UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

MARK ONE

[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the Quarterly Period ended ~~September~~June 30, ~~2013~~2014 or

[ ] 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: 0-11772

SPO GLOBAL INC.

(Exact name of registrant specified in its charter)

Delaware

25-1411971

(State or other jurisdiction of incorporation or

organization)

(I.R.S. Employer Identification No.)

3 Gavish Street, POB 2454, Kfar Saba, Israel

(Address of principal executive offices, including zip code)

972-9-966-2520

(Registrant's telephone number, including area code)

SPO MEDICAL INC.

(Former name, former address and former fiscal year, if changed since last report)

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

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

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

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

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

As of ~~November 13~~August 14, ~~2013~~2014, SPO Global Inc. had outstanding 5 6,~~155~~418,~~608~~368 shares of common stock, par value $0.01 per share.

INDEX PAGE

		PAGE
PART I — FINANCIAL INFORMATION		2
Forward Looking Statements		2
Item 1 - Financial Statements		F-1
Unaudited Condensed Interim Consolidated Balance Sheet September 30, 2013 and audited Consolidated balance sheet December 31, 2012		F-1
Unaudited Condensed Interim Consolidated Balance Sheet June 30, 2014 and audited Consolidated balance sheet December 31, 2013		F-1
Unaudited Condensed Interim Consolidated Statements of Operations for the three and nine months ended September 30, 2013 and 2012		F-2
Unaudited Condensed Interim Consolidated Statements of Operations for the three and six months ended June 30, 2014 and 2013		F-2
Unaudited Condensed Interim Consolidated Statements of Cash Flows for the nine months ended September 30, 2013 and 2012		F-3
Unaudited Condensed Interim Consolidated Statements of Cash Flows for the six months ended June 30, 2014 and 2013		F-3
Notes to Condensed Interim Consolidated Financial Statements		F-4
Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations		3
Item 4 - Controls and Procedures		67
PART II — OTHER INFORMATION
Item 3 - Defaults upon Senior Securities		7
Item 6 – Exhibits		78
SIGNATURES		79

Explanatory Note

SPO Global Inc. implemented the previously approved 1-for-20 reverse stock split on October 7, 2013. All share and per share amounts and calculations in this Quarterly Report and the accompanying consolidated condensed financial statements have been retroactively adjusted to reflect the effects of the reverse stock split.

PART I - FINANCIAL INFORMATION

FORWARD LOOKING STATEMENTS

THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE FINANCIAL STATEMENTS AND RELATED NOTES CONTAINED ELSEWHERE IN THIS FORM 10-Q. CERTAIN STATEMENTS MADE IN THIS DISCUSSION ARE "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. FORWARD-LOOKING STATEMENTS CAN BE IDENTIFIED BY TERMINOLOGY SUCH AS "MAY," "WILL," "SHOULD," "EXPECTS," "INTENDS," "ANTICIPATES," "BELIEVES," "ESTIMATES," "PREDICTS," OR "CONTINUE" OR THE NEGATIVE OF THESE TERMS OR OTHER COMPARABLE TERMINOLOGY AND INCLUDE, WITHOUT LIMITATION, STATEMENTS BELOW REGARDING: THE COMPANY’S ABILITY TO CONTINUE AS A GOING CONCERN; THE COMPANY'S ~~INTENDED~~ BUSINESS PLANS; EXPECTATIONS AS TO PRODUCT PERFORMANCE; EXPECTATIONS AS TO MARKET ACCEPTANCE OF THE COMPANY'S PRODUCT LINES; AND BELIEF AS TO THE SUFFICIENCY OF CASH RESERVES. BECAUSE FORWARD-LOOKING STATEMENTS INVOLVE RISKS AND UNCERTAINTIES, THERE ARE IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE EXPRESSED OR IMPLIED BY THESE FORWARD-LOOKING STATEMENTS. THESE FACTORS INCLUDE, BUT ARE NOT LIMITED TO, SUFFICIENCY OF CASH RESERVES, THE COMPANY'S ABILITY TO OBTAIN ADDITIONAL NEEDED FINANCING; GOING CONCERN QUALIFICATIONS; ORDER BACKLOG RESULTING IN REVENUES; MARKET ACCEPTANCE OF THE COMPANY’S PRODUCT LINES; THE COMPETITIVE ENVIRONMENT GENERALLY AND IN THE COMPANY'S SPECIFIC MARKET AREAS; CHANGES IN TECHNOLOGY; INFLATION; ECONOMIC CONDITIONS IN GENERAL AND IN ~~THE~~ THE COMPANY'S SPECIFIC MARKET AREAS; DEMOGRAPHIC CHANGES; CHANGES IN FEDERAL, STATE AND /OR LOCAL GOVERNMENT LAW AND REGULATIONS AFFECTING THE TECHNOLOGY; CHANGES IN OPERATING STRATEGY OR DEVELOPMENT PLANS; AND THE ABILITY TO ATTRACT AND RETAIN QUALIFIED PERSONNEL. ALTHOUGH THE COMPANY BELIEVES THAT EXPECTATIONS REFLECTED IN THE FORWARD-LOOKING STATEMENTS ARE REASONABLE, IT CANNOT GUARANTEE FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS. MOREOVER, NEITHER THE COMPANY NOR ANY OTHER PERSON ASSUMES RESPONSIBILITY FOR THE ACCURACY AND COMPLETENESS OF THESE FORWARD-LOOKING STATEMENTS. THE COMPANY IS UNDER NO DUTY TO UPDATE ANY FORWARD-LOOKING STATEMENTS AFTER THE DATE OF THIS REPORT TO CONFORM SUCH STATEMENTS TO ACTUAL RESULTS.

SPO GLOBAL INC. ~~AND ITS SUBSIDIARY~~

CONDENSED INTERIM CONSOLIDATED BALANCE SHEETS

(U.S. dollars in thousands (except share and per share data)

