Monster Arts 10K 2013 Annual report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

(Mark one)

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

For the Fiscal Year Ended December 31, 2013



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

For the transition period from_________________to


Commission File Number: 000-53266

Monster Arts, Inc.

(Exact name of registrant as specified in its charter)

Nevada				27-1548306
(State or Other Jurisdiction of Incorporation or Organization)				(I.R.S. Employer Identification No.)

806 East Avenido Pico

Suite I-288

San Clemente, CA

92673

(Address of Principal Executive Offices)

(Zip Code)

(877) 733-6133

(Registrant’s telephone number, including area code)

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

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

oYes x No

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.xYeso No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).xYes o No o Not Applicable

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. .oYesx No

Indicate by checkmark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X]

Large accelerated filero

Accelerated filero

Non-accelerated filero

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[X]No

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was sold, or the average bid and asked prices of such common equity, as of the last business day of the registrant's most recently completed second fiscal quarter. Approximately $501,555 on June 30, 2013.

As of April 15, 2014, there were 159,099,149 shares of common stock, par value $0.001 per share, of the registrant outstanding.

INDEX

	TITLE

ITEM 1.	Business	5

ITEM 2.	Properties	14

ITEM 3.	Legal Proceedings	14

ITEM 4.	Submission of Matters to a Vote of Security Holders	14

ITEM 5.	Market for Common Equity and Related Stockholder Matters	14

ITEM 6.	Selected Financial Data	17

ITEM 7.	Management’s Discussion and Analysis of Financial Condition	17

ITEM 8.	Financial Statement and Supplementary Data	19

ITEM 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	19

ITEM 9A.	Controls and Procedures	20

ITEM 10.	Directors, Executive Officers and Corporate Governance	20

ITEM 11.	Executive Compensation	23

ITEM 12.	Security Ownership of Certain Beneficial Owners Management and Related Stockholder Matters	25

ITEM 13.	Certain Relationships and Related Transactions and Director Independence	25

ITEM 14.	Principal Accounting Fees and Services	27

ITEM 15.	Exhibits, Financial Statement Schedules	28

FORWARD-LOOKING STATEMENTS

This document contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact are "forward-looking statements" for purposes of federal and state securities laws, including, but not limited to, any projections of earnings, revenue or other financial items; any statements of the plans, strategies and objections of management for future operations; any statements concerning proposed new services or developments; any statements regarding future economic conditions or performance; any statements or belief; and any statements of assumptions underlying any of the foregoing.

Forward-looking statements may include the words "may", "could", "estimate", "intend", "continue", "believe", "expect" or "anticipate" or other similar words. These forward-looking statements present our estimates and assumptions only as of the date of this report. Accordingly, readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the dates on which they are made. We do not undertake to update forward-looking statements to reflect the impact of circumstances or events that arise after the dates they are made. You should, however, consult further disclosures we make in future filings of our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.

Although we believe that the expectations reflected in any of our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in any of our forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change and inherent risks and uncertainties. The factors impacting these risks and uncertainties include, but are not limited to:

· inability to raise additional financing for working capital and product development;

· inability to identify internet marketing approaches;

· deterioration in general or regional economic, market and political conditions;

· the fact that our accounting policies and methods are fundamental to how we report our financial condition and results of operations, and they may require management to make estimates about matters that are inherently uncertain;

· adverse state or federal legislation or regulation that increases the costs of compliance, or adverse findings by a regulator with respect to existing operations;

· changes in U.S. GAAP or in the legal, regulatory and legislative environments in the markets in which we operate;

· inability to efficiently manage our operations;

· inability to achieve future operating results;

· our ability to recruit and hire key employees;

· the inability of management to effectively implement our strategies and business plans; and

· the other risks and uncertainties detailed in this report.

In this form 10-K references to "Monster Arts Inc.", MONSTER OFFERS, "the Company", "we", "us", and "our" refer to Monster Arts Inc.

AVAILABLE INFORMATION

We file annual, quarterly and special reports and other information with the SEC. You can read these SEC filings and reports over the Internet at the SEC's website at www.sec.gov. You can also obtain copies of the documents at prescribed rates by writing to the Public Reference Section of the SEC at 100 F Street, NE, Washington, DC 20549 on official business days between the hours of 10:00 am and 3:00 pm. Please call the SEC at (800) SEC-0330 for further information on the operations of the public reference facilities. We will provide a copy of our annual report to security holders, including audited financial statements, at no charge upon receipt to of a written request to us at Monster Arts, Inc., 806 East Avenida Pico, Suite I-288, San Clemente, CA 92673.

PART I

ITEM 1. BUSINESS

History and Organization

On May 2, 2013, Monster Arts, Inc. (the “Company”) amended its articles of incorporation to change its name from Monster Offers to Monster Arts, Inc. The Company was incorporated under the laws of the State of Nevada, as Tropical PC Acquisition Corporation on February 23, 2007 ("Inception"). On December 11, 2007, the Company amended its Articles of Incorporation changing its name from Tropical PC Acquisition Corporation to Monster Offers. On November 9, 2012 the Company executed a share exchange agreement with Ad Shark, Inc., a privately-held California corporation incorporated April 12, 2011. As a result of the share exchange agreement, Ad Shark, Inc. became a wholly owned subsidiary of the Company. Ad Shark, Inc. organizes advertising sales efforts by constructing media and advertising delivery systems for Smartphone and Tablet application developers including the delivery of mobile banners, mobile video, mobile text messaging, and mobile email advertising.

On March 4, 2013, the Company entered into a Master Purchase Agreement with Iconosys, Inc., a private California corporation whom shares a common officer with the Company, whereby the Company acquired a 10% interest in Iconosys, Inc. (Referenced in the Master Purchase Agreement in Note 15).

Our Business

The Company is innovative software developer for mobile devices, smart TV, and set top boxes running iOS, Android, Windows and other platforms. The company is also involved in the travel industry through its online and mobile platform for consumers and paying members of Travel America Visitor Guide (TAVG), (Further described in Note 9).

We utilize proprietary technology that we have developed, acquired, and/or licensed to deploy our products and services.

Our primary services include the development of Smartphone and tablet apps for clients and ourselves. We sell and arrange to sell ours and our clients apps developed thru the online and mobile marketplaces Google Play, iTunes, Amazon AppStore, and Barnes & Noble Online Marketplace. The sales of our innovative apps are subject to a commission fee charged by the online partners mentioned above. From time to time, we partner with a client at a reduced rate to earn potentially longer term residual revenues for ourselves.

On August 8, 2013, the Company approved the execution of an asset purchase agreement with Iconosys, Inc., a private California corporation which shares an officer with the Company, for the rights to domain names, web site content and trademark assignments of Travel America Visitor Guide (“TAVG”) which is a division of Iconosys. Travel America Visitor Guide, founded in 2011, has a multitude of paying business members on some form of revolving account where the paying members pay a monthly, semi-annual, or annual fee to be listed on the website www.travelamericavisitorguide.com/www.tavg.mobi. Travel America Visitor Guide also offers discounted and brokered printing and design consulting services to its clients / members. Travel America Visitor Guide's intent is to emulate the successful business model of AAA or Good Sam's Club, where by consumers become card members and are offered discounts from the member businesses.

Marketing Strategy

App Development Sales: Monster Arts utilizes lead generation techniques, search engine optimization, outbound cold calling, and word of mouth referrals to keep a constant flow of projects for its developers. Monster Arts also offers its app development services to the TAVG membership base.

App Retail Sales: Monster Arts generates sales from cross promoting its more popular apps with newer product releases, and encourages its existing downloader's to download other apps that Monster Arts has built through the use of Instant Messaging, SMS Marketing, Email Marketing, and In-App banner advertising. Monster Arts also focuses on media coverage for its apps and the company in order to increase the number of page views to its sites and to its app location on the online marketplaces.

Software Development

We utilize the services of outsourced contractors for the development of our software technologies. We also utilize the services of technology consultants to assist in the development of our strategic product development roadmap, and the ongoing management of all software development outsourced contractors. As the Company continues to grow, we may hire direct employees to fill various technology management, development, testing and quality control roles as needed.

Competition

The App Development, Mobile Marketing, and Travel Industry Directory Services industries are highly competitive. Management believes that the ability to provide innovative consumer and business solutions that fulfill unmet industry needs is a competitive advantage. A number of companies are active in specific aspects of our business. As an App Developer and mobile marketing services provider, Monster Arts would face competition from a growing list of other providers in our space

Government Regulation

We are subject to federal, state and local laws and regulations affecting our business. Although the Company plans on obtaining all required federal and state permits, licenses, and bonds to operate its facilities, there can be no assurance that the Company's operation and profitability will not be subject to more restrictive regulation or increased taxation by federal, state, or local agencies. New laws and regulations may restrict specific Internet activities, and existing laws and regulations may be applied to Internet activities, either of which could increase our costs of doing business over the Internet and adversely affect the demand for our advertising services. In the United States, federal and state laws already apply or may be applied in the future to areas, including children's privacy, copyrights, taxation, user privacy, search engines, Internet tracking technologies, direct marketing, data security, pricing, sweepstakes, promotions, intellectual property ownership and infringement, trade secrets, export of encryption technology, acceptable content and quality of goods and services.

Employees

We currently have three full time employees, (i) Wayne Irving II, our Chairman, Chief Executive Officer, and Secretary; (ii) Brandon M. Graham, our Chief Financial Officer; and (iii) Thomas Mead, our Director of Technology. These officers also perform many of the Company’s supervisory and administrative roles. We utilize additional independent contractors and temporary labor on a part-time/as needed basis.

Monster Arts Inc. Funding Requirements

We do not currently have sufficient capital to fully develop our business plan. Management anticipates the Company will be required to raise $1,000,000 to fully fund and execute its corporate strategies.

Patent, Trademark, License and Franchise Restrictions and Contractual Obligations and Concessions

In May of 2013, Monster Arts filed for a provisionary patent titled "Hand Wave or Hand SignalOver Front-Facing Smart Device Camera to Trigger Software Commands. With exception to this filing and the filing a trademark application for the name “Monster Offers,” in 2012, we have no current plans for any registrations such as patents, other trademarks, copyrights, franchises, concessions, royalty agreements or labor contracts. We will assess the need for any copyright, trademark or patent applications on an ongoing basis.

Research and Development Activities and Costs

We incurred research and development costs of $11,473 and $0 for the years ended December 31, 2013 and 2012. If the Company is successful in raising capital, it plans to spend approximately $250,000 over the next year or two on research and development in order to complete their prototype EEG headset.

Compliance with Environmental Laws

We are not aware of any environmental laws that have been enacted, nor are we aware of any such laws being contemplated for the future, that impact issues specific to our business. In our industry, environmental laws are anticipated to apply directly to the owners and operators of companies. They do not apply to companies or individuals providing consulting services, unless they have been engaged to consult on environmental matters. We are not planning to provide environmental consulting services.

Item 1A. Risk Factors.

Risk Factors Relating to Our Company

Risks Relating To Our Company

1. WE ARE A DEVELOPMENT STAGE COMPANY AND HAVE HISTORY OF LOSSES SINCE OUR INCEPTION. IF WE CANNOT REVERSE OUR LOSSES, WE WILL HAVE TO DISCONTINUE OPERATIONS.

In our auditor's report for fiscal year ended December 31, 2013 and 2012, our auditors expressed substantial doubt as to our ability to continue as a going concern. We anticipate incurring losses in the foreseeable future. We do not have an established source of revenue sufficient to cover our operating costs. Our ability to continue as a going concern is dependent upon our ability to successfully compete, operate profitably and/or raise additional capital through other means. If we are unable to reverse our losses, we will have to discontinue operations.

2. THE LIMITED PUBLIC TRADING MARKET MAY CAUSE VOLATILITY IN OUR STOCK PRICE.

The quotation of our common stock on the OTC-BB does not assure that a meaningful, consistent and liquid trading market currently exists, and in recent years such market has experienced extreme price and volume fluctuations that have particularly affected the market prices of many smaller companies like us. Our common stock is thus and will be subject to significant volatility. Sales of substantial amounts of our common stock, or the perception that such sales might occur, could adversely affect prevailing market prices of our common stock.

3. SHARES ELIGIBLE FOR FUTURE SALE MAY ADVERSELY AFFECT THE MARKET PRICE OF OUR COMMON STOCK, AS THE FUTURE SALE OF A SUBSTANTIAL AMOUNT OF OUTSTANDING STOCK IN THE PUBLIC MARKETPLACE COULD REDUCE THE PRICE OF OUR COMMON STOCK.

We cannot predict the effect, if any, that market sales of shares of our common stock or the availability of shares of common stock for sale will have on the market price prevailing from time to time. Sales of shares of our common stock in the public market covered under an effective registration statement, or the perception that those sales may occur, could cause the trading price of our common stock to decrease or to be lower than it might be in the absence of those sales or perceptions.

4. WE DO NOT EXPECT TO GENERATE SIGNIFICANT CASH FLOW FROM OPERATIONS FOR THE FORESEEABLE FUTURE. WE WILL NEED TO RAISE CAPITAL IN THE FUTURE BY SELLING MORE COMMON STOCK AND IF WE ARE ABLE TO DO SO, YOUR OWNERSHIP OF THE COMPANY'S COMMON STOCK MAY BE DILUTED.

Although we have started to generate revenues from customer activities, we do not expect to generate significant cash flow from operations for the foreseeable future. Consequently, we will be required to raise additional capital by selling additional shares of common stock. There can be no assurance that we will be able to do so but if we are successful in doing so, your ownership of the Company's common stock may be diluted which might depress the market price of our common stock.

5. OUR HISTORY OF LOSSES IS EXPECTED TO CONTINUE AND WE WILL NEED TO OBTAIN ADDITIONAL CAPITAL FINANCING IN THE FUTURE.

We have a history of losses and expect to generate losses until such a time when we can become profitable in the distribution of our planned products. As of the date of this filing, we cannot provide an estimate of the amount of time it will take to become profitable.

We will be required to seek additional financing in the future to respond to increased expenses or shortfalls in anticipated revenues, accelerate product development, respond to competitive pressures, develop new or enhanced products, or take advantage of unanticipated acquisition opportunities. In order for us to carry out our intended business plan, management believes that we need to raise approximately $1,000,000 over a three year period. Management anticipates that the $1,000,000 will go towards regulatory compliance, product marketing, the development of new software programs and platforms and the development of our "Daily Deal" technology and programs. The Company anticipates obtaining the required funding through equity investment in the company. We cannot be certain we will be able to find such additional financing on reasonable terms, or at all. If we are unable to obtain additional financing when needed, we could be required to modify our business plan in accordance with the extent of available financing made available to our Company. If we obtain the anticipated amount of financing through the offering of our equity securities, this will result in substantial dilution to our existing shareholders, and should be considered a serious risk of investment.

6. WE EXPECT OUR OPERATING EXPENSES TO INCREASE AND MAY AFFECT PROFIT MARGINS AND THE MARKET VALUE OF OUR COMMON STOCK.

Upon obtaining additional capital, we expect to significantly increase our operating expenses to expand our marketing operations, and increase our level of capital expenditures to further develop and maintain our proprietary software systems. Such increases in operating expense levels and capital expenditures may adversely affect operating results and profit margins which may significantly affect the market value of common stock. There can be no assurance that we will, one day, achieve profitability or generate sufficient profits from operations in the future.

7. CURRENT ECONOMIC CONDITIONS MAY PREVENT US FROM GENERATING REVENUE.

Generally, consumer purchases of "Daily Deal" offers are discretionary and may be particularly affected by adverse trends in the general economy. Our ability to generate or sustain revenues is dependent on a number of factors relating to discretionary consumer spending. These include economic conditions and consumer perceptions of such conditions by consumers, employment, the rate of change in employment, the level of consumers' disposable income and income available for discretionary expenditure, business conditions, interest rates, consumer debt and asset values, availability of credit and levels of taxation for the economy as a whole and in regional and local markets where our Company operates.

The United States is currently recovering from an economic downturn, the extent and duration of which cannot be currently predicted, and includes record low levels of consumer confidence due, in part, to job losses. Due to these factors, consumers are not expected to purchase non-essential goods, including our products. If the current economic conditions do not improve, we may not achieve or be able to maintain profitability which may negatively affect the liquidity and market price of our common stock.

Also due to the economic downturn in the United States, credit and private financing is becoming difficult to obtain at reasonable rates, if at all. Until we achieve profitability at sufficient levels, if at all, we will be required to obtain loans and/or private financings to develop and sustain our operations. If we are unable to achieve such capital infusions on reasonable terms, if at all, our operations may be negatively affected.

8. WE MAY NOT BE ABLE TO COMPETE WITH OTHER DAILY DEAL COMPANIES, SOME OF WHOM HAVE GREATER RESOURCES AND EXPERIENCE THAN WE DO.

The Internet industry is dominated by large, well-financed firms. We do not have the resources to compete with larger providers of these similar services at this time. With the minimal resources we have available, we may experience great difficulties in building a customer base. Competition by existing and future competitors could result in our inability to secure any new customers. This competition from other entities with greater resources and reputations may result in our failure to maintain or expand our business as we may never be able to successfully execute our business plan. Further, Monster Arts Inc. Offers cannot be assured that it will be able to compete successfully against present or future competitors or that the competitive pressure it may face will not force it to cease operations.

