f10q0514_soupmaninc.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended May 31, 2014

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

For the transition period from _________to ________

Commission File Number: 000-53943

SOUPMAN, INC.

(Exact name of registrant as specified in its charter)

Delaware		61-1638630
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

1110 South Avenue, Suite 100

Staten Island, New York 10314

(Address of principal executive offices) (Zip Code)

(212) 768-7687

(Registrant’s telephone number, including area code)

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

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

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

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

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

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

Number of shares of common stock outstanding as of July 14, 2014 was 45,783,949.

Soupman, Inc. and Subsidiaries

Consolidated Balance Sheets

	May 31, 2014			August 31, 2013
	(Unaudited)
Assets
Current Assets
Cash	$	168,718		$	114,894
Accounts receivable - net		389,065			307,051
Inventory		472,406			332,183
Prepaid expenses		11,351			24,416
Total Current Assets		1,041,540			778,544

Property and equipment - net		14,750			18,104

Other Assets
Accounts receivable - related party - net		26,284			51,657
Due from franchisees		54,683			6,369
Debt issue costs		9,754			6,076
Intangible assets - net		15,747			29,900
Other		4,800			4,800
Total Other Assets		111,268			98,802

Total Assets	$	1,167,558		$	895,450


Liabilities and Stockholders' Deficit

Current Liabilities
Accounts payable and accrued liabilities	$	4,260,842		$	3,308,046
Accounts payable and accrued liabilities - related parties		336,268			241,083
Debt - net of discount		5,845,315			6,000,664
Deferred franchise revenue		134,750			118,750
Derivative liabilities		382,721			1,895,630
Total Current Liabilities		10,959,896			11,564,173

Stockholders' Deficit
Preferred stock, par value $0.001; 25,000,000 shares authorized,
931,360 and 1,165,573 issued and outstanding		932			1,166
Common stock, par value $0.001; 75,000,000 shares authorized
44,823,949 and 36,615,720 issued and outstanding		44,825			36,616
Additional paid in capital		11,211,734			8,512,970
Accumulated deficit		(20,354,526	)		(18,557,209	)
Total Stockholders' Deficit		(9,097,035	)		(10,006,457	)
Noncontrolling interest		(695,303	)		(662,266	)
Total Deficit		(9,792,338	)		(10,668,723	)

Total Liabilities and Stockholders' Deficit	$	1,167,558		$	895,450

Soupman, Inc. and Subsidiaries

Consolidated Statements of Operations

(Unaudited)

	Three Months Ended May 31,						Nine Months Ended May 31,
	2014			2013			2014			2013

Revenue
Soup sales - net	$	726,576		$	452,898		$	2,535,225		$	1,745,171
Franchise sales - net		(20,000	)		-			(20,000	)		20,000
Franchise royalties		49,458			43,256			114,154			140,496
Total revenue		756,034			496,154			2,629,379			1,905,667

Cost of sales		556,839			387,598			2,178,560			1,503,594

Gross profit		199,195			108,556			450,819			402,073

Operating expenses:
General and administrative		643,804			1,557,056			2,647,167			3,618,066
Royalty		56,250			56,250			168,750			168,750
Total operating expenses		700,054			1,613,306			2,815,917			3,786,816

Loss from operations		(500,859	)		(1,504,750	)		(2,365,098	)		(3,384,743	)

Other income (expense)
Interest income		-			5,878			1,866			15,261
Interest expense		(364,727	)		(363,369	)		(1,157,332	)		(1,065,989	)
Prepayment of debt penalty		(32,750	)		-			(116,925	)		(50,250	)
Stock expense related to convertible notes		(13,600	)		-			(13,600	)		(65,063	)
Change in fair value of derivative liabilities		563,375			105,308			1,842,726			434,195
Loss on debt extinguishment		-			-			(147,893	)		(154,942	)
Forbearance expense		-			-			(165,000	)		-
OID loan expense		22,660			-			-			-
Gain on deconsolidation of VIE		-			1,211,655			-			1,211,655
Derecognition of debt		-			-			290,902			-
Total other income (expense)		174,958			959,472			534,744			324,867