			September 30,				December 31,
	June 30,				December 31,
			2013				2012
	2014				2013
			Unaudited
	(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	137	$	~~236~~	$	286	$	24
Prepaid expenses and other accounts receivable		213		20		61		10
				256				34
		350				347
LONG TERM INVESTMENTS
Severance pay fund		172		~~152~~		168		~~142~~
PROPERTY AND EQUIPMENT, NET		20		21		22		—
Total net assets	$	542	$	~~429~~	$	537	$	~~176~~
LIABILITIES AND STOCKHOLDERS’ DEFICIENCY
Current Liabilities
Short-term loans	$	1,366	$	~~944~~	$	700	$	~~1,081~~
Trade payables		37		~~123~~		38		5
Employees and Payroll accruals		869		~~718~~		774		~~563~~
Accrued expenses and other liabilities		543		~~494~~		531		~~502~~
				2,279				2,151
		2,815				2,043
Long-Term Liabilities
Warrants to issue shares				—				18
Long-Term Loans		464				882
Long-Term Loans				518				375
Accrued severance pay		283				271
Accrued severance pay				257				235
		747				1,153
				775				628
COMMITMENTS AND CONTINGENT LIABILITIES
COMMITMENTS AND CONTINGENT LIABILITIES
STOCKHOLDERS’ DEFICIENCY
STOCKHOLDERS’ DEFICIENCY
Preferred stock $0.01 par value
Preferred stock $0.01 par value
Authorized - 2,000,000 shares, issued and outstanding - 100 Series A shares at June 30, 2014 and December 31, 2013, respectively		—	(*)			—	(*)
Authorized - 2,000,000 shares, issued and outstanding - 100 and 0 Series A shares at September 30, 2013 and December 31, 2012, respectively			(*)	—				—
Common stock $0.01 par value-
Common stock $0.01 par value-
Authorized - 100,000,000 shares, issued and outstanding - 6,127,599 and 5,305,608 shares as at June 30, 2014 and December 31, 2013, respectively (**)		62				53
Authorized - 100,000,000 shares, issued and outstanding - 4,969,148 and 2,823,177 shares as at September 30, 2013 and December 31, 2012, respectively			(**)	50			(**)	28
Additional paid-in capital		18,975				18,971
Additional paid-in capital			(**)	18,825			(**)	18,369
Accumulated deficit		(22,057	)			(21,683	)
Accumulated deficit				(21,500	)			(21,000	)
		(3,020	)			(2,659	)
				(2,625	)			(2,603	)
Total liabilities and stockholders’ deficiency	$	542			$	537
Total liabilities and stockholders’ deficiency			$	429			$	176
(*) Less than $1
(**) The number of shares have been adjusted retroactively to reflect the one for twenty reverse split of our common stock dated October 7, 2013.

(*) Less than $1

(**) The number of shares have been adjusted retroactively to reflect the one for twenty reverse split of our shares of common stock implemented on October 7, 2013.

The accompanying notes to these financial statements are an integral part thereof.

F-1

SPO GLOBAL INC. ~~AND ITS SUBSIDIARY~~

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS

(U.S. dollars in thousands (except share and per share data)

	Three months ended September 30,						Nine months ended September 30,
	Three months ended June 30,						Six months ended June 30,
	2013			2012			2013			2012
	2014			2013			2014			2013
	Unaudited						Unaudited
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Revenues	$	~~245~~22		$	~~278~~100		$	~~494~~50		$	~~278~~249
Cost of revenues		~~199~~0			~~231~~85			~~409~~2			~~231~~210
Gross profit		4622			4715			8548			4739
Operating expenses
Research and development	$	—		$	5—		$	—6		$	5—
Selling and marketing		1816			~~125~~17			3532			~~382~~17
General and administrative		~~138~~115			8397			~~351~~236			~~220~~213
Total operating expenses		~~156~~131			~~213~~114			~~386~~274			~~607~~230
Operating loss		(~~110~~109	)		(~~166~~99	)		(~~301~~226	)		(~~560~~191	)
Financial expense, net		(6192	)		(583	)		(~~199~~148	)		(90138	)
Net Loss for the period	$	(~~171~~201	)	$	(~~171~~182	)	$	(~~500~~374	)	$	(~~650~~329	)
Basic and diluted loss per share (*)	$	(0.0403	)	$	(0.0805	)	$	(0.1307	)	$	(0.3110	)
Weighted average number of shares outstanding used in computation of basic loss per share (*)		45,~~671~~931,~~544~~176			23,~~232~~543,~~487~~055			35,~~744~~726,~~787~~514			23,~~100~~271,~~786~~111
(*) The number of shares have been adjusted retroactively to reflect the one for twenty reverse split of our shares of common stock implemented on October 7, 2013.
(*) The number of shares have been adjusted retroactively to reflect the one for twenty reverse split of our common stock dated October 7, 2013.

The accompanying notes to these financial statements are an integral part thereof.

F-2

SPO GLOBAL INC. ~~AND ITS SUBSIDIARY~~

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

(U.S. dollars in thousands (except share and per share data)

	Nine months ended September 30,
	Six months ended June 30,
	2013			2012
	2014			2013
	Unaudited
	(Unaudited)			(Unaudited)
Cash Flows from Operating Activities
Net Loss for the period	$	(~~500~~374	)	$	(~~650~~329	)
Adjustments to reconcile loss to net cash used in operating activities:
Depreciation		82			—
Non-cash expenses related to convertible debt		9128			5761
Stock-based compensation expenses related to employees, service providers		—			378
Non-cash (income) related to warrants to issue shares		—			(18	)
Non-cash expense related to warrants to issue shares		(18	)		(1	)
Changes in assets and liabilities:
Increase in accrued interest payable on loans		5258			2431
(Increase) in prepaid expenses and other receivables		(10	)		(7	)
(Increase) in accounts receivables		—			(1	)
Increase in trade payables		118			6
(Increase) in prepaid expenses and other receivables		(152	)		(15	)
Increase in accrued severance pay, net		12			5
(Decrease) Increase in trade payables		(1	)		54
Increase (decrease) in accrued expenses and other liabilities		171			(62	)
Increase in accrued severance pay, net		8			10
Net cash used in operating activities		(76	)		(250	)
Increase in accrued expenses and other liabilities		107			109
Cash Flows from Investing Activities
Net cash used in operating activities		(324	)		(98	)
Purchase of property		(29	)		—
Net cash used in investing activities		(29	)		—
Cash Flows from Financing Activities
Proceeds from sale of shares and warrants, net of issuance costs		~~227~~—			—227
Payments of loans		~~(14~~—	)		(2613	)
Proceeds from loan		~~104~~175			~~316~~104
Net cash provided by financing activities		~~317~~175			~~290~~318
Increase in cash and cash equivalents		212			40
Increase (decrease) in cash and cash equivalents		(149	)		220
Cash and cash equivalents at the beginning of the period		24286			3724
Cash and cash equivalents at the end of the period	$	~~236~~137		$	77244
Non cash transactions
Conversion of convertible debt to shares	$	~~135~~13		$	6867
Exercise of warrants in consideration of concession of debt	$	24—		$	2224
Discount on convertible notes recognized to beneficial conversion feature	$	80—		$	—80
Reduced exercise price of warrants in consideration of concession of debt	$	12		$	—
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for:
Interest	$	59		$	2134

The accompanying notes to these financial statements are an integral part thereof.

F-3

SPO GLOBAL INC. ~~AND ITS SUBSIDIARY~~

NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS

(U.S. dollars in thousands (except share data))

NOTE 1 - ~~General~~ GENERAL

SPO Global Inc. (hereinafter referred to as "SPO" or the "Company") is engaged in the design, development and marketing of non-invasive pulse oximetry technologies to measure blood oxygen saturation and heart rate. The applications are marketed, in the following sectors; professional medical care, homecare, sports, safety and search & rescue.

