Entia Biosciences 10Q 2014 Q3 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the Quarterly Period ended September 30, 2014


[ ]	TRANSITION REPORT PURSUANT SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from _______ to _______.

Commission File Number: 000-52864

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Entia Biosciences, Inc.

(Exact name of Registrant as specified in its charter)


Nevada	26-0561199
(State or other jurisdiction	(IRS Employer
of incorporation or organization)	Identification No.)

13565 SW Tualatin-Sherwood Rd #800, Sherwood, OR 97140

(Address of principal executive offices)

(503) 334-3575

(Registrant’s telephone number)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive DataFile required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).YES [X] NO [ ]

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


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

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

On November 10, 2014, 13,860,359 shares of the registrant's common stock, par value $0.001 per share, were outstanding.


TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION		3
Item 1.	Financial Statements	3
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	24
Item 4.	Controls and Procedures	24
PART II - OTHER INFORMATION		25
Item 1.	Legal Proceedings	25
Item 1A.	Risk Factors	25
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	25
Item 3.	Defaults upon Senior Securities	25
Item 4.	Mine Safety Disclosures	25
Item 5.	Other Information	25
Item 6.	Exhibits	26
SIGNATURES		28

Part 1: FINANCIAL INFORMATION

Item 1. Financial Statements


ENTIA BIOSCIENCES, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
				September 30, 2014		December 31, 2013
Assets
Current Assets:
	Cash		$	85,608	$	36,886
	Accounts receivable, net			65,662		11,197
	Inventory, net			116,778		138,941
	Interest income receivable			-		3,965
	Prepaid expenses			19,100		34,462
		Total Current Assets		287,148		225,451

Property and Equipment, net				48,583		62,145
Patents and license, net				333,677		343,498

Total Assets			$	669,408	$	631,094

Liabilities and Stockholders' Equity (Deficit)
Current Liabilities:
	Accounts payable and accrued expenses		$	557,982	$	1,157,717
	Short-term convertible notes payable, net of discount related-party			15,000		23,427
	Short-term convertible notes payable, net of discount			634,548		373,644
	Capital lease payable			-		2,105
	Notes payable			29,764		23,788
		Total Current Liabilities		1,237,294		1,580,681

Total Liabilities				1,237,294		1,580,681

Stockholders' Equity (Deficit):
	Preferred stock, $0.001 par value, 5,000,000 shares authorized,
		Series A preferred stock, 350,000 shares designated,
		207,807 and 281,969 shares issued and outstanding,
		respectively, aggregate liquidation value of $1,039,035
		and $1,409,845 respectively		208		282
	Common stock, $0.001 par value, 150,000,000 shares authorized,
		13,204,359 and 8,297,645 shares issued and outstanding, respectively.		13,205		8,298
	Stock subscription receivable			-		(49,000)
	Additional paid-in capital			9,652,344		7,793,760
	Deferred compensation			(108,799)		(182,576)
	Accumulated deficit			(10,124,844)		(8,520,351)
		Total Stockholders' Equity (Deficit)		(567,886)		(949,587)

Total Liabilities and Stockholders' Equity (Deficit)			$	669,408	$	631,094

See accompanying notes to the consolidated financial statements.


ENTIA BIOSCIENCES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

			Three Months	Three Months	Nine Months	Nine Months
			Ended	Ended	Ended	Ended
			September 30, 2014	September 30, 2013	September 30, 2014	September 30, 2013

REVENUES			$ 87,753	$ 92,102	$ 355,014	$ 262,245
COST OF GOODS SOLD			40,059	33,560	136,083	91,547
GROSS PROFIT			47,694	58,542	218,931	170,698

OPERATING EXPENSES
	Advertising and promotion		42,368	23,399	77,454	151,672
	Professional fees		36,166	38,493	123,382	115,731
	Consulting fees		21,440	79,365	315,032	608,104
	Impairment of intangible asset		27,080	-	27,080
	General and administrative		334,358	396,337	1,051,506	1,202,148

		Total Operating Expenses	461,412	537,594	1,594,454	2,077,655

LOSS FROM OPERATIONS			(413,718)	(479,052)	(1,375,523)	(1,906,957)

OTHER INCOME (EXPENSES)
	Interest income		-	2,512	-	7,412
	Interest expense		(82,123)	(34,188)	(256,525)	(101,790)
	Other income (expense)		37,499	-	24,534	-
	Loss on write-off of debt discount		(100,000)		(100,000)
	Gain on settlement of accounts payable		-	-	103,021	-

NET LOSS			$ (558,342)	$ (510,728)	$ (1,604,493)	$ (2,001,335)

DEEMED DIVIDEND RELATED TO BENEFICIAL CONVERSION FEATURE OF CONVERTIBLE PREFERRED STOCK			-	(39,800)	-	(39,800)

NET LOSS PER SHARE ALLOCABLE TO COMMON STOCKHOLDERS			$ (558,342)	$ (550,528)	$ (1,604,493)	(2,041,135)

NET LOSS PER COMMON SHARE
	- BASIC AND DILUTED:		$ (0.06)	$ (0.07)	$ (0.18)	$ (0.28)

	Weighted common shares outstanding
		- basic and diluted	10,091,052	7,712,950	8,986,310	7,395,137

See accompanying notes to the consolidated financial statements.


ENTIA BIOSCIENCES, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE PERIOD ENDED DECEMBER 31, 2013 and
FOR THE INTERIM PERIOD ENDED SEPTEMBER 30, 2014
(Unaudited)
						Additional		Stock		Total Stockholders'
		Preferred Stock		Common Stock		Paid	Deferred	Subscriptions	Accumulated	Equity
		Shares	Amount	Shares	Amount	In Capital	Compensation	Receivable	Deficit	(Deficit)

Balance - December 31, 2012		109,900	$ 110	7,444,591	$ 7,444	$ 5,115,587	$ (394,510)	$ (49,000)	$ (5,327,924)	(648,293)
Issuance of preferred stock for cash		140,175	140	-	-	700,735	-	-	-	700,875
Issuance of preferred stock for
	cancellation of debt	3,162	3	-	-	15,747	-	-	-	15,750
Issuance of warrants in connection with convertible
	notes payable	-	-	-	-	16,400	-	-	-	16,400
Beneficial conversion feature in connection with convertible
	note payable	-	-	-	-	64,956	-	-	-	64,956
Issuance of preferred stock for conversion of convertible
	notes payable	23,332	23	-	-	116,629	-	-	-	116,652
Issuance of preferred stock for
	conversion of accounts payable	30,400	31	-	-	151,970	-	-	-	152,001
Deemed dividend related to beneficial conversion feature
	of convertible preferred stock	-	-	-	-	87,600	-	-	(87,600)	-
Issuance of common stock for
	conversion of preferred stock	(25,000)	(25)	250,000	250	(225)	-	-	-	-
Issuance of common stock for conversion of accrued
	compensation	-	-	273,158	274	129,727	-	-	-	130,001
Stock compensation		-	-	-	-	413,921	-	-	-	413,921
Issuance of common stock for services		-	-	129,896	130	83,270	-	-	-	83,400
Issuance of common stock & warrants for license
	agreement	-	-	200,000	200	215,329	-	-	-	215,529
Issuance of warrants for services		-	-	-	-	584,108	(584,108)	-	-	-
Issuance of warrants for extension on debt		-	-	-	-	98,006	-	-	-	98,006
Amortization of deferred compensation		-	-	-	-	-	796,042	-	-	796,042
Net loss		-	-	-	-	-	-	-	(3,104,827)	(3,104,827)

