10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 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

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

For the transition period from ___________________________ to ___________________________

Commission file number: 333-164788

ACTIVE HEALTH FOODS, INC.

(Exact Name of Registrant as Specified in Its Charter)

California	26-1736663
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification Number)
6185 Magnolia Ave., Suite 403	Riverside, CA 92506
(Address of Principal Executive Offices)	(City, State and Zip Code)

(951) 360-9970

(Registrant’s Telephone Number, Including Area Code)

Not Applicable 

(Former Name, Former Address and Former Fiscal Year, If Changed Since Last Report)

Copies to:

NBDC

5070 Arville St., Suite 7

Las Vegas, Nevada 89118

Voice and Fax    (702) 988-4250

Email:     nbdc@onebox.com

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

1

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 ¨ No x

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,” "non-accelerated filer" and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	o	Accelerated filer	o
Non-accelerated filer	o	Smaller reporting company	x

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

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date:

As of May 15, 2014, there were 74,607,023 shares of common stock, par value $0.001 per share, outstanding and -0- shares of preferred stock, par value $0.001 per share, outstanding.

2

TABLE OF CONTENTS

		Page
PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements	4
Item 2.	Management’s Discussion and Analysis of Financial Condition and Plan of Operations	14
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	17
Item 4.	Controls and Procedures	17
PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	18
Item 1A.	Risk Factors	18
Item 2.	Unregistered Sale of Equity Securities and Use of Proceeds	21
Item 3.	Defaults Upon Senior Securities	21
Item 4.	Submission of Matters to a Vote of Security Holders	21
Item 5.	Other Information	21
Item 6.	Exhibits	21
SIGNATURES		21

CERTIFICATIONS

Exhibit 31.1  Management Certification 

Exhibit 32.2  Sarbanes-Oxley Act

3

PART I

FINANCIAL INFORMATION

Item 1.  Financial Statements.

4

ACTIVE HEALTH FOODS, INC.
Condensed Balance Sheets
ASSETS
			March 31,		December 31,
			2014		2013
			(Unaudited)
CURRENT ASSETS
	Cash		$	2,074	$	138
	Accounts receivable			3,495		39
	Inventory			39,022		41,555
		Total Current Assets		44,591		41,732
		TOTAL ASSETS	$	44,591	$	41,732
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
	Accounts payable and accrued expenses		$	1,185,307	$	19,691
	Related-party payables			185,048		200,816
	Interest payable			6,461		6,807
	Convertible debt, net			14,040		46,224
	Derivative liability			24,311		109,996
	Notes payable, net			66,989		9,500
		Total Current Liabilities		1,482,156		393,034
		TOTAL LIABILITIES		1,482,156		393,034
STOCKHOLDERS' DEFICIT
	Preferred stock; 100,000,000 shares authorized,
	at $0.001 par value,  25,000,000 and 25,000,000
	shares issued  and outstanding, respectively			-		-
	Common stock; 5,000,000,000 shares authorized,
	at $0.001 par value, 68,607,023 and 29,248,785
	shares issued  and outstanding, respectively			67,046		29,248
	Additional paid-in capital			6,978,423		6,584,829
	Deficit accumulated during the development stage			(8,483,034)		(6,965,379)
		Total Stockholders' Deficit		(1,437,565)		(351,302)
		TOTAL LIABILITIES AND
		STOCKHOLDERS' DEFICIT	$	44,591	$	41,732
The accompanying notes are an integral part of these unaudited condensed financial statements.

5

ACTIVE HEALTH FOODS, INC.
Condensed Statements of Operations
(Unaudited)
			For the Three Months Ended
			March 31,
			2014		2013
REVENUES			$	4,428	$	13,440
COST OF SALES				3,569		11,022
GROSS PROFIT				859		2,418
OPERATING EXPENSES
	General and administrative			1,347,205		53,158
		Total Operating Expenses		1,347,205		53,158
LOSS FROM OPERATIONS				(1,346,346)		(50,740)
OTHER EXPENSE
	Gain or loss on derivative			(27,126)		(192,044)
	Interest expense			(144,183)		(151,424)
		Total Other Expense		(171,309)		(343,468)
LOSS BEFORE INCOME TAXES				(1,517,655)		(394,208)
PROVISION FOR INCOME TAXES				-		(28)
NET LOSS			$	(1,517,655)	$	(394,208)
BASIC AND DILUTED LOSS
PER SHARE			$	(0.03)	$	(0.45)
WEIGHTED AVERAGE
NUMBER OF COMMON SHARES
OUTSTANDING				48,362,958		881,333
The accompanying notes are an integral part of these unaudited condensed financial statements.

6

ACTIVE HEALTH FOODS, INC.
Condensed Statements of Cash Flows
(Unaudited)
				For the Three Months Ended
				March 31,
				2014		2013
OPERATING ACTIVITIES
	Net loss			$	(1,517,655)	$	(394,236)
	Adjustments to reconcile net loss to net cash
	used by operating activities:
		Amortization of discount on notes payable			144,335		147,889
		Gain/loss on derivative liabilities			27,126		192,044
		Loss on extinguishment			105,695		-
		Shares issued for services			16,056		-
	Changes in operating assets and liabilities:
		Inventory			2,533		(2,272)
		Deposits			-		-
		Accounts receivable			(3,456)		(5,330)
		Interest payable			-		3,535
		Accounts payable- related party			(35,500)		-
		Accounts payable and accrued expenses			1,198,071		-
			Net Cash Used in Operating Activities		(62,795)		(58,370)
FINANCING ACTIVITIES
		Proceeds from related-party payables			57,083		130,661
		Proceeds from convertible debt			-		57,500
		Proceeds from notes payable			45,000		-
		Repayment of related-party loans			(37,352)		(102,380)
			Net Cash Provided by Financing Activities		64,731		85,781
		NET INCREASE IN CASH			1,936		27,411
		CASH AT BEGINNING OF PERIOD			138		4,459
		CASH AT END OF PERIOD		$	2,074	$	31,870
SUPPLEMENTAL DISCLOSURES OF
	CASH FLOW INFORMATION
	CASH PAID FOR:
		Interest		$	-	$	-
		Income taxes		$	-	$	-
	NON CASH FINANCING ACTIVITIES:
		Write off of derivative liabilities due to debt conversion		$	156,896	$	322,492
		Debt discount on convertible notes		$	55,000		205,000
		Debt converted to equity		$	89,945		167,249
		Cancellation of preferred stock		$	-	$	50,000
		Cancellation of common stock		$	-		3,000
		Notes payable transferred to convertible notes		$	-		77,000
		Shares issued for interest		$	62,800	$	-
The accompanying notes are an integral part of these unaudited condensed financial statements.

7

ACTIVE HEALTH FOODS, INC.

(A Development Stage Company)

Notes to Unaudited Condensed Financial Statements

March 31, 2014 and December 31, 2013

NOTE 1 - CONDENSED FINANCIAL STATEMENTS

The unaudited interim financial statements included herein have been prepared by BullsnBears.com, Inc. (the “Company”) in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission (the “SEC”). We suggest that these interim financial statements be read in conjunction with the audited financial statements and notes thereto included in our Form 10-K for the year ended December 31, 2013, as filed with the SEC. We believe that all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein and that the disclosures made are adequate to make the information not misleading. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which would substantially duplicate the disclosure contained in the audited financial statements for the most recent fiscal year as reported in Form 10-K have been omitted.

NOTE 2 - GOING CONCERN

The Company's financial statements are prepared using generally accepted accounting principles in the United States of America applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and allow it to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations.

In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management's plan is to obtain such resources for the Company by obtaining capital from management and significant shareholders sufficient to meet its minimal operating expenses and seeking equity and/or debt financing. However management cannot provide any assurances that the Company will be successful in accomplishing any of its plans.

The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other sources of financing and attain profitable operations. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

NOTE 3 – RELATED PARTY TRANSACTIONS

As of March 31, 2014 and December 31, 2013, respectively, the Company had borrowed a net total of $185,048 and $200,816 from an officer and another related party of the Company to finance the ongoing operations of the Company.  These payables are non-interest bearing, unsecured, and are due on demand.

NOTE 4 – NOTES PAYABLE

On September 23, 2013 the company borrowed $8,000 in the form of a promissory note. The note is due on October 4, 2014 along with $2,000 in interest.

