~~	ofiled [ ]
Non-accelerated filer	o	~~(Do not check if a smaller reporting company)~~ [ ]	Smaller reporting company	x [X]

Quarter Ended	High Bid	Low Bid
March 31, 2011	$0.45	$0.30
June 30, 2011	$0.55	$0.30
September 30, 2011	$0.32	$0.20
December 31, 2011	$0.45	$0.15
March 31, 2012	$0.30	$0.14
June 30, 2012	$0.25	$0.15
September 30, 2012	$0.65	$0.25
December 31, 2012	$0.25	$0.15

Period	High	Low

January 1, 2013 through March 31, 2013	$ 0.25	$ 0.15

April 1, 2013 through June 30, 2013	$ 0.24	$ 0.15

July 1, 2013 through September 30, 2013	$ 0.48	$ 0.11

October 1, 2013 through December 31, 2013	$ 0.40	$ 0.10

January 1, 2014 through March 31, 2014	$ 0.75	$ 0.29

April 1, 2014 through June 30, 2014	$ 0.75	$ 0.40

July 1, 2014 through September 20, 2014	$ 1.25	$ 0.68

October 1, 2014 through December 31, 2014	$ 0.95	$ 0.52

January 1, 2015 through March 31, 2015	$ 0.50	$ 0.30

April 1, 2015 through June 30, 2015	$ 0.26	$ 0.09

Plan Category	Number of Securities to be issued upon exercise of outstanding options, warrants and rights	Weighted-average exercise price of outstanding options, warrants and rights	Number of securities remaining available for future issuance under equity compensation plans excluding securities reflected in column (a)
	(a)	(b)	(c)
Equity compensation plans approved by security holders	2,098,334	$1.00	3,000,000
Total	2,098,334	$1.00	3,000,000

Name and Principal Position	Year	Salary	Bonus	Stock Awards	Option Awards	Non-Equity Incentive Plan Compensation	Nonqualified Deferred Compensation	All Other Compensation	Total
(a)	(b)	(c)	(d)	(e)	(f) (1)	(g)	(h)	(i) (2)	(j)
Jeff W. Holmes, CEO	12/31/2012	$96,875	$0	$0	$0	$0	$0	$4,659	$101,534
	12/31/2011	$79,250	$0	$0	$0	$0	$0	$4,363	$83,613
Greg W. Holmes, President	12/31/2012	$74,792	$0	$0	$0	$0	$0	$4,729	$79,521
	12/31/2011	$54,163	$0	$0	$0	$0	$0	$4,393	$58,556
Thomas Harker, CTO	12/31/2012	$105,833	$0	$0	$0	$0	$0	$4,659	$110,492
	12/31/2011	$102,400	$0	$0	$0	$0	$0	$4,460	$106,860
Kevin J. Asher, CFO	12/31/2012	$108,750	$0	$0	$0	$0	$0	$4,660	$113,410
	12/31/2011	$100,000	$0	$0	$0	$0	$0	$4,372	$104,372

Employee	Beginning Date	Annual Salary
Jeff W. Holmes	1/1/2005	$	220,000
Greg W. Holmes	1/1/2005	$	150,000
Kevin J. Asher	2/5/2008	$	130,000
Tom Harker	1/10/2007	$	140,000
Michael Brande	1/10/2007	$	105,000
Kelly Robinson	6/28/2004	$	90,000

	Shares Beneficially Owned (1) (2)
Name	Number		Percent
Jeff W. Holmes (3)		2,407,064		16.78%
Kirk Blosch (4) 2081 S. Lakeline Drive Salt Lake City, UT 84109		1,630,334		11.56%
Greg Holmes (5)		806,060		5.49%
Kevin Asher (6)		225,000		1.60%
Charles House (7)		235,000		1.67%
Michael Myers (8)		25,000		*
Tom Harker (9)		129,167		*
All directors and executive officers as a group (9 persons) (10)		5,457,625		35.28%

	SEC
Exhibit	Reference
No.	No.	Title of Document	Location

3(i)	3.01	Articles of Incorporation of Calibrus	Incorporated by
			Reference1

3(ii)	3.02	Amendment to Articles of Incorporation Calibrus-Name Change	Incorporated by
			Reference1