(Continued on next page)



Continued from previous page)

Balance - December 31, 2013		281,969	$ 282	8,297,645	$ 8,298	$ 7,793,760	$ (182,576)	$ (49,000)	$ (8,520,351)	$ (949,587)

Issuance of warrants in connection with
	convertible notes payable	-	-	-	-	68,735	-	-	-	68,735
Beneficial conversion feature in connection with
	convertible notes payable	-	-	-	-	146,637	-	-	-	146,637
Issuance of common stock for conversion
	of preferred stock	(74,162)	(74)	741,620	742	(668)	-	-	-	-
Issuance of common stock for conversion
	of convertible debt	-	-	1,197,011	1,197	308,523	-	-	-	309,720
Issuance of common stock for conversion
	of accounts payable	-	-	94,530	95	55,806	-	-	-	55,901
Issuance of common stock for conversion of										-
	accrued salary	-	-	2,592,570	2,592	775,178	-	-	-	777,770
Stock compensation		-	-	-	-	143,549	-	-	-	143,549
Issuance of common stock for future services		-	-	68,283	68	44,182	(44,250)	-	-	-
Issuance of common stock for services		-	-	212,700	213	107,669	-	-	-	107,882
Receipt of stock subscription receivable, less write-off
	of $9,000	-	-	-	-	-	-	49,000	-	49,000
Issuance of warrants for conversion of accrued
	salary	-	-	-	-	91,863	-	-	-	91,863
Issuance of warrants for services						117,110	(117,110)	-	-	-
Amortization of deferred compensation		-	-	-	-	-	235,137	-	-	235,137
Net loss		-	-	-	-	-	-	-	(1,604,493)	(1,604,493)


Balance - September 30, 2014		207,807	$ 208	13,204,359	$ 13,205	$ 9,652,344	$ (108,799)	$ -	$ (10,124,844)	$ (567,886)

See accompanying notes to the consolidated financial statements.


ENTIA BIOSCIENCES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
				Nine Months		Nine Months
				Ended		Ended
				September 30, 2014		September 30, 2013
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss			$	(1,604,493)	$	(2,001,335)
Adjustments to reconcile net loss to net cash
	used in operating activities:
	Depreciation/amortization			56,318		25,104
	Gain on settlement of accounts payable			(103,021)		-
	Impairment of intangible asset			27,080		-
	Loss on write-off of debt discount			100,000
	Amortization of discount on convertible notes			221,548		78,142
	Stock-based compensation			486,568		875,343
	Loss on sale of stock subscription receivable			12,965		-
	Changes in operating assets and liabilities:
		Accounts receivable		(54,465)		(30,867)
		Inventory		22,163		3,714
		Prepaid expenses		28,275		19,027
		Other current assets		-		(512)
		Accounts payable and accrued expenses		404,761		541,569
NET CASH USED IN OPERATING ACTIVITIES				(402,301)		(489,815)

CASH FLOWS FROM INVESTING ACTIVITIES:
	Purchase of property and equipment			(4,607)		(55,448)
	Acquisition of patents and patents pending (net)			(28,328)		(20,044)
NET CASH USED IN INVESTING ACTIVITIES				(32,935)		(75,492)

CASH FLOWS FROM FINANCING ACTIVITIES:
	Proceeds from issuance of common stock, preferred stock and warrants			-		565,865
	Proceeds from convertible notes payable and notes payable			503,000		50,000
	Payment on notes payable			(34,042)		(18,284)
	Payment on convertible note payable - related party			(40,000)		-
	Proceeds from sale of stock subscription receivable			40,000		-
	Proceeds from convertible note payable-related party			15,000		-
NET CASH PROVIDED BY FINANCING ACTIVITIES				483,958		597,581
NET CHANGE IN CASH				48,722		32,274
Cash at beginning of period				36,886		13,081
Cash at end of period			$	85,608	$	45,355
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:
	Interest paid		$	843	$	906
SUPPLEMENTAL DISCLOSURE OF NONCASH FLOWS FINANCING
	AND INVESTING ACTIVITIES:
	Stock issued for accounts payable		$	55,901	$	-
	Conversion of accrued compensation, notes payable and
		accrued interest to preferred and common stock	$	1,087,490	$	414,404
	Issuance of warrants for accrued salary		$	91,863	$	-
	Debt issued for license		$	-	$	140,000

See accompanying notes to the consolidated financial statements.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – ORGANIZATION AND OPERATIONS

Generic Marketing Services, Inc. was incorporated on July 19, 2007 under the laws of the State of Nevada as a subsidiary of Basic Services, Inc., also a Nevada corporation. On December 31, 2007, Basic Services spun off Generic Marketing Services. On October 8, 2008, Generic Marketing Services changed its name to Total Nutraceutical Solutions, Inc. (TNS, the Company, us, we, or our). We engage in the distribution of organic dietary supplement nutraceutical products in the United States of America. We are also engaged in the discovery, scientific evaluation and marketing of natural formulations that can be used in medical foods, nutraceuticals, cosmetics and other products developed and sold by Entia and by third parties.

On January 9, 2012, the amendment to our Articles of Incorporation involving the name change from Total Nutraceutical Solutions, Inc. to Entia Biosciences, Inc. (“Entia”) became effective with the Secretary of State of Nevada. We also filed articles of incorporation for a wholly owned subsidiary of Entia, with such subsidiary to be named Total Nutraceutical Solutions, Inc. in January 2012.

We have a history of incurring net losses and net operating cash flow deficits. We are also developing new technologies related to our organic nutraceutical products. At September 30, 2014, we had cash and cash equivalents of $85,608. These conditions raise substantial doubt about our ability to continue as a going concern. As a result, we anticipate that our cash and cash equivalent balances, anticipated cash flows from operations and anticipated operating cash flows will be sufficient to meet our cash requirements through December 2014.

In order for us to continue as a going concern beyond this point and ultimately to achieve profitability, we may be required to obtain capital from external sources, increase revenues and reduce operating costs. The issuance of equity securities will also cause dilution to our shareholders. If external financing sources of financing are not available or are inadequate to fund our operations, we will be required to reduce operating costs including personnel costs, which could jeopardize our future strategic initiatives and business plans. The accompanying consolidated financial statements have been prepared assuming that the Company continues as a going concern.

The consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the matters discussed herein.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation and principles of consolidation

The accompanying consolidated unaudited interim financial statements and related notes have been prepared in accordance with U.S. Generally Accepted Accounting Principles (GAAP) for interim financial information, and with the rules and regulations of the United States Securities and Exchange Commission (“SEC”) to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited interim financial statements furnished reflect all adjustments (consisting of normal recurring accruals) which are, in the opinion of management, necessary to a fair statement of the results for the interim periods presented. Unaudited interim results are not necessarily indicative of the results for the full year. These unaudited interim financial statements should be read in conjunction with the financial statements of the Company for the year ended December 31, 2013 and notes thereto contained in the Company’s Annual Report on Form 10-K filed with the SEC.

All intercompany accounts have been eliminated for the purpose of the consolidated financial statement presentation.

Use of estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP 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 consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash

We consider all highly liquid, short-term investments with original maturities of three months or less when purchased to be cash equivalents.

Accounts receivable

Accounts receivable are recorded at the invoiced amount, net of allowance for doubtful accounts. The allowance for doubtful accounts is our best estimate of the amount of probable credit losses based on specific identification of accounts in our existing accounts receivable. Outstanding account balances are reviewed individually for collectibility. We determine the allowance based on historical write-off experience, customer specific facts and economic conditions. Bad debt expense is included in general and administrative expenses, if any. We consider all accounts greater than 30 days old to be past due. Account balances are charged off against allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The allowance for doubtful accounts was $2,526 at both September 30, 2014 and December 31, 2013.

Inventory

Inventory, which consists primarily of raw materials to be used in the production of our dietary supplement products, is stated at the lower of cost or market using the first-in, first-out method. We regularly review our inventory on hand and, when necessary, record a provision for excess or obsolete inventory.

Property and equipment

Property and equipment are recorded at cost. Additions and improvements that increase the value or extend the life of an asset are capitalized. Maintenance and repairs are expensed as incurred. Upon sale or retirement of property and equipment, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in the consolidated statement of operations. Depreciation is computed on a straight-line basis over the following estimated useful lives of the assets:


Office equipment		3 years
Production equipment		5 to 7 years
Equipment under capital lease		5 to 7 years
Leasehold improvements		Lesser of lease term or useful life of improvement

Patents

Patents, once issued or purchased, are amortized using the straight-line method over their economic remaining useful lives. All internally developed process costs incurred to the point when a patent application is to be filed are expensed as incurred and classified as research and development costs. Patent application costs, generally legal costs, are capitalized pending disposition of the individual patent application, and are subsequently either amortized based on the initial patent life granted, generally 15 to 20 years for domestic patents and 5 to 20 years for foreign patents, or expensed if the patent application is rejected. The costs of defending and maintaining patents are expensed as incurred. Upon becoming fully amortized, the related cost and accumulated amortization are removed from the accounts.

Impairment of long-lived assets

Our long-lived assets, which include property and equipment, patents and licenses of patents, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

We assess the recoverability of our long-lived assets by comparing the projected undiscounted net cash flows associated with the related long-lived asset or group of long-lived assets over their remaining estimated useful lives against their respective carrying amounts. Impairment, if any, is based on the excess of the carrying amount over the fair value of those assets. Fair value is generally determined using the asset’s expected future discounted cash flows or market value, if readily determinable. If long-lived assets are determined to be recoverable, but the newly determined remaining estimated useful lives are shorter than originally estimated, the net book values of the long-lived assets are depreciated over the newly determined remaining estimated useful lives. There was an impairment on patents recorded for the third quarter ended September 30, 2014, amounting to $27,080.

Discount on convertible notes payable

We allocate the proceeds received from convertible notes between convertible notes payable and warrants, if applicable. The resulting discount for warrants is amortized using the effective interest method over the life of the debt instrument. After allocating a portion of the proceeds to the warrants, the effective conversion price of the convertible note payable can be determined. If the effective conversion price is lower than the market price at the date of issuance, a beneficial conversion feature is recorded as an additional discount to the convertible note payable. The beneficial conversion feature discount is amortized using the effective interest method over the life of the debt instrument. The amortization is recorded as interest expense on the consolidated statements of operations.

Fair value of financial instruments

The carrying amounts of our financial assets and liabilities, such as cash, accounts receivable and accounts payable, approximate their fair values (determined based on level 1 inputs in the fair value hierarchy) because of the short maturity of these instruments. Due to conversion features and other terms, it is not practical to estimate the fair value of notes payable and convertible notes.

Fair value measurements

We measure fair value as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that is determined based on assumptions that market participants would use in pricing an asset or liability. We utilize a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:


Level 1		Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.

Level 2		Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.

Level 3		Unobservable inputs where there is little or no market data, which require the reporting entity to develop its own assumptions.

We do not have any assets or liabilities measured at fair value on a recurring or a non-recurring basis. Consequently, we did not have any fair value adjustments for assets and liabilities measured at fair value at September 30, 2014 or December 31, 2013, nor any gains or losses reported in the consolidated statement of operations that are attributable to the change in unrealized gains or losses relating to those assets and liabilities still held at the reporting date for the periods ended September 30, 2014 and September 30, 2013.

Revenue recognition

We recognize revenue when (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred or services have been performed, (iii) amounts are fixed or determinable and (iv) collectibility of amounts is reasonably assured.

Revenues from the sale of products, including shipping and handling fees but excluding statutory taxes collected from customers, as applicable, are recognized when shipment has occurred. We sell our products directly to customers. Persuasive evidence of an arrangement is demonstrated via order and invoice, product delivery is evidenced by a bill of lading from the third party carrier and title transfers upon shipment, the sales price to the customer is fixed upon acceptance of the order and there is no separate sales rebate, discount, or volume incentive.

Shipping and handling costs

Amounts charged to customers for shipping products are included in revenues and the related costs are classified in cost of goods sold as incurred.

Advertising and promotion costs

Costs associated with the advertising and promotions of our products are expensed as incurred.

Equity instruments issued to parties other than employees for acquiring goods or services

We account for all transactions in which goods or services are the consideration received for the issuance of equity instruments based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. The measurement date used to determine the fair value of the equity instrument issued is the earlier of the date on which the performance is complete or the date on which it is probable that performance will occur. Currently such transactions are primarily awards of warrants to purchase common stock.

The fair value of each warrant award is estimated on the date of grant using a Black-Scholes option-pricing valuation model.

The assumptions used to determine the fair value of our warrants are as follows:


-	The expected life of warrants issued represents the period of time the warrants are expected to be outstanding.

-	The expected volatility is generally based on the historical volatility of comparable companies’ stock over the contractual life of the warrant.

-	The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods within the contractual life of the warrant.

-	The expected dividend yield is based on our current dividend yield as the best estimate of projected dividend yield for periods within the contractual life of the warrant.