During the year ended December 31, 2013 the Company borrowed $1,500 in the form of a promissory note. The note bears no interest and is due on demand.

On March 4, 2014 the Company borrowed $25,000 in the form of a promissory note.  The note is due May 15, 2014 along with $15,000 of interest and 10,000,000 restricted shares of common stock.  In anticipation of repayment, the Company issued the stock on March 6, 2014.  An amount of $60,000 for the fair value of the stock was recorded as prepaid interest on the date of authorization to be expensed on the due date of the note.

NOTE 4 – NOTES PAYABLE (Continued)

On March 17, 2014 the Company borrowed $20,000 in the form of a promissory note.  The note is due on May 15, 2014 along with $15,000 of interest and 5,000,000 restricted shares of common stock.

As of March 31, 2014 and December 31, 2013, the notes payable balance totaled $66,989 and $9,500. The notes are unsecured and due on demand.

NOTE 5 – CONVERTIBLE NOTES PAYABLE

$25,000 Convertible Note -On March 13, 2013 the Company borrowed $25,000 from an unrelated third party entity in the form of a convertible note, $23,500 of which was received in cash and $1,500 which was for legal fees. The note bears interest at a rate of 8.0 percent per annum, with principal and interest due March 15, 2014.

The principal balance of the note along with accrued interest is convertible at the option of the note holder, into the Company's common stock at a price of 50 percent below the current market price.  The current market price is defined as the average of the lowest three trading prices for the Common Stock during the thirty day period on the latest complete trading day prior to the conversion date.

On December 3, 2013 the notes principal balance of $18,446 was purchased by and assigned to an unrelated third party. The purchase price for the assigned portion of the note was $20,996. Pursuant to the purchase and assignment agreement a replacement note was issued on December 3, 2013. Pursuant to the terms of the replacement note, the replacement note bears interest at 6 percent per annum and is due on December 3, 2014.  The principal balance of the replacement note along with accrued interest is convertible at the option of the note holder, into the Company's common stock at a price of 55 percent below the current market price.  The current market price is defined as the lowest closing bid price for the Common Stock during the five day period on the latest complete trading day prior to the conversion date.

Pursuant to this conversion feature, the Company recognized a discount on convertible debt in the amount of $25,000 on the note date.  During the year ended December 31, 2013 $16,615 of the outstanding balance was converted into 1,562,833 shares of the Company’s common stock. During the three months ended March 31, 2014, the remaining $8,385 outstanding balance was converted into 2,345,524 shares of the Company’s common stock.  As of March 31, 2014 the Company had amortized $25,000 of the debt discount to interest expense, leaving $-0- in unamortized debt discount. The outstanding balance of the note as of March 31, 2014 totaled $-0-.

$32,500 Convertible Note -On March 18, 2013 the Company borrowed $32,500 from an unrelated third party entity in the form of a convertible note, all of which was received in cash.  The note bears interest at a rate of 8.0 percent per annum, with principal and interest due in full on December 12, 2013.

The principal balance of the note along with accrued interest is convertible beginning 180 days from the issuance date, at the option of the note holder, into the Company's common stock at a price of 42 percent below the current market price.  The current market price is defined as the average of the lowest three trading prices for the Common Stock during the ten day period on the latest complete trading day prior to the conversion date.

Pursuant to this conversion feature, the Company recognized a discount on convertible debt in the amount of $32,500 on the date the note became convertible.  During the year ended December 31, 2013 $24,400 of the principal was converted into 3,696,970 shares of the Company’s common stock. During the three months ended March 31, 2014 the remaining $8,100 of the principal as well as $1,300 of accrued interest was converted into 1,740,741 shares of the Company’s common stock.  As of March 31, 2014 the Company had amortized $32,500 of the debt discount to interest expense, leaving $-0- in unamortized debt discount. The outstanding balance of the note as of March 31, 2014 totaled $-0-.

NOTE 5 – CONVERTIBLE NOTES PAYABLE (Continued)

$37,500 Convertible Note -On June 19, 2013 the Company borrowed $37,500 from an unrelated third party entity in the form of a convertible note, all of which was received in cash.  The note bears interest at a rate of 8.0 percent per annum, with principal and interest due in full on March 21, 2014.

The principal balance of the note along with accrued interest is convertible beginning 180 days from the issuance date, at the option of the note holder, into the Company's common stock at a price of 42 percent below the current market price.  The current market price is defined as the average of the lowest three trading prices for the Common Stock during the ten day period on the latest complete trading day prior to the conversion date.

Pursuant to this conversion feature, the Company recognized a discount on convertible debt in the amount of $34,106 on the date the note became convertible.  During the three months ended March 31, 2014 the outstanding balance of the note and $1,500 in interest was converted into 9,132,150 shares of the Company’s common stock.  As of March 31, 2014 the Company had amortized $34,106 of the debt discount to interest expense, leaving $-0- in unamortized debt discount at March 31, 2014. The outstanding balance of the note as of March 31, 2013 totaled $-0-.

$25,000 Convertible Note– On July 16, 2013 the Company borrowed $25,000 from an unrelated third party entity in the form of a convertible note. The note matures one year after date of issue. The note bears no interest and is convertible into shares of the Company’s common stock when it reaches maturity.

On December 30, 2013 the notes principal balance of $25,000 was purchased by and assigned to an unrelated third party. The purchase price for the assigned portion of the note was $25,000 and a replacement note was issued on December 30, 2013. Pursuant to the terms of the replacement note, the replacement note bears interest at 8 percent per annum and is due on December 30, 2014.  The principal balance of the replacement note along with accrued interest is convertible at the option of the note holder, into the Company's common stock at a price of 50 percent of the lowest daily VWAP of the common stock for the twenty prior trading days including the day upon which a notice of conversion is received by the Company (provided such notice of conversion is delivered by fax or other electronic method of communication to the Company after 4 P.M. Eastern Standard or Daylight Savings Time if the Holder wishes to include the same day closing price).  

Pursuant to this conversion feature, the Company recognized a discount on convertible debt in the amount of $25,000 on the date the note became convertible.  During the three months ended March 31, 2014 $18,710 of the outstanding balance of the note was converted into 5,710,171 shares of the Company’s common stock.  As of March 31, 2014 the Company had amortized $20,118 of the debt discount to interest expense, leaving $4,882 in unamortized debt discount at March 31, 2014. The outstanding balance of the note as of March 31, 2014 totaled $6,290.

$25,000 Convertible Note - On December 3, 2013 the Company borrowed $25,000 from an unrelated third party entity in the form of a convertible note, $25,000 of which was for professional fees. The note bears interest at a rate of 6.0 percent per annum, with principal and interest due December 3, 2014.

The principal balance of the note along with accrued interest is convertible after 180 days, at the option of the note holder, into the Company's common stock at a price of 65 percent below the current market price.  The current market price is defined as the lowest closing bid price for the Common Stock during the five day period on the latest complete trading day prior to the conversion date.  

During the three months ended March 31, 2014 $17,250 of the outstanding balance of the note was converted into 6,272,727 shares of the Company’s common stock.  The Company allowed a onetime conversion prior to the 180 days; therefore, the conversion was fair valued on the date of conversion. The excess expense was recorded as a loss on extinguishment in the amount of $105,695.

NOTE 6 – FAIR VALUE MEASUREMENTS AND DERIVATIVE LIABILITY

The Company evaluates all of it financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported as charges or credits to income. For option-based derivative financial instruments, the Company uses the Black-Scholes option-pricing model to value the derivative instruments at inception and subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date.

Under ASC-815 the conversion options embedded in the notes payable described in Note 6 require liability classification because they do not contain an explicit limit to the number of shares that could be issued upon settlement.

During 2014, certain notes payable were converted resulting in settlement of the related derivative liabilities.  The Company re-measured the embedded conversion options at fair value on the date of settlement and recorded these amounts to additional paid-in capital.

During 2014, the Company issued additional convertible notes.  The conversion options and warrants were classified as derivative liabilities at their fair value on the date of issuance.

As defined in FASB ASC 820, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The Company utilized the market data of similar entities in its industry or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable. The Company classifies fair value balances based on the observability of those inputs. FASB ASC 820 establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the lowest priority to unobservable inputs (level 3 measurement).