The Company was originally incorporated under the laws of the State of Delaware in September 1981 under the name "Applied DNA Systems, Inc." On November 16, 1994, the Company changed its name to "Nu-Tech Bio-Med, Inc." On December 23, 1998, the Company changed its name to "United Diagnostic, Inc." Effective April 21, 2005, the Company acquired (the "Acquisition Transaction") 100% of the outstanding capital stock of SPO Medical Equipment Ltd., a company incorporated under the laws of the State of Israel ("SPO Ltd."), pursuant to a Capital Stock Exchange Agreement dated as of February 28, 2005 between the Company, SPO Ltd. and the shareholders of SPO Ltd., as amended and restated on April 21, 2005 (the "Exchange Agreement"). In exchange for the outstanding capital stock of SPO Ltd., the Company issued to the former shareholders of SPO Ltd. a total of 5,769,106 ~~(288,456 post reverse stock split)~~ shares of the Company's common stock, par value $0.01 per share ("Common Stock"), representing approximately 90% of the Common Stock then issued and outstanding after giving effect to the Acquisition Transaction. As a result of the Acquisition Transaction, SPO Ltd. became a wholly owned subsidiary of the Company as of April 21, 2005 and, subsequent to the Acquisition Transaction, the Company changed its name to "SPO Medical Inc.". Upon consummation of the Acquisition Transaction, the Company effectuated a forward subdivision of the Company's Common Stock issued and outstanding on a 2.65285:1 basis.

The merger between UNDI and the SPO Ltd. was accounted for as a reverse merger. As the shareholders of SPO Ltd. received the largest ownership interest in the Company, SPO Ltd. was determined to be the "accounting acquirer" in the reverse acquisition. As a result, the historical financial statements of the Company were replaced with the historical financial statements of the SPO Ltd.

The Company and its subsidiary, SPO Ltd., are collectively referred to as the "Company". In January 2010, the Company restructured its operations to focus primarily on licensing its core technology for non-medical market applications. Following the restructure, the Company ceased its previous operations associated with the distribution of the PulseOx line in the medical field. In February 2011, the Company transferred research and development activities to subcontractors, thereby ceasing all internal research and development activities.

Effective October 4, 2013, the Company changed its corporate name to “SPO Global Inc.”.

The Company implemented ~~the~~a ~~previously approved~~ 1-for-20 reverse stock split on October 7, 2013. All share and per share amounts and calculations in these financial statements have been retroactively adjusted to reflect the effects of the reverse stock split.

NOTE 2 - Basis of Presentation

The accompanying un-audited condensed consolidated interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with Rule 8-03 of Regulation S-X. These financial statements reflect all adjustments, consisting of normal recurring adjustments and accruals, which are, in the opinion of management, necessary for a fair presentation of the financial position of the Company as of September 30, 2013 and the results of operations and cash flows for the interim periods indicated in conformity with generally accepted accounting principles applicable to interim periods. Accordingly, certain information and footnote disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. Operating results for the three and nine months ended September 30, 2013, are not necessarily indicative of the results that may be expected for the year ended December 31, 2013.

Certain prior years' amounts have been reclassified in conformity with current year's financial statements.

F-4

NOTE 2 3 - ~~Going Concern~~ GOING CONCERN

As reflected in the accompanying financial statements, the Company’s operations for the ~~nine~~six months ended ~~September~~June 30, ~~2013~~2014, resulted in a net loss of $~~500~~374, and the Company’s balance sheet reflects a net stockholders’ deficit of $23,~~625~~020. ~~The~~ The Company’s ability to continue operating as a “going concern” is dependent on its ability to ~~generate~~raise sufficient additional ~~revenues~~ orworking capital. These matters raise ~~additional~~substantial ~~working~~doubt ~~capital~~about the Company’s ability to continue as a going concern. The financial statements have been prepared on a going concern basis, which contemplates realization of assets and liquidation of liabilities in the ordinary course of business. As disclosed in previous filings with the Securities and Exchange Commission, management has been attempting to raise additional cash from current and potential stockholders and, inplans ~~May~~to ~~2013,~~continue ~~the~~these ~~Company~~efforts. ~~raised~~There ~~net proceeds~~can ofbe ~~$227~~no ~~from~~assurance ~~accredited~~that ~~investors.~~this ~~While~~capital itwill ~~has~~be noavailable ~~commitments~~and ~~for~~if ~~additional~~it ~~amounts~~is not, the Company ~~plans~~may be forced to ~~continue its~~substantially ~~capital~~curtail ~~raising~~or ~~efforts.~~cease ~~These~~operations ~~conditions~~and ~~raise~~development ~~substantial~~expenditures. The financial ~~doubt~~statements ~~about~~do ~~the~~not ~~Company’s~~include ~~ability~~any toadjustments ~~continue~~that asmight aresult ~~going~~from ~~concern~~the outcome of this uncertainty.

NOTE 3 4 - ~~Loans Payable~~ SIGNIFICANT ACCOUNTING POLICIES

OnThe ~~January~~accompanying 4,un-audited ~~2013,~~condensed ~~the~~consolidated ~~Company~~interim ~~entered~~financial ~~into~~statements ahave ~~Convertible~~been ~~Note~~prepared ~~Agreement~~in ~~pursuant~~accordance towith ~~which~~accounting principles generally accepted in the ~~Company~~United ~~received~~States aof ~~loan~~America infor ~~the~~interim ~~principal amount~~financial information and with Rule 8-03 of ~~$32~~Regulation S-X.5. ~~The~~These financial ~~scheduled~~statements ~~maturity~~reflect ~~date~~all adjustments, consisting of ~~the~~normal ~~note~~recurring isadjustments ~~January~~and 4accruals, ~~2014.~~which ~~The~~are, ~~note~~in ~~bears~~the ~~interest~~opinion of atmanagement, anecessary ~~per~~for ~~annum~~a ~~rate~~fair presentation of ~~8%. Commencing~~the ~~June~~financial ~~18,~~position ~~2013,~~of the ~~Investor~~Company isas ~~entitled~~of toJune ~~convert~~30, ~~all~~2014 orand ~~any~~the ~~part~~ results of ~~the~~operations ~~outstanding~~ and ~~unpaid~~cash ~~principal~~flows ~~amount~~for on the ~~note,~~interim asperiods ~~well~~indicated asin ~~the~~conformity ~~interest~~with ~~accrued,~~generally ~~into~~accepted ~~shares~~accounting ofprinciples ~~the~~applicable to ~~Company’s~~interim ~~Common~~periods. ~~Stock~~Accordingly, atcertain ainformation ~~conversion~~and ~~rate~~footnote ~~equal~~disclosures tonormally ~~55%~~included ofin annual financial statements ~~the~~prepared ~~average~~in ofaccordance ~~the~~with ~~five~~generally ~~lowest~~accepted ~~closing~~accounting ~~sale~~principles ~~prices~~have ~~during~~been ~~the~~condensed ~~ten~~or ~~days~~omitted. ~~preceding~~Operating ~~the~~results ~~conversion~~for ~~date.~~the six Asmonths ofended ~~September~~June 30, ~~2013~~ 2014, are not necessarily indicative of the ~~Note~~results ~~was~~that ~~paid~~may bybe ~~conversion~~expected tofor ~~stock~~the year ended December 31, 2014.