9. THERE CAN BE NO ASSURANCE THAT THE COMPANY WILL BE ABLE TO ENHANCE ITS PRODUCTS OR SERVICES, OR DEVELOP OTHER PRODUCTS OR SERVICES.

If we are unable to achieve profitability in the future, recruit sufficient personnel or raise money in the future, our ability to develop our services would be adversely affected. Our inability to develop our services or develop new services, in view of rapidly changing technology, changing customer demands and competitive pressures, would have a material adverse effect upon our business, operating results and financial condition.

10. RAPID TECHNOLOGICAL ADVANCES COULD RENDER OUR EXISTING PROPRIETARY TECHNOLOGIES OBSOLETE.

The Internet and online commerce industries are characterized by rapid technological change, changing market conditions and customer demands, and the emergence of new industry standards and practices that could render our existing web site and proprietary technology obsolete. Our future success will substantially depend on our ability to enhance our existing services, develop new services and proprietary technology and respond to technological advances in a timely and cost-effective manner. The development of other proprietary technology entails significant technical and business risk. There can be no assurance that we will be successful in developing and using new technologies or adapt our proprietary technology and systems to meet emerging industry standards and customer requirements. If we are unable, for technical, legal, financial, or other reasons, to adapt in a timely manner in response to changing market conditions or customer requirements, or if our new products and electronic commerce services do not achieve market acceptance, our business, prospects, results of operations and financial condition would be materially adversely affected.

11. INTERNET COMMERCE SECURITY THREATS COULD POSE A RISK TO OUR ONLINE SALES AND OVERALL FINANCIAL PERFORMANCE.

A significant barrier to online commerce is the secure transmission of confidential information over public networks. We and our partners rely on encryption and authentication technology to provide the security and authentication necessary to effect secure transmission of confidential information. There can be no assurance that advances in computer capabilities; new discoveries in the field of cryptography or other developments will not result in a compromise or breach of the algorithms used by us and our partners to protect consumer's transaction data. If any such compromise of security were to occur, it could have a materially adverse effect on our business, prospects, financial condition and results of operations. A party who is able to circumvent our security measures could misappropriate proprietary information or cause interruptions in our operations. We may be required to expend significant capital and other resources to protect against such security breaches or to alleviate problems caused by such breaches. Concerns over the security of transactions conducted on the Internet and the privacy of users may also hinder the growth of online services generally, especially as a means of conducting commercial transactions. To the extent that our activities, our partners or third-party contractors involve the storage and transmission of proprietary information, such as credit card numbers, security breaches could damage our reputation and expose us to a risk of loss or litigation and possible liability. There can be no assurance that our security measures will not prevent security breaches or that failure to prevent such security breaches will not have a materially adverse effect on our business, prospects, financial condition and results of operations.

12. NEW TECHNOLOGIES COULD BLOCK OR FILTER OUR "DAILY DEAL" ADS, WHICH COULD REDUCE THE EFFECTIVENESS OF OUR SERVICES AND LEAD TO A LOSS OF CUSTOMERS.

Technologies may be developed that can block the display of our "Daily Deal" ads. We expect to derive a portion of our revenues from fees paid to us by advertisers in connection with the display of ads on web pages. Any ad-blocking technology effective against our ad placements could severely restrict the number of advertisements that we are able to place before consumers resulting in a reduction in the attractiveness of our services to advertisers. If advertisers determine that our services are not providing substantial value, we may suffer a loss of clients. As a result, ad-blocking technology could, in the future, substantially decrease the number of ads we place resulting in a decrease in our revenues.

13. RISK OF CAPACITY CONSTRAINTS; RELIANCE ON INTERNALLY DEVELOPED SYSTEMS; SYSTEM DEVELOPMENT RISKS.

A key element of our strategy is to generate a high volume of traffic on, and use of, our services across our websites and network infrastructure and systems. Accordingly, the satisfactory performance, reliability and availability of our software systems, transaction-processing systems and network infrastructure are critical to our reputation and our ability to attract and retain customers, as well as maintain adequate customer service levels. Our revenues depend on the number of visitors to our site, number of people who sign up for our services, and the on-going usage of our products. Any systems interruptions that result in the unavailability of our software systems or network infrastructure, or reduced order placements would reduce the volume of sign ups and the attractiveness of our product and service offerings. We may experience periodic systems interruptions from time to time. Any substantial increase in the volume of traffic on our software systems or network infrastructure will require us to expand and upgrade further our technology, transaction-processing systems and network infrastructure. There can be no assurance that we will be able to accurately project the rate or timing of increases, if any, in the use of our web site or timely expand and upgrade our systems and infrastructure to accommodate such increases. We will use a combination of industry supplied software and internally developed software and systems for our search engine, distribution network, and substantially all aspects of transaction processing, including order management, cash and credit card processing, and accounting and financial systems. Any substantial disruptions or delays in any of our systems would have a materially adverse effect on our business, prospects, financial condition, results of operations and cash flows.

14. STORAGE OF PERSONAL INFORMATION ABOUT OUR CUSTOMERS COULD POSE A SECURITY THREAT.

Our policy is not to willfully disclose any individually identifiable information about any user to a third party without the user's consent. Despite this policy, however, if third persons were able to penetrate our network security or otherwise misappropriate our users' personal information or credit card information, we could be subject to liability. These could include claims for unauthorized purchases with credit card information, impersonation or other similar fraud claims. They could also include claims for other misuses of personal information, such as for unauthorized marketing purposes. These claims could result in litigation. In addition, the Federal Trade Commission and other states have been investigating certain Internet companies regarding their use of personal information. We could incur additional expenses if new regulations regarding the use of personal information are introduced or if they chose to investigate our privacy practices.

15. WE HAVE TO KEEP UP WITH RAPID TECHNOLOGICAL CHANGE TO CONTINUE OFFERING OUR "DAILY DEAL" ADVERTISING PARTNERS COMPETITIVE SERVICES OR WE MAY LOSE CLIENTS AND BE UNABLE TO COMPETE.

Our future success will depend on our ability to continue delivering our "Daily Deal" advertising partners competitive results-based Internet marketing services. In order to do so, we will need to adapt to rapidly changing technologies, to adapt our services to evolving industry standards and to improve the performance of our services. Our failure to adapt to such changes would likely lead to a loss of clients or a substantial reduction in the fees we would be able to charge versus competitors who have more rapidly adopted improved technology. Any loss of clients or reduction of fees would adversely impact our revenue. In addition, the widespread adoption of new Internet technologies or other technological changes could require substantial expenditures by us to modify or adapt our services or infrastructure. If we are unable to pass all or part of these costs on to our clients, our margins and, therefore, profitability will be reduced.

16. WE MAY NOT BE ABLE TO FIND SUITABLE EMPLOYEES.

The Company currently relies heavily upon the services and expertise of Wayne Irving II, our chief executive officer and chief financial officer. In order to implement the aggressive business plan of the Company, management recognizes that additional programmers, graphic artists and clerical staff will be required.

No assurances can be given that the Company will be able to find suitable employees that can support the above needs of the Company or that these employees can be hired on terms favorable to the Company.

17. THERE EXISTS UNCERTAINTY WITH REGARDS TO OUR ABILITY TO PROTECT OUR INTELLECTUAL PROPERTY.

Our prospects for success may depend, in part, on our ability to obtain commercially valuable patents, trademarks and copyrights to protect our intellectual property, specifically our software programs. The degree of future protection for our technologies or potential products is uncertain. There are numerous costs, risks and uncertainties that the Company faces with respect to obtaining and maintaining patents and other proprietary rights. The Company may not be able to obtain meaningful patent protection for its future developments. To date, the Company does not have any pending patent or trademark applications with the U.S. Patent and Trademark Office or any agency with regard to the above-referenced intellectual property assets.

In connection with the trademarks, there can be no assurance that such trademarks will provide the Company with significant competitive advantages, or that challenges will not be instituted against the validity or enforceability of any trademarks sublicensed to the Company or, if instituted, that such challenges will not be successful. To date, there have been no interruptions in our business as the result of any claim of infringement. However, no assurance can be given that the Company will not be adversely affected by the assertion of intellectual property rights belonging to others. The cost of litigation to uphold the validity of a trademark and prevent infringement can be very substantial and may prove to be beyond our financial means even if the Company could otherwise prevail in such litigation. Furthermore, there can be no assurance that others will not independently develop similar designs or technologies, duplicate our designs and technologies or design around aspects of our technology, or that the designs and technologies will not be found to infringe on the patents, trademarks or other rights owned by third parties. The effects of any such assertions could include requiring the Company to alter existing trademarks or products, withdraw existing products, including the products delaying or preventing the introduction of products or forcing the Company to pay damages if the products have been introduced.

18. INTELLECTUAL PROPERTY LITIGATION MAY BE NECESSARY AND AN UNFAVORABLE OUTCOME COULD HURT THE COMPANY.

We may become party to patent litigation or proceedings at the U.S. Patent and Trademark Office or at a foreign patent office to determine whether it can market its future products without infringing patent rights of others. Interference proceedings in the U.S. Patent Office or opposition proceedings in a foreign patent office may be necessary to establish which party was the first to design such intellectual property. The cost of any patent litigation or similar proceeding could be substantial and may absorb significant management time and effort. If an infringement suit against us is resolved unfavorably, we may be enjoined from manufacturing or selling certain of its products or services without a license from an adverse third party. We may not be able to obtain such a license on commercially acceptable terms, or at all.

19. WE MAY BE LIABLE FOR CONTENT IN THE ADVERTISEMENTS WE DELIVER FOR OUR CLIENTS RESULTING IN UNANTICIPATED LEGAL COSTS.

We may be liable to third parties for content in the advertising we deliver if the artwork, text or other content involved violates copyrights, trademarks or other third-party intellectual property rights or if the content is defamatory. Although substantially all of our contracts include both warranties from our advertisers that they have the right to use and license any copyrights, trademarks or other intellectual property included in an advertisement and indemnities from our advertisers in the event of a breach of such warranties, a third party may still file a claim against us. Any claims by third parties against us could be time-consuming, could result in costly litigation and adverse judgments. Such expenses would increase our costs of doing business and reduce our net income per share. In addition, we may find it necessary to limit our exposure to such risks by accepting fewer or more restricted advertisements leading to loss of revenue.

20. BECAUSE SOME OF OUR SERVICES GENERALLY CAN BE CANCELLED BY THE CLIENT WITH LITTLE OR NO NOTICE OR PENALTY, THE TERMINATION OF ONE OR MORE PROGRAM COULD RESULT IN AN IMMEDIATE DECLINE IN OUR REVENUES.

We expect to derive the majority of our revenues from "Daily Deal", marketing services. These services are provided to advertise clients services on a short-term basis. They may be canceled upon thirty (30) days or less notice. In addition, these arrangements to advertise for clients generally do not contain penalty provisions for early cancellation. The short term advertising agreements in general reflect the limited time lines, budgets and customer acquisition goals of specific advertising campaigns and are consistent with industry practice. The non-renewal, re-negotiation, cancellation or deferral of large contracts or a number of contracts that in the aggregate account for a significant amount of revenues, could cause an immediate and significant decline in our revenues and harm our business.

21. IF WE ENGAGE IN ACQUISITIONS, WE MAY EXPERIENCE SIGNIFICANT COSTS AND DIFFICULTY ASSIMILATING THE OPERATIONS OR PERSONNEL OF THE ACQUIRED COMPANIES, WHICH COULD THREATEN OUR FUTURE GROWTH.

If we make any acquisitions, we could have difficulty assimilating the operations, technologies and products acquired or integrating or retaining personnel of acquired companies. In addition, acquisitions may involve entering markets in which we have no or limited direct prior experience. The occurrence of any one or more of these factors could disrupt our ongoing business, distract our management and employees and increase our expenses. In addition, pursuing acquisition opportunities could divert our management's attention from our ongoing business operations and result in decreased operating performance. Moreover, our profitability may suffer because of acquisition-related costs or amortization of acquired goodwill and other intangible assets. Furthermore, we may have to incur debt or issue equity securities in future acquisitions. The issuance of equity securities would dilute our existing stockholders.

22. BECAUSE WE ARE NOT SUBJECT TO COMPLIANCE WITH RULES REQUIRING THE ADOPTION OF CERTAIN CORPORATE GOVERNANCE MEASURES, OUR STOCKHOLDERS HAVE LIMITED PROTECTION AGAINST INTERESTED DIRECTOR TRANSACTIONS, CONFLICTS OF INTEREST AND SIMILAR MATTERS.

We do not currently have independent audit or compensation committees. As a result, our director(s) have the ability, among other things, to determine their own level of compensation. Until we comply with such corporate governance measures, regardless of whether such compliance is required, the absence of such standards of corporate governance may leave our stockholders without protections against interested director transactions, conflicts of interest, if any, and similar matters and investors may be reluctant to provide us with funds necessary to expand our operations.

We intend to comply with all corporate governance measures relating to director independence as and when required. However, we may find it very difficult or be unable to attract and retain qualified officers, directors and members of board committees required to provide for our effective management as a result of Sarbanes-Oxley Act of 2002. The enactment of the Sarbanes-Oxley Act of 2002 has resulted in a series of rules and regulations by the SEC that increase responsibilities and liabilities of directors and executive officers. The perceived increased personal risk associated with these recent changes may make it more costly or deter qualified individuals from accepting these roles.

23. COMPLIANCE WITH CHANGING REGULATION OF CORPORATE GOVERNANCE AND PUBLIC DISCLOSURE, AND OUR MANAGEMENT'S INEXPERIENCE WITH SUCH REGULATIONS WILL RESULT IN ADDITIONAL EXPENSES AND CREATES A RISK OF NON-COMPLIANCE.

Changing laws, regulations and standards relating to corporate governance and public disclosure, including the Sarbanes-Oxley Act of 2002 and related SEC regulations, have created uncertainty for public companies and significantly increased the costs and risks associated with accessing the public markets and public reporting. Our management team will need to invest significant management time and financial resources to comply with both existing and evolving standards for public companies, which will lead to increased general and administrative expenses and a diversion of management time and attention from revenue generating activities to compliance activities. Management's inexperience may cause us to fall out of compliance with applicable regulatory requirements, which could lead to enforcement action against us and a negative impact on our stock price.

Additional Risks Relating to Our Common Stock

24. THE MARKET PRICE FOR OUR STOCK MAY BE VOLATILE.

The market price for our stock may be volatile and subject to wide fluctuations in response to factors including the following:

· liquidity of the market for the shares;

· actual or anticipated fluctuations in our quarterly operating results;

· changes in financial estimates by securities research analysts;

· conditions in the markets in which we compete;

· changes in the economic performance or market valuations of other "Daily Deal" companies;

· announcements by us or our competitors of new products, acquisitions, strategic partnerships, joint ventures or capital commitments;

· addition or departure of key personnel;

· intellectual property litigation;

· our dividend policy; and

· general economic conditions.

In addition, the securities market has from time to time experienced significant price and volume fluctuations that are not related to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of our stock.

25. SHARES ELIGIBLE FOR FUTURE SALE MAY ADVERSELY AFFECT THE MARKET PRICE OF OUR COMMON STOCK, AS THE FUTURE SALE OF A SUBSTANTIAL AMOUNT OF OUTSTANDING STOCK IN THE PUBLIC MARKETPLACE COULD REDUCE THE PRICE OF OUR COMMON STOCK.

26. WE MAY, IN THE FUTURE, ISSUE ADDITIONAL COMMON SHARES, WHICH WOULD REDUCE INVESTORS' PERCENT OF OWNERSHIP AND MAY DILUTE OUR SHARE VALUE.

Our Articles of Incorporation authorize the issuance of 730,000,000 shares of common stock and 20,000,000 shares of preferred stock. The future issuance of common stock may result in substantial dilution in the percentage of our common stock held by our then existing shareholders. We may value any common stock issued in the future on an arbitrary basis. The issuance of common stock for future services or acquisitions or other corporate actions may have the effect of diluting the value of the shares held by our investors, and might have an adverse effect on any trading market for our common stock.

27. OUR COMMON STOCK MAY BE CONSIDERED A "PENNY STOCK," AND THEREBY BE SUBJECT TO ADDITIONAL SALE AND TRADING REGULATIONS THAT MAY MAKE IT MORE DIFFICULT TO SELL.

The Securities and Exchange Commission has adopted Rule 15g-9 which establishes the definition of a "penny stock," for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions.

For any transaction involving a penny stock, unless exempt, the rules require:

a) that a broker or dealer approve a person's account for transactions in penny stocks; and

b) the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased.

In order to approve a person's account for transactions in penny stocks, the broker or dealer must: (a) obtain financial information and investment experience objectives of the person; and (b) make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.

The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the Commission relating to the penny stock market, which, in highlight form: (a) sets forth the basis on which the broker or dealer made the suitability determination; and (b) that the broker or dealer received a signed, written agreement from the investor prior to the transaction. Generally, brokers may be less willing to execute transactions in securities subject to the "penny stock" rules. This may make it more difficult for investors to dispose of our Common shares and cause a decline in the market value of our stock.

Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.

28. WE DO NOT FORESEE PAYING CASH DIVIDENDS IN THE FORESEEABLE FUTURE AND, AS A RESULT, OUR INVESTORS' SOLE SOURCE OF GAIN, IF ANY, WILL DEPEND ON CAPITAL APPRECIATION, IF ANY.