The three levels of the fair value hierarchy are as follows:

Level 1    –	Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Level 1 primarily consists of financial instruments such as exchange-traded derivatives, marketable securities and listed equities.
Level 2     -	Pricing inputs are other than quoted prices in active markets included in level 1, which are either directly or indirectly observable as of the reported date.
Level 3     –	Pricing inputs include significant inputs that are generally less observable from objective sources. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value.

NOTE 6 – FAIR VALUE MEASUREMENTS AND DERIVATIVE LIABILITY (Continued)

The following table sets forth by level within the fair value hierarchy the Company’s financial assets and liabilities that were accounted for at fair value as March 31, 2013.

Recurring Fair Value Measures	Level 1			Level 2			Level 3			Total
LIABILITIES:
Derivative liabilities, March 31, 2014		$	--		$	--		$	24,311		$	24,311

The following table summarizes the changes in the derivative liabilities during the quarter ended March 31, 2014:

Ending balance as of December  31, 2013	$	109,996
Reclassification of derivative liabilities to additional paid-in capital due to conversion of notes payable		(156,896)
Additions due to new convertible debt and warrants issued		154,081
Change in fair value		27,126
Ending balance as of March 31, 2014	$	24,311

The Company uses the Black-Scholes option pricing model to value the derivative liability and subsequent remeasurements.  Included in the model are the following assumptions: stock price at valuation date of $0.006 - $0.027, exercise price of $0.006 - $0.027, dividend yield of zero, years to maturity of 0.15 – 0.98, risk free rate of 0.01 – 0.13 percent, and annualized volatility of 604 – 613 percent.

NOTE 7 – EQUITY TRANSACTIONS

During the three months ended March 31, 2014, the Company issued 2,595,891 shares of common stock as compensation for services rendered by related parties.  The services had a fair market value of $16,056.

During the three months ended March 31, 2014 the Company issued 25,201,315 shares of common stock for conversion of debt of $89,945.

On March 6, 2014 the Company issued 10,000,000 shares of common stock for interest on a $25,000 loan due on May 15, 2014.  The shares had a fair market value of $60,000.

NOTE 8 – SIGNIFICANT EVENTS

On March 26, 2014, the Circuit Court in the Second Judicial District for Leon County, Florida entered an order approving the Settlement Agreement and Stipulation, and Request for Fairness Hearing of the parties (the "Stipulation") in the matter of AGS Capital Group, LLC ("AGS") v. Active Health Foods, Inc. (the "Company"). Under the terms of the Stipulation, the Company agreed to issue to AGS, as settlement of certain liabilities owed by the Company in the aggregate amount of $1,429,705.70 (the "Claim Amount") and shares of common stock (the "Settlement Shares").  AGS had purchased the liabilities from the Company’s creditors (both affiliated and non-affiliated) with a face amount of $1,429,705.70. The total amount of liabilities, at March 31, 2014, is $1,429,705.70.  The liabilities relate to various legal, accounting, marketing, and other professional contracts for which services had been provided to the Company as of March 31, 2014.

Pursuant to the Stipulation entered into by the parties, the Company agreed to issue to ASC, in one or more tranches as necessary, that number of shares of common stock sufficient to generate net proceeds equal to the Claim Amount, as defined in the Stipulation.  The parties reasonably estimated that, should the Company issue Settlement Shares sufficient to satisfy the entire Claim Amount, the fair market value of such Settlement Shares and all other amounts to be received by AGS would equal approximately $3,200,000.  Notwithstanding anything to the contrary in the Stipulation, the number of shares beneficially owned by AGS shall not exceed 4.99% of the Company's outstanding common stock at any one time.

In connection with the issuance of the Settlement Shares, the Company may rely on the exemption from registration provided by Section 3(a)(10) under the Securities Act.  To date, the Company has not issued any Settlement Shares to ASC.  As such, the full Claim Amount remains outstanding and payable to AGS.   Based upon the reported closing trading price of the Company’s common stock on May 20, 2014 of $0.0037 per share, if all $1,429,705.70 worth of liabilities were satisfied pursuant to the Stipulation through the issuance of common stock, the Company would issue a maximum of 1,000,000,000 shares.

NOTE 9 – SUBSEQUENT EVENTS

On March 27, 2014 the Company entered into a convertible note agreement for $50,000. The Company will receive $42,500 in cash, $2,500 for legal fees, and $5,000 for payment to a third party.  Because the funds had not been disbursed during this reporting period, the agreement will be disclosed as a subsequent event.  The note bears interest at a rate of 8.0 percent per annum, with principal and interest due in full on March 27, 2014.  The principal balance of the note along with accrued interest is convertible beginning 180 days from the issuance date, at the option of the note holder, into the Company's common stock at a price of 50 percent below the current market price.  The current market price is defined as the lowest trading price for the Common Stock during the twenty day period on the latest complete trading day prior to the conversion date.

On April 2, 2014 the Company entered into a convertible note agreement for $50,000, which is to be received by the Company in two tranches of $25,000 each.  In the first tranche, the Company will receive $21,000 in cash, $1,500 for legal fees, and $2,500 for payment to a third party.  The note bears interest at a rate of 8.0 percent per annum, with principal and interest due in full on April 2, 2015.  The principal balance of the note along with accrued interest is convertible beginning 180 days from the issuance date, at the option of the note holder, into the Company's common stock at a price of 50 percent below the current market price.  The current market price is defined as the lowest trading price for the Common Stock during the twenty day period on the latest complete trading day prior to the conversion date.  The second $25,000 tranche will likely require similar legal and other payments.

NOTE 9 – SUBSEQUENT EVENTS (Continued)

On April 10, 2014 the Company borrowed $32,500 from an unrelated third party entity in the form of a convertible note.  The Company received $18,000 in cash with the remaining $14,500 to pay legal and third party fees.  The note bears interest at a rate of 8.0 percent per annum, with principal and interest due in full on January 14, 2015. The principal balance of the note along with accrued interest is convertible beginning 180 days from the issuance date, at the option of the note holder, into the Company's common stock at a price of 50 percent below the current market price.  The current market price is defined as the average of the lowest three trading prices for the Common Stock during the ten day period on the latest complete trading day prior to the conversion date.

On April 7, 2014 the Company issued 5,000,000 of shares of common stock in anticipation of repayment of the $20,000 loan entered into on March 17, 2014.  The shares will be valued at market value on the date of issuance and will be recorded as interest expense.

8

ACTIVE HEALTH FOODS, INC.

(A Development Stage Company)

Notes to Unaudited Condensed Financial Statements

March 31, 2014 and December 31, 2013

On April 25, 2014 the Company issued 1,000,000 shares of common stock to an unrelated third party entity as payment for services.

9

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

The following discussion of our financial condition and results of operations should be read in conjunction with our financial statements and the related notes, and the other financial information included in this report.

Forward-Looking Statements

The following discussion and analysis should be read in conjunction with our financial statements and related notes thereto included elsewhere in this filing.  Portions of this document that are not statements of historical or current fact are forward-looking statements that involve risk and uncertainties, such as statements of our plans, objectives, expectations and intentions.  Any cautionary statements made herein should be read as applying to all related forward-looking statements wherever they appear.  From time to time, we may publish forward-looking statements relative to such matters as anticipated financial performance, business prospects, technological developments and similar matters.  The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements.  All statements other than statements of historical fact included in this section or elsewhere in this report are, or may be deemed to be, forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.  Important factors that could cause actual results to differ materially from those discussed in such forward-looking statements include, but are not limited to, the following: changes in the economy or in specific customer industry sectors; changes in customer procurement policies and practices; changes in product manufacturer sales policies and practices; the availability of product and labor; changes in operating expenses; the effect of price increases or decreases; the variability and timing of business opportunities including acquisitions, alliances, customer agreements and supplier authorizations; our ability to realize the anticipated benefits of acquisitions and other business strategies; the incurrence of debt and contingent liabilities in connection with acquisitions; changes in accounting policies and practices; the effect of organizational changes within the Company; the emergence of new competitors, including firms with greater financial resources than ours; adverse federal, state and/or local legislation and/or regulation; and the occurrence of extraordinary events, including natural events such as earthquakes, fires and floods, accidents and Acts of God.  We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events, or otherwise.