3(iii)	3.03	Bylaws of Calibrus	Incorporated by
			Reference1

4	4.01	Specimen Stock Certificate	Incorporated by
			Reference1


10	10.01	Lease Agreement – Paragon	Incorporated by
			Reference1

10	10.02	AT&T Services, Inc.-Agreement	Confidentiality
			Requested

10	10.03	Magnet Warrant	Incorporated by
			Reference1

10	10.04	Employment Agreement-Jeff Holmes	Incorporated by
			Reference1

10	10.05	Employment Agreement-Greg Holmes	Incorporated by
			Reference1

10	10.06	Employment Agreement-Kevin Asher	Incorporated by
			Reference1

10	10.07	Incentive Stock Option Plan	Incorporated by
			Reference1

10	10.08	Non-Qualified Stock Option Plan	Incorporated by
			Reference1

10	10.09	Form of Options	Incorporated by
			Reference1

10	10.10	MeoMyo, LLC Development Contract	Incorporated by
			Reference1

10	10.11	Form of Convertible Debenture	Incorporated by
			Reference1

10	10.12	Form of Warrant	Incorporated by
			Reference1

10	10.13	2012 Stock Option and Restricted Stock Plan	Incorporated by
			Reference2

14	14.01	Code of Ethics	Incorporated by
			Reference1

31	31.01	CEO certification	This Filing

31	31.02	CFO certification	This Filing

32	32.01	CEO and CFO certification	This Filing

1 Filed as an exhibit to the Company's registration statement on Form 10 filed with the Commission, SEC file no. 000-53548. 2 Filed as an exhibit to the Company’s definitive proxy statement on Form DEF 14A filed with the Commission, SEC file no. 000-53548.


ASSETS
		2012			2011
Current Assets
Cash and cash equivalents		$	24,692		$	11,065
Accounts receivable - trade, net			423,319			526,413
Prepaid expenses			4,811			13,094
Deferred financing fees			-			500

	Total Current Assets		452,822			551,072

Property and equipment, net			9,138			10,303
Deposits			935			1,050
Assets held for sale			15,241			58,361

	Total Assets	$	478,136		$	620,786



LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

Current Liabilities
Convertible notes payable - current portion		$	-		$	10,000
Convertible related party notes payable - current portion			15,000			15,000
Note payables - current portion			450,000			50,000
Related party notes payable and short term cash advances,
net of unamortized discount of $0 and $16,667 - current portion			559,900			367,733
Due to factor			253,595			238,966
Accounts payable - trade			833,987			476,699
Accrued liabilities			360,796			216,870

	Total Liabilities		2,473,278			1,375,268


Stockholders' Equity (Deficit)
Preferred stock, $.001 par value, 5,000,000 shares authorized,
none issued or outstanding			-			-
Common stock, $.001 par value, 45,000,000 shares authorized,
13,871,080 and 13,808,580 shares issued and outstanding			13,871			13,809
Additional paid-in capital			9,297,446			9,277,185
Accumulated deficit			(11,306,459	)		(10,045,476	)

	Total Stockholders' Equity (Deficit)		(1,995,142	)		(754,482	)

	Total Liabilities and Stockholders' Equity (Deficit)	$	478,136		$	620,786


	2012			2011

Revenues	$	-		$	-

Cost of revenues		-			-

Gross profit		-			-

General and administrative expenses		922,886			1,739,759
Impairment expense		108,458			1,757,898
Research and development		1,382,100			1,472,113

		(2,413,444	)		(4,969,770	)

Other Income (Expense):
Interest income		2			23
Interest expense		(286,171	)		(3,015,156	)

		(286,169	)		(3,015,133	)

Loss from continued operations		(2,699,613	)		(7,984,903	)

Income from discontinued operations		1,438,630			1,652,932

Loss before income taxes		(1,260,983	)		(6,331,971	)

Income taxes		-			-

Net Loss	$	(1,260,983	)	$	(6,331,971	)

Loss per common share from continued operations
Basic and diluted	$	(0.20	)	$	(1.00	)

Income per common share from discontinued operations
Basic and diluted		0.10			0.21

Net loss per common share
Basic and diluted	$	(0.10	)	$	(0.79	)

