10-Q

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 March 31, 2014

or

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

For the transition period from __________________ to __________________________

Commission file number: 000-52524

THINSPACE TECHNOLOGY, INC.

(Exact name of registrant as specified in its charter)

Delaware	43-2114545
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

5535 S. Williamson Blvd, Unit 751 Port Orange, FL	32128
(Address of principal executive offices)	(zip code)

(786) 763-3830

(Registrant's telephone number, including area code)

N/A

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

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

Yes þ No o

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 þ No o

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 o	Accelerated filer o
Non-accelerated filer o (Do not check if smaller reporting company)	Smaller reporting company þ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)

Yes o No þ

Indicated the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date, 91,898,918 shares of common stock are issued and outstanding as of May 9, 2014.

TABLE OF CONTENTS

		Page No.
PART I. - FINANCIAL INFORMATION
Item 1.	Financial Statements.	1
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations.	12
Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	15
Item 4	Controls and Procedures.	15
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings.	16
Item 1A.	Risk Factors.	16
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	16
Item 3.	Defaults Upon Senior Securities.	16
Item 4.	Mine Safety Disclosures.	16
Item 5.	Other Information.	16
Item 6.	Exhibits.	17

Item 1. Financial Statements

THINSPACE TECHNOLOGY, INC.

CONDENSED  CONSOLIDATED BALANCE SHEETS

	March 31,			December 31,
	2014			2013
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	199,087		$	341,031
Receivable from sale of preferred stock		-			472,000
Accounts receivable		318,573			387,279
Inventory		15,294			4,634
Prepaid expenses and other current assets		328,538			36,263
Total current assets		861,492			1,241,207
Fixed assets, net of accumulated depreciation of $64,347 and $60,312, respectively		31,731			31,325
Intangible assets, net of accumulated amortization of $474,898 and $454,416, respectively		180,127			194,743
Prepaid stock based compensation		937,500			-
Other assets		10,064			3,049
Total assets	$	2,020,914		$	1,470,324
Liabilities and stockholders' deficit
Current liabilities:
Accounts payable and accrued expenses	$	1,549,476		$	1,610,753
Deferred revenue		1,160,345			1,482,504
Loans payable, current portion		74,800			74,800
Loans payable - related parties		79,259			117,348
Derivative liabilities		36,036,431			11,268,087
Total current liabilities		38,900,311			14,553,492
Deferred revenue, long term		64,371			73,897
Convertible notes payable, net of discount of $535,766 and $311,806, respectively		746,875			862,019
Loans payable		21,872			25,266
Total liabilities		39,733,429			15,514,674
Stockholders' deficit
Preferred stock, undesignated, authorized 49,253,000 shares, $0.001 par value,
no shares issued and outstanding, respectively		-			-
Preferred stock, Series B, authorized 75,000 shares, $0.001 par value,
75,000 shares issued and outstanding		75			75
Preferred stock, Series C, authorized 672,000 shares, $0.001 par value,
672,000 shares issued and outstanding		672			672
Common stock authorized 500,000,000 shares, $0.001 par value,
91,621,564 and 82,819,694 shares issued and outstanding, respectively		91,622			82,820
Additional paid in capital		2,252,290			-
Accumulated deficit		(40,015,780	)		(14,093,652	)
Accumulated other comprehensive income (loss)		(41,394	)		(34,265	)
Total stockholders' deficit		(37,712,515	)		(14,044,350	)
Total liabilities and stockholders' deficit	$	2,020,914		$	1,470,324

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

1

THINSPACE TECHNOLOGY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

FOR THE THREE MONTH PERIODS ENDED MARCH 31, 2014 AND 2013

(Unaudited)

	Three Months Ended March 31,
	2014			2013
Revenues	$	784,608		$	304,809
Cost of goods sold		115,679			191,125
Gross profit		668,929			113,684
Operating expense:
Selling, general and administrative		1,188,574			283,092
Depreciation and amortization		19,784			16,066
Total operating expense		1,208,358			299,158
Loss from operations		(539,429	)		(185,474	)
Loss on change in fair value of derivative liability		(21,752,944	)		-
Gain on conversion of debt		155,129			-
Interest expense (income)		(3,784,885	)		185
Loss before provision for income taxes		(25,922,129	)		(185,289	)
Provision for income taxes		-			-
Net loss		(25,922,129	)		(185,289	)
Preferred dividend		(1,875	)		-
Net loss attributable to common shareholders	$	(25,924,004	)	$	(185,289	)
Basic and diluted loss per share	$	(0.29	)	$	(0.00	)
Weighted average shares outstanding,
Basic and diluted		89,934,196			80,200,000
Comprehensive loss:
Net loss	$	(25,922,129	)	$	(185,289	)
Foreign currency translation adjustments		(7,097	)		24,710
Comprehensive loss	$	(25,929,226	)	$	(160,579	)

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

2

THINSPACE TECHNOLOGY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTH PERIODS ENDED MARCH 31, 2014 AND 2013

(Unaudited)

	Three Months Ended March 31,
	2014			2013
Cash flows from operating activities:
Net loss	$	(25,922,129	)	$	(185,289	)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization		19,784			16,066
Amortization of prepaid stock based compensation		312,500			-
Gain on conversion of debt		(155,129	)		-
Change in fair value of derivative liability		21,752,944			-
Amortization of debt discount		3,756,944			-
Changes in operating assets and liabilities:
Accounts receivable		75,032			(133,145	)
Inventory		(10,580	)		2,801
Prepaid expenses and other current assets		(291,830	)		22,451
Other assets		(7,000	)		(1,996	)
Accounts payable and accrued expenses		(55,835	)		120,315
Deferred revenue		(336,334	)		133,636
Net cash used in operating activities		(861,633	)		(25,161	)
Cash flows from investing activities:
Cash paid for fixed assets		(3,748	)		(5,999	)
Net cash used in investing activities		(3,748	)		(5,999	)
Cash flows from financing activities:
Proceeds from sale of preferred stock		472,000			-
Proceeds from notes payable		300,000			-
Repayment of loan		(3,735	)		(3,785	)
Advances from related parties		-			20,193
Repayments to related parties		(38,900	)		-
Net cash provided by financing activities		729,365			16,408
Effect of exchange rate changes on cash		(5,928	)		(2,695	)
Net decrease in cash		(141,944	)		(17,447	)
Cash, beginning of period		341,031			51,323
Cash, end of period	$	199,087		$	33,876
Supplemental Schedule of Cash Flow Information:
Cash paid for interest	$	334		$	-
Non-cash investing and financing activities:
Fair value of common stock issued upon conversion of notes	$	1,012,968		$	-
Note payable converted to common stock		191,184			-
Accrued interest converted to common stock		11,410			-
Derivative liability reclassified to equity upon conversion of debt		1,012,880			-
Derivative liability of debt issued		2,729,757			-
Common stock issued as payment of prepaid consulting fees		1,250,000			-

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

3

THINSPACE TECHNOLOGY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2014 AND 2013

(Unaudited)

NOTE 1 - ORGANIZATION AND LINE OF BUSINESS

COMPANY OVERVIEW

Nature of Operations

THINSPACE TECHNOLOGY, INC. (formerly Vanity Events Holding, Inc.)  (the “Company”, “Thinspace” “we”, “us” or “our”), was organized as a Delaware corporation on August 25, 2004, and is a holding company. We are a cloud computing company that  develops software productivity solutions that allow our customers secure access to centrally managed desktop or software applications  and to work and collaborate from anywhere, accessing enterprise apps and data on any of the latest devices, as easily as they would in their own office- simply and securely.

The Company’s principal activity is the development and sale of network software. The company has 5 key products:

•   Propalms TSE - a simple management solution for Microsoft remote desktop users.

•   Propalms VPN - allows secure remote access to applications and data from outside of the corporate network.

•   Propalms VDI - allows customers to run virtual desktops on the internet.

•   Pano Logic G2 – The G2 is a Zero Client that replaces traditional desktops, allows secure fast access to hosted virtual desktops

•   Thin Space – A branded hardware Zero Client solution aimed for the enterprise and corporate market.

We sell directly to independent software vendors and Application Service Providers (ASPs) and sell to end users through a chain of distributors and resellers. Our larger customers are predominantly large businesses based around the world, with a concentration in North America, the Far East and India.

Our operating subsidiaries are Thinspace Technology Ltd (“Thinspace UK”), organized and operating in the United Kingdom, and Thinspace Technology Ltd. (“Thinspace USA”), a Nevada corporation formed on August 24, 2010 and operating in the states of California, Colorado and Florida.

Pursuant to an Agreement of Merger and Reorganization dated December 31, 2013 (the “Agreement”) between the Company, VAEV Merger Sub, Inc., and Thinspace UK, VAEV Merger Sub merged with Thinspace UK and all of the issued and outstanding shares of Thinspace UK were exchanged for 80,200,000 shares of common stock of the Company The transaction has been accounted for as a reverse acquisition of Vanity by Thinspace UK but in substance as a capital transaction, rather than a business combination since Vanity had minimal operations and assets as of the closing of the transaction. The stockholders of Thinspace UK own a majority of the Company’s voting power immediately following the transaction and Thinspace UK’s management has assumed operational, management and governance control. The transaction is deemed as reverse recapitalization and the accounting is similar to that resulting from a reverse acquisition, except that no goodwill or other intangible assets should be recorded.  Thinspace UK is treated as the surviving and continuing entity.   The Company did not recognize goodwill or any intangible assets in connection with this transaction. Accordingly, the Company’s historical financial statements are those of Thinspace UK and its subsidiary, Thinspace USA.

Vanity assets and liabilities retained subsequent to the transaction are as follows:

Cash	$	9,848
Other assets		1,349
Accounts payable and accrued expenses		(1,032,603	)
Notes payable		(922,019	)
Derivative liabilities		(8,504,326	)
Net liabilities retained	$	(10,447,751	)

We have changed the fiscal year end of Thinspace UK and Thinspace USA to December 31 to match that of Vanity Events year end prior to merger.

References herein to “Vanity” refer to the Company prior to the reverse acquisition.

4

BASIS OF PRESENTATION AND GOING CONCERN

Basis of Presentation

The accompanying condensed consolidated financial statements are unaudited. The unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP") and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and note disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading.

These interim condensed consolidated financial statements as of and for the three months ended March 31, 2014 and 2013 are unaudited; however, in the opinion of management, such statements include all adjustments (consisting of normal recurring accruals) necessary to present fairly the financial position, results of operations and cash flows of the Company for the periods presented. The results for the three months ended March 31, 2014 are not necessarily indicative of the results to be expected for the year ending December 31, 2014 or for any future period. All references to March 31, 2014 and 2013 in these footnotes are unaudited.

These unaudited condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements and the notes thereto for the year ended December 31, 2013, included in the Company’s annual report on Form 10-K filed with the SEC on March 31, 2014.

The condensed consolidated balance sheet as of December 31, 2013 has been derived from the audited financial statements at that date but do not include all disclosures required by the accounting principles generally accepted in the United States of America. 

Going Concern

We have incurred a net loss of $25,922,129 for the three months ended March 31, 2014. As of March 31, 2014 we have negative working capital of $38,038,819 and a stockholders’ deficit of $37,712,515. As a result, there is substantial doubt about the Company’s ability to continue as a going concern at March 31, 2014.

Management has implemented its business plan to add new products, increase marketing activities and, as a result, increase revenue. Our ability to implement our current business plan and continue as a going concern ultimately is dependent upon our ability to obtain additional equity or debt financing, attain further operating efficiencies and to achieve profitable operations.

There can be no assurances that funds will be available to the Company when needed or, if available, that such funds would be available under favorable terms. In the event that the Company is unable to generate adequate revenues to cover expenses and cannot obtain additional funds in the near future, the Company may seek protection under bankruptcy laws.  To date, management has not considered this alternative, nor does management view it as a likely occurrence, since the Company is progressing with various potential sources of new capital and we anticipate a successful outcome from these activities. However, capital markets remain difficult and there can be no certainty of a successful outcome from these activities. 