Forward-looking statements involve risks, uncertainties and other factors, which may cause our actual results, performance or achievements to be materially different from those expressed or implied by such forward-looking statements.  Factors and risks that could affect our results and achievements and cause them to materially differ from those contained in the forward-looking statements include those previously identified in prior SEC filings, as well as other factors that we are currently unable to identify or quantify, but that may exist in the future.  

Readers are cautioned not to place undue reliance on any forward-looking statements contained herein, which reflect management’s opinions only as of the date hereof.  Except as required by law, we undertake no obligation to revise or publicly release the results of any revision to any forward-looking statements.  You are advised, however, to consult any additional disclosures we make in our reports to the SEC.  All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements contained in this Report.

Overview

Active Health Foods, Inc. (“AHF” or the “Company”), was incorporated in the State of California on January 9, 2008 under the same name.

Active Health Foods, Inc. is a California corporation with a principal business objective of providing competitively priced, premium quality, organic energy bars. Active Health Foods, Inc. has developed the brand name “Active X^TM” for its energy bars. The term “Active X^TM” was trademarked by the company on May 6, 2008.  Active X^TM energy bars are organic, moist and flavorful. Our energy bars are made from a proprietary formula developed by and exclusive to Active Health Foods, Inc. This proprietary blend only uses natural and organic ingredients. Active X^TM energy bars come in four flavors:

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►

Almond Chocolate Delight

►

Peanut Butter Chocolate Joy

►

Cashew Berry Dream

►

Coconut Cocoa Passion

Each energy bar is 1.8 net ounces and comes wrapped in a distinctive, decorated full color wrapping. Each flavor is packaged into a full color decorated display box, which is specifically designed to be used as a counter display for the retailer. Each uniquely designed display box holds 16 bars. There are eight display boxes to a case, for a total of 128 bars per case.

Competition

Currently, the organic and health food industry is growing and the Company faces considerable competition from other companies worldwide. This business is replete with competition at all levels of geographic settings, expertise and ethical variances. Our ability to remain competitive is based on our ability to provide our customers with a broad range of quality products, competitively priced, with superior customer service. The prospective ability to develop cost effective products that provide superior value is an integral component of our ability to stay competitive. We believe that the breadth and quality of our existing product line, the infrastructure in place to effectively source our products and the skill and dedication of our management will allow us to successfully compete in our chosen marketplace.

No formal study has been commissioned or initiated to analyze the competition that the Company will or may face. The Company’s internal management competitor analysis reveals that the health food industry is a competitive business with competition coming from small locally owned companies, major big box stores labeling generic brands with their signature label, to the more popular selling organic bars such as “Clif” and “Luna”. None of these produce and sell 100% organic and 100% natural food bars like Active XTM energy bars and as such they lack the nutritional value of an Active XTM energy bar. All competitors’ bars are dry, bland and contain fillers and paste, resulting in more of a rice crispy type bar than a 100% organic and 100% natural moist and flavorful bar such as Active XTM.

All of our major competitors are generally better financed, have greater name recognition, an established customer loyalty base and a broader range of markets than we do presently. Our core philosophy of a 100% organic and 100% natural product, reliability of not only product quality but delivery as well, along with a fair price, we believe will distinguish our Company from the competition. Even with the competitive nature of the business, there is an opportunity for the Company to position itself for success by recognizing and catering to an increasingly demanding consumer. If the Company is unable to compete successfully against any of these competitors, then revenues could be negatively impacted, which would adversely affect the business, results of operations and financial condition of the Company.

Employees

The Company does not presently have any full or part-time employees. The sole officer and director of the Company is providing time and services as necessary for the development of the Company.

Active Health Foods, Inc. is currently in the development stage.  During this development period, we plan to rely exclusively on the services of our sole officer and director to establish business operations and perform or supervise the minimal services required at this time. Our operations are currently on a small scale and, it is believed, manageable by the present management. The responsibilities are mainly administrative at this time, as our operations are minimal.

Recent Developments

None

Results of Operations

Three Months Ended March 31, 2014

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Revenues for the three months ended March 31, 2014 were $4,428, compared to $13,440 for the three months ended March 31, 2013.  The lack of revenues in 2013 can be attributed to our start-up nature and lack of operating funds.

Gross profit was $859 for the three months ended March 31, 2014, compared to $2,418 for the three months ended March 31, 2013.  

Operating expenses were $1,347,205 for the three months ended March 31, 2014, as compared to $53,158 for the three months ended March 31, 2013.  The significant increase in operating expenses incurred during the current period relates primarily to a court order approving a Settlement Agreement whereby the Company agreed to issue a third-party entity 1,011,718,715 shares of common stock as consideration for the third-party purchasing Company debts totaling $1,429,706 ($1,156,576 of which were debts incurred during the three months ended March 31, 2014, and related to various consulting, legal, accounting, and professional contracts under which services had been performed in full as of March 31, 2014).   

The Company has a net loss for the three month period ended March 31, 2014 of $1,517,655 as compared to $394,236 for the three month period ended March 31, 2013.

Liquidity and Capital Resources

Liquidity

For the three months ended March 31, 2014, we experienced a net loss of approximately $1,517,655 compared to $394,236 for the three months ended March 31, 2013.  On March 31, 2014, we had approximately $2,074 in cash compared to approximately $138 in cash at December 31, 2013.  Accounts receivable, net of allowances for doubtful accounts, totaled $3,495 at March 31, 2014 compared to $39 at December 31, 2013.

Our liquidity and capital resource planning is largely dependent on the generation of operating cash flows, which is highly sensitive to changes in demand in the market place,  the general economic downturn and our own lack of operating funding.  Our principal liquidity requirements are to finance current operations and fund future expansion.  Currently, our primary source of liquidity to meet these needs is the cash generated by operations and the sale of our equity.

Cash Flow

For the three months ended March 31, 2014, we had negative cash flow from operations of $62,795.  For the three months ended March 31, 2013, we had negative cash flow from operations of approximately $58,730. This negative cash flow is primarily due to the start-up nature of our business, the general economic downturn and our lack of operating capital.

There were no investment activities for either of the three month periods ending March 31, 2014 or March 31, 2013.

For the three months ended March 31, 2014, we had positive cash flow from financing activities of $64,731.  For the three months ended March 31, 2013, we had positive cash flow from financing activities of $85,781.  This positive cash flow is primarily due to the issuance of notes payable and convertible debt.

Capital Resources

Line of Credit

The Company does not have any line of credit nor does it anticipate applying for any.  However, should the current financial condition of the Company prove to be insufficient for the Company’s future requirements, the Company is willing to attempt entry into the capital markets to raise the necessary capital to meet its needs.

Long Term Notes

The Company does not have any long term notes and does not anticipate acquiring any.

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Critical Accounting Estimates and Recently Issued Accounting Standards

Please refer to the Notes to the financial statements.

Inflation

In the opinion of management, inflation will not have any material impact on the Company’s financial condition and results of its operations.

Off-Balance Sheet Arrangements

We do not have any off balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that could reasonably be foreseen as material to any investor in our securities.

Seasonality

Our operating results are generally not materially affected by seasonality.

Other Considerations

There are numerous factors that impact or that can potentially impact our business and results of our operations.  Sources of these factors include general economic and business conditions, federal, state and local regulation of business activities, the level of demand for product or services, the level and intensity of competition, the ability to develop new services and products based on new or evolving technology and the market’s acceptance of those new services or products, our ability to timely and effectively manage periodic product transitions, customer and geographic sales mix of any particular period, and our ability to continue to improve our infrastructure including personnel and systems to keep pace with our anticipated growth.

Additional Information

We file reports and other materials with the Securities and Exchange Commission.  These documents may be inspected and copied at the Commission’s Public Reference Room located at 100 F Street, N.E., Washington, D.C. 20549.  The public may obtain information on the operation of the Public Reference Room by calling the Commission at 1-800-SEC-0330.  The Commission maintains a web site at http://www.sec.gov that contains reports, proxy and information statements and other information regarding issuers that file electronically with the Commission.

Item 3.  Quantitative and Qualitative Disclosures about Market Risk

We do not hold any derivative instruments and do not engage in any hedging activities.

Item 4.  Controls and Procedures

Disclosure controls and procedures are controls and procedures that are designed to ensure that information required to be disclosed by us 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 Securities and Exchange Commission’s rules, regulations 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.