We have never paid cash dividends on our common stock and we do not plan to declare or pay any cash dividends on our shares of common stock in the foreseeable future and currently intend to retain any future earnings for funding growth. As a result, investors should not rely on an investment in our securities if they require the investment to produce dividend income. Capital appreciation, if any, of our shares may be investors' sole source of gain for the foreseeable future. Moreover, investors may not be able to resell their shares of the Company at or above the price they paid for them.

29. UNLESS AN ACTIVE TRADING MARKET DEVELOPS FOR OUR SECURITIES, YOU MAY NOT BE ABLE TO SELL YOUR SHARES.

Although, we are a reporting company and our common shares are quoted on the OTCQB (owned and operated by the Nasdaq Stock Market, Inc.) and on the OTC MARKETS Exchange under the symbol "APPZ", the trading market for our common stock can vary significantly from day-to-day, and a more active trading market may never develop or, if it does develop, may not be maintained. Failure to develop or maintain an active trading market will have a generally negative effect on the price of our common stock, and you may be unable to sell your common stock or any attempted sale of such common stock may have the effect of lowering the market price and therefore your investment could be a partial or complete loss.

30. SINCE OUR COMMON STOCK IS THINLY TRADED IT IS MORE SUSCEPTIBLE TO EXTREME RISES OR DECLINES IN PRICE, AND YOU MAY NOT BE ABLE TO SELL YOUR SHARES AT OR ABOVE THE PRICE PAID.

Since our common stock is thinly traded its trading price is likely to be highly volatile and could be subject to extreme fluctuations in response to various factors, many of which are beyond our control, including:

· the trading volume of our shares;

· the number of securities analysts, market-makers and brokers following our stock;

· changes in, or failure to achieve, financial estimates by securities analysts;

· new products or services introduced or announced by us or our competitors;

· actual or anticipated variations in quarterly operating results;

· conditions or trends in our business industries;

· announcements by us of significant contracts, acquisitions, strategic

· partnerships, joint ventures of capital commitments;

· additions or departures of key personnel;

· sales of our common stock; and

· general stock market price and volume fluctuations of publicly-traded and particularly

microcap, companies.

You may have difficulty reselling shares of our common stock, either at or above the price you paid, or even at fair market value. The stock markets often experience significant price and volume changes that are not related to the operating performance of individual companies, and because our common stock is thinly traded it is particularly susceptible to such changes. These broad market changes may cause the market price of our common stock to decline regardless of how well we perform as a company. In addition, securities class action litigation has often been initiated following periods of volatility in the market price of a company's securities. A securities class action suit against us could result in substantial legal fees, potential liabilities and the diversion of management's attention and resources from our business. Moreover, and as noted below, our shares are currently traded on the OTCQB and, further, are subject to the penny stock regulations. Price fluctuations in such shares are particularly volatile and subject to manipulation by market-makers, short-sellers and option traders.

31. TRADING IN OUR COMMON STOCK ON THE OTC BULLETIN BOARD MAY BE LIMITED THEREBY MAKING IT MORE DIFFICULT FOR YOU TO RESELL ANY SHARES YOU MAY OWN.

Our common stock is quoted on the OTCQB (owned and operated by the Nasdaq Stock Market, Inc.). The OTCQB is not an exchange and, because trading of securities on the OTCQB is often more sporadic than the trading of securities listed on a national exchange or on the Nasdaq National Market, you may have difficulty reselling any of the shares of our common stock that you may own.

Item 1B. Unresolved Staff Comments.

Not applicable.

Item 2. Properties.

Our offices are currently located at 806 East Avenida Pico, Suite I-288, San Clement, CA 92673. Our telephone number is (760) 208-4905. Management believes that its current facilities are adequate for its needs through the next twelve months, and that, should it be needed, suitable additional space will be available to accommodate expansion of the Company's operations on commercially reasonable terms, although there can be no assurance in this regard. Our office space is provided to us at no charge by Wayne Irving II, who will not seek reimbursement.

Item 3. 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 4. Submission of Matters to a Vote of Security Holders.

On November 9, 2012, the Company, Monster Offers Acquisition Corporation, a Nevada corporation ("Merger Sub") and Ad Shark, Inc., a privately-held California corporation (“Ad Shark”), entered into an Acquisition Agreement and Plan of Merger (collectively the "Agreement") pursuant to which the Company, through its wholly-owned subsidiary, Merger Sub, acquired Ad Shark in exchange for 27,939,705 shares of the Company's unregistered restricted common stock (the “Merger Shares”), which were issued to the holders of Ad Shark based on their pro-rata ownership (the “Merger”).

PART II

Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

(a) Market Information

Monster Arts Inc. Common Stock, $0.001 par value, is traded on the OTCQB under the symbol: APPZ. The stock was first cleared for quotation on the OTCBQ on October 23, 2008. The following table sets forth the high and low intra-day prices per share of our common stock for the periods indicated, which information was provided by the OTC Markets. The quotations set forth below reflect inter-dealer prices, without retail mark-up, markdown or commission and may not represent actual transactions.

	High		Low
Fourth Quarter Ended December 31, 2012	$	4.35	$	2.10
Third Quarter Ended September 30, 2012	$	3.25	$	1.00
Second Quarter Ended June 30, 2012	$	1.25	$	0.51
First Quarter Ended March 31, 2012	$	3.15	$	2.88
Fourth Quarter Ended December 31, 2013	$	0.20	$	0.002
Third Quarter Ended September 30, 2013	$	0.28	$	0.10
Second Quarter Ended June 30, 2013	$	0.75	$	0.16
First Quarter Ended March 31, 2013	$	1.83	$	0.33

Price adjusted for the 300:1 reverse stock split that took place on April 9, 2011.

(b) Holders of Common Stock

As of December 31, 2013, there were approximately 106 holders of record of our common stock and 29,201,615 shares issued and outstanding. As of April 15, 2013, there were approximately 267 holders of record of our common stock and 159,099,149 shares issued and outstanding. These figures take into effect our 300:1 reverse stock split that took place on April 9, 2011. The number of record holders was determined from the records of our transfer agent and does not include beneficial owners of our common stock whose shares are held in the names of various securities brokers, dealers, and registered clearing agencies. There is no trading market for the shares of our preferred stock.

(c) Dividends

We have not paid or declared any dividends on our common stock, nor do we anticipate paying any cash dividends or other distributions on our common stock in the foreseeable future. Any future dividends will be declared at the discretion of our board of directors and will depend, among other things, on our earnings, if any, our financial requirements for future operations and growth, and other facts as our board of directors may then deem appropriate.

(d) Securities Authorized for Issuance under Equity Compensation Plans

Stock Options

On March 14, 2011, as part of the Strategic Alliance and Licensing agreement, the Company entered into a consulting agreement with SSL5, providing stock options and a seat on the Monster Offers board of directors to develop ongoing product strategy and development services. In accordance with the terms of the agreement, the consulting company is entitled to purchase a total of 6,667 (post-split) unregistered restricted shares of the Company over the term of the agreement of two years. Upon the completion of each 6-month period, a total of 1,667 shares (post-split) will become vested and available for purchase by the Consultant. The price of these shares will be at $0.3 (post-split) per share, or par value. In the event that the Company is sold or merged with another company, all remaining unvested shares will become fully vested immediately prior to any such transaction.

As of September 13, 2011, 1,667 (post-split) shares have fully vested in accordance with the agreement and were revalued at $12,192 using the Black-Scholes option pricing model based upon the following assumptions: term of 1.5 years, risk free interest rate of 0.21%, a dividend yield of 0% and a volatility rate of 183%.

A pro-rated portion of the unvested stock options for the service period from September 14 to December 31, 2011, totaling 973 (post-split) shares, have been valued at $2,245 using the Black-Scholes option pricing model based upon the following assumptions: term of 1.2 years, risk free interest rate of 0.45%, a dividend yield of 0% and a volatility rate of 216%.

As of March 13, 2012, 1,667 shares fully vested in accordance with the agreement and were revalued at $2,241 using the Black-Scholes option pricing model based upon the following assumptions: term of 1 year, risk free interest rate of 0.20%, a dividend yield of 0% and a volatility rate of 220%.

On May 12, 2012, the company entered into a consulting agreement with Thomas Cook Law Firm providing 150,000 stock options which were valued at $134,850. The options were valued using Black-Scholes option pricing model based upon the following assumptions: term of .25 years, risk free interest rate of 0.10%, a dividend yield of 0% and a volatility rate of 319%. All of the stock options were exercised in July of 2012.

On May 24, 2012, the company entered into a consulting agreement with Marlena Niemann providing 100,000 stock options which were valued at $124,900. The options were valued using Black-Scholes option pricing model based upon the following assumptions: term of .25 years, risk free interest rate of 0.21%, a dividend yield of 0% and a volatility rate of 318%. All of the stock options were exercised in September of 2012.

As of September 13, 2012, 1,667 shares fully vested in accordance with the agreement and were revalued at $1,424 using the Black-Scholes option pricing model based upon the following assumptions: term of .5 years, risk free interest rate of 0.13%, a dividend yield of 0% and a volatility rate of 299%.

A pro-rated portion of the unvested stock options for the service period from September 14 to December 31, 2012, totaling 972 shares, have been valued at $1,268 using the Black-Scholes option pricing model based upon the following assumptions: term of .2 years, risk free interest rate of 0.14%, a dividend yield of 0% and a volatility rate of 295%

The following summarizes pricing and term information for options issued that are outstanding as of December 31, 2013 and 2012:

	Year ended December 31, 2013						Year ended December 31, 2012
			Weighted							Weighted
			Average		Aggregate					Average		Aggregate
	Number of		Exercise		Intrinsic		Number of			Exercise		Intrinsic
Stock Options	Options		Price		Value		Options			Price		Value

Balance at beginning of year		6,667	$	0.30		—		6,667		$	.30		—

Granted		—		—		—		250,000		$	.001		—
Exercised		—		—		—		(250,000	)		—		—
Forfeited		—		—		—		—			—		—

Balance at end of year		6,667		0.30		—		6,667			0.30		—


Options exercisable at end of year		—		—		—		5,000		$	0.30		—


Weighted average fair value of
options granted during year				—							—

The fair value of the options was based on the Black Scholes Model using the following assumptions:


	2013			2012
Exercise price:	$	0.30		$	0.30
Market price at date of grant:	$	1.00		$	1.00
Volatility:		229%-311	%		229%-311	%
Expected dividend rate:		0	%		0	%
Risk-free interest rate:		0.15%-0.23	%		0.13%-0.21	%

The following activity occurred under the Company’s plans:

	December 31,		December 31,
	2013		2012
Weighted-average grant date fair value of options granted	$	—	$	—
Aggregate intrinsic value of options exercise		N/A		N/A
Fair value of options recognized as expense	$	—	$	2,645

(e) Recent Sales of Unregistered Securities

On February 14, 2012, the Company issued 10,753 shares of common stock to Asher Enterprises for the conversion of $10,000 in principal of outstanding convertible notes payable.

On February 23, 2012, the Company issued 834 shares of common stock to Iconosys to satisfy $35,825 of stock payable as part of the license agreement entered into on May 16, 2011.

On March 13, 2012, the Company issued 10,186 shares of common stock to Asher Enterprises for the conversion of $5,500 in principal of outstanding convertible notes payable.

On April 17, 2012, the Company issued 11,217 shares of common stock to Asher Enterprises for the conversion of $1,300 in principal of outstanding convertible notes payable and $831 in accreted discount.

In the second quarter of 2012, the Company had to take immediate action to settle the remaining principle balance of $73,500. Two related parties of the Company agreed to pay off the remaining balance using personally funds in return for the Company issuing 2,700,000 restricted common shares. (Further describe in Note 14).

On April 9, 2012, the Company issued 5,000 shares of its common stock for service rendered by a consultant. The shares were valued at the closing stock price on the date of issuance which was $1.95. This resulted in the Company recording an expense of $9,750.

On June 24, 2012, the Company issued 150,000 shares of its common stock for service rendered by a consultant. The shares were valued at the closing stock price on the date of issuance which was $1.25. This resulted in the Company recording an expense of $187,500.

On June 28, 2012 the Company issued 25,000 shares of its value common stock for service rendered by a consultant. The shares were valued at the closing stock price on the date of issuance which was $1.00. This resulted in the Company recording an expense of $25,000.

On July 1 and September 7, 2012, the Company issued a total of 250,000 shares for the exercise of 250,000 cashless stock options issued to two consultants in the previous quarter.

On November 9, 2012 the Company acquired Ad Shark Inc., through a share exchange agreement whereby the Company will issue 27,939,705 common shares in exchange for all the outstanding equity of Ad Shark, Inc (see note 7). As of December 31, 2012, no shares have been issued pertaining to the share exchange agreement. The Company has reported the issuable shares as a stock subscription payable on the balance sheet and statement of stockholders’ equity.

On November 27, 2012 the Company issued 5,000 shares to Tangier Investors as consideration for extending the outstanding note payable.

In the fourth quarter of 2012 the Company received $278,425 in cash from investors for the future issuance of 506,228 common shares. Of the $278,425 cash for stock, $15,000 was deposited directly into Iconosys bank account and was recorded as a loan receivable to related party on the balance sheet. The shares were not issued as of December 31, 2012 therefor were recorded as stock subscription payable.

In the year ended December 31, 2013, the Company issued 26,136,087 common shares of which 861,751 shares were for $454,300 cash ($278,425 received in 2012), 7,355,667 shares were to consultants for services, 14,775,358 shares were for the reduction of $128,083 in convertible debt and $82 of accrued interest, and 3,143,311 shares were for the conversion of 13,767,684 shares of Ad Shark. The shares to consultants were valued at the closing stock price on the date of the executed agreement. This resulted in a consulting expense of $814,275 being recorded for the year ended December 31, 2013. The uncompleted portions of the consulting contracts for future services were recorded as prepaid expenses (See Note 4 for further details). At December 31, 2013, the Company recorded $139,995 in prepaid expenses pursuant to future consulting services to be performed in 2014 pursuant to contract obligations. Of the 7,355,667 shares issued to consultants, 323,833 shares were incorrectly issued and later returned and cancelled.

(f) Issuer Purchases of Equity Securities

We did not repurchase any of our equity securities during the years ended December 31, 2013 or 2012.

Item 6. Selected Financial Data.

Not applicable.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.

We utilize proprietary technology that we have developed, acquired, and/or licensed to deploy our products and services.

Going Concern

In our auditor's report for the fiscal years ended December 31, 2013 & 2012, our auditors expressed substantial doubt as to our ability to continue as a going concern. We anticipate incurring losses in the foreseeable future. We do not have an established source of revenue sufficient to cover our operating costs. Our ability to continue as a going concern is dependent upon our ability to successfully compete, operate profitably and/or raise additional capital through other means. If we are unable to reverse our losses, we will have to discontinue operations.

Results of Operations for the year ended December 31, 2013 compared to the year ended December 31, 2012

We generated $32,568 in revenues for the year ended December 31, 2013 compared to $79,333 for the year ended December 31, 2012, a decrease of $46,765.

Selling, general and administrative expense.For the year ended December 31, 2013, selling, general and administrative expenses decreased to $80,399 from $101,264, approximately 20.6%. For the year ended December 31, 2013 and 2012 general and administrative expenses consisted of the following:


	2013		2012

Auto	$	2,252	$	2,549
Bank Fees		10,151		3,041
Office supplies		22,604		11,854
Travel		24,016		21,394
Computer & Internet		611		4,295
Other		20,765		58,131
	$	80,399	$	101,264


	·	For the year ended December 31, 2013, consulting expense increased to $991,122 as compared to $325,768 from the prior year, primarily as a result of a the expense related to stock being issued to consultants for services rendered to the Company.

	·	For the year ended December 31, 2013, we had wages of $177,642 compared to $55,456 from the prior year. Employee compensation increased primarily due to employment agreement with Wayne Irving.

	·	For the year ended December 31, 2013, marketing and promotions expense amounted to $17,097 as compared to $4,370 from the prior year. The increase was due to the Company improving its online presence.

	·	For the year ended December 31, 2013, depreciation and amortization expense amounted to $44,974 as compared to $7,805 for the year ended December 31, 2012. For the year ended December 31, 2013, professional fee expense decreased to $121,519 as compared to $212,731 from the prior year. Professional fee expense decreased primarily due to decrease in legal fees. The Company had high legal fees in 2012 due to the merger with Ad Shark, Inc.

	·	For the year ended December 31, 2013, Other income and expense which includes interest expense, derivative interest expense, interest income, financing expense, and debt forgiveness amounted to $21,878,158 as compared to $2,736,308 for the year ended December 31, 2012.

Interest expense. For the year ended December 31, 2013, interest expense increased to $14,950 as compared to $5,160 for the year ended December 31, 2012. The increase was due to additional interest expense incurred from the outstanding notes payable.

Derivative interest expense. For the year ended December 31, 2013, derivative interest expense increased to $21,876,947 as compared to $0 for the year ended December 31, 2012. The increase was due to the Black Scholes Method calculation used to compute the derivative liability regarding the outstanding convertible notes payable.