The accompanying unaudited condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern. This basis of accounting contemplates the recovery of the Company’s assets and the satisfaction of liabilities in the normal course of business and does not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.   

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The condensed consolidated financial statements include the accounts of Thinspace Technology, Inc. and its wholly-owned subsidiaries, Thinspace UK and Thinspace USA. All material inter-company accounts and transactions have been eliminated.

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 consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

5

ACCOUNTS RECEIVABLE

Accounts receivable are reported at the customers' outstanding balances less any allowance for doubtful accounts. Interest is not accrued on overdue accounts receivable. The Company evaluates receivables on a regular basis for potential reserve.   The accounts receivable balances of $318,573 and $387,279 as of March 31, 2014 and December 31, 2013, respectively, do not included an allowance for doubtful accounts as the Company anticipates payment on all accounts within the next fiscal year. The Company routinely evaluates accounts receivable for uncollectible amounts.

REVENUE RECOGNITION

Certain volume licensing arrangements include a perpetual license for current products combined with rights to receive unspecified future versions of software products, which the Company has determined are additional software products and are therefore accounted for as subscriptions, with billings recorded as unearned revenue and recognized as revenue ratably over the coverage period. Arrangements that include term based licenses for current products with the right to use unspecified future versions of the software during the coverage period are also accounted for as subscriptions, with revenue recognized ratably over the coverage period.

Revenue from cloud-based services arrangements that allow for the use of a hosted software product or service over a contractually determined period of time without taking possession of software are accounted for as subscriptions with billings recorded as unearned revenue and recognized as revenue ratably over the coverage period beginning on the date the service is made available to customers.

Some volume licensing arrangements include time-based subscriptions for cloud-based services and software offerings that are accounted for as subscriptions. These arrangements are considered multiple element arrangements. However, because all elements are accounted for as subscriptions and have the same coverage period and delivery pattern, they have the same revenue recognition timing.

DEFERRED REVENUE

Deferred revenue related to support and maintenance is recorded in a manner consistent with the Company’s revenue recognition policy. The Company typically enters into one-year upgrade and maintenance contracts with its customers. The upgrade and maintenance contracts are generally paid in advance but can be billed monthly or quarterly. The Company defers such payment and recognizes revenue ratably over the contract period.

INVENTORY

The Company values its inventory at the lower of cost (first-in, first-out) or market. The Company uses estimates and judgments regarding the valuation of inventory to properly value inventory. Inventory adjustments are made for the difference between the cost of the inventory and the estimated realizable value and charged to cost of goods sold in the period in which the facts that give rise to the adjustments become known.

FAIR VALUE OF FINANCIAL INSTRUMENTS

Our short-term financial instruments, including cash, accounts receivable and accounts payable and accrued expenses consist primarily of instruments without extended maturities, the fair value of which, based on management’s estimates, reasonably approximate their book value. The fair value of our notes and advances payable is based on management estimates and reasonably approximates their book value based on their terms.

Fair value measurements

ASC 820 “Fair Value Measurements and Disclosure” establishes a framework for measuring fair value and expands disclosure about fair value measurements. 

ASC 820 defines fair value as the amount that would be received for an asset or paid to transfer a liability (i.e., an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes the following three levels of inputs that may be used:

6

Level 1 – Quoted prices in active markets for identical assets or liabilities.

Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.  

In accordance with ASC 820, the following table represents the Company's fair value hierarchy for its financial assets and (liabilities) measured at fair value on a recurring basis as of March 31, 2014:

	Level 1		Level 2		Level 3		Total
Liabilities
Conversion and warrant derivative liabilities		-		-	$	36,036,431	$	36,036,431
Total Liabilities	$	-	$	-	$	36,036,431	$	36,036,431

The table below sets forth a summary of changes in the fair value of the Company’s Level 3 financial liabilities (conversion and warrant derivative liabilities) for the three month period ended March 31, 2014.

	2014
Balance at beginning of year	$	11,268,087
Additions to derivative instruments		4,028,280
Change in fair value of derivative liabilities		21,752,944
Reclassification upon conversion of debt		(1,012,880	)
Balance at end of period	$	36,036,431

The following is a description of the valuation methodologies used for these items:

Conversion derivative liability — these instruments consist of certain of our notes which are convertible based on a discount to the market value of our common stock. These instruments were valued using pricing models which incorporate the Company’s stock price, volatility, U.S. risk free rate, dividend rate and estimated life.

CONCENTRATIONS OF CREDIT RISK

The Company performs ongoing credit evaluations of its customers. At March 31, 2014, two customers accounted for 45% of accounts receivable.

The Company maintains cash and cash equivalents with major financial institutions. Cash held in US bank accounts is insured up to $250,000 at each institution. Cash held in UK bank accounts is insured up to £85,000 at March 31, 2014 (approximately $140,000 at March 31, 2014) at each institution for each entity.  At times, cash balances may exceed the insured limits. The Company has not experienced any loss on these accounts.  The balances are maintained in demand accounts to minimize risk.

LOSS PER SHARE

We use ASC 260, “Earnings Per Share” for calculating the basic and diluted income (loss) per share. We compute basic income (loss) per share by dividing net income (loss) and net income (loss) attributable to common shareholders by the weighted average number of common shares outstanding.

Dilutive common stock equivalents consist of shares issuable upon conversion of debt and preferred stock and the exercise of our stock warrants. There were 171,022,597 common share equivalents at March 31, 2014 and none at March 31, 2013, which have been excluded from the computation of the weighted average diluted shares.   

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

Recent accounting pronouncements issued by the FASB and the SEC did not, or are not believed by management to have a material impact on the Company's present or future consolidated financial statements.

7

NOTE 3 – CONVERTIBLE NOTES PAYABLE

IBC February 21, 2014 Financing

 

On February 21, 2014, the Company entered into a Securities Purchase Agreement with IBC Funds, LLC (“IBC”) pursuant to which the Company sold to IBC an 8% convertible debenture in the principal amount of $150,000. The debenture matures on the third anniversary of the date of issuance and bears interest at a rate of 8% per annum, payable semi-annually and on the maturity date. IBC may convert, at any time, the outstanding principal and accrued interest on the debenture into shares of the Company’s common stock, at a conversion per share at 25% of the lowest closing bid price for the Company’s common stock during the previous 20 trading days.

IBC March 21, 2014 Financing

On March 21, 2014, the Company entered into a Securities Purchase Agreement with IBC pursuant to which the Company sold to IBC an 8% convertible debenture in the principal amount of $50,000. The debenture matures on the third anniversary of the date of issuance and has terms substantially the same as the February 21, 2014 debenture.

Greystone March 21, 2014 Financing

On March 21, 2014, the Company entered into a Securities Purchase Agreement with Greystone Capital Partners, Inc. (“Greystone”) pursuant to which the Company sold to Greystone an 8% convertible debenture in the principal amount of $50,000..The debenture matures on the third anniversary of the date of issuance and has terms substantially the same as the February 21, 2014 debenture.

Greystone March 26, 2014 Financing

On March 26, 2014, the Company entered into a Securities Purchase Agreement with Greystone pursuant to which the Company sold to Greystone an 8% convertible debenture in the principal amount of $50,000. The debenture matures on the third anniversary of the date of issuance and has terms substantially the same as the February 21, 2014 note.

The conversion features of the debentures described above contain a variable conversion rate. As a result, we have classified the conversion features as derivative liabilities in the financial statements. At issue, we have recorded conversion feature liabilities of $2,729,757. The value of the conversion feature liabilities was determined using the Black-Scholes method based on the following assumptions:  (1) risk free interest rates of between 0.75 - 0.875%; (2) dividend yield of 0%; (3) volatility factor of the expected market price of our common stock of 419%; and (4) an expected life of 3 years. The Company has allocated $300,000 to debt discount, to be amortized over the life of the debt, with the balance of $2,429,757 being charged to expense at issue.

During the three months ended March 31, 2014, $191,184 of principal and $11,409 of accrued interest was converted into 4,051,870 shares of common stock. The Company has recorded expense of $202,943 for the three months ended March 31, 2014 related to the change in fair value of the conversion feature through the dates of conversion.

NOTE 4 –DERIVATIVE LIABILITIES

The Company has identified certain embedded derivatives related to its convertible notes, convertible preferred stock, common stock purchase warrants and a debt purchase agreement. Since certain of the notes, the preferred stock and the debt settlement agreement are convertible into a variable number of shares, the conversion features of those debentures are recorded as derivative liabilities. Since the warrants have a price reset feature, they are recorded as derivative liabilities. The accounting treatment of derivative financial instruments requires that the Company record fair value of the derivatives as of the inception date and to adjust to fair value as of each subsequent balance sheet date. 

Convertible Notes and Debt Settlement Agreement

At March 31, 2014, we recalculated the fair value of the embedded conversion feature of our notes and debt settlement agreement subject to derivative accounting and have determined that their fair value at March 31, 2014 was $20,297,745. The value of the conversion liabilities was determined using the Black-Scholes method based on the following assumptions:  (1) risk free interest rate of 0.875%; (2) dividend yield of 0%; (3) volatility factor of the expected market price of our common stock of 412% and (4) an expected life of 2.75 years. We recorded expense of $10,392,894 during the three months ended March 31, 2014 related to the change in fair value.

During the three months ended March 31, 2014 we recorded additions to our derivative conversion liabilities related to the conversion feature attributable to interest accrued during the period. These additions aggregated $265,158 for the three months ended March 31, 2014, which has been charged to interest expense.

8

Convertible Preferred Stock

The conversion feature of our Series B preferred stock has been adjusted due to the subsequent issuance of debt. As a result, the conversion price is now $0.05 per share or an aggregate of 1,500,000 shares of the Company’s common stock. The Company has recorded income of $98 for the three months ended March 31, 2014, related to the change in fair value of the conversion feature of the preferred stock through the date of adjustment. The Company has also recorded an expense of $74,977 for the three months ended March 31, 2014 due to the increase in the fair value of the conversion feature as a result of the modification.

At March 31, 2014, we recalculated the fair value of the embedded conversion feature of our Series B and Series C preferred stock subject to derivative accounting and have determined that the fair value at March 31, 2014 was $9,901,117. The value of the conversion liabilities was determined using the Black-Scholes method based on the following weighted average assumptions:  (1) risk free interest rate of 0.139%; (2) dividend yield of 0%; (3) volatility factor of the expected market price of our common stock of 262% and (4) an expected life of 1.125 years. We recorded expense of $7,162,551 during the three months ended March 31, 2014 related to the change in fair value.

Warrant Liabilities

The warrants with price reset features have been adjusted due to the subsequent issuance of debt. As a result, those warrants now total 8,700,000 with an exercise price of $0.05. The Company has recorded income of $21,915 for the three months ended March 31, 2014 related to the change in fair value of the warrants through the date of adjustment. The Company has also recorded an expense of $958,388 for the three months ended March 31, 2014 due to the increase in the fair value of the warrants as a result of the modifications.

At March 31, 2014, we recalculated the fair value of the warrants containing a price reset feature subject to derivative accounting and have determined that the fair value at March 31, 2014 was $5,837,569. The value of the warrant liabilities was determined using the Black-Scholes method based on the following weighted average assumptions:  (1) risk free interest rate of 0.04%; (2) dividend yield of 0%; (3) volatility factor of the expected market price of our common stock of 206% and (4) an expected life of 0.30 years. We recorded expense of $4,016,569 during the three months ended March 31, 2014 related to the change in fair value.

NOTE 5 – LOANS PAYABLE – RELATED PARTY

Entities controlled by certain shareholders have provided short term working capital loans to the Company aggregating approximately $20,000 during the three months ended March 31, 2013. The Company repaid approximately $39,000 of loans during the three months ended March 31, 2014.

NOTE 6– RELATED PARTY TRANSACTIONS

An entity owned by certain of our shareholders provided management services to the Company. Fees incurred for the three months ended March 31, 2014 and 2013 were $0 and $111,633, respectively.