Net loss including non controlling interest		(325,901	)		(545,278	)		(1,830,354	)		(3,059,876	)
Less: net loss attributable to noncontrolling interest		(27,360	)		(24,301	)		(33,037	)		(56,795	)
Net loss attributable to Soupman	$	(298,541	)	$	(520,977	)	$	(1,797,317	)	$	(3,003,081	)

Basic and diluted loss per share:	$	(0.01	)	$	(0.02	)	$	(0.05	)	$	(0.09	)

Weighted average number of common shares outstanding
during the period - basic and diluted		41,784,819			32,712,973			39,081,247			31,851,565

Soupman, Inc. and Subsidiaries

Consolidated Statement of Stockholders 'Deficit

Nine Months Ended May 31, 2014

(Unaudited)

							Common Stock						Additional								Total
	$0.001 Par Value						$0.001 Par Value						Paid-in		Accumulated			Noncontrolling			Stockholders'
	Shares			Amount			Shares			Amount			Capital		Deficit			Interest			Deficit
Balance, August 31, 2013		1,165,573		$	1,166			36,615,720		$	36,616		$	8,512,970	$	(18,557,209	)	$	(662,266	)	$	(10,668,723	)

Stock based compensation		-			-			-			-			344,110		-			-		$	344,110

Issuance of common stock for services rendered ($0.34 - $0.69/share)		-			-			1,326,798			1,327			582,223		-			-		$	583,550

Issuance of common stock for cash ($0.20 - $0.40/share)		-			-			2,980,000			2,980			773,020		-			-		$	776,000

Issuance of common stock for forbearance agreement ($0.60/share)		-			-			275,000			275			164,725		-			-		$	165,000

Issuance of common stock for debt and accrued interest ($0.20 - $0.25)		-			-			3,552,218			3,553			810,176		-			-		$	813,729

Debt discount attributable to shares issued		-			-			40,000			40			13,560		-			-		$	13,600

Debt discount attributable to modification accounting		-			-			-			-			10,750		-			-		$	10,750

Reversal of shares issued in error ($0.72/share)		-			-			(200,000	)		(200	)		200		-			-		$	-

Conversion of preferred stock to common stock		(234,213	)		(234	)		234,213			234			-		-			-		$	-

Net loss		-			-			-			-			-		(1,797,317	)		(33,037	)	$	(1,830,354	)

Balance, February 28, 2014		931,360		$	932			44,823,949		$	44,825		$	11,211,734	$	(20,354,526	)	$	(695,303	)	$	(9,792,338	)

Soupman, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited)

	Nine Months Ended May 31,
	2014			2013
Cash Flows From Operating Activities:
Net loss	$	(1,830,354	)	$	(3,059,876	)
Adjustments to reconcile net loss to net cash used in operating activities
Stock based compensation		344,110			13,836
Stock issued for services		583,550			1,423,526
Stock issued for services - related parties		-			163,800
Stock issued for non payment of note payable		-			65,063
Stock issued for forbearance		165,000			-
Debt issue costs		(13,000	)		-
Bad debt expense		-			10,442
Change in fair market value of derivative liabilities		(1,842,726	)		(434,195	)
Loss on debt extinguishment		147,893			154,942
Amortization of intangibles		14,153			14,100
Amortization of debt discount		717,257			501,617
Amortization of debt issue cost		9,322			169,117
Prepayment of debt penalty		-			50,250
Gain on deconsolidation of VIE		-			(1,211,655	)
Gain on write down of debt		(290,902	)		-
Original issue discount		(64,270	)		-
Depreciation		3,354			7,086
Changes in operating assets and liabilities:
(Increase) decrease in:
Accounts receivable		(82,014	)		80,433
Accounts receivable - related party		25,373			(8,583	)
Inventory		(140,223	)		(346,308	)
Prepaid expenses		13,065			(27,928	)
Other assets		-			27,388
Accounts payable and accrued liabilities		1,071,588			888,635
Accounts payable and accrued liabilities - related parties		95,185			185,189
Deferred franchising revenue		16,000			-
Net Cash Used in Operating Activities		(1,057,639	)		(1,333,121	)