Evaluation of Controls and Procedures

In accordance with Securities Exchange Act of 1934, Rules 13a-15(e) and 15d-15(e), our management is required to perform an evaluation under the supervision and with the participation of the Company’s management, including the

13

Company’s principal executive officer and principal financial officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of the end of the period.  Based on that evaluation, our management concluded that our disclosure controls and procedures were not effective in ensuring that the information required to be filed or submitted under the Exchange Act is accumulated and communicated to our management, as appropriate, to allow timely decisions regarding required disclosure, recording, processing, summarizing and reporting as specified in the Securities and Exchange Commission’s rules and regulations.

Changes in Internal Controls

There were no changes in internal controls over financial reporting that occurred during the period covered by this report 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

On March 26, 2014, the Circuit Court in the Second Judicial District for Leon County, Florida entered an order approving the Settlement Agreement and Stipulation, and Request for Fairness Hearing of the parties (the "Stipulation") in the matter of AGS Capital Group, LLC ("AGS") v. Active Health Foods, Inc. (the "Company"). Under the terms of the Stipulation, the Company agreed to issue to AGS, as settlement of certain liabilities owed by the Company in the aggregate amount of $1,429,705.70 (the "Claim Amount") and shares of common stock (the "Settlement Shares").  AGS had purchased the liabilities from the Company’s creditors (both affiliated and non-affiliated) with a face amount of $1,429,705.70. The total amount of liabilities, at March 31, 2014, is $1,429,705.70.

Pursuant to the Stipulation entered into by the parties, the Company agreed to issue to ASC, in one or more tranches as necessary, that number of shares of common stock sufficient to generate net proceeds equal to the Claim Amount, as defined in the Stipulation.  The parties reasonably estimated that, should the Company issue Settlement Shares sufficient to satisfy the entire Claim Amount, the fair market value of such Settlement Shares and all other amounts to be received by AGS would equal approximately $3,200,000.  Notwithstanding anything to the contrary in the Stipulation, the number of shares beneficially owned by AGS shall not exceed 4.99% of the Company's outstanding common stock at any one time.

In connection with the issuance of the Settlement Shares, the Company may rely on the exemption from registration provided by Section 3(a)(10) under the Securities Act.  To date, the Company has not issued any Settlement Shares to ASC.  As such, the full Claim Amount remains outstanding and payable to AGS.   Based upon the reported closing trading price of the Company’s common stock on May 20, 2014 of $0.0037 per share, if all $1,429,705.70 worth of liabilities were satisfied pursuant to the Stipulation through the issuance of common stock, the Company would issue a maximum of 1,000,000,000 shares.

Aside from the case listed above, we are not a party to any legal proceedings, there are no known judgments against the Company, nor are there any known actions or suits filed or threatened against us or our officers and directors, in their capacities as such.  We are not aware of any disputes involving the Company and the Company has no known claim, actions or inquiries from any federal, state or other government agency.  We are not aware of any claims against the Company or any reputed claims against it at this time.

Item 1A.  Risk Factors

Any investment in our securities involves a high degree of risk.  There have been no material changes to the risk factors previously disclosed in our public filings.  However, all risk factors should be considered and consultation with appropriate legal and financial advisors is recommended.

When we become fully reporting, these additional risk factors should be considered:

Our Common Stock Is Subject to Penny Stock Regulation

Our shares are subject to the provisions of Section 15(g) and Rule 15g-9 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), commonly referred to as the "penny stock" rule.  Section 15(g) sets forth certain requirements for transactions in penny stocks and Rule 15g-9(d)(1) incorporates the definition of penny stock as that used in Rule 3a51-1 of the Exchange Act.  The Commission generally defines penny stock to be any equity security that has a market price less than $5.00 per share, subject to certain exceptions.  Rule 3a51-1 provides that any equity security is considered to be penny stock unless that security is: registered and traded on a national securities exchange meeting specified criteria set by the Commission; authorized for quotation on the NASDAQ Stock Market; issued by a registered investment company; excluded from the definition on the basis of price (at least $5.00 per share) or the registrant's net tangible assets; or exempted from the definition by the Commission.  Since our shares are deemed to be "penny stock", trading in the shares will be subject to additional sales practice requirements on broker/dealers who sell penny stock to persons other than established customers and accredited investors.

FINRA Sales Practice Requirements May Also Limit a Stockholder's Ability to Buy and Sell Our Stock

In addition to the “penny stock” rules described above, the Financial Industry Regulatory Authority (FINRA) has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer.  Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer's financial status, tax status, investment objectives and other information.  Under interpretations of these rules, FINRA believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers.  FINRA requirements make it more difficult for broker-dealers to

14

recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares.

We May Not Have Access to Sufficient Capital to Pursue Our Business and Therefore Would Be Unable to Achieve Our Planned Future Growth

We intend to pursue a growth strategy that includes development of the Company’s business and technology assets.  Currently we have limited capital which is insufficient to pursue our plans for development and growth.  Our ability to implement our growth plans may depend primarily on our ability to obtain additional private or public equity or debt financing.  We are currently seeking additional capital.  Such financing may not be available at all, or we may be unable to locate and secure additional capital on terms and conditions that are acceptable to us.  Our failure to obtain additional capital may have a material adverse effect on our business.

If We Become Quoted on the OTCBB Instead of an Exchange or National Quotation System, Our Investors May Have a Tougher Time Selling Their Stock or Experience Negative Volatility on the Market Price of Our Stock

We anticipate our common stock will be traded on the OTCBB.  The OTCBB is often highly illiquid.  There is a greater chance of volatility for securities that trade on the OTCBB as compared to a national exchange or quotation system.  This volatility may be caused by a variety of factors, including the lack of readily available price quotations, the absence of consistent administrative supervision of bid and ask quotations, lower trading volume, and market conditions.  Investors in our common stock may experience high fluctuations in the market price and volume of the trading market for our securities.  These fluctuations, when they occur, have a negative effect on the market price for our securities.  Accordingly, our stockholders may not be able to realize a fair price from their shares when they determine to sell them or may have to hold them for a substantial period of time until the market for our common stock improves.

Failure to Achieve and Maintain Effective Internal Controls in Accordance with Section 404 of The Sarbanes-Oxley Act Could Have a Material Adverse Effect on Our Business and Operating Results

It may be time consuming, difficult and costly for us to develop and implement the additional internal controls, processes and reporting procedures required by the Sarbanes-Oxley Act.  We may need to hire additional financial reporting, internal auditing and other finance staff in order to develop and implement appropriate additional internal controls, processes and reporting procedures. If we are unable to comply with these requirements of the Sarbanes-Oxley Act, we may not be able to obtain the independent accountant certifications that the Sarbanes-Oxley Act requires of publicly traded companies.

If we fail to comply in a timely manner with the requirements of Section 404 of the Sarbanes-Oxley Act regarding internal control over financial reporting or to remedy any material weaknesses in our internal controls that we may identify, such failure could result in material misstatements in our financial statements, cause investors to lose confidence in our reported financial information and have a negative effect on the trading price of our common stock.

Pursuant to Section 404 of the Sarbanes-Oxley Act and current SEC regulations, we will be required to prepare assessments regarding internal controls over financial reporting and furnish a report by our management on our internal control over financial reporting.  We have begun the process of documenting and testing our internal control procedures in order to satisfy these requirements, which is likely to result in increased general and administrative expenses and may shift management time and attention from revenue-generating activities to compliance activities.  While our management is expending significant resources in an effort to complete this important project, there can be no assurance that we will be able to achieve our objective on a timely basis.  There also can be no assurance that our auditors will be able to issue an unqualified opinion on management’s assessment of the effectiveness of our internal control over financial reporting.  Failure to achieve and maintain an effective internal control environment or complete our Section 404 certifications could have a material adverse effect on our stock price.

In addition, in connection with our on-going assessment of the effectiveness of our internal control over financial reporting, we may discover “material weaknesses” in our internal controls as defined in standards established by the

15

Public Company Accounting Oversight Board, or the PCAOB.  A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected.  The PCAOB defines “significant deficiency” as a deficiency that results in more than a remote likelihood that a misstatement of the financial statements that is more than inconsequential will not be prevented or detected.

In the event that a material weakness is identified, we will employ qualified personnel and adopt and implement policies and procedures to address any material weaknesses that we identify.  However, the process of designing and implementing effective internal controls is a continuous effort that requires us to anticipate and react to changes in our business and the economic and regulatory environments and to expend significant resources to maintain a system of internal controls that is adequate to satisfy our reporting obligations as a public company.  We cannot assure you that the measures we will take will remediate any material weaknesses that we may identify or that we will implement and maintain adequate controls over our financial process and reporting in the future.