Weighted average common shares; basic and diluted		13,837,758			7,978,820

					Additional					Total
	Common Stock				Paid-In		Accumulated			Stockholders'
	Shares		Amount		Capital		Deficit			Equity (Deficit)



Balance at December 31, 2010		6,794,600	$	6,795	$	4,765,758	$	(3,713,505	)	$	1,059,048

Warrants issued with bridge loans		-		-		3,316		-			3,316

Convertible debt warrants		-		-		104,821		-			104,821

Warrants issued with debt conversion		-		-		14,191		-			14,191

Stock issued upon conversion of debt
and interest		6,976,480		6,976		1,737,144		-			1,744,120

Conversion expense		-		-		2,616,177		-			2,616,177

Stock issued for services		37,500		38		14,962		-			15,000

Stock based compensation		-		-		20,816		-			20,816

Net loss for the year ended
December 31, 2011		-		-		-		(6,331,971	)		(6,331,971	)

Balance at December 31, 2011		13,808,580	$	13,809	$	9,277,185	$	(10,045,476	)	$	(754,482	)

	2012			2011

Increase (decrease) in cash and cash equivalents:

Cash flows from operating activities:
Net Loss	$	(1,260,983	)	$	(6,331,971	)

Adjustments to reconcile net loss to net cash (used) provided by
operating activities:
Depreciation and amortization		19,104			946,375
Amortization of financing costs		500			2,816
Amortization of debt discount		19,167			33,333
Options expense		-			20,816
Conversion expense		-			2,735,189
Interest converted to equity		-			204,120
Stock issued for services		-			15,000
Warrants issued		10			-
Impairment expense		108,458			1,757,898
Changes in assets and liabilities:
Accounts receivable - trade		103,094			(153,423	)
Prepaid expenses		(72,576	)		(6,961	)
Deposits		115			743
Accounts payable - trade		357,288			(207,871	)
Accrued liabilities		143,926			(49,236	)
Net cash (used) provided by operating activities		(581,897	)		(1,033,172	)

Cash flows from investing activities:
Purchase of fixed assets		(2,418	)		(22,919	)
Net cash used by investing activities		(2,418	)		(22,919	)

Cash flows from financing activities:
Proceeds from warrant exercises		20,313			-
Proceeds from issuance of debt and short term advances		605,000			1,320,400
Repayment of debt and short term advances		(42,000	)		(381,000	)
Proceeds from factoring line		2,498,307			2,590,867
Repayments of factoring line		(2,483,678	)		(2,484,630	)
Net cash provided by financing activities		597,942			1,045,637

Net increase (decrease) in cash and cash equivalents		13,627			(10,454	)

Cash and cash equivalents at beginning of year		11,065			21,519

Cash and cash equivalents at end of year	$	24,692		$	11,065

Supplemental disclosure of cash flow information:

Non-cash Disclsoures
Conversion of debt and interest to equity	$	-		$	1,744,120
Warrants issued as a discount on debt	$	-		$	3,316

	Year Ended December 31,
	2012			2011

Net loss	$	(1,260,983	)	$	(6,331,971	)

Weighted average number of common shares
used in basic earnings per share		13,837,758			7,978,820

Effect of dilutive securities:
Stock options		-			-
Stock warrants		-			-
Convertible debt		-			-

Weighted average number of common shares
and dilutive potential comon stock used in
diluted loss per share		13,837,758			7,978,820

	2012			2011

Computer hardware	$	2,144,873		$	2,142,455
Furniture and fixtures		244,785			244,785
Leashold improvements		156,144			156,144
Software costs		1,195,761			1,195,761
		3,741,563			3,739,145
Less: accumulated depreciation		(3,717,184	)		(3,698,080	)
Less: assets held for sale, net		(15,241	)		(30,762	)
	$	9,138		$	10,303

	2012		2011

JabberMonkey website development	$	-	$	2,751,492
Less: accumulated amortization		-		(993,594	)
Less: impairment		-		(1,757,898	)

	$	-	$	-

	2012			2011


Note payable to convertible debentureholder, interest rate of 12% accrued monthly
principal and interest due November 16, 2010, unsecured	$	-		$	10,000

Note payable to related party convertible debenture holder, interest rate
of 12% accrued monthly, principal and interest due November 16, 2010, unsecured		15,000			15,000
		15,000			25,000