NOTE 7 – STOCKHOLDERS’ EQUITY

Preferred Stock

The Company is authorized to issue 50,000,000 shares of preferred stock, with par value of $0.001 per share, of which 75,000 shares have been designated as Series B 10% Convertible preferred stock, and 672,000 shares have been designated as Series C Convertible preferred stock. There were 75,000 Series B shares and 672,000 Series C shares issued and outstanding as of March 31, 2014 and December 31, 2013.

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Common Stock

The Company is authorized to issue 500,000,000 shares of common stock, with par value of $0.001 per share. As of March 31, 2014 and December 31, 2013, there were 91,621,564 and 82,819,694 shares of common stock issued and outstanding, respectively.

During January 2014 we issued 5,000,000 shares of common stock, valued at $1,250,000, pursuant to a consulting agreement with a one year term. We will expense the value of the shares over 2014. During the three months ended March 31, 2014, we recorded expense of $312,500.

During January 2014 we cancelled 250,000 shares of common stock which had been issued by Vanity in July of 2012 as payment for consulting services, pursuant to the request of the consultant.

During the three months ended March 31, 2014, we issued 4,051,870 shares of common stock upon the conversion of $191,184 of note principal and $11,409 of accrued interest.

Warrants Outstanding

At March 31, 2014 we have an aggregate of 8,700,000 common stock purchase warrants outstanding and exercisable. The warrants currently have an exercise price of $0.05 per share. The warrants expire on various dates between April 5, 2014 and November 10, 2014 and have a weighted average remaining life of 0.30 years at March 31, 2014. The warrants contain a price reset feature and are accounted for as derivative liabilities.

NOTE 8 - COMMITMENTS AND CONTINGENCIES

LEASE

We currently occupy office space pursuant to various short term leases expiring in 2014.

Rent expense for the three months ended March 31, 2014 and 2013 was $37,283 and $30,772, respectively.

LITIGATION

From time to time, The Company and its subsidiaries 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. The Company and its subsidiaries are currently not aware of any such legal proceedings or claims that they believe will have, individually or in the aggregate, a material adverse effect on our business, financial condition or operating results.  

NOTE 9 - SUBSEQUENT EVENTS

Goldcrest Stock Purchase Agreement

On April 2, 2014, Thinspace UK entered into a stock purchase agreement (the “Purchase Agreement”) with Goldcrest Distribution Limited (“Goldcrest”). Pursuant to the Purchase Agreement, Thinspace UK may, for a period of one year commencing upon the execution of the Purchase Agreement, and upon receipt of orders from customers, request funding for such orders from Goldcrest, which Goldcrest may provide at its discretion, in an aggregate amount of up to £1.8 million (approximately USD$3.02 million). The Purchase Agreement was entered into in connection with a purchase order received by Thinspace UK in the amount of £2,307,357. Pursuant to the Purchase Agreement, Thinspace UK paid Goldcrest an establishment fee of £36,150 and agreed to pay a transaction fee of 3% for a transaction period of 3 months for advances under the Purchase Agreement. Thinspace UK’s obligations under the Purchase Agreement will be secured by a debenture over the assets of Thinspace UK and personal guarantees executed by Owen Dukes and Robert Zysblat, the Company’s Chief Executive Officer and President, respectively.

Greystone $65K Financing

On April 17, 2014, the Company entered into a Securities Purchase Agreement with Greystone pursuant to which the Company sold to Greystone an 8% convertible debenture in the principal amount of up to $65,000 (it being agreed that any such amounts (up to $65,000) may be paid by Greystone to the Company in Greystone’s discretion during the 90 pay period commencing on the date of issuance of the debenture). The debenture matures on the third anniversary of the date of issuance  and bears interest a rate of 8% per annum, payable semi-annually and on the maturity date. Greystone may convert, at any time, the outstanding principal and accrued interest on the Debenture into shares of the Company’s common stock, at a conversion price per share at 25% of the lowest closing bid price for the Company’s common stock during the previous 20 trading days. We have received $65,000 pursuant to this agreement. The conversion price is subject to adjustment in the event of sales by the Company of common stock or securities convertible into common stock at a price per share lower than the then-effective conversion price, to such lower price, subject to certain exceptions.

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IBC Funds $100K Financing

On April 17, 2014, the Company entered into a Securities Purchase Agreement with IBC pursuant to which the Company sold to IBC an 8% convertible debenture in the principal amount of up to $100,000 (it being agreed that any such amounts (up to $100,000) may be paid by IBC to the Company in IBC’s discretion during the 90 pay period commencing on the date of issuance of the debenture). The debenture matures on the third anniversary of the date of issuance and bears interest a rate of 8% per annum, payable semi-annually and on the maturity date. IBC may convert, at any time, the outstanding principal and accrued interest on the debenture into shares of the Company’s common stock, at a conversion price per share at 25% of the lowest closing bid price for the Company’s common stock during the previous 20 trading days. We have received $50,000 pursuant to this agreement. The conversion price is subject to adjustment in the event of sales by the Company of common stock or securities convertible into common stock at a price per share lower than the then-effective conversion price, to such lower price, subject to certain exceptions.

Common Shares Issued

Effective April 15, 2014 and April 30, 2014 we issued an aggregate of 277,354 shares of common stock to our President as payment of accrued salary in the amount of $30,000. Such shares were issued pursuant to terms contained in his employment agreement. The shares had a value of $76,891.

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

Overview

Thinspace Technology, Inc. (the “Company”, “Thinspace”, “we”, “us”, or “our”)  is a cloud computing company that  develops software productivity solutions that allow its customers secure access to centrally managed Desktops or Software Applications  and to work and collaborate from anywhere, accessing enterprise apps and data on any of the latest devices, as easily as they would in their own office- simply and securely. 

Thinspace Technology cloud computing solutions help IT and service providers build both private and public clouds, leveraging virtualization and networking technologies to deliver high-performance, elastic and cost-effective services for mobile workstyles.

Thinspace Technology products have been designed to suit the needs of all sizes of organizations from 5 to 50,000+ users. Customers have found our products to be easier to use, faster to implement and cheaper to maintain than other similar software, which is important to small and medium sized companies or governmental offices as well as large enterprise organizations that are looking to reduce their IT infrastructure costs. We market and license our products directly to systems integrators, or SIs, in addition to indirectly through value-added resellers, or VARs, value-added distributors, or VADs, and original equipment manufacturers, or OEMs.

Thinspace Technology Limited (formerly known as Propalms Ltd), our wholly-owned subsidiary which we acquired on December 31, 2013 (“Thinspace UK”) is a United Kingdom corporation founded on October 11, 2001 and launched sales in July 2005.

Thinspace Technology Ltd. (formerly known as Propalms International Ltd) (“Thinspace US”) is a Nevada corporation founded on August 24, 2010 and is a wholly-owned subsidiary of Thinspace UK.

Critical Accounting Policies

The preparation of our financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and judgments that affect our reported assets, liabilities, revenues, and expenses, and the disclosure of contingent assets and liabilities. We base our estimates and judgments on historical experience and on various other assumptions we believe to be reasonable under the circumstances. Future events, however, may differ markedly from our current expectations and assumptions. While there are a number of significant accounting policies affecting our financial statements; we believe the following critical accounting policies involve the most complex, difficult and subjective estimates and judgments:

Use of Estimates - These financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and, accordingly, require management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

Going Concern - The financial statements have been prepared on a going concern basis, and do not reflect any adjustments related to the uncertainty surrounding our recurring losses or accumulated deficit

Revenue Recognition - We recognize revenue in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 605 “Revenue Recognition”. Revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred and title has transferred or services have been rendered, the price is fixed and determinable and collectability is reasonably assured. Revenue is not recognized on product sales transacted on a test or pilot basis. Instead, receipts from these types of transactions offset marketing expenses.

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Fair Value of Financial Instruments -  Our short-term financial instruments, including cash, accounts payable and other liabilities, consist primarily of instruments without extended maturities, the fair value of which, based on management’s estimates, reasonably approximate their book value. The fair value of the Company’s derivative instruments is determined using option pricing models.  

Three Months ended March 31, 2014 as compared to the Three Months ended March 31, 2013

Revenues:

Net sales were $784,608 for the three months ended March 31, 2014 compared to net sales of $304,809 for the three months ended March 31, 2013. Overall, our revenues increased 157% for the 2014 period as compared to the 2013 period. The increase is attributable to the introduction of new products during calendar year 2013, as well as to the results of increased marketing activities. While we cannot be certain that we will maintain this type of growth, we are optimistic about the recurring revenue from our products.

Cost of revenue

Cost of revenue as a percent of revenue was 15% for the three months ended March 31, 2014 and 63% for the three months ended March 31, 2013. Cost of revenue consists of software development, purchased hardware and software costs and shipping costs. Cost of revenue as a percentage of revenue varies based on the various costs incurred, relative to the timing of the recognition of revenue.

Operating expense:

Operating expense increased 320% for the three months ended March 31, 2014, compared to the three months ended March 31, 2013. Our costs have increased as we have initiated the Thinspace US operations and increased our marketing and other activities, Included in our operating expenses for the first quarter of 2014 is $312,500 of non-cash expense for stock based compensation related to costs associated with consultants we have engaged to assist our company in its growth efforts. This non-cash expense is being amortized over the one year life of the contract, which runs through December 31, 2014. The balance of our other operating expenses includes salaries, consulting, marketing and general overhead expenses.

We expect that our operating expenses will increase as our business grows and we devote additional resources towards promoting that growth, most notably reflected in anticipated increases in salaries for sales personnel and technical resources.

Other income (expense):

We had expense from the change in the fair value of our derivative liabilities of $21,752,944 during the three months ended March 31, 2014 with no comparable expense for the three months ended March 31, 2013. The change in the fair value of our derivative liabilities resulted primarily from the changes in our stock price and the volatility of our common stock during the reported periods. Refer to Note 4 to the financial statements for further discussion of our derivative liabilities.

We reported gain from the conversion of debt of $155,129 during the three months ended March 31, 2014, with no comparable item for the three months ended March 31, 2013. The gain on debt conversion resulted from the issuance of shares of common stock to pay off debt, based on the fair value of the shares issued as compared to the carrying value of the related debt. The closing price on the date of conversion is used to compute the actual fair market value of our common stock in determining the amount of the gain or loss.

We reported interest expense of $3,784,885 during the three months ended March 31, 2014 as compared with interest income of $185 during the three months ended March 31, 2013. Interest expense during the 2014 period consists primarily of derivative liabilities issued during the period whose fair values exceeded the proceeds of the debt, aggregating $2,694,915, and the expense associated with the price resets of certain of our derivative instruments, aggregating $1,033,365. The balance of the expense for the 2014 period relates to the amortization of debt discount and interest accrued on the debt.

Liquidity and Capital Resources

Liquidity is the ability of a company to generate sufficient cash to satisfy its needs for cash. As of March 31, 2014 we had approximately $199,000 in cash and cash equivalents and a working capital deficit of $38,038,819 (resulting primarily from derivative liabilities aggregating $36,036,431), as compared to cash and cash equivalents of approximately $341,000 and a working capital deficit of $13,312,285 at December 31, 2013. Our recent sources of operating capital have been equity and debt financings, along with advances from related parties. In December 2013 we raised $100,000 from the sale of a convertible debenture and $672,000 from the sale of preferred stock (of which $472,000 was received in January 2014). We also received proceeds from convertible notes aggregating $300,000 during the three months ended March 31, 2014.

Net Cash Provided by Operating Activities

We used $861,633 of cash in our operating activities during the three months ended March 31, 2014 compared to $25,161 used by our operating activities for the three months ended March 31, 2013. The increase in net cash used results primarily from an increase in net loss of $65,864 (after adjusting for non-cash expenses), an increase in prepayments and a decrease in deferred revenue.

Net Cash Used in Investing Activities

We used $3,748 for the purchase of furniture and equipment during the three months ended March 31, 2014, with $5,999 used during the three months ended March 31, 2013.