Any failure to complete our assessment of our internal control over financial reporting, to remediate any material weaknesses that we may identify or to implement new or improved controls, or difficulties encountered in their implementation, could harm our operating results, cause us to fail to meet our reporting obligations or result in material misstatements in our financial statements. Any such failure could also adversely affect the results of the periodic management evaluations of our internal controls and, in the case of a failure to remediate any material weaknesses that we may identify, would adversely affect the annual auditor attestation reports regarding the effectiveness of our internal control over financial reporting that are required under Section 404 of the Sarbanes-Oxley Act.  Inadequate internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our common stock.

Operating History and Lack of Profits Could Lead to Wide Fluctuations in Our Share Price.  The Price at Which You Purchase Our Common Shares May Not Be Indicative of the Price That Will Prevail in The Trading Market.  You May Be Unable to Sell Your Common Shares at or above Your Purchase Price, Which May Result in Substantial Losses to You.  The Market Price for Our Common Shares May Be Particularly Volatile Given Our Status as a Relatively Unknown Company.

The market for our common shares is characterized by significant price volatility when compared to seasoned issuers, and we expect that our share price will continue to be more volatile than a seasoned issuer for the indefinite future.  The volatility in our share price is attributable to a number of factors.  First, as noted above, our common shares are sporadically and thinly traded.  As a consequence of this lack of liquidity, the trading of relatively small quantities of shares by our shareholders may disproportionately influence the price of those shares in either direction.  The price for our shares could, for example, decline precipitously in the event that a large number of our common shares are sold on the market without commensurate demand, as compared to a seasoned issuer which could better absorb those sales without adverse impact on its share price.  Secondly, we are a speculative or “risky” investment due to our limited operating history and lack of profits to date, and uncertainty of future market acceptance for our potential products.  As a consequence of this enhanced risk, more risk-adverse investors may, under the fear of losing all or most of their investment in the event of negative news or lack of progress, be more inclined to sell their shares on the market more quickly and at greater discounts than would be the case with the stock of a seasoned issuer.  Many of these factors are beyond our control and may decrease the market price of our common shares, regardless of our operating performance.  We cannot make any predictions or projections as to what the prevailing market price for our common shares will be at any time, including as to whether our common shares will sustain their current market prices, or as to what effect that the sale of shares or the availability of common shares for sale at any time will have on the prevailing market price.

Shareholders should be aware that, according to SEC Release No. 34-29093, the market for penny stocks has suffered in recent years from patterns of fraud and abuse.  Such patterns include (1) control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer; (2) manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases; (3) boiler room practices involving high-pressure sales tactics and unrealistic price projections by inexperienced sales persons; (4) excessive and undisclosed bid-ask differential and markups by selling broker-dealers; and (5) the wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with the resulting inevitable collapse of those prices and with consequent investor losses.  Our

16

management is aware of the abuses that have occurred historically in the penny stock market.  Although we do not expect to be in a position to dictate the behavior of the market or of broker-dealers who participate in the market, management will strive within the confines of practical limitations to prevent the described patterns from being established with respect to our securities.  The occurrence of these patterns or practices could increase the volatility of our share price.

Volatility in Our Common Share Price May Subject Us to Securities Litigation, Thereby Diverting Our Resources That May Have a Material Effect on Our Profitability and Results of Operations

As discussed in the preceding risk factors, the market for our common shares is characterized by significant price volatility when compared to seasoned issuers, and we expect that our share price will continue to be more volatile than a seasoned issuer for the indefinite future.  In the past, plaintiffs have often initiated securities class action litigation against a company following periods of volatility in the market price of its securities.  We may in the future be the target of similar litigation.  Securities litigation could result in substantial costs and liabilities and could divert management’s attention and resources.

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

The Company has not engaged in the sale of any unregistered securities.

Item 3.  Defaults upon Senior Securities

There were no defaults upon senior securities of during this reporting period.

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

No matters have been submitted to a vote of the security holders.

Item 5.  Other Information

None

Item 6.  Exhibits

Exhibit No.	Description
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act
32.1	Certification Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act

SIGNATURES

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

	ACTIVE HEALTH FOODS, INC.
Dated:  May 20, 2014	By:	/s/ Gregory Manos
		Gregory Manos
		Chief Executive Officer, President and Chairman (Principal Executive Officer) (Principal Financial/Accounting Officer)

17

EX-31

EXHIBIT 31.1

CERTIFICATION

SARBANES-OXLEY ACT OF 2002

I, Greg Manos as President and CEO, certify that:

1.

I have reviewed this quarterly report on Form 10-Q of Active Health Foods, Inc. for period then ended March 31, 2014;

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 small business issuer 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 small business issuer, 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 small business issuer'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 small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of an annual report)that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control financial reporting;

1.

The small business issuer's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of small business issuer's board of directors (or persons performing the equivalent function):

(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 small business issuer'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 small business issuer's internal control over financial reporting.  

Date:

May 19, 2014

By:

/s/ Gregory Manos_____________                

Gregory Manos

Chief Executive Officer, President and Chairman

(Principal Executive Officer)

(Principal Financial/Accounting Officer)

1

EX-32

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 Annual Report of Active Health Foods, Inc. (the “Company”) on Form 10-K for the period ended March 31, 2014 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Gregory Manos, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge and belief:

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.

May 20, 2014	By:	/s/ GREGORY MANOS
		Gregory Manos
		President and Secretary

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Note 5 - Convertible Notes Payable

3 Months Ended

Mar. 31, 2014

Notes

Note 5 - Convertible Notes Payable

NOTE 5 – CONVERTIBLE NOTES PAYABLE

$25,000 Convertible Note -On March 13, 2013 the Company borrowed $25,000 from an unrelated third party entity in the form of a convertible note, $23,500 of which was received in cash and $1,500 which was for legal fees. The note bears interest at a rate of 8.0 percent per annum, with principal and interest due March 15, 2014.

The principal balance of the note along with accrued interest is convertible at the option of the note holder, into the Company's common stock at a price of 50 percent below the current market price.  The current market price is defined as the average of the lowest three trading prices for the Common Stock during the thirty day period on the latest complete trading day prior to the conversion date.

On December 3, 2013 the notes principal balance of $18,446 was purchased by and assigned to an unrelated third party. The purchase price for the assigned portion of the note was $20,996. Pursuant to the purchase and assignment agreement a replacement note was issued on December 3, 2013. Pursuant to the terms of the replacement note, the replacement note bears interest at 6 percent per annum and is due on December 3, 2014.  The principal balance of the replacement note along with accrued interest is convertible at the option of the note holder, into the Company's common stock at a price of 55 percent below the current market price.  The current market price is defined as the lowest closing bid price for the Common Stock during the five day period on the latest complete trading day prior to the conversion date.

Pursuant to this conversion feature, the Company recognized a discount on convertible debt in the amount of $25,000 on the note date.  During the year ended December 31, 2013 $16,615 of the outstanding balance was converted into 1,562,833 shares of the Company’s common stock. During the three months ended March 31, 2014, the remaining $8,385 outstanding balance was converted into 2,345,524 shares of the Company’s common stock.  As of March 31, 2014 the Company had amortized $25,000 of the debt discount to interest expense, leaving $-0- in unamortized debt discount. The outstanding balance of the note as of March 31, 2014 totaled $-0-.

NOTE 5 – CONVERTIBLE NOTES PAYABLE (Continued)

$32,500 Convertible Note - On March 18, 2013 the Company borrowed $32,500 from an unrelated third party entity in the form of a convertible note, all of which was received in cash.  The note bears interest at a rate of 8.0 percent per annum, with principal and interest due in full on December 12, 2013.

The principal balance of the note along with accrued interest is convertible beginning 180 days from the issuance date, at the option of the note holder, into the Company's common stock at a price of 42 percent below the current market price.  The current market price is defined as the average of the lowest three trading prices for the Common Stock during the ten day period on the latest complete trading day prior to the conversion date.