OnCertain ~~February~~prior 5,years' ~~2013,~~amounts ~~the~~have ~~Company~~been ~~entered~~reclassified ~~into a Convertible Note Agreement pursuant to which the Company received an additional loan~~ in ~~the~~conformity ~~principal~~with ~~amount~~current of $32.5 from the above referenced investor. The scheduled maturity date of the note is February 5, 2014. The note bears interest at a per annum rate of 8%. Commencing July 28, 2013, the Investor is entitled to convert all or any part of the outstanding and unpaid principal amount on the note, as well as the interest accrued, into shares of the Company’year's ~~Common~~ ~~Stock~~financial ~~at a conversion rate equal to 55% of the average of the five lowest closing sale prices during the ten days preceding the conversion date~~statements. ~~As of September 30, 2013 the Note was paid by conversion to stock.~~

OnNOTE ~~April~~4 ~~12,~~- ~~2013,~~PROPERTY ~~the~~AND Company entered into a Convertible Note Agreement pursuant to which the Company received an additional loan in the principal amount of $32.5 from the above referenced investor. The scheduled maturity date of the note is April 12, 2014. The note bears interest at a per annum rate of 8%. Commencing October 9, 2013, the Investor is entitled to convert all or any part of the outstanding and unpaid principal amount on the note, as well as the interest accrued, into shares of the Company’s Common Stock at a conversion rate equal to 55% of the average of the five lowest closing sale prices during the ten days preceding the conversion date.EQUIPMENT

The Company negotiated new payment terms for certain loans with principal balances totaling $75. The original due dates ranging from September through November 2013 were extended for an additional 18 months. The conversion prices of these loans were changed to $0.025 ($0.50 post reverse stock split).

	June 30, 2014		December 31, 2013
Cost:
Office furniture and equipment	$	5	$	5
Automobile	$	24	$	24

Less accumulated depreciation:	$	9	$	7

Property and Equipment, net	$	20	$	22

~~The~~Depreciation ~~Company~~expense ~~negotiated new payment terms~~ for ~~certain~~the ~~loans~~period ~~with~~ended ~~principal balances totaling $425. The original due dates ranging from~~ June ~~through~~30, ~~November~~2014 ~~2013~~amounted ~~were extended for an additional 18 months. The conversion prices of these loans and the exercise prices of associated warrants were changed~~ to $02.~~025 ($0.50 post reverse stock split).~~

NOTE 5 - Stockholders Equity

Issuance of Securities

On May 8, 2013, the Company entered into a Subscription Agreement with two accredited investors (the “Investors”), pursuant to which the Company sold and issued to the Investors (the “Private Placement”) a total of 10,000,000 (500,000 post reverse stock split) shares of the Company's Common Stock for proceeds of $227, net of issuance expenses. In connection with the Private Placement, warrants (the “Warrants”) for an additional 5,000,000 (250,000 post reverse stock split) shares of the Company’s Common Stock were issued to one of the Investors. The Warrants are exercisable through May 8, 2018 at a per share exercise price of $0.10 ($2.00 post reverse stock split).

F-5

~~On May 29, 2013, the Company issued 2,366,639~~NOTE ~~(118,332~~5 ~~post~~- ~~reverse~~LOANS ~~stock split) shares to satisfy an obligation to issue shares.~~PAYABLE

On ~~August~~April 2612, 2013, the Company ~~designated~~entered ~~100~~into ~~shares~~a ofConvertible ~~its~~Note ~~preferred~~Agreement ~~stock~~pursuant asto ~~Series~~which Athe ~~Preferred~~Company ~~Stock,~~received ~~par~~a ~~value~~loan ~~$0.01~~in ~~per~~the ~~share~~principal ~~(the~~amount ~~“Series~~of A$32.5 ~~Preferred~~from ~~Stock”)~~an investor. ~~Among~~ ~~other~~The ~~things~~note was originally scheduled to mature on March 19, ~~the~~2014. ~~Certificate~~As of ~~Designation~~June ~~for~~30, ~~the~~2014, ~~Series~~$27 Aof ~~Preferred~~the ~~Stock~~loan ~~provides~~principal ~~that~~was ~~each~~converted ~~one~~into ~~share~~1,008,095 shares of ~~Series~~Common AStock ~~Preferred~~and ~~Stock~~the ~~has~~remaining ~~voting~~balance ~~rights~~in ~~equal~~the toamount ~~(x)~~of 0$5.~~019607~~5 ~~multiplied~~was bydue ~~the~~and ~~total~~owing. ~~issued~~The outstanding and ~~outstanding~~unpaid ~~Common~~principal ~~Stock~~amount ~~eligible~~continues to ~~vote~~accrue interest at ~~the~~a ~~time~~per ofannum ~~the~~rate ~~respective~~of ~~vote~~22%. ~~(the~~The ~~"Numerator"),~~outstanding ~~divided~~and byunpaid ~~(y)~~principal ~~0.49,~~together ~~minus~~with ~~(z)~~ the ~~Numerator.~~interest Onaccrued ~~August~~continue ~~26,~~to ~~2013~~be convertible, at the ~~Company~~election ~~entered~~of ~~into~~the aholder, ~~Preferred~~into ~~Stock~~shares ~~Purchase Agreement~~of ~~pursuant~~the toCompany’s ~~which~~Common itStock ~~issued~~at ~~one~~a ~~hundred~~conversion ~~(100)~~rate ~~shares~~equal ofto ~~its~~55% ~~Series~~of Athe ~~Preferred~~average ~~Stock~~of tothe ~~its~~five ~~Chief~~lowest ~~Executive~~closing ~~Officer.~~sale ~~The~~prices ~~Series~~during Athe ~~Preferred~~ten ~~Stock~~days ~~has~~preceding nothe ~~economic~~conversion ~~value and was issued solely for voting purposes~~date.