Liquidity and Capital Resources

Liquidity is the ability of a company to generate adequate amounts of cash to meet its needs for cash. The following table provides certain selected balance sheet comparisons between December 31, 2013 and December 31, 2012:

	December 31,	December 31,	$	%
	2013	2012	Change	Change

Working Capital	$ (21,994,223)	$ 342,149	$ 22,336,372	(Over 100%)
Cash	46,234	182,820	136,586	(Over 100%)
Total current assets	496,512	694,274	197,762	(28.4%)
Total assets	502,972	739,708	236,736	(32.0%)
Accounts payable and accrued liabilities	67,586	70,219	2,633	(3.7%)
Notes payable and accrued interest	341,245	53,562	287,683	Over 100%
Total current liabilities	22,490,735	352,125	22,138,610	Over 100%
Total liabilities	22,490,735	352,125	22,138.610	Over 100%

At December 31, 2013 our working capital decreased as compared to December 31, 2012 primarily as a result of an increase in derivative liability of $21,994,223 which was calculated using the Black Scholes Model based on our outstanding convertible notes payable.

Operating activities

Net cash used for continuing operating activities during fiscal 2013 was $524,613 as compared to $213,797 for fiscal 2012. Non-cash items totaling approximately $22,766,357 contributing to the net cash used in continuing operating activities for fiscal 2013 include:

	•	$3,050 in available-for-sale securities
	•	$21,876,947 in derivative interest expense
	•	$998,568 in stock issued for consulting services
	•	$298,745 pursuant to the Master Purchase Agreement with Iconosys
	•	$260,905 in stock options for services
	•	$44,974 in depreciation
	•	$6,737 in accrued interest receivable
	•	$18,356 in loan receivable from Iconosys
	•	$18,359 in deferred revenues from members agreements with TAVG
	•	$65,480 in accounts payable and accrued expenses
	•	$42,358in accounts payable and accrued expenses to related parties
	•	$9,847 in accrued interest from outstanding notes and loans payable

Net cash used for continuing operating activities during fiscal 2012 was $213,797 for fiscal 2012. Non-cash items totaling approximately $3,154,977 contributing to the net cash used in continuing operating activities for fiscal 2012 include:

	•	$100,000 in impairment expense
	•	$33,333 in license revenues- noncash
	•	$31,148 in financing fees from convertible notes payable
	•	$258,414 in stock issued for consulting services
	•	$134,291 in stock options for services
	•	$15,000 in stock issued for note extension
	•	$1,250 in bad debt
	•	$15,000 in discount on notes payable
	•	$2,700,000 from debt conversion related
	•	$35,825 in strategic alliance expense related to strategic alliance with SSL5
	•	$7,805 in depreciation and amortization
	•	$62,129 in accounts payable and accrued expenses

Investing activities

Net cash used in investing activities was $0 for both fiscal 2012and 2011.

Financing activities

Net cash provided by financing activities was $388,027 during fiscal 2013 as compared to $392,800 for fiscal 2012. During the fiscal 2013 period we collected $168,875 in cash from the sale of our common stock in 2012, $18,165 in proceeds from officer loans, $102,269 in payments against officer loan, $286,865 in proceeds from convertible notes, $10,161 in proceeds from notes payable, and $770 in payments against notes payable to a related party.

Future Financing

We anticipate continuing to rely on equity sales of our common shares in order to continue to fund our business operations. Issuance of additional shares will result in dilution to our existing shareholders. There is no assurance that we will achieve any of additional sales of our equity securities or arrange for debt or other financing to fund our exploration and development activities.

Summary of any product research and development that we will perform for the term of our plan of operation.

If the Company is successful in raising capital, it plans to spend approximately $250,000 over the next year on research and development costs associated with the completion of the EEG headset.

Expected purchase or sale of property and significant equipment

We do not anticipate the purchase or sale of any property or significant equipment; as such items are not required by us at this time.

Significant changes in the number of employees

As of December 31, 2013, we have three employees. We are dependent upon our officers and directors for our future business development. As our operations expand we anticipate the need to hire additional employees, consultants and professionals; however, the exact number is not quantifiable at this time.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results or operations, liquidity, capital expenditures or capital resources that is material to investors.

Critical Accounting Policies and Estimates

Revenue Recognition: In accordance with ASC 605 and SEC Staff Accounting Bulletin 104, fee revenue is recognized in the period that the Company's advertiser customer generates a sale or other agreed-upon action on the Company's affiliate marketing networks or as a result of the Company's services, provided that no significant Company obligations remain, collection of the resulting receivable is reasonably assured, and the fees are fixed or determinable. All transactional services revenues are recognized on a gross basis in accordance with the provisions of ASC Subtopic 605-45, due to the fact that the Company is the primary obligor, and bears all credit risk to its customer, and publisher expenses that are directly related to a revenue-generating event are recorded as a component of commission paid-related party.

Recent Pronouncements

We have examined all other recent accounting pronouncements and believe that none of them will have a material impact on the financial statements of our company.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk.

Not applicable.

Item 8. Financial Statements and Supplementary Data.

Our financial statements are contained in this filing, starting on page F-1.

Item 9. Changes in and Disagreements with Accountants On Accounting and Financial Disclosure.

CHANGES IN REGISTRANT’S CERTIFYING ACCOUNTANT

On January 20, 2014, the Company accepted the resignation of Patrick Rodgers, CPA, P.A. (“Rodgers”) from his engagement to be the independent certifying accountant for the Company.

Effective March 6, 2014, the Public Company Accounting Oversight Board ("PCAOB") revoked the registration of Patrick Rodgers, CPA, PA. due to Rogers’ violations of PCAOB rules and auditing standards in auditing the financial statements and PCAOB rules and quality control standards with respect to Rogers’ clients; the Registrant was not one of the clients for which Rogers was sanctioned. You can find a copy of the order at http://pcaobus.org/Enforcement/Decisions/Documents/2014_Rodgers.pdf

Other than an explanatory paragraph included in Rodgers’ audit report for the Company's fiscal year ended December 31, 2012 relating to the uncertainty of the Company's ability to continue as a going concern, the audit report of Rodgers on the Company's financial statements for the last fiscal year ended December 31, 2012 through January 20, 2014, did not contain an adverse opinion or a disclaimer of opinion, nor was it qualified or modified as to uncertainty, audit scope or accounting principles.

During the Company's 2012 fiscal year and through the date of this Current Report on Form 10-K there were no disagreements with Rodgers on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which, if not resolved to the satisfaction of Rodgers, would have caused Rodgers to make reference to the subject matter of the disagreements in connection with their report, and (2) there were no “reportable events” as that term is defined in Item 304(a)(1)(v) of Regulation S-K.

On January 20, 2014, the Company’s Board of Directors approved the engagement of Terry L. Johnson, CPA, as the Company's independent accountant effective immediately to audit the Company’s financial statements and to perform reviews of interim financial statements. During the fiscal years ended December 31, 2012 and 2011 through January 20, 2014 neither the Company nor anyone acting on its behalf consulted with Terry L. Johnson, CPA regarding (i) either the application of any accounting principles to a specific completed or contemplated transaction of the Company, or the type of audit opinion that might be rendered by Terry L. Johnson, CPA on the Company's financial statements; or (ii) any matter that was either the subject of a disagreement with Rodgers or a reportable event with respect to Rodgers. The Registrant provided Patrick Rodgers, CPA, PA with an exhibit 16.1 letter to sign but the firm refused to sign the letter.

The report of Terry L. Johnson, CPA on our financial statements for the fiscal year ended December 31, 2013 and 2012 did not contain an adverse opinion or disclaimer of opinion, nor were they modified as to uncertainty, audit scope or accounting principles, other than to state that there is substantial doubt as to our ability to continue as a going concern. During our fiscal years ended December 31, 2013 and 2012, there were no disagreements between us and Terry L. Johnson, CPA, whether or not resolved, on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which, if not resolved to the satisfaction of Terry L. Johnson, CPA, would have caused Terry L. Johnson, CPA to make reference thereto in their reports on our audited financial statements.

Item 9A(T). Controls and Procedures.

(a) Evaluation of disclosure controls and procedures

We maintain “disclosure controls and procedures” as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934. In designing and evaluating our disclosure controls and procedures, our management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon 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. Based on his evaluation as of the end of the period covered by this Annual Report on Form 10-K, our Chief Executive Officer and our Chief Financial Officer have concluded that our disclosure controls and procedures were effective such that the information relating to our company, required to be disclosed in our Securities and Exchange Commission reports (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and (ii) is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, 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 Securities Exchange Act of 1934. Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2013. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) inInternal Control-Integrated Framework. Our management has concluded that, as of December 31, 2013 our internal control over financial reporting is effective based on these criteria.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting identified in connection with our evaluation that occurred during our last fiscal quarter (our fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. Other Information.

None.

PART III

Item 10. Director, Executive Officer and Corporate Governance.

The following table sets forth certain information regarding our current director and executive officer. Our executive officers serve one-year terms. Set forth below are the names, ages and present principal occupations or employment, and material occupations, positions, offices or employments for the past five years of our current director and executive officer.

Name

Age

Position & Offices Held

Wayne Irving II

Chief Executive Officer

All directors hold office until the next annual meeting of stockholders of the Company and until their successors have been elected and qualified. Directors currently receive no fees for services provided in that capacity. The officers of the Company are elected annually and serve at the discretion of the Board of Directors.

Set forth below is a brief description of the background and business experience of our sole officer/director.

Biography of Wayne Irving, Director, Chairman, CEO, and Secretary

Mr. Irving is a pioneer in mobile communications technology. He is responsible for the recent development of certain new safety and lifestyle-related mobile applications for Smartphones, tablet computers and otherSmarthandheld devices. He is considered an innovator with respect to mobile marketing and advertising. In addition, he maintains a high visibility with the general public and is recognized as a leading authority in the areas of mobile app design and mobile marketing through his frequent public appearances, both at industry conferences and at charitable fundraising events with non-profit organizations and other causes relating to curbing the practices of TWD (texting while driving), as well through his continued media exposure in print, Internet, and on radio and television.

The following provides a summary of Wayne Irving II’s recent and past work experience:

Iconosys, Inc. (November 2009 - Present) -- Mr. Irving is a co-founder of Iconosys and currently holds the positions of director, Chairman, CEO and CFO with the same company. Iconosys develops apps and technologies for iOS and Android OS Smartphones tablet computers and otherSmarthandheld devices, is a member of the National Organization for Youth Safety (NOYS) and the maker of the widely used and well publicized DriveReply™, SMSW!sh™, Trick or Tracker®, Zombie Slasher®, Word Bully®, Latchkey Kid™, Guards Up™, My Receipt Manager™, Tax Deduction Tracker™, and My Max Speed™ Smartphone apps, and is developing technologies and technology-driven products for its clients with a goal toward designing apps that enrich, enhance, and ultimately make safer and more convenient, our day-to-day lives.

In 2010, Mr. Irving founded the outreach organization Text Kills®, making 2 cross country trips in a 36 foot, wrapped RV, spreading the word about the life threatening dangers from texting while driving. Since 2010, it is estimated that more than 100,000 persons have taken the pledge by signing the Text Kills bus, at more than 400 stops and events where Text Kills demonstrates and shares facts with teens, young adults, and the employees of corporations that hire Text Kills to present and share their insight and expertise in this area. Text Kills has presented at many events for Sempra Energy, Coca-Cola Bottling Company, and other organizations. The original founder of Mothers Against Drunk Drivers sits on Text Kills advisory board.

Showerpros.com, Inc. (August 2004 – January 2008) -- Mr. Irving started Showerpros.com in the summer of 2004 as a temporary departure from the Internet and financial markets. From 2004 through July 2007, Showerpros completed more than 800 bathroom and kitchen remodels in Orange County, CA and more than 2,000 total residential and commercial projects, including engaging in all facets of general contracting as a CA-licensed General Contractor. In August 2006, Showerpros was awarded and completed a 660 Kitchen Remodel projects in Las Vegas, NV, where apartments were being converted to condominiums. In the wake of the housing industry/remodeling industry's well chronicled collapsed in the middle of 2007, Mr. Irving left this business and re-entered the hi-tech and clean-tech worlds.

Agilon Products Group, Inc. (November 2001 – July 2002) -- In 2001, Agilon was formed as a business consulting project by Mr. Irving to explore opportunities in alternate industries such as biotechnology. This company's stated mission was to utilize lessons-learned by Mr. Irving in running Internet and hi-tech companies in guiding the business strategies of new start-up and entrepreneur-led consulting clients. In March of 2002, Mr. Irving arranged for the sale and financing of PrimeGen Biotech Corporation, a stem-cell research startup, to an investment group headed by Mr. Thomas Yuen, former CEO of SRS Labs and COO of AST Computer Company.

Solutions Media, Inc. (August 1998 – August 2000) -- Mr. Irving was Chairman and CEO of Solutions Media, a convergence technology company focused initially on developing solutions for interactive television and "smarter" devices. As the company evolved, special attention began to be paid to the media distribution methods that devices utilized in delivering content to the user. Spinrecords.com was Solutions Media's flagship product. Early investors in Solutions Media included NY-based NetGain, Goldman Sachs, and others. Solutions Media further offered technology and consulting-based solutions to a number of companies. In January of 2000, Mr. Irving negotiated and engaged ING Barrings to for an Initial Public Offering and bridge financing.

Cyber Office Technologies, Inc. (1997 – 1998) -- Mr. Irving was Information Security Manager of Cyber Office Technologies, a venture of DuPont, and in this capacity supported the development of a mid-level accounting software package, similar to Peachtree accounting.

Echolink Interactive (1996 – 1997) -- Mr. Irving was a Microsoft Certified Systems Administrator consulting with regard to help desk solutions for a 40-employee firm that managed approximately 100 web development clients.

United States Marine Corps (April 1991 – April 1996) -- Mr. Irving was a Marine Sergeant. While serving as Maintenance Management Chief, 1st Marine Regiment, 1st Marine Division, Mr. Irving managed and taught classes on the usage of several systems including Maintenance Management Systems and Publications Management Systems. In addition, in his position of authority in the S-4 office for 3rd Battalion, 1st Marines, as well as later for the Headquarters for 1st Marine Regiment, Wayne was responsible for writing and managing policies under the Commanding Officer's signature. Mr. Irving was meritoriously promoted 3 times and decorated 5 times for outstanding leadership in his field during his 5 years as a US Marine.

Education:

Mr. Irving studied mathematics and general educational subjects at Mira Costa College in Oceanside, CA (1994-1996) and later studied computer science and pre-medical subjects while attending University of San Diego (1996-1998), where he was also President of Alpha Epsilon Delta (the university's pre-medical student fraternity).

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), requires our executive officer and director, and persons who beneficially own more than ten percent of our common stock, to file initial reports of ownership and reports of changes in ownership with the SEC. Executive officers, directors and greater than ten percent beneficial owners are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file. Based upon a review of the copies of such forms furnished to us and written representations from our executive officer and director, we believe that as of the date of this report they were not current in their 16(a) reports.

Board of Directors

Our board of directors currently consists of only one member, Mr. Wayne Irving II.

Audit Committee

The Company does not presently have an Audit Committee. The Board sits as the Audit Committee. No qualified financial expert has been hired because the company is too small to afford such expense.

Committees and Procedures

The registrant has no standing audit, nominating and compensation committees of the Board of Directors, or committees performing similar functions. The Board acts itself in lieu of committees due to its small size.

The view of the board of directors is that it is appropriate for the registrant not to have such a committee because its directors participate in the consideration of director nominees and the board and the Company are small.

The members of the Board who acts as nominating committee is not independent, pursuant to the definition of independence of a national securities exchange registered pursuant to section 6(a) of the Act (15 U.S.C. 78f(a).

The nominating committee has no policy with regard to the consideration of any director candidates recommended by security holders, but the committee will consider director candidates recommended by security holders.

The basis for the view of the Board that it is appropriate for the registrant not to have such a policy is that there is no need to adopt a policy for a small company.

The nominating committee will consider candidates recommended by security holders, and by security holders in submitting such recommendations.

There are no specific, minimum qualifications that the nominating committee believes must be met by a nominee recommended by security holders except to find anyone willing to serve with a clean background.

The nominating committee's process for identifying and evaluation of nominees for director, including nominees recommended by security holders, is to find qualified persons willing to serve with a clean backgrounds. There are no differences in the manner in which the nominating committee evaluates nominees for director based on whether the nominee is recommended by a security holder, or found by the board.

Code of Ethics

In December 2008 we adopted a Code of Business Conduct and Ethics which applies to our officers, directors, employees and consultants. This Code outlines the broad principles of ethical business conduct we adopted, covering subject areas such as:

	•	compliance with applicable laws and regulations.
	•	handling of books and records.
	•	public disclosure reporting.
	•	insider trading.
	•	discrimination and harassment.
	•	health and safety.
	•	conflicts of interest.
	•	competition and fair dealing; and
	•	protection of company assets.

Limitation of Liability of Directors

Pursuant to the Nevada General Corporation Law, our Articles of Incorporation exclude personal liability for our Directors for monetary damages based upon any violation of their fiduciary duties as Directors, except as to liability for any breach of the duty of loyalty, acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, or any transaction from which a Director receives an improper personal benefit. This exclusion of liability does not limit any right which a Director may have to be indemnified and does not affect any Director's liability under federal or applicable state securities laws. We have agreed to indemnify our directors against expenses, judgments, and amounts paid in settlement in connection with any claim against a Director if he acted in good faith and in a manner he believed to be in our best interests.