Pursuant to this conversion feature, the Company recognized a discount on convertible debt in the amount of $32,500 on the date the note became convertible.  During the year ended December 31, 2013 $24,400 of the principal was converted into 3,696,970 shares of the Company’s common stock. During the three months ended March 31, 2014 the remaining $8,100 of the principal as well as $1,300 of accrued interest was converted into 1,740,741 shares of the Company’s common stock.  As of March 31, 2014 the Company had amortized $32,500 of the debt discount to interest expense, leaving $-0- in unamortized debt discount. The outstanding balance of the note as of March 31, 2014 totaled $-0-.

$37,500 Convertible Note - On June 19, 2013 the Company borrowed $37,500 from an unrelated third party entity in the form of a convertible note, all of which was received in cash.  The note bears interest at a rate of 8.0 percent per annum, with principal and interest due in full on March 21, 2014.

The principal balance of the note along with accrued interest is convertible beginning 180 days from the issuance date, at the option of the note holder, into the Company's common stock at a price of 42 percent below the current market price.  The current market price is defined as the average of the lowest three trading prices for the Common Stock during the ten day period on the latest complete trading day prior to the conversion date.

Pursuant to this conversion feature, the Company recognized a discount on convertible debt in the amount of $34,106 on the date the note became convertible.  During the three months ended March 31, 2014 $the outstanding balance of the note was converted into 9,132,150 shares of the Company’s common stock.  As of March 31, 2014 the Company had amortized $34,106 of the debt discount to interest expense, leaving $-0- in unamortized debt discount at March 31, 2014. The outstanding balance of the note as of March 31, 2013 totaled $-0-.

$25,000 Convertible Note– On July 16, 2013 the Company borrowed $25,000 from an unrelated third party entity in the form of a convertible note. The note matures one year after date of issue. The note bears no interest and is convertible into shares of the Company’s common stock when it reaches maturity.

NOTE 5 – CONVERTIBLE NOTES PAYABLE (Continued)

On December 30, 2013 the notes principal balance of $25,000 was purchased by and assigned to an unrelated third party. The purchase price for the assigned portion of the note was $25,000 and a replacement note was issued on December 30, 2013. Pursuant to the terms of the replacement note, the replacement note bears interest at 8 percent per annum and is due on December 30, 2014.  The principal balance of the replacement note along with accrued interest is convertible at the option of the note holder, into the Company's common stock at a price of 50 percent of the lowest daily VWAP of the common stock for the twenty prior trading days including the day upon which a notice of conversion is received by the Company (provided such notice of conversion is delivered by fax or other electronic method of communication to the Company after 4 P.M. Eastern Standard or Daylight Savings Time if the Holder wishes to include the same day closing price).  

Pursuant to this conversion feature, the Company recognized a discount on convertible debt in the amount of $25,000 on the date the note became convertible.  During the three months ended March 31, 2014 $18,710 of the outstanding balance of the note was converted into 5,710,171 shares of the Company’s common stock.  As of March 31, 2014 the Company had amortized $20,118 of the debt discount to interest expense, leaving $4,882 in unamortized debt discount at March 31, 2014. The outstanding balance of the note as of March 31, 2013 totaled $6,290.

$25,000 Convertible Note - On December 3, 2013 the Company borrowed $25,000 from an unrelated third party entity in the form of a convertible note, $25,000 of which was for professional fees. The note bears interest at a rate of 6.0 percent per annum, with principal and interest due December 3, 2014.

The principal balance of the note along with accrued interest is convertible after 180 days, at the option of the note holder, into the Company's common stock at a price of 65 percent below the current market price.  The current market price is defined as the lowest closing bid price for the Common Stock during the five day period on the latest complete trading day prior to the conversion date.  

Pursuant to this conversion feature, the Company recognized a discount on convertible debt in the amount of $25,000 on the date the note became convertible.  During the three months ended March 31, 2014 $17,250 of the outstanding balance of the note was converted into 6,272,727 shares of the Company’s common stock.  As of March 31, 2014 the Company had amortized $19,182 of the debt discount to interest expense, leaving $5,818 in unamortized debt discount at March 31, 2014. The outstanding balance of the note as of March 31, 2013 totaled $7,750.

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Note 4 - Notes Payable

3 Months Ended

Mar. 31, 2014

Notes

Note 4 - Notes Payable

NOTE 4 – NOTES PAYABLE

On September 23, 2013 the company borrowed $8,000 in the form of a promissory note. The note is due on October 4, 2014 along with $2,000 in interest.

During the year ended December 31, 2013 the Company borrowed $1,500 in the form of a promissory note. The note bears no interest and is due on demand.

On March 4, 2014 the Company borrowed $25,000 in the form of a promissory note.  The note is due May 15, 2014 along with $15,000 of interest and 10,000,000 restricted shares of common stock.  In anticipation of repayment, the Company issued the stock on March 6, 2014.  An amount of $60,000 for the fair value of the stock was recorded as prepaid interest on the date of authorization to be expensed on the due date of the note.

On March 17, 2014 the Company borrowed $20,000 in the form of a promissory note.  The note is due on May 15, 2014 along with $15,000 of interest and 5,000,000 restricted shares of common stock.

As of March 31, 2014 and December 31, 2013, the notes payable balance totaled $66,989 and $9,500. The notes are unsecured and due on demand.

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Condensed Balance Sheets (USD $)	Mar. 31, 2014	Dec. 31, 2013
ASSETS
Cash	$ 2,074	$ 138
Accounts receivable	(3,456)	39
Inventory	2,533	41,555
Total Current Assets	44,591	41,732
TOTAL ASSETS	44,591	41,732
Accounts payable and accrued expenses	1,198,071	19,691
Related-party payables	185,048	200,816
Interest payable	6,461	6,807
Convertible debt, net	14,040	46,224
Derivative liability	24,311	109,996
Notes payable, net	66,989	9,500
Total Current Liabilities	1,482,156	393,034
TOTAL LIABILITIES	1,482,156	393,034
Common stock; 5,000,000,000 shares authorized, at $0.001 par value, 68,607,023 and 29,248,785 shares issued and outstanding, respectively	67,046	29,248
Additional paid-in capital	6,978,423	6,584,829
Deficit accumulated during the development stage	(8,483,034)	(6,965,379)
Total Stockholders' Deficit	(1,437,565)	(351,302)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT	$ 44,591	$ 41,732

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Note 2 - Going Concern

3 Months Ended

Mar. 31, 2014

Notes

Note 2 - Going Concern

NOTE 2 - GOING CONCERN

The Company's financial statements are prepared using generally accepted accounting principles in the United States of America applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and allow it to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations.

In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management's plan is to obtain such resources for the Company by obtaining capital from management and significant shareholders sufficient to meet its minimal operating expenses and seeking equity and/or debt financing. However management cannot provide any assurances that the Company will be successful in accomplishing any of its plans.

The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other sources of financing and attain profitable operations. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

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Note 3 - Related Party Transactions

3 Months Ended

Mar. 31, 2014

Notes

Note 3 - Related Party Transactions

NOTE 3 – RELATED PARTY TRANSACTIONS

As of March 31, 2014 and December 31, 2013, respectively, the Company had borrowed a net total of $185,048 and $200,816 from an officer and another related party of the Company to finance the ongoing operations of the Company.  These payables are non-interest bearing, unsecured, and are due on demand.