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Net Cash Provided by Financing Activities

During the three months ended March 31, 2014, we received $472,000 from the sale of our preferred stock and $300,000 from the sale of convertible debentures. We repaid $3,735 of a note payable and repaid $38,900 of shareholder advances. During the three months ended March 31, 2013 we made note repayments of $3,785 and received advances from related parties of $20,193.

IBC $150K Financing

On February 21, 2014, the Company entered into a Securities Purchase Agreement with IBC Funds, LLC (“IBC”) pursuant to which the Company sold to IBC an 8% convertible debenture in the principal amount of $150,000. The debenture matures on the third anniversary of the date of issuance and bears interest at a rate of 8% per annum, payable semi-annually and on the maturity date. IBC may convert, at any time, the outstanding principal and accrued interest on the debenture into shares of the Company’s common stock, at a conversion per share at 25% of the lowest closing bid price for the Company’s common stock during the previous 20 trading days. The conversion price is subject to adjustment in the event of sales by the Company of common stock or securities convertible into common stock at a price per share lower than the then-effective conversion price, to such lower price, subject to certain exceptions.

IBC $50K Financing

On March 21, 2014, the Company entered into a Securities Purchase Agreement with IBC pursuant to which the Company sold to IBC an 8% convertible debenture in the principal amount of $50,000. The debenture matures on the third anniversary of the date of issuance and bears interest at a rate of 8% per annum, payable semi-annually and on the maturity date. IBC may convert, at any time, the outstanding principal and accrued interest on the debenture into shares of the Company’s common stock, at a conversion per share at 25% of the lowest closing bid price for the Company’s common stock during the previous 20 trading days. The conversion price is subject to adjustment in the event of sales by the Company of common stock or securities convertible into common stock at a price per share lower than the then-effective conversion price, to such lower price, subject to certain exceptions.

Greystone $50K Financing

On March 21, 2014, the Company entered into a Securities Purchase Agreement with Greystone Capital Partners, Inc. (“Greystone”) pursuant to which the Company sold to Greystone an 8% convertible debenture in the principal amount of $50,000. The debenture matures on the third anniversary of the date of issuance and bears interest a rate of 8% per annum, payable semi-annually and on the maturity date. Greystone may convert, at any time, the outstanding principal and accrued interest on the Debenture into shares of the Company’s common stock, at a conversion the conversion price per share at 25% of the lowest closing bid price for the Company’s common stock during the previous 20 trading days. The conversion price is subject to adjustment in the event of sales by the Company of common stock or securities convertible into common stock at a price per share lower than the then-effective conversion price, to such lower price, subject to certain exceptions.

Greystone $50K Financing

On March 26, 2014, the Company entered into a Securities Purchase Agreement with Greystone pursuant to which the Company sold to Greystone an 8% convertible debenture in the principal amount of $50,000. The Debenture matures on the third anniversary of the date of issuance and bears interest a rate of 8% per annum, payable semi-annually and on the maturity date. Greystone may convert, at any time, the outstanding principal and accrued interest on the debenture into shares of the Company’s common stock, at a conversion price per share at 25% of the lowest closing bid price for the Company’s common stock during the previous 20 trading days. The conversion price is subject to adjustment in the event of sales by the Company of common stock or securities convertible into common stock at a price lower than the then-effective conversion price, to such lower price, subject to certain exceptions.

Greystone $65K Financing

On April 17, 2014, the Company entered into a Securities Purchase Agreement with Greystone pursuant to which the Company sold to Greystone an 8% convertible debenture in the principal amount of up to $65,000 (it being agreed that any such amounts (up to $65,000) may be paid by Greystone to the Company in Greystone’s discretion during the 90 pay period commencing on the date of issuance of the debenture). The Debenture matures on the third anniversary of the date of issuance and bears interest a rate of 8% per annum, payable semi-annually and on the maturity date. Greystone may convert, at any time, the outstanding principal and accrued interest on the Debenture into shares of the Company’s common stock, at a conversion price per share at 25% of the lowest closing bid price for the Company’s common stock during the previous 20 trading days. To date, we have received $65,000 pursuant to this agreement. The conversion price is subject to adjustment in the event of sales by the Company of common stock or securities convertible into common stock at a price per share lower than the then-effective conversion price, to such lower price, subject to certain exceptions.

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IBC Funds $100K Financing

On April 17, 2014, the Company entered into a Securities Purchase Agreement with IBC pursuant to which the Company sold to IBC an 8% convertible debenture in the principal amount of up to $100,000 (it being agreed that any such amounts (up to $100,000) may be paid by IBC to the Company in IBC’s discretion during the 90 pay period commencing on the date of issuance of the debenture). The debenture matures on the third anniversary of the date of issuance and bears interest a rate of 8% per annum, payable semi-annually and on the maturity date. IBC may convert, at any time, the outstanding principal and accrued interest on the debenture into shares of the Company’s common stock, at a conversion price per share at 25% of the lowest closing bid price for the Company’s common stock during the previous 20 trading days . To date, we have received $50,000 pursuant to this agreement. The conversion price is subject to adjustment in the event of sales by the Company of common stock or securities convertible into common stock at a price per share lower than the then-effective conversion price, to such lower price, subject to certain exceptions.

We presently do not have any other available credit, bank financing or other external sources of liquidity. We will need to obtain additional capital in order to expand operations and become profitable. In order to obtain capital, we may need to sell additional shares of our common stock or borrow funds from private lenders. There can be no assurance that we will be successful in obtaining additional funding.

We will need additional capital in order to continue operations until we are able to achieve positive operating cash flow. Additional capital is being sought, but we cannot guarantee that we will be able to obtain such investments. Financing transactions may include the issuance of equity or debt securities, obtaining credit facilities, or other financing mechanisms. However, the trading price of our common stock and a downturn in the equity and debt markets could make it more difficult to obtain financing through the issuance of equity or debt securities. Even if we are able to raise the funds required, we may incur unexpected costs and expenses, fail to collect significant amounts owed to us, or experience unexpected cash requirements that would force us to seek alternative financing. Furthermore, if we issue additional equity or debt securities, stockholders may experience additional dilution or the new equity securities may have rights, preferences or privileges senior to those of existing holders of our common stock. If additional financing is not available or is not available on acceptable terms, we will have to curtail our operations.

Off-Balance Sheet Arrangements

We have not entered into any transactions with unconsolidated entities in which we have financial guarantees, subordinated retained interests, derivative instruments or other contingent arrangements that expose us to material continuing risks, contingent liabilities or any other obligations under a variable interest in an unconsolidated entity that provides us with financing, liquidity, market risk or credit risk support.

Item 3.Quantitative and Qualitative Disclosures About Market Risk.

Not applicable for a smaller reporting company.

Item 4.Controls and Procedures.

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) are recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's (the “SEC”) rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file under the Exchange Act is accumulated and communicated to our management, including our principal executive and financial officers, as appropriate to allow timely decisions regarding required disclosure.

As of the end of the period covered by this Quarterly Report, we conducted an evaluation, under the supervision and with the participation of our President and Chief Executive Officer, of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act). Based upon this evaluation, our President and Chief Executive Officer concluded that, due to the material weaknesses in our internal controls over financial reporting disclosed in the Company’s 10-K for the year ended December 31, 2013,the Company’s disclosure controls and procedures are not effective to ensure that information required to be disclosed by the Company in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and also are not effective in ensuring that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including the Company’s President and Chief Executive Officer to allow timely decisions regarding required disclosure.

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Changes in Internal Control over Financial Reporting

There have been no changes in our internal controls over financial reporting (as such term is defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended March 31, 2014 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

We are not party to any material legal proceedings and no property of the Company is subject to any material legal proceedings.

Item 1A. Risk Factors.

Not applicable to a smaller reporting company.

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

During January 2014 we issued 5,000,000 shares of common stock for consulting services.

During the three months ended March 31, 2014, we issued 4,051,870 shares of common stock upon the conversion of $191,184 of note principal and $11,409 of accrued interest.

On February 21, 2014, the Company entered into a Securities Purchase Agreement with IBC pursuant to which the Company sold to IBC an 8% convertible debenture in the principal amount of $150,000. IBC may convert, at any time, the outstanding principal and accrued interest on the debenture into shares of the Company’s common stock, at a conversion per share at 25% of the lowest closing bid price for the Company’s common stock during the previous 20 trading days.

On March 21, 2014, the Company entered into a Securities Purchase Agreement with IBC pursuant to which the Company sold to IBC an 8% convertible debenture in the principal amount of $50,000. IBC may convert, at any time, the outstanding principal and accrued interest on the debenture into shares of the Company’s common stock, at a conversion per share at 25% of the lowest closing bid price for the Company’s common stock during the previous 20 trading days.

On March 21, 2014, the Company entered into a Securities Purchase Agreement with Greystone pursuant to which the Company sold to Greystone an 8% convertible debenture in the principal amount of $50,000. Greystone may convert, at any time, the outstanding principal and accrued interest on the debenture into shares of the Company’s common stock, at a conversion per share at 25% of the lowest closing bid price for the Company’s common stock during the previous 20 trading days.

On March 26, 2014, the Company entered into a Securities Purchase Agreement with Greystone pursuant to which the Company sold to Greystone an 8% convertible debenture in the principal amount of $50,000. Greystone may convert, at any time, the outstanding principal and accrued interest on the debenture into shares of the Company’s common stock, at a conversion per share at 25% of the lowest closing bid price for the Company’s common stock during the previous 20 trading days.

In connection with the foregoing, the Company relied upon the exemption from registration provided by Section 4(a)(2) under the Securities Act of 1933, as amended, for transactions not involving a public offering.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

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Item 6. Exhibits.

No.	Description
31.1	Rule 13a-14(a)/ 15d-14(a) Certification of Principal Executive and Financial Officer
31.2	Rule 13a-14(a)/ 15d-14(a) Certification of Principal Executive Officer
32.1	Section 1350 Certification of Principal Executive and Financial Officer
32.2	Section 1350 Certification of Principal Executive Officer
EX-101.INS	XBRL INSTANCE DOCUMENT
EX-101.SCH	XBRL TAXONOMY EXTENSION SCHEMA DOCUMENT
EX-101.CAL	XBRL TAXONOMY EXTENSION CALCULATION LINKBASE
EX-101.LAB	XBRL TAXONOMY EXTENSION LABELS LINKBASE
EX-101.PRE	XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE

17

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.