Nevada Anti-Takeover Law and Charter and By-law Provisions

The anti-takeover provisions of Sections 78.411 through 78.445 of the Nevada Corporation Law apply to Monster Arts, Inc Section 78.438 of the Nevada law prohibits the Company from merging with or selling more than 5% of our assets or stock to any shareholder who owns or owned more than 10% of any stock or any entity related to a 10% shareholder for three years after the date on which the shareholder acquired the Monster Arts, Inc., unless the transaction is approved by Monster Arts, Inc.'s Board of Directors. The provisions also prohibit the Company from completing any of the transactions described in the preceding sentence with a 10% shareholder who has held the shares more than three years and its related entities unless the transaction is approved by our Board of Directors or a majority of our shares, other than shares owned by that 10% shareholder or any related entity. These provisions could delay, defer or prevent a change in control of Monster Arts, Inc.

Compliance with Section 16(a) of the Exchange Act

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our executive officers and directors, and persons who beneficially own more than 10% of a registered class of our equity securities to file with the Securities and Exchange Commission initial statements of beneficial ownership, reports of changes in ownership and annual reports concerning their ownership of our common shares and other equity securities, on Forms 3, 4 and 5 respectively. Executive officers, directors and greater than 10% stockholders are required by the Securities and Exchange Commission regulations to furnish us with copies of all Section 16(a) reports they file. Based on our review of the copies of such forms received by us, and to the best of our knowledge, all executive officers, directors and persons holding greater than 10% of our issued and outstanding stock have filed the required reports in a timely manner during fiscal 2012.

Item 11. Executive Compensation

The following table sets forth certain compensation information for: (i) each person who served as the chief executive officer of our company at any time during the last two years, regardless of compensation level, and (ii) each of our other executive officers, other than the chief executive officer, serving as an executive officer at any time during 2013 and 2012. The foregoing persons are collectively referred to herein as the "Named Executive Officers." Compensation information is shown for fiscal years 2013 and 2012.

Monster Arts, Inc. Summary Compensation Table

					Stock	Other Compen-
	Principal	Years	Salary	Bonus	Awards	sation	Total
Name	Position	Ending	($)	($)	($)	($)	($)

Wayne Irving II (1)	CEO, CFO	2013 2012	92,924 88,500	- -	40,000 -	- -	132,924 88,500
Brandon M. Graham (2)	Former CFO	2013	-	-	-	-	-
		2012	-	-	-	-	-
Vikram M. Pattarkine, PH.D. (3)	Former Director	2013	-	-	-	-	-
		2012	-	-	-	-	-
William F. Povondra, Jr.	Former Director	2013	-	-	-	-	-
		2012	-	-	-	-	-
Paul Gain	Former CEO	2013	-	-	-	-	-
		2012	20,656	-	-	-	20,656

Note: (1) Wayne Irving II was appointed as an Officer and Director of the Company on May 15, 2012.

(2) Brandon M. Graham was appointed as the Company’s Chief Financial Officer on March 15, 2013. Mr Graham resigned as CFO on December 21, 2013.

(3) Vikram M Pattarkine, Ph.D. was appointed as Officers and/or Directors of the Company on November 9, 2012. He resigned on October 18, 2013.

(4.) William F. Povondra, Jr. was appointed as Officers and/or Directors of the Company on November 9, 2012. Mr. Povondra resigned as an officer of the Company effective February 13, 2013 and as a director effective February 20, 2013.

(5) Paul Gain resigned his position as CEO and Director of the Company on November 9, 2012.

We do not maintain key-man life insurance for our executive officer/director. We do not have any long-term compensation plans, stock option plans or employment agreements with our executive officer/director.

How Mr. Irvings compensation is determined

On August 1, 2011, the Company’s wholly owned subsidiary, Ad Shark, entered into an employment agreement with its President Wayne Irving. The term of employment shall be three (3) years, commencing on the August 1, 2011 and terminating on July 31, 2014, or at a later mutually agreeable date.Salary compensation is to be paid at the rate of $88,500 annually, payable on a monthly basis. On the anniversary of employment, this rate will increase 5% annually. At December 31, 2013 and 2012, the Company had accrued wages of $155,706 and $127,219, respectively which are included in accounts payable and accrued expenses balance. In the year ended December 31, 2013 and 2012, the Company made cash payments to Wayne Irving totaling $64,437 and $0.

Stock Option Grants

We did not grant any stock options to the executive officer or director from inception through fiscal years end December 31, 2013 and 2012.

Outstanding Equity Awards at 2013 and 2012 Fiscal Year-End

We did not have any outstanding equity awards as of December 31, 2013 and 2012 to Company executives.

Stock Options Exercises for Fiscal 2013 and 2012

There were no options exercised by our named executive officer in fiscal year 2013 and 2012.

Potential Payments Upon Termination or Change in Control

We have not entered into any compensatory plans or arrangements with respect to our named executive officer, which would in any way result in payments to such officer because of his resignation, retirement, or other termination of employment with us or our subsidiaries, or any change in control of, or a change in his responsibilities following a change in control.

Director Compensation

Our sole director, Wayne Irving II, was not paid any compensation during the fiscal year ending December 31, 2013 and 2012 for services relating to his duties as a member of the Board of Directors. The Company does not pay nor have a compensation plan with regards to services related to being a member of the Board of Directors.

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 as of the date of this annual report on Form 10-K, which account for the 300:1 reverse split by (i) each Named Executive Officer, (ii) each member of our Board of Directors, (iii) each person deemed to be the beneficial owner of more than five percent (5%) of any class of our common stock, and (iv) all of our executive officers and directors as a group. Unless otherwise indicated, each person named in the following table is assumed to have sole voting power and investment power with respect to all shares of our common stock listed as owned by such person.


Name and Address of Beneficial Owner	Number of Shares Beneficially Owned	Percentage of Outstanding Shares of Common Stock (1)

Wayne Irving II (2)	4,731,960	3.0%
Mind Solutions, Inc.	8,333,333	5.24%

All Directors and Officers as a Group	4,731,960	3.0%

(1)

Percent of Class is based on 159,099,149 common shares issued and outstanding as of April 15, 2013.

(2)

Unless otherwise indicated, the address for each of these stockholders is c/o Monster Arts Inc., at 806 East Avenida Pico, Suite I-288, San Clemente, CA 92673.

We are not aware of any arrangements that may result in "changes in control" as that term is defined by the provisions of Item 403(c) of Regulation S-B.

We believe that all persons named have full voting and investment power with respect to the shares indicated, unless otherwise noted in the table. Under the rules of the Securities and Exchange Commission, a person (or group of persons) is deemed to be a "beneficial owner" of a security if he or she, directly or indirectly, has or shares the power to vote or to direct the voting of such security, or the power to dispose of or to direct the disposition of such security. Accordingly, more than one person may be deemed to be a beneficial owner of the same security. A person is also deemed to be a beneficial owner of any security, which that person has the right to acquire within 60 days, such as options or warrants to purchase our common stock.

Item 13. Certain Relationships and Related Transactions, and Director Independence.

Loss on debt settlement with Asher Enterprises, Inc.

The Company issued 2,700,000 unregistered restricted shares of common stock to its chief executive officer Wayne Irving II, in return for him paying off 73,500 in convertible notes payable and forgiving $21,121 in shareholder loans (See Note 14 for further description).

Asset Purchase Agreement with Iconosys for TAVG

The Company approved the execution of certain asset purchase and domain name, web site content and trademark assignment agreement dated August 8, 2013 with Iconosys, Inc., a private California corporation which shares an officer with the Company. See Note 9 for further details.

Management Service Agreement with Iconosys

On July 16, 2013, the Company executed a management service agreement with a subdivision of Iconosys called Text Kills. Iconosys shares an officer with the Company. The Company will provide service and management support for Text Kills events which includes but is not limited to raising awareness, public education campaigns, and managing the Text Kills tour bus. In the year ended December 31, 2013 the Company recognized $5,387 of commission revenues from related parties relating to Text Kills.

Notes Payable to Related Parties

In 2012, the Company had certain debts paid directly by Iconosys, a private California corporation which shares an officer with the Company. The amounts paid on behalf of the Company totaled $13,250 as of December 31, 2013 and December 31, 2012. They were recorded as a note payable to related party. The note payable has terms of 0% interest and is payable on demand.

Pursuant to the asset purchase agreement with Iconosys executed on August 8, 2013, further described in Note 8, the Company issued a promissory note to Iconosys in the amount of $45,000, due August 7, 2014, with annum interest of 4%.

At December 31, 2013 and December 31, 2012, the Company had notes payable to related parties balance of $57,480 and $13,250.

Loan receivable to related party

The Company’s subsidiary, Ad Shark Inc., has a $300,000 line of credit agreement with Iconosys. The line of credit agreement has terms of 4%, payable on demand. Iconosys is a private California corporation which shares an officer with the Company. Mr. Irving was appointed CFO in May of 2012 and then appointed CEO in late 2012. Iconosys was at one time the parent company to Ad Shark, Inc. At December 31, 2013 and December 31, 2012, the total loan receivable balance advanced to Iconosys is $290,532 and $452,362, respectively. At December 31, 2013 and December 31, 2012, the accrued interest receivable to related party balance was $15,577 and $8,840, respectively.

Accounts payable & accrued expenses to related parties

Pursuant to the Asset Purchase Agreement with Iconosys, described in Note 8, the Company was to pay Iconosys $5,000 cash upon closing. The Company has yet to pay the $5,000 and has recorded it as accounts payable to related party.

An affiliate to the Company, Fan Apps, transferred $4,000 of their De Joya Griffith retainer balance to the Company to be used for accounting expenses. Fan Apps is a subsidiary of Iconosys which shares a common officer with the Company. The Company used the full $4,000 retainer balance in the year ended December 31, 2013. Iconosys, a private company that shares a common officer with the Company, paid $10,721 to Tangier Investors LLP for the benefit of the Company’s. There is no interest on the related party debt.

The accounts payable to related parties balance at December 31, 2013 and December 31, 2012 was $169,577 and $0.

Loan from Officer

The Company was loaned money by Wayne Irving, the chief executive officer of the Company, with 0% interest and payable on demand. At December 31, 2013 and 2012 the loan from officer balance was $13,421 and $101,125.

Master Purchase Agreement with Iconosys

On March 4, 2013, the Company and Iconosys, a privately held corporation, which shares an officer with the Company, entered into a Master Purchase Agreements in order for the Company to purchase, and for Iconosys to sell, certain intellectual property assets, including, without limitation, domain names, trademarks, smart phone apps. In addition, the Company received 15,046,078 shares of Iconosys common stock, $0.001 par value, as consideration for the cancellation of $295,862 in advances to Iconosys and $2,884 in accrued interest receivable. The Iconosys stock received accounts for approximately 10% of the 150,460,781 shares of Iconosys issued and outstanding as of December 31, 2013. Since this agreement was between related parties, being the two company’s share an officer, the Company did not record an asset for the excess consideration received but recorded the debit to additional paid in capital.

Ad Shark Acquisition

The Chairman, Chief Executive Officer and Chief Financial Officer of Monster Arts Inc. (formerly Monster Offers) is Wayne Irving II; Mr. Irving has been an officer and director of the Company since May 15, 2012. On November 9, 2012, Monster Offers entered into an Acquisition Agreement and Plan of Merger to acquire Ad Shark. At the time of this transaction, Wayne Irving II was also the Chief Executive Officer and a director of Ad Shark. He is also the Chief Executive Officer, Director and majority shareholder of Iconosys, Inc. (“Iconosys”), which owned Ad Shark prior to Iconosys’ spinoff (the “Spinoff”) of its shareholdings in Ad Shark to its shareholders. Subsequent to the Spinoff, Ad Shark merged with Monster Offers (the “Merger”). As a result of the Merger, Mr. Irving became the director, Chairman, Chief Executive Officer and Chief Financial Officer of the Company, which was the surviving entity of the Merger, and remains the largest shareholder of the Company. As a condition of the Merger between Monster Offers and Ad Shark, Monster Offers agreed to keep in full force and effect a three-year Employment Agreement between Ad Shark and Mr. Irving which was entered into on August 1, 2012.

As a condition of the Merger between Monster Offers and Ad Shark, Monster Offers agreed to keep in full force and effect and to honor an ISO (Independent Sales Organization) Agreement between Ad Shark and Iconosys for the duration of the agreement, which terminates in June, 2013. At the time that subject agreement was entered into by the parties, Wayne Irving II was a principal executive officer and director for both Ad Shark and Iconosys. This Agreement allows Ad Shark to receive compensation from Iconosys in exchange for services rendered by Ad Shark in connection with its acting as Iconosys’ Independent Sales Organization. Under the terms of this Agreement, at the time of the Merger, Iconosys currently had an obligation to pay Ad Shark approximately $75,000.

As a condition of the Merger between Monster Offers and Ad Shark, Monster Offers agreed to keep in full and effect and to honor the Engagement Agreement dated March 19, 2011 between the Law Office of Brandon S. Chabner, a Professional Corporation, and Ad Shark. Brandon S. Chabner, Esq., is a director and corporate officer of Iconosys and 5%-plus shareholder of Monster Offers. The above-referenced Engagement Agreement provides for the provision of discounted cash rate legal services in exchange for equity-based compensation.

As a condition of the Merger between Monster Offers and Ad Shark, Monster Offers agreed to keep in full and effect and to honor a Line of Credit Agreement dated June 19, 2012 (the “LOC Agreement”) between Ad Shark, as “Lender,”, and Iconosys, as “Borrower.” This is a $300,000 revolving line of credit, pursuant to which, as of the effective time of the Merger, Iconosys has an obligation to repay Ad Shark approximately $271,000 in borrowings. This represents funds borrowed by Iconosys from Ad Shark on various dates during the period June 19, 2012 through October 9, 2012. Monster Offers agreed to assume Ad Shark’s rights and obligations under the LOC Agreement as an integral part of this Merger. As of the Effective Time of the Merger, Monster Offers also owed Iconosys approximately $75,000 in repayments of monies previously borrowed by Monster Offers from Iconosys, and which obligation, as agreed to by Monster Offers and Ad Shark in the Merger Agreement, may be offset by Iconosys against Iconosys’ repayment obligations to Monster Offers under the LOC Agreement.

As a condition of the Merger between Monster Offers and Ad Shark, Monster Offers agreed to keep in full effect two separate Consulting Agreements, each dated June 1, 2012, between Ad Shark and Paul Gain, a former officer and director of Monster Offers, and between Ad Shark and Paul West. Under each of these Consulting Agreements, Ad Sharkpaid grants of Common Stock of Five Million (5,000,000) and One Million Five Hundred Thousand (1,500,000) of restricted Ad Shark shares to Mr. Gain and Mr. West, respectively, for past consulting services rendered to Ad Shark. As part of these Consulting Agreements, each ofMessrs. Gain and West entered into a Confidentially Agreement pursuant to which (i) they each agreed to keep Ad Shark proprietary information confidential, and (ii) for a period of twelve (12) months immediately following the termination of their applicable Consulting Agreement, they each agreed not to solicit Ad Shark employees or independent contractors.

Licensing agreement with Iconosys

In 2011, Iconosys obtained a license of the Existing Monster Offers Tier 1 Zala Merchant license with the ability to promote and sign up Zala account holders and participate in a revenue sharing model with the Company. As consideration for this license, Iconosys issued 3,333 (post-split) of its unregistered restricted shares to the Company. Since Iconosys is not a publicly-traded corporation, these shares were valued at a fair value based upon a fair value of similar shares sold under a private placement memorandum by Iconosys at rate of $30 (post-split) per share, for a total of $100,000. The entire value of the shares was recognized as unearned revenues and will be recognized over one year, the term of the license. For the year ended December 31, 2013 and 2012, the Company recognized $0 and 33,333 in license revenue. At December 31, 2012, management performed an impairment analysis on the Iconosys license asset and determined that impairment was necessary due to the fact that the 3,333 shares of Iconosys stock were not received by the Company. An impairment loss of $100,000 was recognized for the year ended December 31, 2012.

Item 14. Principal Accountant Fees and Services.

Terry L. Johnson, CPA, (“Johnson”), served as our principle independent public auditor for the years ending December 31, 2013 and 2012. The Company engaged Johnson to audit the financial statements for the year ending December 31, 2013 as well as the prior year ending December 31, 2012 because the prior year auditor, Patrick Rodger, CPA, PA had his license revoked by the PCAOB in early 2014.

Patrick Rodgers CPA, PA served as our principal independent public accountants for the fiscal year ending December 31, 2012. On January 20, 2014, the Company accepted the resignation of Patrick Rodgers, CPA, P.A. (“Rodgers”) from his engagement to be the independent certifying accountant for the Company.

	For Year Ended December 31,	For Year Ended December 31
	2013	2012
Audit Fees (1)	$14,000	$10,000
Audit-Related Fees	$2,000	$2,000
Tax Fees
All Other Fees

Total fees paid or accrued to our principal auditors

(1) Audit Fees include fees billed and expected to be billed for services performed to comply with Generally Accepted Auditing Standards (GAAS), including the recurring audit of the Company's financial statements for such period included in this Annual Report on Form 10-K and for the reviews of the quarterly financial statements included in the Quarterly Reports on Form 10-Q filed with the Securities and Exchange Commission.