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Condensed Statements of Operations (USD $)	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
REVENUES
REVENUES	$ 4,428	$ 13,440
COST OF SALES	3,569	11,022
GROSS PROFIT	859	2,418
General and administrative	1,347,205	53,158
Total Operating Expenses	1,347,205	53,158
LOSS FROM OPERATIONS	(1,346,346)	(50,740)
Gain or loss on derivative	(27,126)	(192,044)
Interest expense	(144,183)	(151,424)
Total Other Expense	(171,309)	(343,468)
LOSS BEFORE INCOME TAXES	(1,517,655)	(394,208)
PROVISION FOR INCOME TAXES		(28)
PROFIT (LOSS)	$ (1,517,655)	$ (394,208)
BASIC AND DILUTED LOSS PER SHARE	$ (0.03)	$ (0.45)
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING	48,362,958	881,333

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Document and Entity Information (USD $)	3 Months Ended
	Mar. 31, 2014	May 15, 2014
Document and Entity Information:
Entity Registrant Name	Active Health Foods, Inc.
Document Type	10-Q
Document Period End Date	Mar. 31, 2014
Amendment Flag	false
Entity Central Index Key	0001477472
Current Fiscal Year End Date	--12-31
Entity Common Stock, Shares Outstanding		68,607,023
Entity Public Float		$ 68,607,023
Entity Filer Category	Smaller Reporting Company
Entity Current Reporting Status	No
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q1

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Condensed Statements of Cash Flows (USD $)	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
OPERATING ACTIVITIES
Net loss	$ (1,517,655)	$ (394,236)
Amortization of discount on notes payable	144,335	147,889
Gain/loss on derivative liabilities	27,126	192,044
Loss on extinguishment	105,695
Shares issued for services	16,056
Inventory	2,533	(2,272)
Accounts receivable	(3,456)	(5,330)
Change in Interest payable		3,535
Accounts payable- related party	(35,500)
Accounts payable and accrued expenses	1,198,071
Net Cash Used in Operating Activities	(62,795)	(58,370)
Proceeds from related-party payables	57,083	130,661
Proceeds from convertible debt		57,500
Proceeds from notes payable	45,000
Repayment of related-party loans	(37,352)	(102,380)
Net Cash Provided by Financing Activities	64,731	85,781
NET INCREASE IN CASH	1,936	27,411
CASH AT BEGINNING OF PERIOD	138	4,459
CASH AT END OF PERIOD	2,074	31,870
Write off of derivative liabilities due to debt conversion	156,896	322,492
Debt discount on convertible notes	55,000	205,000
Debt converted to equity	92,745	167,249
Cancellation of preferred stock		50,000
Cancellation of common stock		3,000
Notes payable transferred to convertible notes		77,000
Shares issued for interest	$ 60,000

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Note 8 - Subsequent Events

3 Months Ended

Mar. 31, 2014

Notes

Note 8 - Subsequent Events

NOTE 8 – SUBSEQUENT EVENTS

On March 27, 2014 the Company entered into a convertible note agreement for $50,000. The Company will receive $42,500 in cash, $2,500 for legal fees, and $5,000 for payment to a third party.  Because the funds had not been disbursed during this reporting period, the agreement will be disclosed as a subsequent event.  The note bears interest at a rate of 8.0 percent per annum, with principal and interest due in full on March 27, 2014.  The principal balance of the note along with accrued interest is convertible beginning 180 days from the issuance date, at the option of the note holder, into the Company's common stock at a price of 50 percent below the current market price.  The current market price is defined as the lowest trading price for the Common Stock during the twenty day period on the latest complete trading day prior to the conversion date.

On April 2, 2014 the Company entered into a convertible note agreement for $50,000, which is to be received by the Company in two tranches of $25,000 each.  In the first tranche, the Company will receive $21,000 in cash, $1,500 for legal fees, and $2,500 for payment to a third party.  The note bears interest at a rate of 8.0 percent per annum, with principal and interest due in full on April 2, 2015.  The principal balance of the note along with accrued interest is convertible beginning 180 days from the issuance date, at the option of the note holder, into the Company's common stock at a price of 50 percent below the current market price.  The current market price is defined as the lowest trading price for the Common Stock during the twenty day period on the latest complete trading day prior to the conversion date.  The second $25,000 tranche will likely require similar legal and other payments.

On April 10, 2014 the Company borrowed $32,500 from an unrelated third party entity in the form of a convertible note.  The Company received $18,000 in cash with the remaining $14,500 to pay legal and third party fees.  The note bears interest at a rate of 8.0 percent per annum, with principal and interest due in full on January 14, 2015. The principal balance of the note along with accrued interest is convertible beginning 180 days from the issuance date, at the option of the note holder, into the Company's common stock at a price of 50 percent below the current market price.  The current market price is defined as the average of the lowest three trading prices for the Common Stock during the ten day period on the latest complete trading day prior to the conversion date.

On April 7, 2014 the Company issued 5,000,000 of shares of common stock in anticipation of repayment of the $20,000 loan entered into on March 17, 2014.  The shares will be valued at market value on the date of issuance and will be recorded as interest expense.

On April 25, 2014 the Company issued 1,000,000 shares of common stock to an unrelated third party entity as payment for services.

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Note 7 - Equity Transactions

3 Months Ended

Mar. 31, 2014

Notes

Note 7 - Equity Transactions

NOTE 7 – EQUITY TRANSACTIONS

During the three months ended March 31, 2014, the Company issued 2,595,891 shares of common stock as compensation for services rendered by related parties.  The services had a fair market value of $16,056.

During the three months ended March 31, 2014 the Company issued 25,201,315 shares of common stock for conversion of debt of $89,945.

On March 6, 2014 the Company issued 10,000,000 shares of common stock in anticipation of repayment of a portion of a $25,000 loan due on May 15, 2014.  The shares were recorded valued at $0.001 per share and recorded as interest expense.

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Note 1 - Condensed Financial Statements

3 Months Ended

Mar. 31, 2014

Notes

Note 1 - Condensed Financial Statements

NOTE 1 - CONDENSED FINANCIAL STATEMENTS

The unaudited interim financial statements included herein have been prepared by BullsnBears.com, Inc. (the “Company”) in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission (the “SEC”). We suggest that these interim financial statements be read in conjunction with the audited financial statements and notes thereto included in our Form 10-K for the year ended December 31, 2013, as filed with the SEC. We believe that all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein and that the disclosures made are adequate to make the information not misleading. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which would substantially duplicate the disclosure contained in the audited financial statements for the most recent fiscal year as reported in Form 10-K have been omitted.

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Note 6 - Fair Value Measurements and Derivative Liability

3 Months Ended

Mar. 31, 2014

Notes

Note 6 - Fair Value Measurements and Derivative Liability

NOTE 6 – FAIR VALUE MEASUREMENTS AND DERIVATIVE LIABILITY

The Company evaluates all of it financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported as charges or credits to income. For option-based derivative financial instruments, the Company uses the Black-Scholes option-pricing model to value the derivative instruments at inception and subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date.

NOTE 6 – FAIR VALUE MEASUREMENTS AND DERIVATIVE LIABILITY (Continued)

Under ASC-815 the conversion options embedded in the notes payable described in Note 6 require liability classification because they do not contain an explicit limit to the number of shares that could be issued upon settlement.

During 2014, certain notes payable were converted resulting in settlement of the related derivative liabilities.  The Company re-measured the embedded conversion options at fair value on the date of settlement and recorded these amounts to additional paid-in capital.

During 2014, the Company issued additional convertible notes.  The conversion options and warrants were classified as derivative liabilities at their fair value on the date of issuance.

As defined in FASB ASC 820, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The Company utilized the market data of similar entities in its industry or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable. The Company classifies fair value balances based on the observability of those inputs. FASB ASC 820 establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the lowest priority to unobservable inputs (level 3 measurement).

The three levels of the fair value hierarchy are as follows:

Level 1    –	Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Level 1 primarily consists of financial instruments such as exchange-traded derivatives, marketable securities and listed equities.
Level 2     -	Pricing inputs are other than quoted prices in active markets included in level 1, which are either directly or indirectly observable as of the reported date.
Level 3     –	Pricing inputs include significant inputs that are generally less observable from objective sources. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value.

NOTE 6 – FAIR VALUE MEASUREMENTS AND DERIVATIVE LIABILITY (Continued)

The following table sets forth by level within the fair value hierarchy the Company’s financial assets and liabilities that were accounted for at fair value as March 31, 2013.

Recurring Fair Value Measures	Level 1			Level 2			Level 3			Total
LIABILITIES:
Derivative liabilities, March 31, 2014		$	--		$	--		$	24,311		$	24,311

The following table summarizes the changes in the derivative liabilities during the quarter ended March 31, 2014:

Ending balance as of December  31, 2013	$	109,996
Reclassification of derivative liabilities to additional paid-in capital due to conversion of notes payable		(105,695)
Additions due to new convertible debt and warrants issued		43,995
Change in fair value		27,126
Ending balance as of March 31, 2014	$	24,311

The Company uses the Black-Scholes option pricing model to value the derivative liability and subsequent remeasurements.  Included in the model are the following assumptions: stock price at valuation date of $0.0006 - $0.001, exercise price of $0.0003 - $0.0147, dividend yield of zero, years to maturity of 0.00001 – 01.01, risk free rate of 0.09 – 0.15 percent, and annualized volatility of 309.7 – 322.72 percent.