Cash Flows From Investing Activities:
Due from franchisee		(48,314	)		(627	)
Due from franchisees - related party		-			(74,522	)
Net Cash Used in Investing Activities		(48,314	)		(75,149	)

Cash Flows From Financing Activities:
Proceeds from issuance of notes		1,022,160			1,569,500
Proceeds from issuance of common stock for cash		776,000			-
Repayment of debt and accrued interest		(638,383	)		(269,805	)
Cash paid for direct offering costs of convertible notes payable and issuance of common stock		-			(36,480	)
Net Cash Provided by Financing Activities		1,159,777			1,263,215

Net decrease in cash		53,824			(145,055	)

Cash at beginning of year		114,894			174,315

Cash at end of period	$	168,718		$	29,260

Supplemental disclosures of cash flow information:
Cash paid for interest	$	111,940		$	148,764
Cash paid for taxes	$	-		$	-

Supplemental disclosures of non-cash investing and financing activities:
Stock issued for debt	$	728,550		$	-
Debt discount recorded on derivatives	$	181,924		$	569,525
Stock issued for accrued interest	$	85,179		$	-
Common stock issued in connection with debt financing	$	13,600		$	75,040
Debt discount recorded on debt modification	$	10,750		$	-
Conversion of preferred stock to common stock	$	234		$	32

Soupman, Inc. and Subsidiaries

Notes to Consolidation Financial Statements

May 31, 2014

(Unaudited)

Note 1 Description of Business and Summary of Significant Accounting Policies

The Company (fka/ Passport Arts) was incorporated in the State of Nevada on December 2, 2008. On January 31, 2011, the Company reincorporated in the State of Delaware and changed its name to Soupman.

The Company manufactures and sells a variety of soups to grocery chains and franchisees.

Fair Value of Financial Instruments

The Company measures assets and liabilities at fair value based on an expected exit price as defined by the authoritative guidance on fair value measurements, which represents the amount that would be received on the sale of an asset or paid to transfer a liability, as the case may be, in an orderly transaction between market participants. As such, fair value may be based on assumptions that market participants would use in pricing an asset or liability. The authoritative guidance on fair value measurements establishes a consistent framework for measuring fair value on either a recurring or nonrecurring basis whereby inputs, used in valuation techniques, are assigned a hierarchical level.

The following are the hierarchical levels of inputs to measure fair value:

●	Level 1 – Observable inputs that reflect quoted market prices in active markets for identical assets or liabilities.

●	Level 2 - Inputs reflect quoted prices for identical assets or liabilities in markets that are not active; quoted prices for similar assets or liabilities in active markets; inputs other than quoted prices that are observable for the assets or liabilities; or inputs that are derived principally from or corroborated by observable market data by correlation or other means.
●	Level 3 – Unobservable inputs reflecting the Company’s assumptions incorporated in valuation techniques used to determine fair value. These assumptions are required to be consistent with market participant assumptions that are reasonably available.

The following are the major categories of liabilities measured at fair value on a recurring basis as of at May 31, 2014 and August 31, 2013, using quoted prices in active markets for identical liabilities (Level 1); significant other observable inputs (Level 2); and significant unobservable inputs (Level 3):

		2013				2012
Derivative Liabilities (Level 3)		$	382,721			$	1,895,630

The Level 3 valuation relates to derivative liabilities measured using management's estimates of fair value as well as other significant inputs, such as volatility and risk free interest rate, which may be unobservable. See Note 6.

The Company has determined the estimated fair value amounts presented in these financial statements using available market information and appropriate methodologies. However, considerable judgment is required in interpreting market data to develop the estimates of fair value. The estimates presented in the financial statements are not necessarily indicative of the amounts that could be realized in a current market exchange. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.