Audit Committee Policies and Procedures

We do not have an audit committee; therefore our directors pre-approve all services to be provided to us by our independent auditor. This process involves obtaining (i) a written description of the proposed services, (ii) the confirmation of our Chief Financial Officer that the services are compatible with maintaining specific principles relating to independence, and (iii) confirmation from our securities counsel that the services are not among those that our independent auditors have been prohibited from performing under SEC rules. Our sole director then makes a determination to approve or disapprove the engagement of Terry L. Johnson, CPA for the proposed services. In the fiscal year ending December 31, 2013, all fees paid to Terry L. Johnson, CPA were unanimously pre-approved in accordance with this policy.

PART IV

Item 15. Exhibits, Financial Statement Schedules.

The following information required under this item is filed as part of this report:

(a) Exhibit Index

				Incorporated by reference
Exhibit	Exhibit Description	Filed herewith	Form	Period Ending	Exhibit	Filing Date
3.1	Articles of Incorporation		SB-2		3.1	01/15/08
3.2	By-laws as currently in effect		SB-2		3.2	01/15/08
3.2	Amended Articles of Incorporation		SB-2		3.3	01/12/12
10.1	Asset Exchange Agreement by and between Monster Offers and Prime Mover Global, LLC, dated August 5, 2010		8-K		10.1	09/02/10
10.2	Share Lock-Up Agreement with Scott J. Gerardi, dated August 6, 2010		8-K		10.2	09/02/10
10.3	Share Lock-Up Agreement with Powerhouse Development, dated August 6, 2010		8-K		10.3	09/02/10
10.4	Share Lock-Up Agreement with Paul Gain, dated August 6, 2010		8-K		10.4	09/02/10
10.5	Share Lock-Up Agreement with Jonathan W. Marshall, dated August 6, 2010		8-K		10.5	09/02/10
10.6	Investor and Public Relations Agreement between Monster Offers and Emerging Growth Research, LLC, date November 10, 2010		8-K		10.9	11/19/10
10.7	Exchange and Hold Harmless Agreement with Scott J. Gerardi dated November 19, 2010	X	8-K		10.7	11/24/10
10.8	Drawdown Equity Financing Agreement between Monster Offers and Auctus Private Equity Fund, LLC, dated December 23, 2010.		8-K		10.6	01/03/11
10.9	Registration Rights Agreement between Monster Offers and Auctus Private Equity Fund, LLC, dated December 23, 2010.		8-K		10.7	01/03/11
10.10	Consulting Agreement with Christina R. Hansen, dated January 21, 2011		S-8		10.1	01/27/11
10.11	Investor and Public Relations Agreement between Monster OFFERS and Equititrend Advisors, LLC, dated January 21, 2011		8-K		10.11	02/03/11
10.12	Strategic Alliance and Licensing Agreement between Monster OFFERS and SSL5, dated March 14, 2011		8-K		10.12	03/16/11
23.1	Consent letter from DeJoya Griffith, LLC	X
31.1	Certification of President and Principal Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act	X	8-K		99.1	09/30/11
32.1	Certification of President and Principal Financial Officer, pursuant to Section 906 of the Sarbanes-Oxley Act	X	8-K		99.2	09/30/11
	Consulting Agreement with Jeffrey Weiss, dated April 9, 2012		8-K			04/30/12
	Consulting Agreement with Cleverson Schmidt, dated April 23, 2012		8-K			6/28/12
	Acquisition and Plan of Merger Agreement with AdShark, dated 11/9/12 (+ Articles of Merger)		8-K			11/13/12
	Consulting Agreement between AdShark and Paul West, dated 6/1/12		8-K			11/13/12
	Line of Credit Agreement between AdShark and Iconosys, dated 6/19/12		8-K			11/13/12
	Engagement Agreement between AdShark and The Law Office of Brandon S. Chabner, dated 3/19/11		8-K			11/13/12

SIGNATURES

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

Monster Arts Inc.

Registrant



Date: April 15, 2014	/s/ Wayne Irving II
	Name: Wayne Irving II
		Principal Executive Officer Principal Financial Officer

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




Date: April 15, 2014	/s/ Wayne Irving II
	Name: Wayne Irving II
		Principal Executive Officer Principal Financial Officer

Table of Contents

Page

Financial Statements of Monster Arts, Inc.:

Report of Independent Registered Public Accounting Firm

F-1

Consolidated Balance Sheets as of December 31, 2013 and 2012

F-2

Consolidated Statements of Operations for the Years ended December 31, 2013 and 2012, and from Inception (February 23, 2007) to December 31, 2013

F-3

Consolidated Statement of Stockholders' Deficit for Years ended December 31, 2013 and 2012, and from Inception (February 23, 2007) to December 31, 2013

F-4

Consolidated Statement of Cash Flows for the Years ended December 31, 2013 and 2012, and from Inception (February 23, 2007) to December 31, 2013

F-5

Notes to the Consolidated Financial Statements

F-6

TERRY L. JOHNSON, CPA

406 Greyford Lane

Casselberry, Florida 32707

Phone 407-721-4753

Fax/Voice Message 866-813-3428

E-mail cpatlj@yahoo.com

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors

Monster Arts Inc.

I have audited the accompanying consolidated balance sheets of Monster Arts Inc. as of December 31, 2013 and 2012 and the consolidated statements of operations, consolidated stockholders’ equity, and consolidated cash flows for the years ended December 31, 2013 and 2012, and from inception February 23, 2007 to December 31, 2013. These consolidated financial statements are the responsibility of the Company’s management. My responsibility is to express an opinion on these financial statements based on my audit.

I conducted my audit in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that I 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 was I engaged to perform, an audit of its internal control over financial reporting. My 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, I express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. I believe that my audit provides a reasonable basis for my opinion.

In my opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Monster Arts Inc. as of December 31, 2013 and 2012 and the results of its consolidated operations and its consolidated cash flows for the years ended December 31, 2013 and 2012 and from inception February 23, 2007 to December 31, 2013, are in conformity with accounting principles generally accepted in the United States.

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company has a minimum cash balance available for payment of ongoing operating expenses, has experienced losses from operations since inception, and it does not have a source of revenue sufficient to cover its operating costs. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ Terry L. Johnson, CPA

Casselberry, Florida

April 15, 2014

F-1

MONSTER ARTS, INC.
(Formerly MONSTER OFFERS)
(A Development Stage Company) CONSOLIDATED BALANCE SHEETS



		December 31,			December 31,
Assets:		2013			2012
Current Assets
Cash	$	46,234		$	182,820
Accounts receivable, net of allowance for doubtful
accounts of $1,250		4,173			4,173
Loan receivable to related party		290,532			452,362
Interest receivable to related party		15,577			8,840
Prepaid expenses		139,996			46,079
Total Current Assets		496,512			694,274

Fixed Assets
Property and equipment, net		460			1,248
Website, net		—			44,186
Total Fixed Assets		460			45,434

Other Assets
Available-for-sale securities		6,000			—
Total Other Assets		6,000			—

Total Assets	$	502,972		$	739,708

Liabilities and Stockholders' Equity:
Current Liabilities
Accounts payable & accrued expenses	$	67,586		$	70,219
Accounts payable & accrued expenses to related parties		169,577			127,219
Accrued interest		11,659			1,812
Deferred revenues		18,359			—
Loan from officer		17,021			101,125
Notes payable		10,161
Notes payable to related party		57,480			13,250
Convertible notes payable		261,945			38,500
Derivative Liability		21,876,947			—
Total Liabilities		22,490,735			352,125

Stockholders' Equity:
Preferred stock, $.001 par value 10,000,000 shares
authorized, 0 shares issued and outstanding, respectively		—			—
Series A preferred stock, $.001 par value 10,000,000 shares
authorized, 0 shares issued and outstanding, respectively
Common stock, $0.001 par value 730,000,000 shares		—			—
authorized, 29,201,615 and 3,389,361 shares issued and
outstanding, respectively		29,202			3,389
Additional paid in capital		6,121,441			4,932,914
Stock subscription payable		493,673			788,389
Accumulated Comprehensive Loss		(4,000	)		—
Deficit accumulated during the development stage		(28,628,079	)		(5,337,109	)
Total stockholders' equity (deficit)		(21,987,763	)		387,583

Total Liabilities and Stockholders' Equity	$	502,972		$	739,708

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

F-2

CONSOLIDATED STATEMENTS OF OPERATIONS
(Formerly MONSTER OFFERS)
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS


							From Inception
	For the Years Ended						(February 23, 2007) to
	December 31,						December 31,
	2013			2012			2013

Commissions	$	13,750		$	36,250		$	207,385
Commissions- related parties		11,470			—			337,717
License revenues		—			33,333			100,000
Services		1,961			9,750			11,711
Services- related party		5,387			—			78,588
		32,568			79,333			735,401

Cost of services		12,627			4,405			266,860

Gross Profit		19,941			74,928			468,541

Operating expenses:
General and administration		80,399			101,264			662,883
Consulting		991,122			325,768			2,030,947
Wages		177,642			55,456			437,298
Marketing and promotions		17,097			4,370			52,998
Depreciation and amortization		44,974			7,805			69,539
Professional fess		121,519			212,731			543,099
Total operating expenses		1,432,753			707,394			3,796,764

Income (Loss) from operations		(1,412,812	)		(632,466	)		(3,328,223	)

Other income and (expenses):
Interest expense		(14,950	)		(5,160	)		(95,841	)
Interest expense- derivative		(21,876,947	)		—			(21,876,947	)
Interest income		9,643			—			14,802
Financing expense		—			(31,148	)		(160,987	)
Loss on debt settlement		—			(2,700,000	)		(2,700,000	)
Debt forgiveness		4,096			—			10,552
Refund on expenses		—			—			34,000
Impairment expense		—			—			(525,435	)
Total other income and (expenses)		(21,878,158	)		(2,736,308	)		(25,299,856	)

Net loss before taxes	$	(23,290,970	)	$	(3,368,774	)	$	(28,628,079	)

Tax provisions		—			—			—

Net loss after taxes	$	(23,290,970	)	$	(3,368,774	)	$	(28,628,079	)

Other Comprehensive Income:
Gain (Loss) on Available-for-Sale Securities		(4,000	)		—			(4,000	)

Other Comprehensive Income (Loss)	$	(23,294,970	)	$	(3,368,774	)	$	(28,632,079	)

Basic & diluted loss per share	$	(3.28	)		(1.47	)

Weighted average shares outstanding		7,102,414			2,289,099

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

F-3

CONSOLIDATED STATEMENTS OF OPERATIONS
(Formerly MONSTER OFFERS)
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)


						Additional			Common			Common			Other
	Common Stock			Paid in			Stock			Stock			Comprehensive			Accumulated
	Shares			Amount			Capital			Receivable			Payable			Income (Loss)			Deficit			Total
Contributed Capital, February 2007	—		$	—		$	400		$	—		$	—		$	—		$	—		$	400
Founder shares issued for services	56,250			56			11,194			—			—			—			—			11,250
Contributed Capital	—			—			585			—			—			—			—			585
Tropical PC spin off shares	4,050			4			(4	)		—			—			—			—			—
Shares returned to Company	(3,000	)		(3	)		3			—			—			—			—			—
Shares issued pursuant to offer	37,500			38			33,712			—			—			—			—			33,750
Net loss	—			—			—			—			—			—			(6,595	)		(6,595	)
Balance December 31, 2007	94,800			95			45,890			—			—			—			(6,595	)		39,390

Net loss	—			—			—						—			—			(41,556	)		(41,556	)
Balance December 31, 2008	94,800			95			45,890			—			—			—			(48,151	)		(2,166	)

Private placement	67,500			67			13,432			(1,000	)		—			—			—			12,499
Net income	—			—			—			—			—			—			8,741			8,741
Balance December 31, 2009	162,300			162			59,322			(1,000	)		—			—			(39,410	)		19,074

Cancellation of unearned shares	(5,000	)		(5	)		(995	)		1,000			—			—			—			—
Shares issued for cash	40,000			40			7,960			(8,000	)		—			—			—			—
Shares issued for services	3,662			4			462,833			(400	)		—			—			—			462,437
Net loss	—			—			—						—			—			(494,195	)		(494,195	)
Balance December 31, 2010	200,962			201			529,120			(8,400	)		—			—			(533,605	)		(12,684	)

Shares issued for services	2,000			2			155,998			—			750			—			—			156,750
Shares issued for license	—			—			—			—			450,000			—			—			450,000
Issuance of stock options for services	—			—			14,302			—			—			—			—			14,302
Shares issued as part of strategic
alliance	—			—			—			—			35,825			—			—			35,825
Shares issued for conversion of																						—
notes payable	16,296			16			202,776			—			—			—			—			202,792
Sale of stock at 3% discount	1,309			1			13,190			—			—			—						13,191
Financing fees incurred on sale of																						—
stock	—			—			(5,000	)		—			—			—			—			(5,000	)
Write off of stock receivable	—			—			—			8,400			—			—			—			8,400
Net loss	—			—			—			—			—			—			(998,876	)		(998,876	)
Balance December 31, 2011	220,567			220			910,386			—			486,575			—			(1,532,481	)		(135,300	)

Shares issued for debt settlement	2,732,156			2,732			2,948,110			—			—			—			—			2,950,842
Shares issued as part of strategic
alliance	834			1			35,824			—			(35,825	)		—			—			—
Stock options for services	—			—			134,291			—			—			—			—			134,291
Shares issued for services	430,000			430			226,710			—			31,274			—			—			258,414
Stock subscription payable	—			—			—			—			278,425			—			—			278,425
Shares issued for note extension	5,000			5			14,995			—			—			—			—			15,000
Stock split adjustment	803			1			—			—			—			—			—			1
Effect from share exchange agreement
with Ad Shark, Inc.	—			—			662,598			—			27,940			—			(435,854	)		254,684
Net loss	—			—			—			—			—			—			(3,368,774	)		(3,368,774	)
Balance December 31, 2012	3,389,360			3,389			4,932,914			—			788,389			—			(5,337,109	)		387,583

Shares issued for cash	861,751			862			446,438			—			(271,425	)		—			—			175,875
Shares issued for services	7,355,667			7,356			1,019,413			—			(28,201	)		—						998,568
Cancellation of shares	(323,832	)		(323	)		(91,969	)		—			—			—			—			(92,292	)
Shares issued for reduction in
convertible debt	14,775,358			14,775			113,390			—			—			—			—			128,165
Stock subscription payable	—			—			—			—			7,000			—			—			7,000
Stock issued from converted
Ad Shark, Inc. shareholders	3,143,311			3,143			—			—			(3,143	)		—			—			—
Master Purchase Agreement with
Iconosys (Note 11)	—			—			(298,745	)		—			—			—			—			(298,745	)
Asset purchase of TAVG	—			—			—			—			1,053			—			—			1,053
Loss on available for sale securities	—			—			—			—			—			(4,000	)		—			(4,000	)
Net loss	—			—			—			—			—			—			(23,290,970	)		(23,290,970	)
Balance December 31, 2013	29,201,615		$	29,202		$	6,121,441		$	—		$	493,673		$	(4,000	)	$	(28,628,079	)	$	(21,987,763	)

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

F-4

CONSOLIDATED STATEMENTS OF OPERATIONS

(Formerly MONSTER OFFERS)

(A Development Stage Company)

CONSOLIDATED STATEMENTS OF CASH FLOWS


							From Inception
							(February 23, 2007) to
	For the Years December 31,						December 31,
	2013			2012			2013
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss for the period	$	(23,290,970	)	$	(3,368,774	)	$	(28,628,079	)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Impairment loss		—			100,000			525,435
License revenues- non cash		—			(33,333	)		(100,000	)
Available-for-sale securities revenues		(3,050	)		—			(3,050	)
Non-cash compensation		—			—			8,400
Forgiveness of debt		—			—			(846	)
Financing fees		—			31,148			160,987
Derivative expense		21,876,947			—			21,876,947
Stock for services		998,568			258,414			1,873,109
Stock options for services		—			134,291			134,291
Stock for note extension		—			15,000			15,000
Bad debt		—			1,250			1,250
Discount on notes payable		—			15,000			15,000
Loss on debt settlement		—			2,700,000			2,700,000
Strategic alliance costs		—			35,825			45,878
Effect from share exchange		—			24,618			24,618
Master purchase agreement		(298,745	)		—			(298,745	)
Depreciation and amortization		44,974			7,805			77,344
Changes in Operated Assets and Liabilities:
(Increase) decrease in prepaids		—			(19,807	)		—
(Increase) decrease in accounts receivable		—			4,000			(5,423	)
Increase in interest receivable		(6,737	)		(5,159	)		(15,577	)
Decrease in unamortized financing fees		—			2,421			(2,875	)
Increase (decrease) in loan receivable to related party		18,356			(171,812	)		290,532
Increase in unearned revenues		18,359			—			18,359
Increase in accounts payable and accrued expenses		65,480			62,607			67,586
Increase in accounts payable to related parties		42,358			—			169,577
Increase (decrease) in accrued interest		9,847			(7,291	)		11,659
Net cash (used) in operating activities		(524,613	)		(213,797	)		(1,038,623	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of stock		168,875			278,425			515,845
Stock subscription payable		7,000			—			7,000
Proceeds from officer loan		18,165			101,125			119,290
Payments on officer loan		(102,269	)		—			(102,269	)
Proceeds from convertible notes		286,865			—			527,365
Payments on convertible notes		—			—			(6,000	)
Proceeds from note payable		10,161			—			10,161
Payments on notes payable to related party		(770	)		13,250			12,480
Contributed Capital		—			—			985
Net Cash Provided by Financing Activities		388,027			392,800			1,084,857

Net (Decrease) Increase in Cash		(136,586	)		179,003			46,234
Cash at Beginning of Period		182,820			3,817			—
Cash (Overdraft) at End of Period	$	46,234		$	182,820		$	46,234

SUPPLEMENTAL DISCLOSURES:
Income Taxes Paid	$	—		$	—		$	—
Interest Paid	$	—		$	—		$	—

NON-CASH INVESTING AND FINANCING ACTIVITIES:

Stock issued for purchase of license	$	—		$	—		$	450,000
Stock issued for conversion of convertible notes payable	$	128,165		$	217,676		$	560,407
Stock issued for debt settlement	$	—		$	2,700,000		$	2,700,000
Increase in prepaid stock compensation	$	—		$	257,419		$	257,419

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

F-5

Monster Arts, Inc.