~~During~~On May 23, 2014, the ~~nine~~Company ~~months~~entered ~~ended~~into ~~September~~a ~~30,~~loan ~~2013,~~agreement with investor pursuant to which the Company ~~issued~~received a loan in the principal amount of $175 to be used for order financing. The loan is interest-free. The principle amount of the loan with a $10 fee is repayable by September 30,~~552~~ 2014 and may be pre-paid,~~769~~ (1at the option of the Company,~~527,639~~ ~~post~~without ~~reverse~~notice ~~stock~~or ~~split)~~penalty. ~~shares~~If ofthe ~~its~~loan ~~common~~is ~~stock~~not ~~upon~~repaid by ~~conversion~~the scheduled maturity date, the principle amount of ~~$135~~the inloan ~~principal~~shall ~~and~~begin ~~accrued~~to accrue interest at a rate of ~~convertible~~12% ~~promissory~~per ~~notes~~annum from the maturity date until repayment in full.

~~The~~NOTE 6 ~~Company declared a 1~~-~~for-20~~ ~~reverse~~FINANCIAL ~~stock~~INCOME split with an effective date of October 7, 2013. All share and per share amounts and calculations in these financial statements have been retroactively adjusted to reflect the effects of the reverse stock split.(EXPENSE)

~~NOTE 6 -~~ Financial ~~Expenses~~income (expense) is comprised of the following:

Financial expenses for the nine months ended September 30, 2013 and 2012 are comprised of the following:

	Six Months Ended			Six Months Ended
	June 30,			June 30,
	2014			2013
Non-cash expenses related to convertible debt	$	(28	)	$	(61	)
Non-cash expenses related to warrants to issue shares		(1	)		18
Interest in respect of debt instruments and liabilities		(117	)		(65	)
Exchange rate differences caused by fluctuations in the exchange rate with the New Israeli Shekel ("NIS") on liabilities denominated in NIS held by the subsidiary		(2	)		(30	)
	$	(148	)	$	(138	)

	2013			2012
Non-cash expenses related to convertible debt	$	(91	)	$	(57	)
Non-cash expenses related to warrants to issue shares		18			11
Interest in respect of debt instruments		(111	)		(84	)
Exchange rate differences caused by fluctuations in the exchange rate with the New Israeli Shekel (“NIS”) on liabilities denominated in NIS held by the subsidiary		(15	)		7
Forgiven interest		—			33
	$	(199	)	$	(90	)

NOTE 7 - SUBSEQUENT EVENTS

~~NOTE~~On July 7 17, 2014, the Company entered into a loan agreement with an investor pursuant to which the Company received a loan in the principal amount of $50 to be used for order financing. The loan is interest- ~~Subsequent~~free. The principle amount of the loan with a $4 ~~Event~~fee is repayable by November 30, 2014 and may be pre-paid, at the option of the Company, without notice or penalty. If the loan is not repaid by the maturity date, the interest with respect to the unpaid principle amount of the loan shall begin to accrue at a rate of 12% per annum from the maturity date until repayment in full.

~~Effective~~On August ~~October 7~~6, ~~2013~~2014, the Company ~~implemented a~~issued ~~1-for-20~~290,769 ~~reverse~~shares of its common stock ~~split~~upon conversion of convertible debt of approximately $2.

On August 7, 2014, the Company entered into a loan agreement with an investor pursuant to which the Company received a loan in the principal amount of $200 to be used for order financing. The loan is interest-free. The principle amount of the loan with a $16 fee is repayable by November 30, 2014 and may be pre-paid, at the option of the Company, without notice or penalty. If the loan is not repaid by the maturity date, the interest with respect to the unpaid principle amount of the loan shall begin to accrue at a rate of 12% per annum from the maturity date until repayment in full.

F-6

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH OUR FINANCIAL STATEMENTS AND THE NOTES RELATED TO THOSE STATEMENTS. SOME OF OUR DISCUSSION IS FORWARD-LOOKING AND INVOLVES RISKS AND UNCERTAINTIES. FOR INFORMATION REGARDING RISK FACTORS THAT COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS, REFER TO THE RISK FACTORS SECTION OF THE ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, ~~2012~~2013.

OVERVIEW

SPO Global Inc. (“we” or the “Company”) is engaged in the design, development and marketing of non-invasive pulse oximetry technologies to measure blood oxygen saturation and heart rate. We have developed and patented proprietary technology that enables the measurement of heart rate and oxygen saturation levels in the blood, which is known as Reflectance Pulse Oximetry (RPO). Using RPO, a sensor can be positioned on various body parts, hence minimizing problems from motion artifacts and poor perfusion. ~~The~~ The unique design features contribute to substantially lower power requirements and enhance wireless, stand-alone configurations ~~facilitating~~ facilitating expanded commercial possibilities. As of ~~November 2013~~August2014, we held 12 patents issued by the United States Patent and Trademark ~~Office~~ Office ("USPTO") covering various aspects of our technologies. Our technologies are currently applied to products that are designed for use by in the homecare, professional medical care, sports, safety and search and rescue markets.

We are primarily engaged in developing, manufacturing and licensing our technology to third parties for integration with products in the general wellness, recreational, baby monitoring and sports monitoring fields. We pursue joint ventures, OEM type arrangements, research and or subcontracting agreements relating to our oximetry technology with respect to the general wellness, recreational, baby monitoring and sports monitoring fields. Since August 2012, we have partnered with HoMedics LLC, a distributor and manufacturer of leading brands in an array of consumer health, wellness and electronic lifestyle categories throughout the Americas, Europe, the Asia-Pacific region, Africa and the Middle-East, for the distribution of a private labeled, over the counter pulse oximeter for non-medial consumer wellness applications.

We are currently focused on exploiting the sports and wellness markets by developing cutting edge products based on our proprietary technology. These are multibillion dollar markets which we intend to penetrate with our disruptive technologies. Our current products under development include an innovative wellness watch, a baby monitoring unit and a sports watch.

The SPO sports watch has been designed to measure continuous heart-rate wirelessly, without the need to wear a conventional chest strap. This is a major and unique practical advantage over current products that we believe exist in the general leisure and wellness market. As importantly, the sports watch will be able to read the heart rate without the sports enthusiast ceasing his physical activity. This will be made possible through the use of SPO’s patented reflectance technology. Subject to raising significant additional funds, of which no assurance can be provided, we anticipate that the product should become commercially available through an OEM arrangement with a strategic market partner during ~~2014~~ 2015.

In addition to the sports watch, we launched an innovative wellness watch that measures the number of activities and calories burned by an individual performs on a given day. The watch, designed for both children and adults, features a display function to to continuously measure the number of daily activities against preset recommended goals. SPO has designed and patented the ~~functionality~~ functionality of the watch to be an affordable, simple-to-use, fashion accessory to encourage users to increase their mobility and overall wellness and to wear it with pride. In December 2011, we signed an exclusive agreement with a large private time-piece manufacture to manufacture and sell our wellness watch to department stores, mid-tier mass-market and food& drug stores throughout North America. The agreement specifies that the manufacturer will finance all costs associated with bringing the wellness watch to the marketplace. We and the manufacturer have agreed to divide the profit margin from the sale of the wellness watch net of all costs associated with manufacturing and marketing of the product.