	Thinspace Technology, Inc.
Date: May 15, 2014	By:	/s/ Owen Dukes
		Owen Dukes
		Chief Executive Officer (principal executive officer)
	By:	/s/ Robert Zysblat
		Robert Zysblat
		President (principal executive, financial and accounting officer)

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EX-31.1

Exhibit 31.1

Certifications

I, Robert Zysblat, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Thinspace Technology, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 15, 2014

/s/ Robert Zysblat

Robert Zysblat

President (principal executive and financial officer)

EX-31.2

Exhibit 31.2

Certifications

I, Owen Dukes, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Thinspace Technology, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 15, 2014

/s/ Owen Dukes

Owen Dukes

Chief Executive Officer (principal executive officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Thinspace Technology, Inc. (the “Company”) on Form 10-Q for the period ended March 31, 2014, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Robert Zysblat, President of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: May 15, 2014

/s/ Robert Zysblat

Robert Zysblat

President (principal executive and financial officer)

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Thinspace Technology, Inc. (the “Company”) on Form 10-Q for the period ended March 31, 2014, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Owen Dukes, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: May 15, 2014

/s/ Owen Dukes

Owen Dukes

Chief Executive Officer (principal executive officer)

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Derivative Liabilities (Details) (USD $)	3 Months Ended
	Mar. 31, 2014
Derivative Liabilities Textual [Abstract]
Debt conversion original number of shares issued in conversion	4,051,870
Income related to change in fair value of conversion	$ 202,943
Number of common stock purchase warrants outstanding	8,700,000
Expense related to change in fair value	4,016,569
Warrant Liabilities [Member]
Derivative Liabilities Textual [Abstract]
Fair value assumptions, method used	Black-Scholes method
Conversion feature liability	5,837,569
Fair value assumptions, risk free interest rate	0.04%
Fair value assumptions, dividend yield	0.00%
Fair value assumptions, expected volatility rate	206.00%
Fair value assumptions, expected life (in years)	3 months 18 days
Expense related to change in fair value	958,388
Convertible Preferred Stock [Member]
Derivative Liabilities Textual [Abstract]
Income related to change in fair value of conversion	98
Expense related to change in fair value	74,977
Series B Preferred Stock [Member]
Derivative Liabilities Textual [Abstract]
Debt conversion original number of shares issued in conversion	1,500,000
Conversion price per share	$ 0.05
Series B And Series C Preferred Stock [Member]
Derivative Liabilities Textual [Abstract]
Fair value assumptions, method used	Black-Scholes method
Conversion feature liability	9,901,117
Fair value assumptions, risk free interest rate	0.139%
Fair value assumptions, dividend yield	0.00%
Fair value assumptions, expected volatility rate	262.00%
Fair value assumptions, expected life (in years)	1 year 1 month 15 days
Expense related to change in fair value	7,162,551
Convertible Debt [Member]
Derivative Liabilities Textual [Abstract]
Fair value assumptions, method used	Black-Scholes method
Conversion feature liability	20,297,745
Fair value assumptions, risk free interest rate	0.875%
Fair value assumptions, dividend yield	0.00%
Fair value assumptions, expected volatility rate	412.00%
Fair value assumptions, expected life (in years)	2 years 9 months
Additions to interest expense	265,158
Expense related to change in fair value	10,392,894
Convertible Debt [Member] | Warrant Liabilities [Member]
Derivative Liabilities Textual [Abstract]
Conversion price per share	$ 0.05
Income related to change in fair value of conversion	$ 21,915

XML

Derivative Liabilities

3 Months Ended

Mar. 31, 2014

Derivative Liabilities [Abstract]

DERIVATIVE LIABILITIES

NOTE 4 –DERIVATIVE LIABILITIES

The Company has identified certain embedded derivatives related to its convertible notes, convertible preferred stock, common stock purchase warrants and a debt purchase agreement. Since certain of the notes, the preferred stock and the debt settlement agreement are convertible into a variable number of shares, the conversion features of those debentures are recorded as derivative liabilities. Since the warrants have a price reset feature, they are recorded as derivative liabilities. The accounting treatment of derivative financial instruments requires that the Company record fair value of the derivatives as of the inception date and to adjust to fair value as of each subsequent balance sheet date. 

Convertible Notes and Debt Settlement Agreement

At March 31, 2014, we recalculated the fair value of the embedded conversion feature of our notes and debt settlement agreement subject to derivative accounting and have determined that their fair value at March 31, 2014 was $20,297,745. The value of the conversion liabilities was determined using the Black-Scholes method based on the following assumptions:  (1) risk free interest rate of 0.875%; (2) dividend yield of 0%; (3) volatility factor of the expected market price of our common stock of 412% and (4) an expected life of 2.75 years. We recorded expense of $10,392,894 during the three months ended March 31, 2014 related to the change in fair value. 

During the three months ended March 31, 2014 we recorded additions to our derivative conversion liabilities related to the conversion feature attributable to interest accrued during the period. These additions aggregated $265,158 for the three months ended March 31, 2014, which has been charged to interest expense.

Convertible Preferred Stock

The conversion feature of our Series B preferred stock has been adjusted due to the subsequent issuance of debt. As a result, the conversion price is now $0.05 per share or an aggregate of 1,500,000 shares of the Company’s common stock. The Company has recorded income of $98 for the three months ended March 31, 2014, related to the change in fair value of the conversion feature of the preferred stock through the date of adjustment. The Company has also recorded an expense of $74,977 for the three months ended March 31, 2014 due to the increase in the fair value of the conversion feature as a result of the modification.

At March 31, 2014, we recalculated the fair value of the embedded conversion feature of our Series B and Series C preferred stock subject to derivative accounting and have determined that the fair value at March 31, 2014 was $9,901,117. The value of the conversion liabilities was determined using the Black-Scholes method based on the following weighted average assumptions:  (1) risk free interest rate of 0.139%; (2) dividend yield of 0%; (3) volatility factor of the expected market price of our common stock of 262% and (4) an expected life of 1.125 years. We recorded expense of $7,162,551 during the three months ended March 31, 2014 related to the change in fair value. 

Warrant Liabilities

The warrants with price reset features have been adjusted due to the subsequent issuance of debt. As a result, those warrants now total 8,700,000 with an exercise price of $0.05. The Company has recorded income of $21,915 for the three months ended March 31, 2014 related to the change in fair value of the warrants through the date of adjustment. The Company has also recorded an expense of $958,388 for the three months ended March 31, 2014 due to the increase in the fair value of the warrants as a result of the modifications.

At March 31, 2014, we recalculated the fair value of the warrants containing a price reset feature subject to derivative accounting and have determined that the fair value at March 31, 2014 was $5,837,569. The value of the warrant liabilities was determined using the Black-Scholes method based on the following weighted average assumptions:  (1) risk free interest rate of 0.04%; (2) dividend yield of 0%; (3) volatility factor of the expected market price of our common stock of 206% and (4) an expected life of 0.30 years. We recorded expense of $4,016,569 during the three months ended March 31, 2014 related to the change in fair value. 

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Stockholders' Equity (Detail Textual 1) (USD $)	1 Months Ended	3 Months Ended
	Jan. 30, 2014	Mar. 31, 2014	Mar. 31, 2013	Dec. 31, 2013	Jan. 31, 2013
Stockholders' Equity [Abstract]
Common stock, shares authorized		500,000,000		500,000,000
Common stock, par value		$ 0.001		$ 0.001
Common stock, shares issued		91,621,564		82,819,694	80,200,000
Common stock, shares outstanding		91,621,564		82,819,694	80,200,000
Shares issued pursuant to consulting agreement	5,000,000
Shares issued pursuant to consulting agreement, value	$ 1,250,000
Expense on consulting agreement		312,500
Common stock cancelled which was issued for consulting services as compensation	250,000
Debt conversion original number of shares issued in conversion		4,051,870
Note payable converted to common stock		191,184
Accrued interest converted to common stock		$ 11,409

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Stockholders' Equity (Detail Textual) (USD $)	3 Months Ended
	Mar. 31, 2014	Dec. 31, 2013
Class of Stock [Line Items]
Preferred stock, shares authorized	50,000,000
Preferred stock, par value (in dollars per share)	$ 0.001
Series B convertible preferred stock
Class of Stock [Line Items]
Preferred stock, shares authorized	75,000	75,000
Preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Percentage of convertible preferred stock	10.00%
Preferred stock, shares issued	75,000	75,000
Preferred stock, shares outstanding	75,000	75,000
Series C convertible preferred stock
Class of Stock [Line Items]
Preferred stock, shares authorized	672,000	672,000
Preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Preferred stock, shares issued	672,000	672,000
Preferred stock, shares outstanding	672,000	672,000

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Stockholders' Equity (Detail Textual 2)	3 Months Ended
	Mar. 31, 2014
Stockholders' Equity [Abstract]
Number of common stock purchase warrants outstanding	8,700,000
Number of common stock purchase warrants exercisable	8,700,000
Warrants exercise price	0.05
Warrant expiration	The warrants expire on various dates between April 5, 2014 and November 10, 2014 and have a weighted average remaining life of 0.30 years at March 31, 2014.
Warrants, weighted average contractual life (Years)	3 months 18 days

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Commitments and Contingencies (Details) (USD $)	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Commitments and Contingencies [Abstract]
Short term lease on office space, expiration date	Dec. 31, 2014
Rent expense	$ 37,283	$ 30,772

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Convertible Notes Payable

3 Months Ended

Mar. 31, 2014

Convertible Notes Payable [Abstract]

CONVERTIBLE NOTES PAYABLE

NOTE 3 – CONVERTIBLE NOTES PAYABLE

IBC February 21, 2014 Financing

 

On February 21, 2014, the Company entered into a Securities Purchase Agreement with IBC Funds, LLC (“IBC”) pursuant to which the Company sold to IBC an 8% convertible debenture in the principal amount of $150,000. The debenture matures on the third anniversary of the date of issuance and bears interest at a rate of 8% per annum, payable semi-annually and on the maturity date. IBC may convert, at any time, the outstanding principal and accrued interest on the debenture into shares of the Company’s common stock, at a conversion per share at 25% of the lowest closing bid price for the Company’s common stock during the previous 20 trading days.

IBC March 21, 2014 Financing

On March 21, 2014, the Company entered into a Securities Purchase Agreement with IBC pursuant to which the Company sold to IBC an 8% convertible debenture in the principal amount of $50,000. The debenture matures on the third anniversary of the date of issuance and has terms substantially the same as the February 21, 2014 debenture.

Greystone March 21, 2014 Financing

On March 21, 2014, the Company entered into a Securities Purchase Agreement with Greystone Capital Partners, Inc. (“Greystone”) pursuant to which the Company sold to Greystone an 8% convertible debenture in the principal amount of $50,000..The debenture matures on the third anniversary of the date of issuance and has terms substantially the same as the February 21, 2014 debenture.

Greystone March 26, 2014 Financing

On March 26, 2014, the Company entered into a Securities Purchase Agreement with Greystone pursuant to which the Company sold to Greystone an 8% convertible debenture in the principal amount of $50,000. The debenture matures on the third anniversary of the date of issuance and has terms substantially the same as the February 21, 2014 note.

The conversion features of the debentures described above contain a variable conversion rate. As a result, we have classified the conversion features as derivative liabilities in the financial statements. At issue, we have recorded conversion feature liabilities of $2,729,757. The value of the conversion feature liabilities was determined using the Black-Scholes method based on the following assumptions:  (1) risk free interest rates of between 0.75 - 0.875%; (2) dividend yield of 0%; (3) volatility factor of the expected market price of our common stock of 419%; and (4) an expected life of 3 years. The Company has allocated $300,000 to debt discount, to be amortized over the life of the debt, with the balance of $2,429,757 being charged to expense at issue.

During the three months ended March 31, 2014, $191,184 of principal and $11,409 of accrued interest was converted into 4,051,870 shares of common stock. The Company has recorded expense of $202,943 for the three months ended March 31, 2014 related to the change in fair value of the conversion feature through the dates of conversion.

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Subsequent Events (Detail Textuals)

1 Months Ended

0 Months Ended

1 Months Ended

Jan. 30, 2014

USD ($)

Apr. 02, 2014

Subsequent Event [Member]

USD ($)

Apr. 02, 2014

Subsequent Event [Member]

GBP (£)

Apr. 17, 2014

Subsequent Event [Member]

Greystone Capital Partners, Inc. [Member]

USD ($)

Apr. 17, 2014

Subsequent Event [Member]

IBC Funds, LLC (IBC) [Member]

USD ($)

Apr. 30, 2014

Subsequent Event [Member]

President [Member]

USD ($)

Subsequent Event [Line Items]

Purchase agreement, aggregate amount

$ 3,020,000

£ 1,800,000

Purchase order received through purchase agreement

2,307,357

65,000

50,000

Establishment fee

36,150

Description of purchase agreement

Pursuant to the Purchase Agreement, Thinspace UK paid Goldcrest an establishment fee of £36,150 and agreed to pay a transaction fee of 3% for a transaction period of 3 months for advances under the Purchase Agreement.

Pursuant to the Purchase Agreement, Thinspace UK paid Goldcrest an establishment fee of £36,150 and agreed to pay a transaction fee of 3% for a transaction period of 3 months for advances under the Purchase Agreement.

Debt Instrument, Interest Rate, Stated Percentage

8.00%

8.00%

Debt Instrument, Face Amount

65,000

100,000

Debt instrument, conversion price per share , description

At a conversion price per share at 25% of the lowest closing bid price for the Company’s common stock during the previous 20 trading days.

At a conversion price per share at 25% of the lowest closing bid price for the Company’s common stock during the previous 20 trading days.