(A Development Stage Company)

Notes to the Consolidated Financial Statements

December 31, 2013 and 2012

NOTE 1 – ORGANIZATION & BUSINESS DESCRIPTION

NOTE 2 - GOING CONCERN

These financial statements have been prepared in accordance with generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. Since inception (February 23, 2007) through December 31, 2013, the Company incurred an accumulated deficit during development stage of approximately $28,628,079. The Company's ability to continue as a going concern is contingent upon its ability to achieve and maintain profitable operations and its ability to raise additional capital as required.

Management plans to raise equity capital to finance the operating and capital requirements of the Company, and also plans to pursue acquisition opportunities of other revenue-generating companies that provide complementary capabilities to that of the Company. Amounts raised will be used for further development of the Company's products and services, to provide financing for marketing and promotion, to secure additional property and equipment, and for other working capital purposes. While the Company is devoting its best efforts to achieve the above plans, there is no assurance that any such activity will generate funds that will be available for operations.

These conditions raise substantial doubt about the Company's ability to continue as a going concern. These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might result from this uncertainty.

NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES

Basis of Accounting

These financial statements are prepared on the accrual basis of accounting in conformity with accounting principles generally accepted in the United States of America (“US GAAP”).

Principles of Consolidation

The accompanying consolidated financial statements include all of the accounts of the Company and Ad Shark, Inc. as of December 31, 2013. Ad Shark, Inc. was acquired through a share exchange agreement on November 9, 2012. Therefore, the Company only reports the profits and losses from Ad Shark, Inc. after the date of merger. All intercompany balances and transactions have been eliminated.

Development Stage Company

The Company is currently a development stage enterprise reporting under the provisions of FASB ASC Topic 915, Development Stage Entity. The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America.

F-6

Monster Arts, Inc.

(A Development Stage Company)

Notes to the Consolidated Financial Statements

December 31, 2013 and 2012

NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES (continued)

Reclassification

On April 9, 2012, the Company executed a 300 to 1 reverse stock split, which was retrospectively applied to all financial statements, including the comparative balance sheet as of December 31, 2011.

Cash and Cash Equivalents

The Company considers all short-term investments with a maturity of three months or less at the date of purchase to be cash equivalents. As of December 31, 2013 and 2012, there are no cash equivalents.

Use of 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 revenue and expenses during the reporting period. Actual results could differ from those estimates.

Advertising

Advertising costs are expensed when incurred. The Company incurred advertising expenses of $17,097 and $4,370 for the years ended December 31, 2013 and 2012, respectively. For the period since inception on February 23, 2007 through the year ended December 31, 2013, the Company has incurred advertising expenses of $52,998.

Revenue Recognition

In accordance with ASC 605 and SEC Staff Accounting Bulletin 104, fee revenue is recognized in the period that the Company's advertiser customer generates a sale or other agreed-upon action on the Company's affiliate marketing networks or as a result of the Company's other services, provided that no significant Company obligations remain, collection of the resulting receivable is reasonably assured, and the fees are fixed or determinable. All transactional services revenues are recognized on a gross basis in accordance with the provisions of ASC Subtopic 605-45, due to the fact that the Company is the primary obligor, and bears all credit risk to its customer, and publisher expenses that are directly related to a revenue-generating event are recorded as a component of commission paid.

Earnings per Share

Historical net (loss) per common share is computed using the weighted average number of common shares outstanding. Diluted earnings per share include additional dilution from common stock equivalents, such as stock issuable pursuant to the exercise of securities or other contracts to issue common stock that were exercised or converted into common stock or resulted in the issuance of common stock that shared in the earnings of the entity.

At December 31, 2013, the Company had multiple convertible debentures outstanding that if-converted would result in 78,369,390 new common shares being issued. The Company also has a court order settlement with Premier Venture Partners that will require them to issue an additional 58,668,039 shares of common stock.

Accounts receivable

Accounts receivable are stated at the amount management expects to collect from balances outstanding at year end. Management provides for probable uncollectible amounts through a charge to earnings and a credit to an allowance based on its assessment of the current status of individual accounts. Balances that are still outstanding after management has used reasonable collection efforts are written off through a charge to the valuation allowance. As of December 31, 2013 and December 31, 2012, we have $5,423, respectively, in accounts receivable and $1,250 charged to allowance for doubtful accounts.

Equipment

Equipment is stated at cost, less accumulated depreciation. Depreciation is provided principally on the straight-line method over the estimated useful lives of the assets, which consist of computer equipment, which is 3 years. The cost of repairs and maintenance is charged to expense as incurred. Expenditures for equipment betterments and renewals are capitalized. Upon sale or other disposition of a depreciable asset, cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in other income or expense. The Company will periodically evaluate whether events and circumstances have occurred that may warrant revision of the estimated useful lives of equipment and website development costs or whether the remaining balance of equipment should be evaluated for possible impairment. The Company uses an estimate of the related undiscounted cash flows over the remaining life of the equipment in measuring their recoverability.

F-7

Monster Arts, Inc.

(A Development Stage Company)

Notes to the Consolidated Financial Statements

December 31, 2013 and 2012

NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES (continued)

Website Development Costs

The Company recognizes the costs associated with developing a website in accordance with FASB ASC 350-50 “Website Development Costs”.Accordingly costs associated with the website consist primarily of website development costs paid to a third party. These capitalized costs are amortized based on their estimated useful life over two years upon the website becoming operational. Internal costs related to the development of website content will be charged to operations as incurred.

Fair Value of Financial Instruments

The carrying amounts of the financial instruments, including cash and cash equivalents, accounts receivable, accounts payable, and accrued liabilities, approximate fair value due to the short maturities of these financial instruments. The notes payable are also considered financial instruments whose carrying amounts approximate fair values.

Intangible assets

The Company follows Financial Accounting Standard Board’s (FASB) Codification Topic 350-10 (“ASC 350-10”), “Intangibles - Goodwill and Other” to determine the method of amortization of its intangible assets. The Company’s intangible assets are capitalized at historical cost and are amortized over their useful lives. The Company amortizes its license of SSL5 intellectual property using the straight-line method over an estimated useful life of 10 years (see Note 8).

Stock-based compensation

The Company records stock based compensation in accordance with the guidance in ASC Topic 718 which requires the Company to recognize expenses related to the fair value of its employee stock option awards. This eliminates accounting for share-based compensation transactions using the intrinsic value and requires instead that such transactions be accounted for using a fair-value-based method. The Company recognizes the cost of all share-based awards on a graded vesting basis over the vesting period of the award.

ASC 505, "Compensation-Stock Compensation", establishes standards for the accounting for transactions in which an entity exchanges its equity instruments to non-employees for goods or services. Under this transition method, stock compensation expense includes compensation expense for all stock-based compensation awards granted on or after January 1, 2006, based on the grant-date fair value estimated in accordance with the provisions of ASC 505.

Income Taxes

The Company accounts for its income taxes in accordance with Income Taxes Topic of the FASB ASC 740, which requires recognition of deferred tax assets and liabilities for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and tax credit carry forwards. 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 operations in the period that includes the enactment date.

F-8

Monster Arts, Inc.

(A Development Stage Company)

Notes to the Consolidated Financial Statements

December 31, 2013 and 2012

Recent Accounting Pronouncements

Company management does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying financial statements.

NOTE 4 – PREPAIDS

At December 31, 2013 and December 31, 2012 the Company recorded prepaid expense of $139,995 and $46,079. The prepaid asset recorded at December 31, 2013 was the result of the Company executing four consulting contracts for future services which have terms extending past December 31, 2013. They are as follows,

On January 9, 2013, the Company issued 50,000 shares of common stock to Thomas Mead as part of a (3) three year employment agreement to serve as the Company’s Director of Technology. The Company valued the shares at the closing price of $0.285 on the date of the agreement and recorded the remaining unearned portion of the contract as a prepaid expense which is being expensed over the contract life of three years.

On June 7, 2013, the Company signed a consulting agreement with Pyrenees Investments, LLC, a Nevada Limited Liability Company for services including but not limited to the introduction to potential investor relation firms and capital investor groups. The Company agreed to compensate Pyrenees Investments, LLC with $25,000 worth of restricted common stock for a (1) one year contract term. As of June 30, 2013, the Company has not issued any stock pursuant to this executed agreement. The Company recorded a $25,000 stock subscription payable and has recorded a prepaid asset for the unearned portion of the contract term.

On July 1, 2013, the Company issued 450,000 shares of common stock to Pyrenees Investments, LLC as part of a twelve month consulting agreement to perform consulting services for the Company. The Company valued the shares at the closing price of $0.19 on the date of the agreement and recorded the remaining unearned portion of the contract as a prepaid expense which will be expensed over the remaining life of the contract.

On September 17, 2013, the Company issued 1,400,000 shares of common stock to Mirador Consulting LLC as part of a six month consulting agreement to perform consulting services for the Company. The Company valued the shares at the closing price of $0.13 on the date of the agreement and recorded the remaining unearned portion of the contract as a prepaid expense which will be expensed over the remaining life of the contract.

The following is a summary of recognized prepaid expenses per consulting contracts.

	December 31, 2013		December 31, 2012
Iconosys	$	—	$	11,942
Marlena Niemann		—		30,804
Arthur Sterling		—		3,333
Thomas Mead		9,897		—
Pyrenees Investments, LLC		48,607		—
Mirador Consulting LLC		81,491		—
	$	139,995	$	46,079

NOTE 5 – AVAILABLE FOR SALE SECURITIES

On November 1, 2013, the Company executed a joint venture agreement with Intelligent Living, Inc. (“ILIV”). You can read the full agreement in the registrant’s SEC Form 8-K filing on November 5, 2013. The Company will provide ILIV comprehensive and end-to-end turnkey business function through its development of smartphone and tablet apps. The Company’s revenue sharing will be 35% of gross payments from app sales from Google Play and 50% of gross payments from app sales through Amazon, Nook, iTunes, and others. The Company will be paid in the form of stock by ILIV which is a publically traded company trading on the OTCQB under the symbol “ILIV”. The Company will be paid 36,600,000 common shares of ILIV in quarterly installments over a period of 2 years from the date of the agreement. The Company has been paid an initial 10,000,000 common shares upon closing of the agreement which were valued at the closing price of ILIV stock on November 1, 2013 which was $0.001. This resulted in the Company recording an available-for-sale securities asset of $10,000. The available-for-sale securities asset was revalued at December 31, 2013 using the ILIV closing stock price of $0.0006 per share which resulted in the Company recording an unrealized loss on available-for-sale securities of $4,000. The Company also recorded a portion of the stock payment received based on the uncompleted portion of the agreement as unearned revenues which as of December 31, 2013 amounted to $6,950. As of December 31, 2013 and 2012, the Company had an available-for-sale securities asset balance of $6,000 and $0.

F-9

Monster Arts, Inc.

(A Development Stage Company)

Notes to the Consolidated Financial Statements

December 31, 2013 and 2012

NOTE 6 – PROPERTY & EQUIPMENT

Property and equipment consists of the following at December 31, 2013 and 2012:

	2013		2012
Property and equipment, net	$	2,364	$	2,364
Less: accumulated depreciation		1,904		1,116
Property and equipment, net	$	460	$	1,248

The Company acquired the property and equipment through the share exchange agreement with Ad Shark, Inc. on November 9, 2012. Therefore the Company only recognized depreciation on the equipment after the share exchange date. Depreciation expense for the years ended December 31, 2013 and 2012 totaled $788 and $197.

NOTE 7 – WEBSITE DEVELOPMENT COSTS

Website development costs consist of the following at December 31, 2013 and 2012:

	2013		2012
Website	$	91,298	$	91,298
Less: accumulated amortization		91,298		47,112
Website, net	$	—	$	44,186

The Company acquired the website asset through the share exchange agreement with Ad Shark, Inc. on November 9, 2012. Therefore the Company only recognized amortization expense on the website after the share exchange date. Amortization expense for the years ended December 31, 2013 and 2012 totaled $44,186 and $7,608.

NOTE 8 – STOCK SPLIT

On April 9, 2012, the Company executed a 300 to 1 reverse stock split, which was retrospectively applied to all financial statements.

NOTE 9 – ASSET PURCHASE AGREEMENT WITH ICONOSYS (TAVG)

On August 8, 2013, the Company approved the execution of an asset purchase agreement with Iconosys, Inc., a private California corporation which shares an officer with the Company for the rights to domain names, web site content and trademark assignments of Travel America Visitor Guide (“TAVG”) which is a division of Iconosys. Iconosys shall sell, convey, transfer and assign to the Company and the Company shall purchase all right, title and interest in and to the assets of Iconosys as follows: (i) the Iconosys trademarks (the "Trademarks"); (ii) the Iconosys domain name (the "Domain Name") together with all associated service marks, copyrights, trade names and other intellectual property associated with the Domain Name; (iii) the Iconsys web site content (the "Web Site"), together with all associated intellectual property rights to the Web Site.

In accordance with the terms and provisions of the Asset Purchase Agreement, the Company shall pay to Iconosys a purchase price of $250,000 as follows: (i) $50,000 of the Purchase Price shall be paid in cash with a cash payment of $5,000 and $45,000 to be satisfied with the issuance of a promissory note dated August 8, 2013, due August 7, 2014, and with annum interest of 4%. The remaining $200,000 of the purchase price shall be paid in stock through a stock purchase agreement dated August 8, 2013 whereby the Company will issue Iconosys 1,052,632 common shares with a fair market price of $.0.19 (based on the closing trading price of the Company's shares of common stock on the OTCQB as of August 8, 2013.

Being Iconosys is a related party to the Company, it was management’s decision to not record an intangible asset related to the asset purchase. As of December 31, 2013, the Company has not yet issued the 1,052,632 shares and has recorded them as a stock payable.

In the year ended December 31, 2013 the Company recognized $1,961 in services income relating to the TAVG asset. The Company also recorded deferred revenues of $11,409 relating to TAVG membership sales which will be recognized over the one year subscription term.

NOTE 10 – SHARE EXCHANGE AGREEMENT

On November 9, 2012 the Company acquired Ad Shark Inc., a privately-held California corporation, through a share exchange agreement whereby the Company will issue 27,939,705 common shares in exchange for all the outstanding equity of Ad Shark, Inc. As a result of the share exchange, Ad Shark, Inc. became a wholly owned subsidiary of the Company (referenced in Note 15).

F-10

Monster Arts, Inc.

(A Development Stage Company)

Notes to the Consolidated Financial Statements

December 31, 2013 and 2012

NOTE 11 - STOCKHOLDERS' DEFICIT

Authorized Stock

On July 19, 2013, the Company amended its articles of incorporation to increase its authorized shares from 75,000,000 to 750,000,000 of which 730,000,000 were designated as common stock and 20,000,000 were designated as preferred stock. The stocks have a par value of $0.001. The Company then designated 10,000,000 preferred shares as Series A Preferred Stock. Each share of Series A Preferred Stock can vote equal to 100 shares of common stock and can be converted to common stock at a rate of 1 to 1.

Issued Stock

On February 14, 2012, the Company issued 10,753 shares of common stock to Asher Enterprises for the conversion of $10,000 in principal of outstanding convertible notes payable.

On February 23, 2012, the Company issued 834 shares of common stock to Iconosys to satisfy $35,825 of stock payable as part of the license agreement entered into on May 16, 2011.

On March 13, 2012, the Company issued 10,186 shares of common stock to Asher Enterprises for the conversion of $5,500 in principal of outstanding convertible notes payable.

On July 1 and September 7, 2012, the Company issued a total of 250,000 shares for the exercise of 250,000 cashless stock options issued to two consultants in the previous quarter.

On November 27, 2012 the Company issued 5,000 shares to Tangier Investors as consideration for extending the outstanding note payable.

F-11

Monster Arts, Inc.

(A Development Stage Company)

Notes to the Consolidated Financial Statements

December 31, 2013 and 2012

NOTE 11 - STOCKHOLDERS' DEFICIT (continued)

Stock Options

F-12

Monster Arts, Inc.