Fair value estimates are based upon pertinent information available. The Company has determined that the carrying value of all financial instruments approximates fair value. The Company's financial instruments consist primarily of accounts receivable, inventory, prepaid expenses, accounts payable and accrued liabilities and debt. The carrying amounts of the Company's financial instruments generally approximated their fair values at May 31, 2014 and August 31, 2013, respectively, due to the short-term nature of these instruments.

Fiscal Year

The Company’s fiscal year-end is August 31.

Soupman, Inc. and Subsidiaries

Notes to Consolidation Financial Statements

May 31, 2014

(Unaudited)

Note 2 Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules and regulations of the United States Securities and Exchange Commission for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they may not include all the information and footnotes necessary for a comprehensive presentation of financial position, results of operations or cash flows. It is management's opinion, however, that all material adjustments (consisting of normal recurring adjustments) have been made which are necessary for a fair financial statement presentation. The results for the interim period are not necessarily indicative of the results to be expected for the full year.

The unaudited interim consolidated financial statements should be read in conjunction with the Company’s Annual Report filed on Form 10-K for the year ended August 31, 2013, which contains the audited financial statements and notes thereto, together with Management’s Discussion and Analysis of Financial Condition and Results of Operation, for the year ended August 31, 2013. The interim results for the period ended May 31, 2014 are not necessarily indicative of results for the full fiscal year.

Recently Issued Accounting Pronouncements

There are no new accounting pronouncements that have any impact on the Company’s consolidated financial statements.

Note 3 Accounts Receivable / Accounts Receivable - Franchisee – Related Parties

In connection with certain debt financings, all accounts receivables serve as collateral; see Note 5(C).

Accounts receivable consisted of the following at May 31, 2014 and August 31, 2013.

	May 31, 2014			August 31, 2013
Accounts receivable	$	442,335		$	339,801
Allowance for doubtful accounts		(53,270	)		(32,750	)
Accounts receivable – net	$	389,065		$	307,051

Related-parties accounts receivable consisted of the following at May 31, 2014 and August 31, 2013.

	May 31, 2014		August 31, 2013
Accounts receivable	$	26,284	$	72,177
Allowance for doubtful accounts		-		(20,520	)
Accounts receivable – net	$	26,284	$	51,657

Note 4 – Accounts Payable and Accrued Liabilities – Related Parties

Accounts payable and accrued liabilities – related parties consist of the following at May 31, 2014 and August 31, 2013:

	May 31, 2014		August 31, 2013
Accrued payroll	$	291,668	$	189,283
Accrued expenses (auto allowances)		44,600		51,800
Total	$	336,268	$	241,083

Note 5 – Debt

Debt consists of the following at May 31, 2014 and August 31, 2013:

Description	May 31, 2014			Aug. 31, 2013
A. Unsecured convertible debt – Derivative Liabilities	$	1,578,250		$	1,732,250
Less : debt discount		(60,410	)		(297,153	)
Convertible debt - net		1,517,840			1,435,097

B. Convertible debt – Unsecured		888,207			479,097
Less : debt discount		(77,645	)		(287,615	)
Convertible debt - net		810,562			191,482

C. Notes - Secured		2,700,000			3,246,902

D. Notes – Unsecured		816,913			1,127,183

Total debt	$	5,845,315		$	6,000,664

Soupman, Inc. and Subsidiaries

Notes to Consolidation Financial Statements

May 31, 2014

(Unaudited)

Debt in default consists of unsecured notes totaling $1,621,597 and $558,183 at May 31, 2014 and August 31, 2013, respectively.

The corresponding debts above are more fully discussed below:

(A) Unsecured Convertible Debt – Derivative Liabilities

During the nine months ended May 31, 2014, the Company did not issue any unsecured convertible debt or warrants that had an embedded conversion feature; however, during the same period the Company did reclassify two of its convertible non-derivative debts to convertible derivative debt under the terms of that agreement.