Percentage of discount of the average of the closing bid price of common stock

25.00%

25.00%

Number of trading days of conversion

20 days

20 days

Shares issued for services

5,000,000

277,354

Shares issued for services, value

1,250,000

76,891

Accrued salaries

$ 30,000

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Condensed Consolidated Balance Sheets (USD $)	Mar. 31, 2014	Dec. 31, 2013
Current assets:
Cash and cash equivalents	$ 199,087	$ 341,031
Receivable from sale of preferred stock		472,000
Accounts receivable	318,573	387,279
Inventory	15,294	4,634
Prepaid expenses and other current assets	328,538	36,263
Total current assets	861,492	1,241,207
Fixed assets, net of accumulated depreciation of $64,347 and $60,312, respectively	31,731	31,325
Intangible assets, net of accumulated amortization of $474,898 and $454,416, respectively	180,127	194,743
Prepaid stock based compensation	937,500
Other assets	10,064	3,049
Total assets	2,020,914	1,470,324
Current liabilities:
Accounts payable and accrued expenses	1,549,476	1,610,753
Deferred revenue	1,160,345	1,482,504
Loans payable, current portion	74,800	74,800
Loans payable - related parties	79,259	117,348
Derivative liabilities	36,036,431	11,268,087
Total current liabilities	38,900,311	14,553,492
Deferred revenue, long term	64,371	73,897
Convertible notes payable, net of discount of $535,766 and $311,806, respectively	746,875	862,019
Loans payable	21,872	25,266
Total liabilities	39,733,429	15,514,674
Stockholders' deficit
Preferred stock, value
Common stock authorized 500,000,000 shares, $0.001 par value, 91,621,564 and 82,819,694 shares issued and outstanding, respectively	91,622	82,820
Additional paid in capital	2,252,290
Accumulated deficit	(40,015,780)	(14,093,652)
Accumulated other comprehensive income (loss)	(41,394)	(34,265)
Total stockholders' deficit	(37,712,515)	(14,044,350)
Total liabilities and stockholders' deficit	2,020,914	1,470,324
Preferred Stock, Undesignated
Stockholders' deficit
Preferred stock, value
Preferred Stock, Series B
Stockholders' deficit
Preferred stock, value	75	75
Preferred Stock,Series C
Stockholders' deficit
Preferred stock, value	$ 672	$ 672

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Organization and Line of Business

3 Months Ended

Mar. 31, 2014

Organization and Line of Business [Abstract]

ORGANIZATION AND LINE OF BUSINESS

NOTE 1 - ORGANIZATION AND LINE OF BUSINESS

COMPANY OVERVIEW

Nature of Operations

THINSPACE TECHNOLOGY, INC. (formerly Vanity Events Holding, Inc.)  (the “Company”, “Thinspace” “we”, “us” or “our”), was organized as a Delaware corporation on August 25, 2004, and is a holding company. We are a cloud computing company that  develops software productivity solutions that allow our customers secure access to centrally managed desktop or software applications  and to work and collaborate from anywhere, accessing enterprise apps and data on any of the latest devices, as easily as they would in their own office- simply and securely.

The Company’s principal activity is the development and sale of network software. The company has 5 key products:

•   Propalms TSE - a simple management solution for Microsoft remote desktop users.

•   Propalms VPN - allows secure remote access to applications and data from outside of the corporate network.

•   Propalms VDI - allows customers to run virtual desktops on the internet.

•   Pano Logic G2 – The G2 is a Zero Client that replaces traditional desktops, allows secure fast access to hosted virtual desktops

•   Thin Space – A branded hardware Zero Client solution aimed for the enterprise and corporate market.

We sell directly to independent software vendors and Application Service Providers (ASPs) and sell to end users through a chain of distributors and resellers. Our larger customers are predominantly large businesses based around the world, with a concentration in North America, the Far East and India.

Our operating subsidiaries are Thinspace Technology Ltd (“Thinspace UK”), organized and operating in the United Kingdom, and Thinspace Technology Ltd. (“Thinspace USA”), a Nevada corporation formed on August 24, 2010 and operating in the states of California, Colorado and Florida.

Pursuant to an Agreement of Merger and Reorganization dated December 31, 2013 (the “Agreement”) between the Company, VAEV Merger Sub, Inc., and Thinspace UK, VAEV Merger Sub merged with Thinspace UK and all of the issued and outstanding shares of Thinspace UK were exchanged for 80,200,000 shares of common stock of the Company The transaction has been accounted for as a reverse acquisition of Vanity by Thinspace UK but in substance as a capital transaction, rather than a business combination since Vanity had minimal operations and assets as of the closing of the transaction. The stockholders of Thinspace UK own a majority of the Company’s voting power immediately following the transaction and Thinspace UK’s management has assumed operational, management and governance control. The transaction is deemed as reverse recapitalization and the accounting is similar to that resulting from a reverse acquisition, except that no goodwill or other intangible assets should be recorded.  Thinspace UK is treated as the surviving and continuing entity.   The Company did not recognize goodwill or any intangible assets in connection with this transaction. Accordingly, the Company’s historical financial statements are those of Thinspace UK and its subsidiary, Thinspace USA.

Vanity assets and liabilities retained subsequent to the transaction are as follows:

Cash	$	9,848
Other assets		1,349
Accounts payable and accrued expenses		(1,032,603	)
Notes payable		(922,019	)
Derivative liabilities		(8,504,326	)
Net liabilities retained	$	(10,447,751	)

We have changed the fiscal year end of Thinspace UK and Thinspace USA to December 31 to match that of Vanity Events year end prior to merger.

References herein to “Vanity” refer to the Company prior to the reverse acquisition.

BASIS OF PRESENTATION AND GOING CONCERN

Basis of Presentation

The accompanying condensed consolidated financial statements are unaudited. The unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP") and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and note disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading.

These interim condensed consolidated financial statements as of and for the three months ended March 31, 2014 and 2013 are unaudited; however, in the opinion of management, such statements include all adjustments (consisting of normal recurring accruals) necessary to present fairly the financial position, results of operations and cash flows of the Company for the periods presented. The results for the three months ended March 31, 2014 are not necessarily indicative of the results to be expected for the year ending December 31, 2014 or for any future period. All references to March 31, 2014 and 2013 in these footnotes are unaudited.

These unaudited condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements and the notes thereto for the year ended December 31, 2013, included in the Company’s annual report on Form 10-K filed with the SEC on March 31, 2014.

The condensed consolidated balance sheet as of December 31, 2013 has been derived from the audited financial statements at that date but do not include all disclosures required by the accounting principles generally accepted in the United States of America. 

Going Concern

We have incurred a net loss of $25,922,129 for the three months ended March 31, 2014. As of March 31, 2014 we have negative working capital of $38,038,819 and a stockholders’ deficit of $37,712,515. As a result, there is substantial doubt about the Company’s ability to continue as a going concern at March 31, 2014.

Management has implemented its business plan to add new products, increase marketing activities and, as a result, increase revenue. Our ability to implement our current business plan and continue as a going concern ultimately is dependent upon our ability to obtain additional equity or debt financing, attain further operating efficiencies and to achieve profitable operations.

There can be no assurances that funds will be available to the Company when needed or, if available, that such funds would be available under favorable terms. In the event that the Company is unable to generate adequate revenues to cover expenses and cannot obtain additional funds in the near future, the Company may seek protection under bankruptcy laws.  To date, management has not considered this alternative, nor does management view it as a likely occurrence, since the Company is progressing with various potential sources of new capital and we anticipate a successful outcome from these activities. However, capital markets remain difficult and there can be no certainty of a successful outcome from these activities. 

The accompanying unaudited condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern. This basis of accounting contemplates the recovery of the Company’s assets and the satisfaction of liabilities in the normal course of business and does not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

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Summary of Significant Accounting Policies (Details 1) (USD $)	3 Months Ended
	Mar. 31, 2014
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Balance at beginning of year	$ 11,268,087
Additions to derivative instruments	4,028,280
Change in fair value of derivative liability	21,752,944
Reclassification upon conversion of debt	(1,012,880)
Balance at end of period	$ 36,036,431

XML

Convertible Notes Payable (Details) (USD $)	3 Months Ended			1 Months Ended		3 Months Ended			3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013	Dec. 31, 2013	Feb. 21, 2014 Convertible debentures IBC Funds, LLC (IBC) [Member]	Mar. 21, 2014 Convertible debentures IBC Funds, LLC (IBC) [Member]	Mar. 31, 2014 Convertible debentures Greystone Capital Partners Inc [Member]	Mar. 26, 2014 Convertible debentures Greystone Capital Partners Inc [Member]	Mar. 21, 2014 Convertible debentures Greystone Capital Partners Inc [Member]	Mar. 31, 2014 Convertible debentures Minimum [Member] Greystone Capital Partners Inc [Member]	Mar. 31, 2014 Convertible debentures Maximum [Member] Greystone Capital Partners Inc [Member]
Debt Instrument [Line Items]
Principal amount				$ 150,000	$ 50,000		$ 50,000	$ 50,000
Percentage of discounts to market price of common stock				25.00%
Debt discount	535,766		311,806			300,000
Interest rate				8.00%	8.00%		8.00%	8.00%
Number of trading days of conversion				20 days
Conversion feature liability						2,729,757
Fair value assumptions, method used						Black-Scholes method
Fair value assumptions, risk free interest rate									0.75%	0.875%
Fair value assumptions, dividend yield						0.00%
Income related to change in fair value of conversion	202,943
Fair value assumptions, expected volatility rate						419.00%
Fair value assumptions, expected life (in years)						3 years
Debt issuing expense						2,429,757
Debt conversion original number of shares issued in conversion	4,051,870
Note payable converted to common stock	191,184
Accrued interest converted to common stock	11,409
Expense related to change in fair value	$ 4,016,569

XML

Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2014

Summary of Significant Accounting Policies [Abstract]

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The condensed consolidated financial statements include the accounts of Thinspace Technology, Inc. and its wholly-owned subsidiaries, Thinspace UK and Thinspace USA. All material inter-company accounts and transactions have been eliminated.

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 consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

ACCOUNTS RECEIVABLE

Accounts receivable are reported at the customers' outstanding balances less any allowance for doubtful accounts. Interest is not accrued on overdue accounts receivable. The Company evaluates receivables on a regular basis for potential reserve.   The accounts receivable balances of $318,573 and $387,279 as of March 31, 2014 and December 31, 2013, respectively, do not included an allowance for doubtful accounts as the Company anticipates payment on all accounts within the next fiscal year. The Company routinely evaluates accounts receivable for uncollectible amounts.

REVENUE RECOGNITION

Certain volume licensing arrangements include a perpetual license for current products combined with rights to receive unspecified future versions of software products, which the Company has determined are additional software products and are therefore accounted for as subscriptions, with billings recorded as unearned revenue and recognized as revenue ratably over the coverage period. Arrangements that include term based licenses for current products with the right to use unspecified future versions of the software during the coverage period are also accounted for as subscriptions, with revenue recognized ratably over the coverage period.

Revenue from cloud-based services arrangements that allow for the use of a hosted software product or service over a contractually determined period of time without taking possession of software are accounted for as subscriptions with billings recorded as unearned revenue and recognized as revenue ratably over the coverage period beginning on the date the service is made available to customers.

Some volume licensing arrangements include time-based subscriptions for cloud-based services and software offerings that are accounted for as subscriptions. These arrangements are considered multiple element arrangements. However, because all elements are accounted for as subscriptions and have the same coverage period and delivery pattern, they have the same revenue recognition timing.

DEFERRED REVENUE

Deferred revenue related to support and maintenance is recorded in a manner consistent with the Company’s revenue recognition policy. The Company typically enters into one-year upgrade and maintenance contracts with its customers. The upgrade and maintenance contracts are generally paid in advance but can be billed monthly or quarterly. The Company defers such payment and recognizes revenue ratably over the contract period.

INVENTORY

The Company values its inventory at the lower of cost (first-in, first-out) or market. The Company uses estimates and judgments regarding the valuation of inventory to properly value inventory. Inventory adjustments are made for the difference between the cost of the inventory and the estimated realizable value and charged to cost of goods sold in the period in which the facts that give rise to the adjustments become known.