In addition, we are developing an innovative home-baby monitoring device for continuous measurement of wellness information to the parent or caregiver, while the baby is sleeping. This parental reassurance tool gives the company a technological competitive edge in providing an innovative, high performance solution for a market application that is applicable to most family homes. Subject to raising significant additional funds, of which no assurance can be provided, we believe that the product could become commercially available through an OEM arrangement with a strategic market partner during ~~2014~~2015.

Current Operational Highlights

We recorded revenues of $~~316~~556,000 for the year ended December ~~2012~~2013 and $~~494~~50,000 for the ~~nine~~six months ended ~~September~~June 30, ~~2013~~2014. ~~All~~As ~~revenues~~of toAugust 14, ~~date~~2014, ~~are primarily~~we ~~attributable~~had toa ~~the~~backlog ~~arrangement~~of ~~with~~approximately ~~HoMedics~~$692,000, consisting of orders for additional units of our wellness product that we expect to deliver during 2014.

~~We have generated~~Since ~~significant~~August ~~operating~~2012, ~~losses~~we ~~since~~have ~~inception~~partnered ~~and~~with weHoMedics ~~have~~LLC, a ~~limited~~distributor ~~operating~~and ~~history~~manufacturerof ~~upon~~leading ~~which~~brands in an ~~evaluation~~array of ~~our~~consumer ~~prospects~~health, ~~can~~wellness beand ~~made.~~electronic ~~Our~~lifestyle ~~prospects~~categories ~~must~~throughout ~~therefore~~the beAmericas, ~~evaluated~~Europe, inthe ~~light~~Asia-Pacific ofregion, Africa and the ~~problems~~Middle-East, for ~~expenses~~the distribution of a private labeled, ~~delays~~over ~~and~~the ~~complications~~counter ~~associated with~~pulse aoximeter ~~development~~for ~~stage~~non-medial ~~company~~consumer wellness applications.

InRevenues to ~~May~~date ~~2013,~~have ~~we raised~~resulted ~~$250,000~~primarily from the ~~sale~~initial shipments of ~~our~~a ~~securities~~new toconsumer ~~two~~wellness ~~accredited~~product ~~investors. However, we need~~ to ~~raise~~mass-market ~~additional~~retailers ~~funds~~based in ~~order~~ ~~to realize in full our business plan as well as pay outstanding loans in~~ the ~~approximate~~United ~~amount~~States. ofWe ~~$944,000~~have ~~which~~generated ~~mature~~significant byoperating ~~September 30,~~losses ~~2014.~~since Ininception ~~January~~and ~~2010,~~ we ~~restructured~~have ~~our~~a ~~operations~~limited inoperating anhistory ~~attempt to focus primarily on our core technology for non-medical~~upon ~~market~~which ~~operations.~~an Asevaluation of ~~November~~our ~~2013,~~prospects wecan ~~had~~be ~~two employees working on a full-time basis~~made. InOur ~~addition,~~prospects ~~all~~must ~~research~~therefore ~~and~~be ~~development activities~~evaluated ~~are~~in ~~performed~~light onof athe ~~sub-contracted basis. If we are unable to raise additional capital~~problems, ~~it may be necessary for us to~~expenses, ~~take~~delays ~~further cost cutting measures to reduce our cash burn including laying-off additional personnel~~ and~~/or~~ ~~cease~~complications ~~operations~~associated ~~entirely. No~~with ~~assurance~~a ~~can~~development bestage ~~given that we will be able to raise additional capital~~company. ~~These conditions raise substantial doubt about our ability to continue as a going concern.~~

OnHowever, we ~~October~~need 4,to ~~2013,~~raise weadditional ~~changed~~funds on an immediate basis in order to realize our ~~name~~business plan as well as pay outstanding loans toin ~~“SPO~~the ~~Global~~approximate ~~Inc~~amount of $1,830,000, of which $1,366,000 is due or matures by June 30, 2015.” ~~and~~In ~~implemented~~January ~~a reverse~~2010, ~~stock~~we ~~split~~restructured our ofoperations in an attempt to focus primarily on our ~~issued~~core ~~and~~technology ~~outstanding~~for ~~shares~~non-medical market operations. As of ~~common~~August ~~stock~~14, 2014, atwe ahad ~~ratio~~two ofemployees 1working on a full-~~for~~time 20basis. ~~shares~~In ~~(the~~addition, ~~“Reverse~~all ~~Split”)~~research and development activities are performed on a sub-contracted basis. ~~The~~ ~~Reverse~~If ~~Split~~we ~~became~~are ~~effective~~unable to raise capital on ~~October~~an 7immediate basis, ~~2013~~it may be necessary for us to take further cost cutting measures to reduce our cash burn including laying-off additional personnel and/or ~~has~~cease ~~been~~operations ~~reflected~~entirely. inNo ~~this~~assurance ~~Quarterly~~can ~~Report~~be ongiven that ~~Form~~we ~~10-Q~~will be able to raise the needed capital. These conditions raise substantial doubt about our ability to continue as a going concern.

CRITICAL ACCOUNTING POLICIES

The discussion and analysis of our financial condition and results of operations are based upon our unaudited consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States. The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to revenue recognition, bad debts, ~~investments,~~ intangible assets and income taxes. Our estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results may differ from these estimates.

~~We have identified the accounting policies below as critical to our business operations and the understanding of our results of operations.~~4

~~REVENUE~~We have ~~RECOGNITION~~identified the accounting policies below as critical to our business operations and the understanding of our results of operations.

~~We generate revenues~~REVENUE principally from product manufacturing. Revenues generated from product manufacturing are recognized when such products are shipped; subcontracted research and development services are recognized when such services are performed.RECOGNITION

~~USE~~We generate OFrevenues ~~ESTIMATES~~principally from product manufacturing. Revenues generated from product manufacturing are recognized when such products are shipped; subcontracted research and development services are recognized when such services are performed.

~~The preparation~~USE ofOF financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.ESTIMATES

4The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

RESULTS OF OPERATIONS

COMPARISON OF THE THREE AND ~~NINE~~SIX MONTHS ENDED ~~SEPTEMBER~~ JUNE 30, ~~2013~~2014 AND THE THREE AND ~~NINE~~SIX MONTHS ENDED ~~SEPTEMBER~~JUNE 30, ~~2012~~2013.