Income taxes

We recognize deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in our consolidated statements of income in the period that includes the enactment date.

We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in our consolidated financial statements from such a position should be measured based

on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. Should they occur, our policy is to classify interest and penalties related to tax positions as income tax expense.

We did not record an income tax provision for the three months and nine months ended September 30, 2014 and 2013 as we had a net taxable loss in the periods.

Net loss per common share

Basic and diluted net loss per share has been computed by dividing our net loss by the weighted average number of common shares issued and outstanding. Convertible preferred stock, options and warrants to purchase our common stock as well as debt which are convertible into common stock are anti-dilutive and therefore are not included in the determination of the diluted net loss per share for three months ended September 30, 2014 and 2013 and the nine months ended September 30, 2014 and 2013. The following table presents a reconciliation of basic loss per share and excluded dilutive securities:


	For the Three Months Ended September 30,		For the Nine Months Ended September 30,
	2014	2013	2014	2013
Numerator:
Net loss	$ (558,342)	$ (550,528)	$ (1,604,493)	$ (2,041,135)

Denominator:
Weighted-average common shares outstanding	10,091,052	7,712,950	8,986,310	7,395,137

Basic and diluted net loss per share	$ (0.06)	$ (0.07)	$ (0.18)	$ (0.28)

Common stock warrants	5,019,006	3,987,744	5,019,006	3,987,744
Series A convertible preferred stock	2,078,070	2,699,690	2,078,070	2,699,690
Stock options	2,848,670	1,651,118	2,848,670	1,651,118
Convertible debt including interest	915,085	856,030	915,085	856,030
Excluded dilutive securities	10,860,831	9,194,582	10,860,831	9,194,582

Reclassifications

Certain reclassifications have been made to prior period financial statements and footnotes in order to conform to the current period's presentation.

Segments

We have determined that we operate in one segment for financial reporting purposes.

Recently issued accounting pronouncements

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 Entia beginning January 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 financial statements.

NOTE 3 – INVENTORY

Inventory consists of the following:


	September 30, 2014	December 31, 2013
Raw materials	$ 217,430	$ 240,750
Finished goods	50,412	49,255
	267,842	290,005
Less: reserve for excess and obsolete inventory	(151,064)	(151,064)
	$ 116,778	$ 138,941

NOTE 4 – PROPERTY AND EQUIPMENT

Property and equipment, stated at cost, consists of the following:


	September 30, 2014	December 31, 2013
Office equipment	$ 27,507	$ 26,284
Production equipment	86,999	83,615
Leasehold improvements	16,328	16,328
	130,834	126,227
Less: accumulated depreciation	(82,251)	(64,082)
	$ 48,583	$ 62,145

NOTE 5 - PATENTS AND LICENSES, NET

Our identifiable long-lived intangible assets are patents and prepaid licenses. Patent and license amortization is $3,371 and $3,578 for the three months ended September 30, 2014 and 2013, respectively and $11,070 and $6,824 for the nine months ended September 30, 2014 and 2013, respectively.

The licenses are being amortized over an economic useful life of 17 years. The gross carrying amounts and accumulated amortization related to these intangible assets consist of the following at:


	September 30, 2014	December 31, 2013
Licenses and amortizable patents	$ 207,244	$ 234,324
Unamortized patents	153,630	125,301
Accumulated amortization	(27,197)	(16,127)
Patents and Licenses, net	$ 333,677	$ 343,498

During third quarter 2014, we recorded an impairment on one of our patents and expensed this amount. The amount expensed is $27,080 and is recorded as an impairment to intangibles on our consolidated statements of operations.

NOTE 6 – ACCRUED EXPENSES

Accrued expenses (included with accounts payable) consists of the following at:


	September 30, 2014	December 31, 2013
Executive compensation	$ 30,197	$ 476,368
Other accruals	19,575	60,671
	$ 49,772	$ 537,039

During third quarter, 2014, we negotiated agreements with our employees to accept either warrants or shares of common stock for conversion of their accrued payroll. The conversion rate for the warrants or common stock would be at $0.30 per share. During third quarter, we issued 2,592,570 shares of common stock to our key employees for conversion of $777,770 of accrued compensation. In addition, we granted 10 year warrants to purchase 306,208 of common stock exercisable at $0.0001 per share. These warrants fully vested on date of grant and had a grant date fair value of $91,863.

NOTE 7 – NOTES PAYABLE

Notes payable consists of the following:


	September 30, 2014	December 31, 2013
Notes payable - current
7.85% unsecured, $781 due monthly	$ 3,659	$ 1,964
7.85% unsecured, $373 due monthly	1,105	-
4.15% unsecured, $2,678 due monthly	-	21,824
10.00% unsecured, interest only, due December 30, 2014	25,000	-
	$ 29,764	$ 23,788


Convertible notes payable, net
8%, unsecured due on demand (net of discount related to beneficial conversion feature of $0 in 2014 and $49,004 in 2013), convertible into common stock at $0.45 per share.	$ 312,500	$ 263,496
8% secured due on demand (net of discount related to beneficial conversion feature of $0 in 2014 and $12,300 in 2013), convertible into preferred stock at $5.00 per share.	50,000	37,700
6% unsecured, convertible into common stock at $2.00 per share, due on demand	50,000	50,000
8% unsecured due August 2014 (net of discount related to beneficial conversion feature of $0 in 2014 and $40,552 in 2013), convertible into common stock at an average price of $0.205 per share This note was converted during August 2014.	-	22,448
8% unsecured due November 2014 (net of discount related to beneficial conversion feature of $0 in 2014 and $0 in 2013), convertible into common stock at a price to be determined after September 2, 2014. This note was converted during August 2014.	-	-
8% unsecured due January 2015 (net of discount related to beneficial conversion feature of $9,152 in 2014 and $0 in 2013), convertible into common stock at a price to be determined after October 17, 2014.	23,348	-
8% unsecured due March 2015 (net of discount related to beneficial conversion feature of $14,382 in 2014 and $0 in 2013), convertible into common stock at a price to be determined after December 13, 2014.	18,118	-
10% unsecured due March 2015 (net of discount related to warrants of $4,725 in 2014 and $0 in 2013) convertible price not yet determined	20,275	-
10% unsecured due April 2015 (net of discount related to warrants of $19,600 in 2014 and $0 in 2013) convertible price not yet determined	80,400	-
10% unsecured due April 2015 (net of discount related to warrants of $2,409 in 2014 and $0 in 2013) convertible price not yet determined	7,591	-
8% unsecured due April 2015 (net of discount related to beneficial conversion feature of $22,227 in 2014 and $0 in 2013), convertible into common stock at a price to be determined after January 14, 2015.	20,273	-
8% unsecured due May 2015 (net of discount related to beneficial conversion feature of $31,983 in 2014 and $0 in 2013), convertible into common stock at a price to be determined after February 11, 2015.	21,017	-
10% unsecured due August 2015 (net of discount related to warrants of $6,600 in 2014 and $0 in 2013) convertible price not yet determined	23,400	-
10% unsecured due September 2015 (net of discount related to warrants of $2,374 in 2014 and $0 in 2013) convertible price not yet determined	7,626	-
	$ 634,548	$ 373,644