FAIR VALUE OF FINANCIAL INSTRUMENTS

Our short-term financial instruments, including cash, accounts receivable and accounts payable and accrued expenses consist primarily of instruments without extended maturities, the fair value of which, based on management’s estimates, reasonably approximate their book value. The fair value of our notes and advances payable is based on management estimates and reasonably approximates their book value based on their terms.

Fair value measurements

ASC 820 “Fair Value Measurements and Disclosure” establishes a framework for measuring fair value and expands disclosure about fair value measurements. 

ASC 820 defines fair value as the amount that would be received for an asset or paid to transfer a liability (i.e., an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes the following three levels of inputs that may be used:

Level 1 – Quoted prices in active markets for identical assets or liabilities.

Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.  

In accordance with ASC 820, the following table represents the Company's fair value hierarchy for its financial assets and (liabilities) measured at fair value on a recurring basis as of March 31, 2014:

	Level 1		Level 2		Level 3		Total
Liabilities
Conversion and warrant derivative liabilities		-		-	$	36,036,431	$	36,036,431
Total Liabilities	$	-	$	-	$	36,036,431	$	36,036,431

The table below sets forth a summary of changes in the fair value of the Company’s Level 3 financial liabilities (conversion and warrant derivative liabilities) for the three month period ended March 31, 2014.

	2014
Balance at beginning of year	$	11,268,087
Additions to derivative instruments		4,028,280
Change in fair value of derivative liabilities		21,752,944
Reclassification upon conversion of debt		(1,012,880	)
Balance at end of period	$	36,036,431

The following is a description of the valuation methodologies used for these items:

Conversion derivative liability — these instruments consist of certain of our notes which are convertible based on a discount to the market value of our common stock. These instruments were valued using pricing models which incorporate the Company’s stock price, volatility, U.S. risk free rate, dividend rate and estimated life.

CONCENTRATIONS OF CREDIT RISK

The Company performs ongoing credit evaluations of its customers. At March 31, 2014, two customers accounted for 45% of accounts receivable.

The Company maintains cash and cash equivalents with major financial institutions. Cash held in US bank accounts is insured up to $250,000 at each institution. Cash held in UK bank accounts is insured up to £85,000 at March 31, 2014 (approximately $140,000 at March 31, 2014) at each institution for each entity.  At times, cash balances may exceed the insured limits. The Company has not experienced any loss on these accounts.  The balances are maintained in demand accounts to minimize risk.

LOSS PER SHARE

We use ASC 260, “Earnings Per Share” for calculating the basic and diluted income (loss) per share. We compute basic income (loss) per share by dividing net income (loss) and net income (loss) attributable to common shareholders by the weighted average number of common shares outstanding.

Dilutive common stock equivalents consist of shares issuable upon conversion of debt and preferred stock and the exercise of our stock warrants. There were 171,022,597 common share equivalents at March 31, 2014 and none at March 31, 2013, which have been excluded from the computation of the weighted average diluted shares.   

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

Recent accounting pronouncements issued by the FASB and the SEC did not, or are not believed by management to have a material impact on the Company's present or future consolidated financial statements.

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Condensed Consolidated Balance Sheets (Parenthetical) (USD $)	Mar. 31, 2014	Dec. 31, 2013
Accumulated depreciation (in dollars)	$ 64,347	$ 60,312
Accumulated amortization (in dollars)	474,898	454,416
Discount on convertible notes payable (in dollars)	$ 535,766	$ 311,806
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized	500,000,000	500,000,000
Common stock, shares issued	91,621,564	82,819,694
Common stock, shares outstanding	91,621,564	82,819,694
Preferred stock, par value (in dollars per share)	$ 0.001
Preferred stock, shares authorized	50,000,000
Preferred Stock, Undesignated
Preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Preferred stock, shares authorized	49,253,000	49,253,000
Preferred stock, shares issued
Preferred stock, shares outstanding
Preferred Stock, Series B
Preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Preferred stock, shares authorized	75,000	75,000
Preferred stock, shares issued	75,000	75,000
Preferred stock, shares outstanding	75,000	75,000
Series C Preferred Stock [Member]
Preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Preferred stock, shares authorized	672,000	672,000
Preferred stock, shares issued	672,000	672,000
Preferred stock, shares outstanding	672,000	672,000

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Summary of Significant Accounting Policies (Tables)

3 Months Ended

Mar. 31, 2014

Summary of Significant Accounting Policies [Abstract]

Schedule of financial assets and liabilities measured at fair value on a recurring basis

	Level 1		Level 2		Level 3		Total
Liabilities
Conversion and warrant derivative liabilities		-		-	$	36,036,431	$	36,036,431
Total Liabilities	$	-	$	-	$	36,036,431	$	36,036,431

Schedule of a summary of changes in the fair value of the Company's Level 3 financial liabilities - Warrant derivative liability and Conversion derivative liability

	2014
Balance at beginning of year	$	11,268,087
Additions to derivative instruments		4,028,280
Change in fair value of derivative liabilities		21,752,944
Reclassification upon conversion of debt		(1,012,880	)
Balance at end of period	$	36,036,431

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Document and Entity Information	3 Months Ended
	Mar. 31, 2014	May 09, 2014
Document and Entity Information [Abstract]
Entity Registrant Name	Thinspace Technology, Inc.
Entity Central Index Key	0001393935
Trading Symbol	thns
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Document Type	10-Q
Document Period End Date	Mar. 31, 2014
Amendment Flag	false
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q1
Entity Common Stock, Shares Outstanding		91,898,918

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Organization and Line of Business (Details) (Retained subsequent [Member], USD $)	Mar. 31, 2014
Retained subsequent [Member]
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Cash	$ 9,848
Other assets	1,349
Accounts payable and accrued expenses	(1,032,603)
Notes payable	(922,019)
Derivative liabilities	(8,504,326)
Net liability retained	$ (10,447,751)

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Condensed Consolidated Statements of Operations and Comprehensive Loss (USD $)	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Income Statement [Abstract]
Revenues	$ 784,608	$ 304,809
Cost of goods sold	115,679	191,125
Gross profit	668,929	113,684
Operating expense:
Selling, general and administrative	1,188,574	283,092
Depreciation and amortization	19,784	16,066
Total operating expense	1,208,358	299,158
Loss from operations	(539,429)	(185,474)
Loss on change in fair value of derivative liability	(21,752,944)
Gain on conversion of debt	155,129
Interest expense (income)	(3,784,885)	185
Loss before provision for income taxes	(25,922,129)	(185,289)
Provision for income taxes
Net loss	(25,922,129)	(185,289)
Preferred dividend	(1,875)
Net loss attributable to common shareholders	(25,924,004)	(185,289)
Basic and diluted loss per share	$ (0.29)	$ 0.00
Weighted average shares outstanding, Basic and diluted	89,934,196	80,200,000
Comprehensive loss:
Net loss	(25,922,129)	(185,289)
Foreign currency translation adjustments	(7,097)	24,710
Comprehensive loss	$ (25,929,226)	$ (160,579)

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Stockholders' Equity

3 Months Ended

Mar. 31, 2014

Stockholders' Equity [Abstract]

STOCKHOLDERS' EQUITY

NOTE 7 – STOCKHOLDERS’ EQUITY

Preferred Stock

The Company is authorized to issue 50,000,000 shares of preferred stock, with par value of $0.001 per share, of which 75,000 shares have been designated as Series B 10% Convertible preferred stock, and 672,000 shares have been designated as Series C Convertible preferred stock. There were 75,000 Series B shares and 672,000 Series C shares issued and outstanding as of March 31, 2014 and December 31, 2013. 

Common Stock

The Company is authorized to issue 500,000,000 shares of common stock, with par value of $0.001 per share. As of March 31, 2014 and December 31, 2013, there were 91,621,564 and 82,819,694 shares of common stock issued and outstanding, respectively.

During January 2014 we issued 5,000,000 shares of common stock, valued at $1,250,000, pursuant to a consulting agreement with a one year term. We will expense the value of the shares over 2014. During the three months ended March 31, 2014, we recorded expense of $312,500.

During January 2014 we cancelled 250,000 shares of common stock which had been issued by Vanity in July of 2012 as payment for consulting services, pursuant to the request of the consultant.

During the three months ended March 31, 2014, we issued 4,051,870 shares of common stock upon the conversion of $191,184 of note principal and $11,409 of accrued interest.

Warrants Outstanding

At March 31, 2014 we have an aggregate of 8,700,000 common stock purchase warrants outstanding and exercisable. The warrants currently have an exercise price of $0.05 per share. The warrants expire on various dates between April 5, 2014 and November 10, 2014 and have a weighted average remaining life of 0.30 years at March 31, 2014. The warrants contain a price reset feature and are accounted for as derivative liabilities.

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Related Party Transactions

3 Months Ended

Mar. 31, 2014

Related Party Transactions [Abstract]

RELATED PARTY TRANSACTIONS

NOTE 6– RELATED PARTY TRANSACTIONS

An entity owned by certain of our shareholders provided management services to the Company. Fees incurred for the three months ended March 31, 2014 and 2013 were $0 and $111,633, respectively.

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Summary of Significant Accounting Policies (Detail Textual)	3 Months Ended
	Mar. 31, 2014 USD ($)	Mar. 31, 2013	Dec. 31, 2013 USD ($)	Mar. 31, 2014 US Bank [Member] USD ($)	Mar. 31, 2014 UK Bank [Member] USD ($)	Mar. 31, 2014 UK Bank [Member] EUR (€)
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]
Accounts receivable	$ 318,573		$ 387,279
Common share equivalents excluded from the computation of the weighted average diluted shares	171,022,597	0
Concentration risk, percentage	45.00%
Cash				$ 250,000	$ 140,000	€ 85,000

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Organization and Line of Business (Detail Textuals)	Mar. 31, 2014	Dec. 31, 2013	Jan. 31, 2013
Organization and Line of Business [Abstract]
Common stock, shares issued	91,621,564	82,819,694	80,200,000
Common stock, shares outstanding	91,621,564	82,819,694	80,200,000

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Summary of Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2014

Summary of Significant Accounting Policies [Abstract]

PRINCIPLES OF CONSOLIDATION

PRINCIPLES OF CONSOLIDATION

The condensed consolidated financial statements include the accounts of Thinspace Technology, Inc. and its wholly-owned subsidiaries, Thinspace UK and Thinspace USA. All material inter-company accounts and transactions have been eliminated.

USE OF ESTIMATES

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 consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

ACCOUNTS RECEIVABLE

ACCOUNTS RECEIVABLE

Accounts receivable are reported at the customers' outstanding balances less any allowance for doubtful accounts. Interest is not accrued on overdue accounts receivable. The Company evaluates receivables on a regular basis for potential reserve.   The accounts receivable balances of $318,573 and $387,279 as of March 31, 2014 and December 31, 2013, respectively, do not included an allowance for doubtful accounts as the Company anticipates payment on all accounts within the next fiscal year. The Company routinely evaluates accounts receivable for uncollectible amounts.

REVENUE RECOGNITION

REVENUE RECOGNITION

Certain volume licensing arrangements include a perpetual license for current products combined with rights to receive unspecified future versions of software products, which the Company has determined are additional software products and are therefore accounted for as subscriptions, with billings recorded as unearned revenue and recognized as revenue ratably over the coverage period. Arrangements that include term based licenses for current products with the right to use unspecified future versions of the software during the coverage period are also accounted for as subscriptions, with revenue recognized ratably over the coverage period.

Revenue from cloud-based services arrangements that allow for the use of a hosted software product or service over a contractually determined period of time without taking possession of software are accounted for as subscriptions with billings recorded as unearned revenue and recognized as revenue ratably over the coverage period beginning on the date the service is made available to customers.

Some volume licensing arrangements include time-based subscriptions for cloud-based services and software offerings that are accounted for as subscriptions. These arrangements are considered multiple element arrangements. However, because all elements are accounted for as subscriptions and have the same coverage period and delivery pattern, they have the same revenue recognition timing.