REVENUES. Revenues for the three and ~~nine~~six months ended ~~September~~June 30, ~~2013~~2014 were $~~245~~22,000 and $~~494~~50,000, respectively, as compared to $~~278~~100,000 and $~~278~~249,000, respectively, for the corresponding periods in ~~2012~~2013. The decrease in revenues for the three and six months ended June ~~September~~ 30, ~~2013~~2014 as compared to the corresponding ~~three~~periods ~~months~~ in ~~2012~~2013 is attributable to a decline in deliverable purchase orders. ~~The increase in revenues for the nine months ended September 30, 2013 as compared to the corresponding nine months in 2012 is attributable to the growth of the HoMedics sales program.~~

COSTS OF REVENUES. Costs of revenues include all costs related to subcontracted manufacturing and product delivery. Cost of Revenues for the three and ~~nine~~six months ended ~~September~~ June 30, ~~2013~~2014 were $~~199,000~~0 and $~~409~~2,000, respectively, as compared to $~~231~~85,000 and $~~231~~210,000, respectively, for the corresponding periods in ~~2012~~2013. The decrease in cost of revenues for the three and ~~the~~six ~~increase for the nine~~ months ended ~~September~~June 30, ~~2013~~2014 as compared to the corresponding periods in ~~2012~~2013 is attributable to the manufacturing costs associated with product sales in the ~~said quarters~~quarter.

RESEARCH ~~AND~~ AND DEVELOPMENT EXPENSES, NET. Research and development expenses, net, consist primarily of expenses incurred in the design, development and testing of our products. These expenses consist primarily of ~~salaries~~subcontractor ~~and related expenses for employees~~services, contract design and testing services, supplies used and consulting fees paid to third parties. NoResearch ~~research~~ and development expenses were $0 ~~recorded~~and $6,000 for the three and ~~nine~~six months ended ~~September~~June 30, ~~2013~~2014, asrespectively. ~~compared~~No toresearch ~~$5,000~~ and ~~$5,000,~~development ~~respectively,~~expenses were recorded for the corresponding periods in ~~2012~~2013. The ~~decrease~~increase in research and development expenses, ~~net,~~for ~~during each of~~ the ~~three~~six ~~and nine~~ months ended June ~~September~~ 30, ~~2013~~ 2014 as compared to the corresponding period in ~~2012~~2013 is primarily attributable to ~~decrease~~activities inrelating ~~the~~to ~~number of employees and other personnel~~new ~~resulting~~product ~~from the cessation by us in 2011 of all internal research and~~ development ~~activities~~.

SELLING AND MARKETING EXPENSES. Selling and marketing expenses consist primarily of costs relating to compensation attributable to consultants for the provision of public relations, promotion and marketing services geared to the recreational sports and wellness markets. Selling and marketing expenses ~~for three and nine months ended September 30, 2013~~ were $1816,000 and $3532,000, respectively, as compared to $~~125~~17,000 and $~~382~~17,000, respectively, for the corresponding periods in ~~2012~~2013. ~~Selling and marketing expenses for the three and nine months ended September 30, 2012 included stock based non-cash expenses of $125,000 and $375,000, respectively.~~ The ~~decrease~~increase in selling and marketing expenses during the ~~three~~six ~~and nine~~ months ended ~~September~~June 30, ~~2013~~2014 as compared to the corresponding ~~periods~~ period in ~~2012~~2013 is primarily attributable to activities relating to evaluating the ~~reduction~~potential inof ~~stock~~product ~~based~~sales ~~non-cash~~in ~~expenses~~new territories.

GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses primarily consist of salaries and other related costs for personnel in executive and other administrative functions. Other significant costs include professional fees for legal and accounting services. General and administrative expenses for the three and nine months ended September 30, 2013 were $138,000 and $351,000, respectively, as compared to $83,000 and $220,000 for the corresponding periods in 2012. The increase in general and administrative expenses during the three and nine months ended September 30, 2013 as compared to the corresponding periods in 2012 is primarily attributable to increased professional, investor relations fees and product liability insurance.5

~~FINANCIAL~~GENERAL ~~EXPENSE,~~AND ~~NET~~ADMINISTRATIVE EXPENSES. ~~Finance~~General ~~expense,~~and ~~net~~administrative expenses primarily consist of salaries and other related costs for personnel in executive and other administrative functions. Other significant costs include professional fees for legal and accounting services. General and administrative expenses for the three ~~months~~ and ~~nine~~six months ended ~~September~~June 30, ~~2013~~2014 were $61115,000 and $~~199~~236,000, respectively, as compared to $597,000 and $90213,000, respectively,for the corresponding periods in ~~2012~~2013. The increase ~~was primarily attributable to non-cash expenses related to conversion features, interest~~ in ~~respect~~general ~~of debt instruments,~~ and ~~fluctuations~~ inadministrative ~~the~~expenses ~~exchange rate of~~ during the ~~New~~three ~~Israeli~~and ~~Shekel~~six ~~(“NIS”)~~months ~~on liabilities~~ended ~~denominated~~June ~~in NIS held by the subsidiary. Additionally~~30, ~~financial~~2014 ~~income~~as ~~from~~compared ~~forgiven~~to ~~interest was 0 for~~ the ~~nine~~corresponding ~~months~~periods ~~ended~~in ~~September 30,~~ 2013 as ~~compared~~is toprimarily ~~$33,000~~attributable ~~for~~to ~~the~~increased ~~corresponding~~professional ~~period~~fees inand ~~2012~~insurance expenses.

~~NET~~FINANCIAL EXPENSE, ~~LOSS~~NET. ~~For~~Finance expense, net for the ~~nine~~three and six months ended ~~September~~June 30, ~~2013~~2014 ~~and~~were ~~2012~~$92,000 weand ~~had~~$148,000, respectively, ~~net~~as ~~losses~~compared ofto $~~500~~83,000 and $~~650~~138,000, respectively., ~~The~~for ~~decrease~~the corresponding periods in ~~net~~2013. The increase ~~loss~~in ~~for~~finance expenses during the ~~nine~~ three and six months ended ~~September~~June 30, ~~2013~~2014 as compared to the corresponding periods ~~nine month period~~ in ~~2012~~2013 is primarily attributable to athe ~~reduction~~net ineffects of increased loans payable and variations of estimated fair ~~stock~~values ~~based~~of ~~non-cash~~warrants ~~marketing~~and ~~related~~conversion ~~expenses~~features.

5NET LOSS. Net loss for the three and six months ended June 30, 2014 were $201,000 and $374,000, respectively, as compared to $182,000 and $329,000, respectively, for the corresponding periods in 2013. The increased net loss during the three and six months ended June 30, 2014 as compared to the corresponding periods in 2013 is primarily attributable to an increase in research and development,marketing, general and administrative expenses.