The Company’s unsecured convertible derivative debt (recorded as a derivative liability) consists of the following terms and balances at May 31, 2014 and August 31, 2013:

Description	Information	May 31, 2014		Aug. 31, 2013
Interest rate			8% - 12%		8% - 12%
Maturity Date(s)		Dec. 31, 2013 to Aug 24, 2014		Apr. 1, 2013 to Aug. 28, 2013
Series 2	Fixed conversion price of $1.00 ($1.00 warrants)	$	724,750	$	265,000
Series 3	Fixed conversion price of $0.40 ($0.75 warrants)	$	735,000	$	735,000

Below is a summary of the Company’s unsecured convertible debt (recorded as a derivative liability) at May 31, 2014 and August 31, 2013:

Description	May 31, 2014			Aug. 31, 2013
Carry forward balance	$	1,732,250		$	832,750
Borrowings		-			1,000,000
Repayment of convertible derivative debt		-			(100,500	)
Reclassification of convertible debt to convertible derivative debt		235,050			-
Conversion of convertible derivative debt to stock		(389,050	)		-0-
Ending balance	$	1,578,250		$	1,732,250

The Company converted $53,753 of accrued interest to stock in addition to the principal noted in the table above.

(B) Convertible Debt – Unsecured

The Company’s unsecured non-derivative convertible debt consists of the following terms and balances at May 31, 2014 and August 31, 2013:

Description	Information
Interest rate			10% - 12%
Default interest rate			N/A
Term		1 year
Maturity		Aug. 3, 2013 to May 29, 2015
Series 4 debt	Fixed conversion price of $0.75	$	274,097
Series 5 debt	Zero percent (0%) interest if repaid within 3 months; Convertible at the lesser of $0.47 or 65% of the lowest trade price in the then prior 25 days, but only after 180 days from the date of the loan	$	592,610

Soupman, Inc. and Subsidiaries

Notes to Consolidation Financial Statements

May 31, 2014

(Unaudited)

In connection with its Series 4 debt, and for the nine months ended May 31, 2014, the Company incurred debt discount of $10,750 relating to the extension of the maturity date on one of its notes. For this modification, the Company compared the value of both the old and new convertible debt and determined that the present value of the cash flows associated with the new convertible debt did not exceeded the present value of the old convertible debt by more than 10%, which resulted in the application of modification accounting.

In connection with its Series 5 debt, and for the nine months ended May 31, 2014, the Company incurred original issue discounts of $64,270, recorded $13,000 in debt issue costs and amortized $9,322 of its debt issue costs.

Below is a summary of the Company’s unsecured convertible debt (not recorded as a derivative liability) at May 31, 2014 and August 31, 2013:

	May 31, 2014			Aug. 31, 2013
Carry forward balance	$	479,097		$	650,000
Borrowings		644,160			409,000
Repayment of convertible debt		-			(59,220	)
Reclassification to convertible derivative debt		(235,050	)		(520,683	)
Ending balance	$	888,207		$	479,097

The Company’s secured debt consists of the following terms and balances at May 31, 2014:

Interest Rate			7% - 12.75%
Maturity	Sep. 1, 2013 to Aug. 28, 2014
SKI debts (Secured by all the assets of OSM)		$	2,700,000

Below is a summary of the Company’s secured debt at May 31, 2014 and August 31, 2013:

	May 31, 2014			Aug. 31, 2013
Carry forward balance	$	3,246,902		$	3,242,613
Borrowings (Series 6)		-			256,000
Repayment of debt		(50,000	)		-
Conversion to stock of secured debt		(206,000)			-
Settlement of debt		(290,902	)		-
Reclassification of accrued interest on debt from debt to accrued interest		-			(251,711	)
Ending balance	$	2,700,000		$	3,246,902

In addition to the principal noted in the table above, the Company repaid $15,000 and converted $14,300 of accrued interest into stock.