DEFERRED REVENUE

DEFERRED REVENUE

Deferred revenue related to support and maintenance is recorded in a manner consistent with the Company’s revenue recognition policy. The Company typically enters into one-year upgrade and maintenance contracts with its customers. The upgrade and maintenance contracts are generally paid in advance but can be billed monthly or quarterly. The Company defers such payment and recognizes revenue ratably over the contract period.

INVENTORY

INVENTORY

The Company values its inventory at the lower of cost (first-in, first-out) or market. The Company uses estimates and judgments regarding the valuation of inventory to properly value inventory. Inventory adjustments are made for the difference between the cost of the inventory and the estimated realizable value and charged to cost of goods sold in the period in which the facts that give rise to the adjustments become known.

FAIR VALUE OF FINANCIAL INSTRUMENTS

FAIR VALUE OF FINANCIAL INSTRUMENTS

Our short-term financial instruments, including cash, accounts receivable and accounts payable and accrued expenses consist primarily of instruments without extended maturities, the fair value of which, based on management’s estimates, reasonably approximate their book value. The fair value of our notes and advances payable is based on management estimates and reasonably approximates their book value based on their terms.

Fair value measurements

ASC 820 “Fair Value Measurements and Disclosure” establishes a framework for measuring fair value and expands disclosure about fair value measurements. 

ASC 820 defines fair value as the amount that would be received for an asset or paid to transfer a liability (i.e., an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes the following three levels of inputs that may be used:

Level 1 – Quoted prices in active markets for identical assets or liabilities.

Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.  

In accordance with ASC 820, the following table represents the Company's fair value hierarchy for its financial assets and (liabilities) measured at fair value on a recurring basis as of March 31, 2014:

	Level 1		Level 2		Level 3		Total
Liabilities
Conversion and warrant derivative liabilities		-		-	$	36,036,431	$	36,036,431
Total Liabilities	$	-	$	-	$	36,036,431	$	36,036,431

The table below sets forth a summary of changes in the fair value of the Company’s Level 3 financial liabilities (conversion and warrant derivative liabilities) for the three month period ended March 31, 2014.

	2014
Balance at beginning of year	$	11,268,087
Additions to derivative instruments		4,028,280
Change in fair value of derivative liabilities		21,752,944
Reclassification upon conversion of debt		(1,012,880	)
Balance at end of period	$	36,036,431

The following is a description of the valuation methodologies used for these items:

Conversion derivative liability— these instruments consist of certain of our notes which are convertible based on a discount to the market value of our common stock. These instruments were valued using pricing models which incorporate the Company’s stock price, volatility, U.S. risk free rate, dividend rate and estimated life.

CONCENTRATIONS OF CREDIT RISK

CONCENTRATIONS OF CREDIT RISK

The Company performs ongoing credit evaluations of its customers. At March 31, 2014, two customers accounted for 45% of accounts receivable.

The Company maintains cash and cash equivalents with major financial institutions. Cash held in US bank accounts is insured up to $250,000 at each institution. Cash held in UK bank accounts is insured up to £85,000 at March 31, 2014 (approximately $140,000 at March 31, 2014) at each institution for each entity.  At times, cash balances may exceed the insured limits. The Company has not experienced any loss on these accounts.  The balances are maintained in demand accounts to minimize risk.

LOSS PER SHARE

LOSS PER SHARE

We use ASC 260, “Earnings Per Share” for calculating the basic and diluted income (loss) per share. We compute basic income (loss) per share by dividing net income (loss) and net income (loss) attributable to common shareholders by the weighted average number of common shares outstanding.

Dilutive common stock equivalents consist of shares issuable upon conversion of debt and preferred stock and the exercise of our stock warrants. There were 171,022,597 common share equivalents at March 31, 2014 and none at March 31, 2013, which have been excluded from the computation of the weighted average diluted shares.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

Recent accounting pronouncements issued by the FASB and the SEC did not, or are not believed by management to have a material impact on the Company's present or future consolidated financial statements.

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Commitments and Contingencies

3 Months Ended

Mar. 31, 2014

Commitments and Contingencies [Abstract]

COMMITMENTS AND CONTINGENCIES

NOTE 8 - COMMITMENTS AND CONTINGENCIES

LEASE

We currently occupy office space pursuant to various short term leases expiring in 2014.

Rent expense for the three months ended March 31, 2014 and 2013 was $37,283 and $30,772, respectively.

LITIGATION

From time to time, The Company and its subsidiaries 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. The Company and its subsidiaries are currently not aware of any such legal proceedings or claims that they believe will have, individually or in the aggregate, a material adverse effect on our business, financial condition or operating results.  

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Subsequent Events

3 Months Ended

Mar. 31, 2014

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

NOTE 9 - SUBSEQUENT EVENTS

Goldcrest Stock Purchase Agreement

On April 2, 2014, Thinspace UK entered into a stock purchase agreement (the “Purchase Agreement”) with Goldcrest Distribution Limited (“Goldcrest”). Pursuant to the Purchase Agreement, Thinspace UK may, for a period of one year commencing upon the execution of the Purchase Agreement, and upon receipt of orders from customers, request funding for such orders from Goldcrest, which Goldcrest may provide at its discretion, in an aggregate amount of up to £1.8 million (approximately USD$3.02 million). The Purchase Agreement was entered into in connection with a purchase order received by Thinspace UK in the amount of £2,307,357. Pursuant to the Purchase Agreement, Thinspace UK paid Goldcrest an establishment fee of £36,150 and agreed to pay a transaction fee of 3% for a transaction period of 3 months for advances under the Purchase Agreement. Thinspace UK’s obligations under the Purchase Agreement will be secured by a debenture over the assets of Thinspace UK and personal guarantees executed by Owen Dukes and Robert Zysblat, the Company’s Chief Executive Officer and President, respectively.

Greystone $65K Financing

On April 17, 2014, the Company entered into a Securities Purchase Agreement with Greystone pursuant to which the Company sold to Greystone an 8% convertible debenture in the principal amount of up to $65,000 (it being agreed that any such amounts (up to $65,000) may be paid by Greystone to the Company in Greystone’s discretion during the 90 pay period commencing on the date of issuance of the debenture). The debenture matures on the third anniversary of the date of issuance  and bears interest a rate of 8% per annum, payable semi-annually and on the maturity date. Greystone may convert, at any time, the outstanding principal and accrued interest on the Debenture into shares of the Company’s common stock, at a conversion price per share at 25% of the lowest closing bid price for the Company’s common stock during the previous 20 trading days. We have received $65,000 pursuant to this agreement. The conversion price is subject to adjustment in the event of sales by the Company of common stock or securities convertible into common stock at a price per share lower than the then-effective conversion price, to such lower price, subject to certain exceptions.

IBC Funds $100K Financing

On April 17, 2014, the Company entered into a Securities Purchase Agreement with IBC pursuant to which the Company sold to IBC an 8% convertible debenture in the principal amount of up to $100,000 (it being agreed that any such amounts (up to $100,000) may be paid by IBC to the Company in IBC’s discretion during the 90 pay period commencing on the date of issuance of the debenture). The debenture matures on the third anniversary of the date of issuance and bears interest a rate of 8% per annum, payable semi-annually and on the maturity date. IBC may convert, at any time, the outstanding principal and accrued interest on the debenture into shares of the Company’s common stock, at a conversion price per share at 25% of the lowest closing bid price for the Company’s common stock during the previous 20 trading days. We have received $50,000 pursuant to this agreement. The conversion price is subject to adjustment in the event of sales by the Company of common stock or securities convertible into common stock at a price per share lower than the then-effective conversion price, to such lower price, subject to certain exceptions.

Common Shares Issued

Effective April 15, 2014 and April 30, 2014 we issued an aggregate of 277,354 shares of common stock to our President as payment of accrued salary in the amount of $30,000. Such shares were issued pursuant to terms contained in his employment agreement. The shares had a value of $76,891.

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Organization and Line of Business (Tables)

3 Months Ended

Mar. 31, 2014

Organization and Line of Business [Abstract]

Schedule of assets and liabilities of retained subsequent

Cash	$	9,848
Other assets		1,349
Accounts payable and accrued expenses		(1,032,603	)
Notes payable		(922,019	)
Derivative liabilities		(8,504,326	)
Net liabilities retained	$	(10,447,751	)

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Summary of Significant Accounting Policies (Details) (Fair Value, Measurements, Recurring, USD $)	Mar. 31, 2014
Level 1
Liabilities
Conversion and warrant derivative liabilities
Total Liabilities
Level 2
Liabilities
Conversion and warrant derivative liabilities
Total Liabilities
Level 3
Liabilities
Conversion and warrant derivative liabilities	36,036,431
Total Liabilities	36,036,431
Total
Liabilities
Conversion and warrant derivative liabilities	36,036,431
Total Liabilities	$ 36,036,431

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Loans Payable - Related Party (Details) (Shareholders [Member], USD $)	3 Months Ended
	Mar. 31, 2014
Shareholders [Member]
Related Party Transaction [Line Items]
Short term working capital loans	$ 20,000
Repayment of loan	$ 39,000

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Condensed Consolidated Statements of Cash Flows (USD $)	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Cash flows from operating activities:
Net loss	$ (25,922,129)	$ (185,289)
Adjustments to reconcile net loss to net
Depreciation and amortization	19,784	16,066
Amortization of prepaid stock based compensation	312,500
Gain on conversion of debt	(155,129)
Change in fair value of derivative liability	21,752,944
Amortization of debt discount	3,756,944
Changes in operating assets and liabilities:
Accounts receivable	75,032	(133,145)
Inventory	(10,580)	2,801
Prepaid expenses and other current assets	(291,830)	22,451
Other assets	(7,000)	(1,996)
Accounts payable and accrued expenses	(55,835)	120,315
Deferred revenue	(336,334)	133,636
Net cash used in operating activities	(861,633)	(25,161)
Cash flows from investing activities:
Cash paid for fixed assets	(3,748)	(5,999)
Net cash used in investing activities	(3,748)	(5,999)
Cash flows from financing activities:
Proceeds from sale of preferred stock	472,000
Proceeds from notes payable	300,000
Repayment of loan	(3,735)	(3,785)
Advances from related parties		20,193
Repayments to related parties	(38,900)
Net cash provided by financing activities	729,365	16,408
Effect of exchange rate changes on cash	(5,928)	(2,695)
Net decrease in cash	(141,944)	(17,447)
Cash, beginning of period	341,031	51,323
Cash, end of period	199,087	33,876
Supplemental Schedule of Cash Flow Information:
Cash paid for interest	334
Non-cash investing and financing activities:
Fair value of common stock issued upon conversion of notes	1,012,968
Note payable converted to common stock	191,184
Accrued interest converted to common stock	11,410
Derivative liability reclassified to equity upon conversion of debt	1,012,880
Derivative liability of debt issued	2,729,757
Common stock issued as payment of prepaid consulting fees	$ 1,250,000

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Loans Payable - Related Party

3 Months Ended

Mar. 31, 2014

Converteble Notes Payable, Loans Payable and Loans Payable - Related party [Abstract]

LOANS PAYABLE - RELATED PARTY

NOTE 5 – LOANS PAYABLE – RELATED PARTY

Entities controlled by certain shareholders have provided short term working capital loans to the Company aggregating approximately $20,000 during the three months ended March 31, 2013. The Company repaid approximately $39,000 of loans during the three months ended March 31, 2014.

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Related Party Transactions (Details) (USD $)	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Related Party Transactions [Abstract]
Fees incurred from related party transaction	$ 0	$ 111,633

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Organization and Line of Business (Detail Textuals 1) (USD $)	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013	Dec. 31, 2013	Jan. 31, 2013	Jan. 31, 2012
Organization and Line of Business [Abstract]
Net loss	$ (25,922,129)	$ (185,289)
Stockholders' deficit	37,712,515		14,044,350	454,968	296,571
Negative working capital	$ 38,038,819