Convertible notes payable, net related party

0% unsecured due March 30, 2014 (net of discount related to beneficial conversion feature of $0 in 2014 and $16,573 in 2013) convertible into common stock at $0.65 per share. This note was paid off on March 31, 2014.	$ -	$ 23,427
0% unsecured due October 1, 2014 (net of discount related to beneficial conversion feature of $0 in 2014 and $0 in 2013 convertible into common stock at $0.50 per share. Subsequent to September 30, 2014, we reached an agreement with the note holder to extend the maturity date. See Note 11 for further details.	$ 15,000	$ -
	$ 15,000	$ 23,427

$312,500 in notes payable was due on June 30, 2014. We are currently in negotiations with the note holder to extend this note and we are not in default.

$50,000 in notes payable was due during August, 2014. We are currently in negotiations with the note holder to extend this note and we are not in default.

During first quarter 2014, we entered into a promissory note for $25,000 at 10% interest due on December 30, 2014. This note is not convertible and is listed with notes payable as a short-term liability on the balance sheet.

On August 28, 2014, we entered into a convertible promissory note for $100,000. The note was convertible into common stock at $0.25 per share. The investor converted the notes right away and received 400,000 shares of common stock. Following the conversion, we wrote off the debt discount for a loss of $100,000. We have recorded this as an expense on our consolidated statements of operations.

During 2014, we entered into the following debenture agreements that accrue interest at 10%, mature in 1 year and grant the investor on a one warrant per dollar basis that are exercisable for 3 years at $1 per share and vest immediately:

On September 2, 2014, we entered into an agreement for $10,000. We calculated the fair value of the warrants at $2,590.

On August 28, 2014, we entered into an agreement for $30,000. We calculated the fair value of the warrants at $7,290.

On April 15, 2014, we entered into an agreement for $10,000. We calculated the fair value of the warrants at $4,130,

On April 27, 2014, we entered into an agreement for $100,000. We calculated the fair value of the warrants at $39,200, and

On March 28, 2014, we entered into an agreement for $25,000. We calculated the fair value of the warrants at $9,450.

We posted the fair value of the warrants as a discount on the notes and amortize them over the life of the debenture.

In addition to the debentures, during 2014, we entered into the following convertible promissory notes with an interest rate of 8% per annum, compounded annually. If the note remains unpaid after one hundred eighty (180) days from the Issue date, the holder has the option to convert the principal and accrued interest into shares of our Company stock at a conversion price equal to 58% of the “trading price” as described in the note. We have calculated a discount for the beneficial conversion feature and will be amortized over the life of the loan.

On February 3, 2014, $42,500 due on November 3, 2014,

On April 17, 2014, $32,500 due on January 17, 2015,

On June 13, 2014, $32,500 due on March 13, 2015,

On July 14, 2014, $42,500 due on April 13, 2015, and

On August 11, 2014, $53,000 due on May 10, 2015.

On March 25, 2014, we entered into a line of credit arrangement. The line of credit is $60,000 with an interest rate of prime plus 3.00%. There are no loan covenants applicable to this line of credit and the amount outstanding as of September 30, 2014 is $0.

NOTE 8 – RELATED PARTY TRANSACTIONS

Debt agreements from board member

In December 2013, we entered into a promissory note due on March 31, 2014 at 0% in the principal amount of $40,000 with Dr. Philip Sobol, a member of our board of directors. The note was paid off on March 31, 2014.

On July 1, 2014, we entered into a promissory note due on October 31, 2014 at 0% in the principal amount of $15,000 with Dr. Philip Sobol, a member of our board of directors. In conjunction with the note, we granted Dr. Sobol a five year warrant to purchase 15,000 shares of common stock at $0.50 per share and fully vests upon receipt of monies. We calculated a discount on the granting of the warrants in the amount of $5,445 and expensed this during the third quarter to interest expense. The note also contained a conversion feature where Dr. Sobol can convert the note into common stock at $0.50 per share. We calculated and posted a discount related to this conversion feature of $7,545 and amortized it during the third quarter 2014.

NOTE 9 – STOCKHOLDERS’ EQUITY (DEFICIT)

Preferred Stock

On May 26, 2011, our board of directors designated 350,000 shares of preferred stock as Series A preferred stock, $0.001 par value. The Series A preferred stock is entitled to a liquidation preference in the amount of $5 per share, votes on an as converted basis with the common stock on all matters as to which holders of common stock shall be entitled to vote, and is currently convertible into common stock on a one-for-ten basis.

During third quarter 2014, two investors converted 30,000 shares of Series A Preferred stock for 300,000 shares of common stock.

During second quarter 2014, two investors converted 44,162 shares of Series A Preferred stock for 441,620 shares of common stock.

Common stock

During third quarter 2014, we issued shares of common stock for the following:

645,885 shares of common stock with a value of $77,200 upon conversion of $75,500 of convertible notes payable along with accrued interest of $1,700.

300,000 shares of common stock in exchange for 30,000 shares of Series A Preferred stock,

2,592,570 shares of common stock in exchange for converting $777,770 of accrued salary to two key employees,

400,000 shares of common stock with a value of $107,882 in exchange for conversion of notes payable,

7,813 shares of common stock with a value of $5,000 for the settlement of accounts payable.

50,000 shares of common stock in conjunction with a distributor agreement valued at $21,500. This amount is posted as a reduction in revenues, and

75,000 shares of common stock with a value of $33,713 for services rendered.

During second quarter 2014, we issued shares of common stock for the following:

151,126 shares of common stock with a value of $32,520 upon conversion of $30,000 of convertible notes payable along with accrued interest of $2,520,

23,000 shares of common stock for a value of $13,113 for services rendered,

441,620 shares of common stock in exchange for 44,162 shares of Series A Preferred stock, and

80,000 shares of common stock with a value of $46,400 for the settlement of accounts payable in the amount of $149,421. We posted a gain on settlement in the amount of $103,021.

During first quarter 2014, we issued shares of common stock for the following:

64,700 shares of common stock for a value of $39,556 for services rendered,

68,283 shares of common stock for a value of $44,250 for services to be performed in the future, and

6,717 shares of common stock with a value of $4,501 for the settlement of accounts payable.