Less: current portion		(15,000	)		(25,000	)

	$	-		$	-

	2012			2011

Convertible note payable to related party, interest rate of 12% accrued monthly,
principal and accrued interest due March 31, 2011 extended to June 30, 2013	$	15,000		$	25,000

Note payable to related party, interest rate of 12% accrued monthly,
principal and accrued interest due January 31, 2012 extended to June 30, 2013		50,000			50,000

Note payable, interest rate of 12% accrued monthly,
principal and accrued interest due January 31, 2012 extended to June 30, 2013		50,000			50,000

Notes payable to related party, interest rate of 12% accrued monthly,
principal and accrued interest due January 31, 2012 extended to June 30, 2013		25,000			25,000

Note payable to related party, interest rate of 12% accrued monthly,
principal and accrued interest due January 31, 2012 extended to June 30, 2013		200,000			200,000

Note payable to related party, interest rate of 12% accrued monthly,
principal and accrued interest due October 13, 2012, extended to June 30, 2013		67,500			-

Note payable, interest rate of 18% accrued monthly, principal and accrued interest,
due September 15, 2012, in default and accruing interest at 30% per annum		150,000			-

Note payable, interest rate of 18% accrued monthly, principal and accrued interest
due September 15, 2012, in default and accruing interest at 30% per annum		100,000			-

Note payable, interest rate of 18% accrued monthly, principal and accrued interest
due September 15, 2012, in default and accruing interest at 30% per annum		150,000			-


Various short-term, due on demand, non-interest bearing advances from related parties		217,400			109,400
		1,024,900			459,400

Less: discount		-			(16,667	)

Less: current portion		(1,024,900	)		(442,733	)

	$	-		$	-

Expiration Date	Federal NOL Carryforwards		Expiration Date	State NOL Carryforwards
12/31/2021	$	734,000	12/31/2013		1,120,000
12/31/2022		443,000	12/31/2014		1,428,000
12/31/2023		-	12/31/2015		1,605,000
12/31/2024		-	12/31/2016		928,000
12/31/2025		-	12/31/2017		1,250,000
12/31/2026		-		$	6,331,000
12/31/2027		436,000
12/31/2028		1,120,000
12/31/2029		1,428,000
12/31/2030		1,605,000
12/31/2031		928,000
12/31/2032		1,250,000
	$	7,944,000

	2012			2011

Federal Tax Benefit (Expense) at Statutory Rates	$	430,000		$	2,150,000
State Tax Benefit (Expense) at Statutory Rates		65,000			317,000
Meals and Entertainment		7,000			(1,000	)
Induced Conversion of Debt		-			(1,141,000	)
Valuation Allowance Adjustment		(502,000	)		(1,325,000	)

Net Deferred Tax Benefit (Expense)	$	-		$	-

Year Ending
December 31,	Amount
2013		147,337
2014		149,159
2015		126,387
2016		2,880

	$	425,763

	2012		2011
Expected Volatility		12.11% - 14.74%		24.85% - 24.90%
Risk-free interest rate		0.11% - 0.13%		0.89% - 0.25%
Expected dividends		-		-
Expected life	6 months		2 - 3 Years
Fair value	$	0.00 - $0.00	$	0.00 - $0.15

						Weighted
						Average
				Weighted-Average		Remaining	Aggregate
				Grant-Date		Contractual	Intrinsic
	Warrants			Fair Value		Term (in years)	Value
Non-exercisable at December 31, 2010		505,000		$	0.05

Granted		517,088			0.01

Exercisable		(1,004,588	)		0.03

Forfeited		(5,000	)		0.05

Non-exercisable at December 31, 2011		12,500			0.05

Granted		-			-

Exercisable		-			-

Forfeited		(5,000	)		0.05

Non-exercisable at December 31, 2012		7,500		$	0.05	0.94	$	-

	For the Year Ended December 31, 2012		For the Year Ended December 31, 2011

Revenue	$	3,415,147	$	3,563,265

Cost of revenue		1,315,683		1,293,801

Gross profit		2,099,464		2,269,464

Operating expenses		660,834		616,532

Income from discontinued operations	$	1,438,630	$	1,652,932