(A Development Stage Company)

Notes to the Consolidated Financial Statements

December 31, 2013 and 2012

NOTE 11 - STOCKHOLDERS' DEFICIT (continued)

The following summarizes pricing and term information for options issued that are outstanding as of December 31, 2013 and 2012:

	Year ended December 31, 2013			Year ended December 31, 2012
		Weighted			Weighted
		Average	Aggregate		Average	Aggregate
	Number of	Exercise	Intrinsic	Number of	Exercise	Intrinsic
Stock Options	Options	Price	Value	Options	Price	Value

Balance at beginning of year	6,667	$ 0.30	-	6,667	$ .30	-

Granted	-	-	-	250,000	$ .001	-
Exercised	-	-	-	(250,000)	-	-
Forfeited	-	-	-	-	-	-

Balance at end of year	6,667	0.30	-	6,667	0.30	-


Options exercisable at end of year	-	-	-	5,000	$ 0.30	-


Weighted average fair value of
options granted during year		-			-

The fair value of the options was based on the Black Scholes Model using the following assumptions:


	2013			2012
Exercise price:	$	0.30		$	0.30
Market price at date of grant:	$	1.00		$	1.00
Volatility:		229%-311	%		229%-311	%
Expected dividend rate:		0	%		0	%
Risk-free interest rate:		0.15%-0.23	%		0.13%-0.21	%

The following activity occurred under the Company’s plans:


	December 31,		December 31,
	2013		2012
Weighted-average grant date fair value of options granted	$	-	$	-
Aggregate intrinsic value of options exercise		N/A		N/A
Fair value of options recognized as expense	$	-	$	2,645

F-13

Monster Arts, Inc.

(A Development Stage Company)

Notes to the Consolidated Financial Statements

December 31, 2013 and 2012

NOTE 12 - CONVERTIBLE NOTES PAYABLE

Asher Enterprises, Inc.

As of January 1, 2012, the Company had three convertible notes outstanding to Asher Enterprises, Inc. with a combined principle balance of $80,300.

On March 13, 2012, the Company issued 10,186 shares of common stock to Asher Enterprises for the conversion of $5,500 in principal of outstanding convertible notes payable. On April 17, 2012, the Company issued 11,217 shares of common stock to Asher Enterprises for the conversion of $1,300 in principal of outstanding convertible notes payable and $831 in accreted discount. During the second quarter of 2012, Asher Enterprises, Inc. took actions not beneficial to the Company or its shareholders. As a result, on April 26, 2012, two related-party investors, one of which is the Company’s current chief executive officer, paid personally the remaining Asher principle convertible note payable balance of $73,500 as well as forgiving $21,121 in shareholder loans. In return the Company issued a total of 2,700,000 shares of unregistered restricted common stock.

On April 11, 2013, the Company entered into a Convertible Note Agreement with Asher Enterprises Inc. for a $42,500 convertible note payable with interest of 8% per annum, unsecured, and due January 14, 2014. The note is convertible into common shares of the Company at a conversion rate of 55% of the market price, calculated as the average of the three lowest trading prices in the previous 10 days leading up to the date of conversion.

On May 13, 2013, the Company entered into a Convertible Note Agreement with Asher Enterprises Inc. for a $63,000 convertible note payable with interest of 8% per annum, unsecured, and due February 17, 2014. The note is convertible into common shares of the Company at a conversion rate of 55% of the market price, calculated as the average of the three lowest trading prices in the previous 10 days leading up to the date of conversion.

On June 14, 2013, the Company entered into a Convertible Note Agreement with Asher Enterprises Inc. for a $37,500 convertible note payable with interest of 8% per annum, unsecured, and due March 18, 2014. The note is convertible into common shares of the Company at a conversion rate of 55% of the market price, calculated as the average of the three lowest trading prices in the previous 10 days leading up to the date of conversion.

On July 10, 2013, the Company, entered into a Securities Purchase Agreement whereby the Company sold a Convertible Promissory Note to Asher Enterprises, Inc., a Delaware corporation, in the original principal amount of $37,500, and accruing interest at eight percent (8%) per annum. The Note is convertible into the Company’s common stock at a conversion price equal to fifty-five percent (55%) of the then-prevailing market price, beginning one hundred eighty (180) days from the date of the Note’s issuance.

On September 12, 2013, the Company, entered into a Securities Purchase Agreement whereby the Company sold a Convertible Promissory Note to Asher Enterprises, Inc., a Delaware corporation, in the original principal amount of $32,500, and accruing interest at eight percent (8%) per annum. The Note is convertible into the Company’s common stock at a conversion price equal to fifty-five percent (55%) of the then-prevailing market price, beginning one hundred eighty (180) days from the date of the Note’s issuance.

On December 23, 2013, the Company, entered into a Securities Purchase Agreement whereby the Company sold a Convertible Promissory Note to Asher Enterprises, Inc., a Delaware corporation, in the original principal amount of $60,000, and accruing interest at eight percent (8%) per annum. The Note is convertible into the Company’s common stock at a conversion price equal to fifty-five percent (55%) of the then-prevailing market price, beginning one hundred eighty (180) days from the date of the Note’s issuance.

In the year ended December 31, 2013, Asher Enterprises converted $44,490 of convertible notes payable into 7,265,116 common shares.

Tangier Investors LLP

On May 16, 2011, the Company entered into an agreement with Tangiers Investors, LP, a Delaware limited partnership, an accredited investor, whereby Tangiers Investors loaned the Company the aggregate principal amount of $50,000, less $500 for costs of the loan transaction and $4,000 fee to be paid to a third party, together with any interest at the rate of seven percent (7%) per annum, until the maturity date of May 7, 2012. The original issue discount note, as described in ASC 480-55, may not be prepaid in whole or in part. If the Note is not paid in full with interest on the maturity date, the note holder has the right to convert this Note into restricted common shares of the Company. The conversion price shall equal the “Variable Conversion Price” (subject to equitable adjustments for stock splits, stock dividends or rights offerings by the Borrower). The “Variable Conversion Price” shall mean 75% multiplied by the Market Price (representing a discount rate of 25%). “Market Price” means the lowest 11 trading price for the Common Stock during the seven (7) Trading Day period ending one Trading Day prior to the date the Conversion Notice is sent by the Holder to the Borrower via facsimile. In November of 2012 Tangier Investors LLP agreed to extend the terms of the convertible note for 5,000 common shares paid as consideration by the Company. This allowed the maturity date to be delayed until January 25, 2013.

Tangier Investors LLP exercised their conversion rights to convert $30,000 of convertible notes payable into 160,000 common shares. The remaining balance was paid in full as of December 31, 2013.

F-14

Monster Arts, Inc.

(A Development Stage Company)

Notes to the Consolidated Financial Statements

December 31, 2013 and 2012

Premier Venture Partners, LLC (“Premier”)

On October 24, 2013, the Company entered into a court ordered settlement with Premier Venture Partners, LLC in the amount of $63,063. Premier Venture Partners, LLC purchased bona fide accounts payable vendor accounts of the Company in the amount of $63,063 which pursuant to the courts judgment will be settled in the form of common stock of the Company. Premier’s entitled to receive the number of common shares equal to a number, “with an aggregate value equity to (i) the sum of the claim amount plus a 10% settlement fee and plaintiff’s reasonable attorney fees and expense, (ii) divided by the lower of the following: (1) fifty percent of the closing bid price for the trading day immediately preceding the order date or (2) fifty percent of the arithmetic average of the individual daily VWAPs for any five trading days within the calculation period”.

The sum of the claim amount plus a 10% settlement fee and plaintiff’s reasonable attorney fees and expenses were calculated as follows:


Claim amount	$	63,063
10% settlement fee		6,306
Attorney fees		5,770
Total	$	75,139

Management calculates the conversion price to be $0.00114 using fifty percent of the arithmetic average of the individual daily VWAPs for any five trading days within the calculation period. Accordingly, Premier is entitled to receive 65,911,456 common shares of the Company as part of the settlement. As of December 31, 2013, the Company has issued 7,243,417 common shares to Premier and was required to issue an additional 58,668,039 shares of common stock in the Company.

Dennis Pieczarka

On May 22, 2013 the Company executed a convertible debenture agreement with Dennis Pieczarka for a $2,500 convertible note payable with interest of 9% per annum, unsecured and due on May 22, 2014. The holder has the right to convert the principle plus interest into common shares of the Company at a conversion rate of $0.15 per share.

Christopher Thompson

On April 1, 2013, the Company entered into a Securities Purchase Agreement with Christopher Thompson for a $10,000 note payable due interest at 9% per annum, unsecured, and due April 1, 2014. The note is convertible into common shares of the Company at a conversion rate of $.10per share.

Michael Lace

On June 26, 2013, the Company entered into a Securities Purchase Agreement with Michael Lace for a $2,800 note payable due interest at 9% per annum, unsecured, and due June 26, 2014. The note is convertible into common shares of the Company at a conversion rate of $.05per share. In the year ended December 31, 2013, Mr. Lace exercised his conversion rights to convert $2,800 of convertible debt and $11 of accrued interest into 56,221 common shares.

Charles Knoop

On July 9, 2013, the Company entered into a Securities Purchase Agreement with Charles Knoop for a $1,000 note payable due interest at 9% per annum, unsecured, and due July 9, 2014. The note is convertible into common shares of the Company at a conversion rate of $.095 per share.

Balamurugan Shanmugam

On August 8, 2013, the Company entered into a Securities Purchase Agreement with Balamurugan Shanmugam for a $5,000 note payable due interest at 9% per annum, unsecured, and due August 8, 2014. The note is convertible into common shares of the Company at a conversion rate of $.10per share. On September 26, 2013, Balamurugan exercised his right to convert his $5,000 of convertible debt and $60 of accrued interest into 50,604 common shares.

The following table summarizes the total outstanding principle on convertible notes payable:

	December 31, 2013		December 31, 2012

Convertible Notes Payable- Asher Enterprises, Inc.	$	228,510	$	—
Convertible Notes Payable - Tangier Investors, LLP		—		38,500
Convertible Note Payable- Premier Venture Partners LLC		17,370
Convertible Note Payable- Dennis Pieczarka		2,500		—
Convertible Note payable - Christopher Thompson		10,000		—
Convertible Note payable - James Ault		2,565		—
Convertible Note payable - Charles Knoop		1,000		—
Total	$	261,945	$	38,500

The accrued interest on convertible notes payable at December 31, 2013 and December 31, 2012 was $11,695 and $2,050, respectively.

Derivative liability

At December 31, 2013 and December 31, 2012, the Company had $21,876,947 and $0 in derivative liability pertaining to the outstanding convertible notes. The Company calculates the derivative liability using the Black Scholes Model which takes into consideration the stock price on the grant date, exercise price with discount to market conversion rate, stock volatility, expected life of the note, risk-free rate, annual rate of quarterly dividends, call option value and put option value. The material increase in the derivative liability recorded at December 31, 2013 was the primarily due to the dramatic decrease in the Company’s stock price from the grant date of the convertible notes to December 31, 2013.

F-15

Monster Arts, Inc.

(A Development Stage Company)

Notes to the Consolidated Financial Statements

December 31, 2013 and 2012

NOTE 13 – CONTINGENCY AGREEMENTS

Master Purchase Agreement with Iconosys

Management Service Agreement with Iconosys

Joint Venture agreement with Intelligent Living Inc.

On November 1, 2013, the Company executed a joint venture agreement with Intelligent Living, Inc. (“ILIV”). You can read the full agreement in the registrant’s SEC Form 8-K filing on November 5, 2013. The Company will provide ILIV comprehensive and end-to-end turnkey business function through its development of smartphone and tablet apps. The Company’s revenue sharing will be 35% of gross payments from app sales from Google Play and 50% of gross payments from app sales through Amazon, Nook, iTunes, and others. The Company will be paid in the form of stock by ILIV which is a publically traded company trading on the OTCQB under the symbol “ILIV”. The Company will be paid 36,600,000 common shares of ILIV in quarterly installments over a period of 2 years from the date of the agreement. The Company has been paid an initial 10,000,000 common shares upon closing of the agreement which were valued at the closing price of ILIV stock on November 1, 2013 which was $0.001. This resulted in the Company recording an available-for-sale securities asset of $10,000. The available-for-sale securities asset was revalued at December 31, 2013 using the closing price of ILIV of $0.0006 per share which resulted in the Company recording an unrealized loss on available-for-sale securities of $4,000.

Employment Agreement with President

NOTE 14 – LOSS ON DEBT SETTLEMENT

During the second quarter of 2012, Asher Enterprises, Inc., a holder of convertible debt in the Company, took actions not beneficial to the Company or its shareholders. As a result, on April 26, 2012, two related-party investors, one of which is the Company’s current chief executive officer, paid personally the remaining Asher principle convertible note payable balance of $73,500 as well as forgiving $21,121 in shareholder loans. In return the Company issued a total of 2,700,000 shares of unregistered restricted common stock. On the day of the debt settlement and issuance of stock, the Company’s stock was trading at $1 per share. The Company recognized a non-cash loss on the settlement of debt associated with this stock issuance of $2,700,000.

NOTE 15 – RELATED PARTY TRANSACTIONS

Loss on debt settlement with Asher Enterprises, Inc.

F-16

Monster Arts, Inc.

(A Development Stage Company)

Notes to the Consolidated Financial Statements

December 31, 2013 and 2012

Asset Purchase Agreement with Iconosys for TAVG

Management Service Agreement with Iconosys

Notes Payable to Related Parties

At December 31, 2013 and December 31, 2012, the Company had notes payable to related parties balance of $57,480 and $13,250.

Loan receivable to related party

Accounts payable & accrued expenses to related parties

The accounts payable to related parties balance at December 31, 2013 and December 31, 2012 was $169,577 and $0.

Loan from Officer

Master Purchase Agreement with Iconosys

Ad Shark Acquisition

The Chairman, Chief Executive Officer and Chief Financial Officer of Monster Offers is Wayne Irving II; Mr. Irving has been an officer and director of the Company since May 15, 2012. On November 9, 2012, Monster Offers entered into an Acquisition Agreement and Plan of Merger to acquire Ad Shark. At the time of this transaction, Wayne Irving II was also the Chief Executive Officer and a director of Ad Shark. He is also the Chief Executive Officer, Director and majority shareholder of Iconosys, Inc. (“Iconosys”), which owned Ad Shark prior to Iconosys’ spinoff (the “Spinoff”) of its shareholdings in Ad Shark to its shareholders. Subsequent to the Spinoff, Ad Shark merged with Monster Offers (the “Merger”). As a result of the Merger, Mr. Irving became the director, Chairman, Chief Executive Officer and Chief Financial Officer of the Company, which was the surviving entity of the Merger, and remains the largest shareholder of the Company. As a condition of the Merger between Monster Offers and Ad Shark, Monster Offers agreed to keep in full force and effect a three-year Employment Agreement between Ad Shark and Mr. Irving which was entered into on August 1, 2012.

F-17

Monster Arts, Inc.

(A Development Stage Company)

Notes to the Consolidated Financial Statements

December 31, 2013 and 2012

NOTE 15 - RELATED PARTY TRANSACTIONS (continued)

Ad Shark Acquisition (continued)

Licensing agreement with Iconosys

F-18

Monster Arts, Inc.

(A Development Stage Company)

Notes to the Consolidated Financial Statements

December 31, 2013 and 2012

NOTE 16 - INCOME TAXES

Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carryforwards 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 bases. 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 deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

Net deferred tax assets consist of the following components as of December 31, 2013 and 2012:

	December 31, 2013			December 31, 2012
Deferred Tax Assets – Non-current:

NOL Carryover	$	1,599,500		$	1,419,300

Less valuation allowance		(1,599,500	)		(1,419,300	)


Deferred tax assets, net of valuation allowance	$	—			$ - -

Reconciliation between the statutory rate and the effective tax rate is as follows at December 31:

	2013 & 2012
Federal statutory tax rate	(34	%)
Permanent difference and other	34	%
	0	%

At December 31, 2013, the Company had net operating loss carryforwards of approximately $1,599,500 that may be offset against future taxable income from the year 2014 to 2033. No tax benefit has been reported in the December 31, 2013 financial statements since the potential tax benefit is offset by a valuation allowance of the same amount.

Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carryforwards for Federal Income tax reporting purposes are subject to annual limitations. Should a change in ownership occur, net operating loss carryforwards may be limited as to use in future years.

F-19

Monster Arts, Inc.

(A Development Stage Company)

Notes to the Consolidated Financial Statements

December 31, 2013 and 2012

NOTE 17 - SUBSEQUENT EVENTS

Management has evaluated subsequent events pursuant to the requirements of ASC Topic 855 and has determined that other than mentioned below no other material subsequent events exist.

From January 1, 2014 until the date of this filing April 15, 2013, the Company issued 129,897,534 common shares of which 61,958,516 were issued to Asher Enterprises, Inc. for the conversion of $98,510 in convertible notes payable, 25,693,824 shares were issued to Premier Venture Partners, LLC pursuant to the court ordered settlement, 19,222,681 shares were issued to Ad Shark, Inc. shareholders for the conversion of their Ad Shark, Inc. shares at a ratio of 4.38 Ad Shark shares to Monster Arts Inc. shares and 23,022,513 shares were to consultants for services.

On February 14, 2014, the Company entered into a convertible note debenture agreement with Asher Enterprises, Inc. for $12,500. The note accrues interest at 8% per annum and is convertible into common stock of the Company at a 45% discount to market.
On February 19, 2014, the Company entered into a consulting agreement with Mind Solutions, Inc., whereby Mind Solutions, Inc. will provide the Company with thought controlled software development services over a one year term. The Company will pay Mind Solutions, Inc. four quarterly payments of $50,000 in restricted common stock of the Company.

F-20

Positive
Negative
Uncertain
Constraining
Legalese
Litigous
Readability	H.S. freshman Avg

Monster Arts (APPZ) Inactive 10-K2013 FY Annual report

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