Stock incentive plan

On September 17, 2010, our Board of Directors adopted the 2010 Stock Incentive Plan (“Plan”). The Plan provides for the grant of options to purchase shares of our common stock, and stock awards consisting of shares of our common stock, to eligible participants, including directors, executive officers, employees and consultants of the Company. We have reserved 4,650,000 shares of common stock for issuance under the Plan with an annual increase in shares of 50,000 as of January 1 of each year; commencing January 1, 2012. Stock options are granted at or below the closing price of our stock on the date of grant for terms ranging from four to fifteen years and generally vest over a five year period. The fair value of option grants were calculated at the date of the grants using the Black-Scholes option pricing model with the following assumptions:


	September 30, 2014	December 31, 2013
Expected dividend yield	-	-
Expected stock price volatility	182.94%-216.96%	216.96% - 236.55%
Risk-free interest rate	0.28% - 1.91%	0.95% - 2.47%
Expected term (in years)	3 - 7 years	5 - 10 years
Weighted-average granted date fair value	$0.48	$0.45

A summary of option activity under the stock option plan as of September 30, 2014 and changes during the quarter then ended is presented below:


				Weighted
				Average
			Weighted	Remaining
	Number of	Exercise Price	Average Exercise	Contractual Term	Aggregate Intrinsic
	Shares	Range	Price	(Years)	Value

Outstanding, December 31, 2012	1,202,099	$ 0.40-$1.00	$ 0.56	7.74	-

Exercisable, December 31, 2012	830,504	$ 0.40-$1.00	$ 0.57	8.19	-

Granted	1,150,000	$ 0.38-$0.81	$ 0.47	8.07	-
Exercised	-	-	$ -	-	-
Expired	-	-	$ -	-	-

Outstanding, December 31, 2013	2,352,099	$ 0.38-$1.00	$ 0.51	7.90	199,505

Exercisable, December 31, 2013	1,810,344	$ 0.38-$1.00	$ 0.52	7.88	138,707

Granted	496,571	$ 0.40-$0.75	$ 0.48	6.36
Exercised	-	-	$ -	-
Expired	-	-	$ -	-

Outstanding, September 30, 2014	2,848,670	$ 0.38-$1.00	$ 0.52	7.68	-

Exercisable, September 30, 2014	2,125,502	$ 0.38-$1.00	$ 0.49	9.13	-

The range of exercise prices for options outstanding under the 2010 Stock Incentive Plan at September 30, 2014 are as follows:


Number of		Exercise
shares		Price
55,000		$ 0.38
1,286,670		$ 0.40
30,000		$ 0.42
20,000		$ 0.44
190,000		$ 0.45
824,000		$ 0.50
160,000		$ 0.60
15,000		$ 0.62
20,000		$ 0.75
10,000		$ 0.81
200,000		$ 0.85
38,000		$ 1.00
2,848,670

At September 30, 2014, the Company had 1,801,330 unissued shares available under the Plan. Also, at September 30, 2014, the Company had $228,697 of total unrecognized compensation cost related to unvested stock options, which is expected to be recognized over a weighted average period of 7 years.

Warrants – Consulting Agreements

Outstanding warrants to purchase common stock are as follows:


Date of Issue	September 30, 2014	Exercise Price	Expiration
September-14	316,208	$0.001	09/2024
August-14	80,000	$0.50 - $1.00	8/2017 - 8/2019
June-14	15,000	$0.50	06/2019
April-14	113,333	$0.65 - 1.00	04/2017 - 03/2021
January-14	62,277	$0.65 - $1.00	01/2019 - 01/2021
As of December 2013	4,457,188	$0.36 - $10.00	10/2014 - 10/2021
Total	5,044,006
Less:
Expired	25,000
Exercised	-
Total	5,019,006

We use the Black-Scholes option-pricing model to determine the fair value of warrants on the date of grant. In determining the fair value of warrants, we employed the following key assumptions:


	September 30, 2014	December 31, 2013
Risk-Free interest rate	0.28% - 2.97%	0.95% - 3.32%
Expected dividend yield	0%	0%
Volatility	182.81%-222.30%	216.48%-239.20%
Expected life	3 - 7 years	3-10 years

At September 30, 2014 and 2013, the weighted-average Black-Scholes value of warrants granted was $0.66 and $1.52, respectively.

NOTE 10 - COMMITMENTS AND CONTINGENCIES

Leases

On April 4, 2012, the Company entered into a Commercial Lease agreement with Lanz Properties, LLC for 13,081 square feet of office and warehouse space located at 13565 SW Tualatin-Sherwood Road, Suite 800, Sherwood, OR 97140. The new lease commenced on June 1, 2012 and will terminate on July 31, 2015. No rent was payable until October 2012. The base monthly rental rate started at $3,160, increasing to $3,260 in October 2013, and then $3,343 in June 2014. The Company has straight-lined the full value of the lease agreement over the life of the lease and has recorded this amount monthly. The amount of rent expense that is above the actual rent amount is recorded as deferred rent and is shown on the balance sheet in current liabilities as part of accounts payable and accrued expenses. The amount recorded for as of September 30, 2014 and 2013 is $2,719 and $18,782, respectively.

NOTE 11 – SUBSEQUENT EVENTS

During October 2014, we entered into two promissory notes with two investors totaling $35,000. These notes are part of our debenture agreement that states interest at 10% and maturing in one year. In addition, the investors are granted warrants to purchase one share of stock for each dollar loaned. The warrants are three-year warrants, vest immediately and can be exercised for $1.00 per share. We calculated a discount on these warrants in the amount of $7,980 and will amortize this over the life of the note to interest expense.

On October 27, 2014, an investor purchased 400,000 shares of our common stock along with 200,000 5-year warrants to purchase our common stock at $0.50 per share and they vest immediately for $200,000 cash.

On November 3, 2014, we extended a note with Dr. Sobol, a board member. The original note was due on October 31, 2014 and had a convertible provision at $0.50 per share. The extension negotiated reduced the conversion price, extended the note until November 3, 2015 and we granted Dr. Sobol a 7-year warrant to purchase 15,000 shares of common stock at $0.20 per share. We calculated a gain on the extinguishment of the original debt in the amount of $3,435 and will recognize this gain during fourth quarter, 2014. In addition, we calculated a discount related to the beneficial conversion feature in the amount of $3,285 and will amortize this amount to interest expense over the life of the note. We also calculated a discount related to the granting of the warrants in the amount of $3,435 and this will be amortized to interest expense over the life of the note.

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

Overview of Current Operations

Entia Biosciences, Inc. (Entia) is an emerging biotechnology company engaged in the discovery, formulation, production and marketing of functional ingredients that can be used in branded medical foods, nutraceuticals, cosmetics and other products developed and sold by Entia and third parties. Our current portfolio of formulations contains ERGO D2, vitamin D2, L-Ergothioneine and curcumin.

Through our wholly owned subsidiary Total Nutraceutical Solutions, Inc. (TNS), we currently market nutraceutical products under the GROH® and SANO™ brands direct to consumers online and through leading hair salons and other resellers in North America. TNS currently offers three natural organic nutraceutical mushroom dietary supplement products, ImmuSANO®, GlucoSANO®, and GROH®, which has been designed to nutritionally support hair follicles and nail beds. ImmuSANO^TM is designed to nutritionally address the needs of the immune system by balancing cellular function and promoting a stronger immune system. GlucoSANO^TM is designed to assist in maintaining more normal cellular metabolism and stabilizing blood sugar levels.