The Company issued 275,000 shares of its common stock in connection with the extension of a forbearance agreement (as further described in the Company’s Annual Report filed on Form 10-K for the year ended August 31, 2013); these share have a fair value of $165,000 which was charged to other expense and was based on the quoted closing trading price of the Company’s stock on September 16, 2013 ($0.60/share).

Soupman, Inc. and Subsidiaries

Notes to Consolidation Financial Statements

May 31, 2014

(Unaudited)

On February 28, 2014 and in connection with the Company’s guarantee of certain debt, a Federal Bankruptcy Court approved a final settlement agreement in regard to the SKI bankruptcy, and as a result, the Company removed $290,902 in debt from its balance sheet. See Note 9 Litigation and Claims.

(D) Notes – Unsecured Demand Notes

The Company’s unsecured demand debt consists of the following terms and balances at May 31, 2014 and August 31, 2013:

Amount		Information	Maturity
$	769,413	Represents current convertible demand debt	Aug 3, 2013 to Sept 16, 2014
$	10,000	Represents an advance from a third party	Due on demand
$	37,500	The Company is in litigation regarding this debt; see Note 9 Litigation, Claims and Assessments.	In litigation

Below is a summary of the Company’s unsecured demand debt at May 31, 2014 and August 31, 2013:

Description	May 31, 2014			Aug. 31, 2013
Carry forward balance	$	1,127,183		$	287,500
Reclassification from derivative to demand debt		-			100,500
Borrowings		378,000			422,500
Repayments		(554,770	)		(204,000	)
Reclassification from convertible to demand debt		-			520,683
Amount converted into stock		(133,500	)		-
Ending balance	$	816,913			1,127,183

In addition to the principal noted in the table above, the Company repaid $18,613 and converted $3,140 of accrued interest into stock.

(E) Debt discount

Below is a summary of the Company’s debt discount at May 31, 2014 and August 31, 2013:

	May 31, 2014			Aug. 31, 2013
Total outstanding debt	$	5,983,370		$	6,585,432
Carry forward debt discount – net		(584,768	)		( 404,088	)
Debt discount		( 270,544	)		( 994,214	)
Amortization of debt discount		717,257			813,534
Debt – net	$	5,845,315		$	6,000,664

The Company’s remaining debt discount of $138,055 will be fully amortized in fiscal year 2015.

The Company recorded no derivative expense for the nine months ended May 31, 2014.

Note 6 – Derivative Liabilities

During the nine months ended May 31, 2014, the Company identified one conversion features embedded within its convertible debt (see Note 5(A)).

The fair value of the Company’s derivative liabilities at May 31, 2014 and August 31, 2013 is as follows:

	May 31, 2014			Aug. 31, 2013
Carry forward balance	$	1,895,630		$	513,493
Fair value at the commitment date for convertible notes		181,924			527,796
Fair value at the commitment date for warrants issued		-			78,777
Reclassification to additional paid in capital for financial instruments that ceased to be a derivative liability		-			-
Loss on debt extinguishment		147,893			338,507
Fair value mark-to-market adjustment		(1,842,726	)		437,057
Derivative liabilities (balance)	$	382,721		$	1,895,630

Soupman, Inc. and Subsidiaries

Notes to Consolidation Financial Statements

May 31, 2014

(Unaudited)

The fair values at the commitment and re-measurement dates for convertible debt and warrants that were treated as derivative liabilities are based upon the following estimations/assumptions made by management for the nine months ended May 31, 2014:

Nine months ended		Commitment Date		Re-measurement Date

Exercise price		Lesser of $0.47 or 65% of the lowest trade price in the then prior 25 days, but only after 180 days from the date of the loan		Lesser of $0.47 or 65% of the lowest trade price in the then prior 25 days, but only after 180 days from the date of the loan
Expected dividends		0%		0%
Expected volatility	116% - 137%			116% - 139%
Expected term: convertible debt and warrants	6 months		6 months
Risk free interest rate		0.10% - 0.13%		0.10 - 0.13%

Note 7 Deferred Franchise Revenue

In accordance with the franchise agreement, franchisees are required to make advanced payment to the Company for training of personnel, and other service related matters. Generally, this occurs prior to the franchisee selecting a location; therefore, the Company records this payment as a liability on its balance sheet per ASC 430. Upon the franchisee securing a location and readying operations, the Company performs its obligation(s) and reclassifies the franchisee’s payment to revenue.