LIQUIDITY AND CAPITAL RESOURCES

We need to raise additional funds in order to meet our on-going operating requirements, pay outstanding loans in the aggregate approximate ~~amount~~ amount of $1,~~462~~830,000 and to realize our restructured business plan. We believe that our currently existing cash resources are ~~sufficient~~ sufficient to satisfy our operating requirements through ~~January~~December 31, 2014. If we are unable to raise additional capital through a financial raise or revenues, it may be necessary for us to take further measures to reduce our cash burn including laying-off ~~additional~~ additional personnel, or ceasing operations entirely. No assurance can be given that we will be able to raise the needed capital. These conditions raise substantial doubt about our ability to continue as a going concern. Such “going concern” ~~qualification~~ qualification may make it more difficult for us to raise funds if and when needed. In addition, any additional equity financings is likely to be dilutive to holders of our Common Stock and debt financing, if available, may require us to be bound by significant ~~repayment~~ repayment obligations and covenants that restrict our operations.

As of ~~September~~ June 30, ~~2013~~2014, we had $~~236~~136,~~000~~528 in cash and cash equivalents available to us.

We generated negative cash flow from operating activities of approximately $76324,000 during the ~~nine~~six months ended ~~September~~June 30, ~~2013~~ 2014 compared to $~~250~~98,000 for the ~~2012~~ 2013 corresponding period.

To date, we have financed our operations primarily from debt financing and the sale of our securities. See Notes 45 and 9 in our consolidated financial statements accompanying our Annual Report on Form 10-K for the year ended December 31, 2013 filed on April 9, 2014 and Notes 5 and 7 in our consolidated financial statements accompanying this Quarterly Report on Form 10-Q. In May, July and August 2014, we borrowed, on a short-term basis, $425,000 for working capital purposes to fund our backlog of purchase orders, of which $175,000 is repayable by September 30, 2014 and the remaining $250,000 by November 30, 2014.

On May 8, 2013, we raised $250,000 from the private placement of a total of 10,000,000 (500,000 post reverse stock split) shares of our common stock to two accredited investors. In connection with such private placement, we also issued to one of the investors warrants exercisable through May 2018 to purchase up to an additional 5,000,000 (250,000 post reverse stock split) shares of our common stock at a per share exercise price of $0.10 ($2.00 post reverse stock split).6

ITEM 4. CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. We maintain disclosure controls and procedures that are designed to ensure that information ~~required~~ required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer, as appropriate, to allow timely decisions regarding required disclosure based closely on the definition of "disclosure controls and procedures" in Rule 13a-14(c).

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with participation of management, including our Chief Executive Officer, who serves as our principal executive officer and principal financial and accounting officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, our Chief Executive Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report to provide reasonable assurance that material information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms.

Management is aware that there is a lack of segregation of duties due to the small number of employees dealing with general administrative and financial matters. However, at this time, management has decided that considering the employees involved, the control procedures in place, and the outsourcing of certain financial functions, the risks associated with such lack of segregation are low and the ~~potential~~ potential benefits of adding additional employees to clearly segregate duties do not justify the expenses associated with such increases. Management will periodically reevaluate this situation. If the volume of the business increases and sufficient capital is secured, it is our intention to increase staffing to mitigate the current lack of segregation of duties within the general ~~administrative~~ administrative and financial functions.

A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems no evaluation of controls can provide absolute assurance that all control issues, if any, within a company have been detected. Such limitations include the fact that human judgment in decision-making can be faulty and that breakdowns in internal control can occur because of human failures, such as simple errors or mistakes or intentional circumvention of the established process.

6CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING. During the quarter ended June 30, 2014, there were no changes in our internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, these controls.

~~CHANGES IN INTERNAL CONTROLS OVER FINANCIAL~~PART ~~REPORTING.~~II ~~During~~- ~~the~~OTHER ~~quarter ended September 30, 2013, there were no changes in our internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, these controls.~~INFORMATION

~~PART~~ITEM 3. IIDEFAULTS -UPON ~~OTHER~~SENIOR ~~INFORMATION~~SECURITIES.

~~ITEM~~We first 3disclosed in the quarterly report on Form 10-Q for the three months ended March 31, 2008, that we had not repaid principal and accrued interest that became due during the quarterly period covered by such report. ~~DEFAULTS~~We ~~UPON~~disclosed ~~SENIOR~~in ~~SECURITIES~~subsequent quarterly reports on Form 10-Q additional amounts that became due in ensuing quarterly periods and the results of our efforts to resolve these matters. As of June 30, 2014, principal and accrued interest in the aggregate amount of approximately $620,000 continues to remain outstanding. We continue to hold discussions with certain of the holders of the outstanding debt in an attempt to resolve this matter; no assurance can be provided that we will be successful in concluding any mutually acceptable resolution of this matter.

We first disclosed in the quarterly report on Form 10-Q for the three months ended March 31, 2008, that we had not repaid principal and accrued interest that became due during the quarterly period covered by such report. We disclosed in subsequent quarterly reports on Form 10-Q additional amounts that became due in ensuing quarterly periods and the results of our efforts to resolve these matters. As of September 30, 2013, there continues to remain outstanding, in the aggregate approximately $825,000 of such principal and accrued interest. We continue to hold discussions with certain of the holders of the outstanding debt in an attempt to resolve this matter; no assurance can be provided that we will be successful in concluding any mutually acceptable resolution of this matter.7

ITEM 6. EXHIBITS.

3.1		Certificate of Amendment of the Amended and Restated Certificate of Incorporation.
31		Rule 13a - 14(a) Certification of Principal Executive Officer (and Principal Financial and Accounting Officer)
32		Section 1350 Certification of Principal Executive Officer (and Principal Financial and Accounting Officer)
101.INS*		XBRL Instance Document
101.INS		XBRL Instance Document
101.SCH*		XBRL Taxonomy Extension Schema
101.SCH		XBRL Taxonomy Extension Schema
101.CAL*		XBRL Taxonomy Extension Calculation Linkbase
101.CAL		XBRL Taxonomy Extension Calculation Linkbase
101.DEF*		XBRL Taxonomy Extension Definition Linkbase
101.DEF		XBRL Taxonomy Extension Definition Linkbase
101.LAB*		XBRL Taxonomy Extension Label Linkbase
101.LAB		XBRL Taxonomy Extension Label Linkbase
101.PRE*		XBRL Taxonomy Extension Presentation Linkbase
101.PRE		XBRL Taxonomy Extension Presentation Linkbase

* Furnished herewith 8

7SIGNATURES

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

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

DATE: August 14, 2014	/s/ Michael Braunold
	Michael Braunold
	Chief Executive Officer (Principal Executive
	Officer and Principal Financial and Accounting Officer) and Director

DATE: November 13, 2013	/s/ Michael Braunold
	Michael Braunold
	Chief Executive Officer (Principal Executive
	Officer and Principal
	Financial and Accounting Officer) and Director

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