Our formulations, which contain highly potent antioxidants, have the nutritional potential to provide multiple health benefits, including balancing iron homeostasis, reducing inflammation, supporting the immune system, promoting healthy joints, increasing stamina, and reducing stress and anxiety. These naturally occurring dietary substances and products have not been chemically altered, and we believe these products have both health benefits and mass appeal to people wanting natural and non-toxic nutritional-based healthcare. We utilize novel clinical models, biomarkers, and analytical tools to validate the nutritional and clinical efficacy of our formulations and the products that incorporate them. Research and development of new formulations and nutraceutical products are also performed under contract with outside laboratories, such as the Department of Food Science, Pennsylvania State University.

Material Changes in Results of Operations for the Three and Nine Months ended September 30, 2014 and 2013.

Revenues and Cost of Goods Sold:


	For the Three Months Ended September 30, December 31,		Change
	2014	2013	$	%
Revenues	$ 87,753	$ 92,102	$ (4,349)	-4.7%
Cost of Goods Sold	40,059	33,560	6,499	19.4%

	For the Nine Months Ended September 30,		Change
	2014	2013	$	%
Revenues	$ 355,014	$ 262,245	$ 92,769	35.4%
Cost of Goods Sold	136,083	91,547	44,536	48.6%

Revenues. Revenues are generated primarily from the sale of our ERGO D2® ingredients and our GROH® ERGO Boost line of beauty and wellness products as well as our mushroom-based nutraceutical dietary supplement products. The decrease in revenues for the three and nine months ending September 30, 2014 from 2013 was due to a direct reduction in revenues based upon equity given in a distribution agreement signed during third quarter 2014. The amount given in equity was valued at $21,500.

Cost of Goods Sold. Cost of goods sold includes raw materials such as nutraceutical mushrooms, as well as production costs for manufacturing our supplement products. Cost of goods sold for the three and nine months ended September 30, 2014 increased from 2013 due to increased product sales and the result of changes in our

product mix. If there wasn’t a direct reduction to our revenues due to a distribution agreement, the gross profit percentage would be within 0.3% of prior year (63.3% versus 63.6% during the third quarter 2013).

The following is a summary of certain consolidated statement of operations data for the periods:

Operating Expenses:


	For the Three Months Ended September 30, December 31,		Change
	2014	2013	$	%
Advertising & promotion expenses	$ 42,368	$ 23,399	$ 18,969	81.1%
Professional fees	36,166	38,493	(2,327)	6.6%
Consulting fees	21,440	79,365	(57,925)	-73.0%
General and Administrative expenses	361,438	396,337	(34,899)	-8.8%

	For the Nine Months Ended September 30,		Change
	2014	2013	$	%
Advertising & promotion expenses	$ 77,454	$ 151,672	$ (74,218)	-48.9%
Professional fees	123,382	115,731	7,651	6.6%
Consulting fees	315,032	608,104	(293,072)	-48.2%
General and Administrative expenses	1,078,586	1,202,148	(123,562)	-10.3%

Advertising and promotional expenses. These costs include costs for promotional products, production fees for marketing materials, costs associated with fulfillment, fees for advertising programs such as ad placement fees, and postage fees for mailing marketing materials. The increase in these expenses during third quarter 2014 is attributed to the a major event we sponsored during third quarter. $25,000 of this expense was paid in equity.

Professional fees. These expenses primarily include accounting/auditing fees, legal fees and stock transfer fees. The increase in professional fees from 2013 is due primarily to increased accounting fees during 2014.

Consulting fees. These expenses are comprised of fees incurred by third-party consultants for the provision of administrative, information technology and marketing management services. The decrease in these expenses from 2013 is due to decreased consultants fees for their services during 2014 and the decrease in warrants granted.

General and administrative expenses. These expenses primarily include compensation, costs related to travel, rent and utilities, insurance, depreciation, product development, payroll and bad debt. The decrease from 2013 is attributable to a decrease in stock based compensation and travel during 2014.

Material Changes in Financial Condition

At September 30, 2014, cash totaled $85,608, compared to $36,886 at December 31, 2013. The primary reasons for the net increase in 2014 are described below. Working capital deficit was $(950,146) at September 30, 2014, compared to $(1,355,230) at December 31, 2013. The change in working capital was due primarily to the conversion of accrued compensation for executive officers. The net change in cash and cash equivalents for the periods presented was comprised of the following:


		For the Nine Months Ended September 30,		Change
		2014	2013	$	%
Net cash provided by (used in)
	Operating activities	$ (402)	$ (490)	$ 88	-18.0%
	Investing activities	(33)	(75)	42	-56.0%
	Financing activities	484	598	(114)	-19.1%

Operating Activities. The decrease in net cash flows used from operating activities was due primarily to a reduction in accounts payable.

Investing Activities. The increase in net cash flows used from investing activities was due primarily to lack of acquisitions of patents and patents pending.

Financing Activities. The decrease in net cash flows from financing activities was due primarily to the lack of investors’ funds.

Future Liquidity. We have a history of incurring net losses and negative operating cash flows. We are also deploying new technologies and continue to develop commercial products and services. Based on our cash on hand, income from operations and the degree to which our burn rate can be reduced while continuing operations, management believes it has sufficient funds to remain operational through December 2014.

We expect our revenues to increase in the fourth quarter of 2014. Notwithstanding that expected increase in revenues, we anticipate that we will continue to generate losses in 2014 and therefore we may be unable to continue operations in the future. In order for us to continue as a going concern and ultimately to achieve profitability, we may be required to obtain capital from external sources, increase revenues or reduce operating costs or take all of these actions. We will require additional capital of at least approximately $25,000 to repay debt principal and accrued interest maturing on December 31, 2014 and we intend to raise the monies by undertaking one or more equity private placements. In addition, we have $412,500 in notes payable that are due upon demand. Currently, these notes are in extension negotiations. We are confident these notes will be extended into mid-2015. Extension negotiations have been slow-moving due to logistical issues with the investors. We may also pursue re-negotiation and re-structuring of the debt. However, there can be no assurances that our operations will become profitable or that external sources of financing, including the issuance of debt and/or equity securities, will be available at times and at terms acceptable to us, or at all. The issuance of additional equity or convertible debt securities will also cause dilution to our shareholders. If external financing sources are not available or are inadequate to fund our operations, we will be required to reduce our operating costs, which could jeopardize our future strategic initiatives and business plans. For example, a reduction in operating costs could jeopardize our ability to launch, market, and sell new nutraceutical supplement products necessary to grow and sustain our operations.

Subsequent Events

During October 2014, we entered into two debentures with two investors totaling $35,000. These notes have stated interest at 10% and mature in one year. In addition, the investors are granted warrants to purchase one share of stock for each dollar loaned. The warrants are three-year warrants, vest immediately and can be exercised for $1.00 per share. We calculated a discount on these warrants in the amount of $7,980 and will amortize this over the life of the note to interest expense.

On October 27, 2014, an investor purchased 400,000 shares of our common stock along with 200,000 5 year warrants to purchase our common stock at $0.50 per share and they vest immediately for $200,000 cash.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.

Critical Accounting Policies and Estimates

Revenue Recognition: We recognize revenue from product sales once all of the following criteria for revenue recognition have been met: pervasive evidence that an agreement exists; the services have been rendered; the fee is fixed and determinable and not subject to refund or adjustment; and collection of the amount due is reasonable assured.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

Not applicable.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

In connection with the preparation of this Quarterly Report on Form 10-Q, an evaluation was carried out by our management, with the participation of our Chief Executive Officer who is also our principal financial and accounting officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of September 30, 2014. Based on that evaluation, our principal executive officer and principal financial officer concluded that the material weaknesses identified in our management report on internal controls and procedures contained in our Form 10-K for the fiscal year ended December 31, 2013, Item 9A filed on March 31, 2014 still exist, and therefore our disclosure controls and procedures were not effective as of September 30, 2014.

Changes in Internal Control Over Financial Reporting

As of September 30, 2014, there have been no changes in internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) during the quarter ended September 30, 2014, that materially affected, or are reasonably likely to materially affect, our company’s internal control over financial reporting.

Part II. OTHER INFORMATION

Item 1. Legal Proceedings

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

We are not presently a party to any material litigation, nor to the knowledge of management is any litigation threatened against us, which may materially affect us.

Item 1A. Risk Factors

See Risk Factors set forth in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2013, and the discussion above in Part I, Item 2, under " Liquidity and Capital Resources.”

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

During third quarter 2014, we issued shares of common stock for the following:

645,885 shares of common stock with a value of $77,200 upon conversion of $75,500 of convertible notes payable along with accrued interest of $1,700.

300,000 shares of common stock in exchange for 30,000 shares of Series A Preferred stock,

2,162,930 shares of common stock were issued to Marvin S Hausman, MD, CEO, President, Acting CFO and Chairman of Entia Biosciences, Inc. in exchange for converting $648,879 of accrued salary and 429,640 shares of common stock were issued to Devin Andres, COO of Entia Biosciences, Inc. in exchange for converting $128,892 of accrued salary, both issuances pursuant to employment agreements with both officers.

400,000 shares of common stock with a value of $107,882 in exchange for conversion of notes payable,

50,000 shares of common stock in conjunction with a distributor agreement valued at $21,500. This amount is posted as a reduction in revenues, and

82,813 shares of common stock with a value of $38,713 for services rendered.

The issuances of these shares were exempt from registration pursuant to Section 4(2) of the Securities Act of 1933.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not Applicable.

Item 5. Other Information

None.

Item 6. Exhibits


Exhibit Number	Description of Exhibit	Filed Herewith	Form	Exhibit	Filing Date

3.1	Amended and Restated Articles of Incorporation of Registrant		8-K	3.1	10/29/2010
3.2	Amended and Restated Bylaws of Registrant		8-K	3.2	09/22/2010
3.3	Amended Articles of Merger Incorporation as currently in effect		8-K	3.3	10/13/2008
10.1	Exclusive Option Agreement dated May 1, 2006, between The Penn State Research Foundation and Northwest Medical Research Inc.		8-K	10.1	09/04/2008
10.2	Assignment Agreement to the Option Agreement, dated July 31, 2008, among The Penn State Research Foundation, Northwest Medical Research Inc. and Generic Marketing Services, Inc.		8-K	10.2	09/04/2008
10.3	Assignment and Assumption Agreement, dated July 31, 2008, between Northwest Medical Research Inc. and Generic Marketing Services, Inc.		8-K	10.3	09/04/2008
10.4	Form of Common Stock and Warrant Purchase Agreement		8-K	10.1	06/12/2009
10.5	Form of Securities Purchase Agreement		8-K	10.1	09/21/2009
10.6	$50,000 Promissory Note between TNS and Marvin S. Hausman, M.D. and Philip Sobol dated December 30, 2009		8-K	10.1	12/31/2010
10.7	$100,000 Promissory Note between TNS and Larry A. Johnson dated January 12, 2010		8-K	10.1	2/24/2010
10.8	$100,000 Promissory Note between TNS and Mark C. Wolf dated February 18, 2010		8-K	10.2	2/24/2010
10.9	$50,000 Promissory Note between TNS and Mark C. Wolf dated February 18, 2010		10-K	10.9	4/15/2010
10.10	Profit Sharing Agreement between TNS, American Charter & Marketing LLC, and Delta Group Investments, Limited dated March 26, 2010		10-K	10.10	4/15/2010
10.11	Form of Common Stock and Warrant Agreement 2010		8-K	10.1	12/20/2010
10.12	$312,500 Promissory Note between TNS and Delta Group Investments Limited dated January 26, 2011		8-K	10.2	2/22/2010
10.13	Termination of Profit Sharing Agreement dated February 21, 2011		8-K	10.1	2/22/2011
10.14	Lease Agreement between TNS and Sherwood Venture LLC dated March 15, 2011		8-K	10.1	4/6/2011
10.15	Form of Warrant A Agreement 2010		8-K	10.2	12/22/2010
10.16	Form of Warrant B Agreement 2010		8-K	10.3	12/22/2010
10.15	Form of Warrant A Agreement 2010		8-K	10.2	12/22/2010
10.16	Form of Warrant B Agreement 2010		8-K	10.3	12/22/2010


10.17	Asset Purchase Agreement between TNS, FunGuys, LLC and Mark C. Wolf dated May 27, 2011		8-K	10.1	3/3/2011
10.18	Certificate of Designation of Preferences, Rights and Limitations of the Series A Preferred Stock of Total Nutraceutical Solutions, Inc. dated May 26, 2011.		8-K	10.3	3/3/2011
10.19	Employment Agreement between Marvin S. Hausman, M.D. and Total Nutraceutical Solutions, Inc. dated October 28, 2011.		8-K	10.1	11/2/2011
10.20	Employment Agreement between Devin Andres and Total Nutraceutical Solutions, Inc. dated October 28, 2011.		8-K	10.2	11/2/2011
32.1	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Executive Officer).	X
32.2	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Financial Officer).	X

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	Entia Biosciences, Inc.

November 14, 2014	By:	/s/ Marvin Hausman, M.D.
		Marvin Hausman, M.D. Chief Executive Officer (Principal Executive Officer and Acting Principal Financial and Accounting Officer)

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Entia Biosciences (ERGO) Inactive 10-Q2014 Q3 Quarterly report

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