Note 8 Stockholders’ Deficit

During the nine months ended May 31, 2014, the Company expensed $344,110 in stock based compensation and offset this amount to APIC. This amount is comprised of stock option expensing (see note 8(c)) and compensation expenses relating to certain contractual commitments (see note 9).

(A) Series A – Convertible Preferred Stock

Holders of the Company’s preferred shares have no voting rights and receive no dividends, but receive $1.00 per share in the case of liquidation of the Company. This series of shares convert on a 1:1 basis at par value ($0.001) into shares of the Company’s common stock. In the event that shares are issued, the Company will evaluate for beneficial conversion features.

For the nine months ended May 31, 2014, holders of 234,213 shares of Series A preferred stock converted their shares into 234,213 shares of common stock.

(B) Common Stock

For the nine months ended May 31, 2014, the Company issued the following shares of common stock:

Type	Shares			Fair value		Range of value per share
Stock issued for cash		2,980,000		$	776,000	$	0.20 - $0.40
Stock issued for services		1,326,798		$	583,550	$	0.34 - $0.69
Stock issued in connection with forbearance		275,000		$	165,000	$	0.60
Stock issued for debt		3,592,218		$	827,329	$	0.20 - $0.34
Cancellation of stock		(200,000	)	$	-	$	-

Fair value for the share issued was based upon the quoted closing trading price on the dates shares were issued.

Soupman, Inc. and Subsidiaries

Notes to Consolidation Financial Statements

May 31, 2014

(Unaudited)

The Company issued no stock options during the nine months ended May 31, 2014.

The following is a summary of the Company’s stock option activity for the nine months ended May 31, 2014:

	Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life	Aggregate Intrinsic Value
Balance – August 31, 2013		1,975,000	$	0.53	7.44 years	408,250
Granted		-		-
Exercised		-		-
Forfeited		-		-
Balance – May 31, 2014		1,975,000	$	0.51	6.24 years		-

Outstanding options held by related parties (May 31, 2014)		1,450,000
Exercisable options held by related parties (May 31, 2014)		1,450,000
Exercisable options held by third parties (May 31, 2014)		375,000

The following is a summary of the Company’s unvested stock options at May 31, 2014:

	Un-vested Stock Options		Weighted Average Grant Date Fair Value
Unvested – August 31, 2013		100,000	$	0.75
Granted		-		-
Vested/Exercised		-		-
Forfeited/Cancelled		-		-
Unvested – May 31, 2014		100,000	$	-
Weighted average remaining life for vesting	6.69 years

The Company expensed $7,687 during the nine months ended May 31, 2014 related to options that vested.

(D) Stock Warrants

The following is a summary of the Company’s stock warrant activity for the nine months ended May 31, 2014:

	Number of Warrants			Weighted Average Exercise Price
Balance at August 31, 2013		5,792,702		$	.67
Granted		480,000			.80
Exercised		-			-
Forfeited/Cancelled		(334,500	)		1.12
Balance at May 31, 2014		5,938,202		$	.66

Warrants were granted to certain note holders in consideration of the modification of the maturity date on their notes. The exercise price of these warrants was equal to the exercise price of warrants granted on the dates of the original agreements. All warrants must be exercised within three years.

		Warrants Outstanding						Warrants Exercisable
Range of exercise price		Number Outstanding		Weighted Average Remaining Contractual Life (in years)		Weighted Average Exercise Price		Number Exercisable		Weighted Average Exercise Price		Intrinsic Value
$	0.40 - 1.25		5,938,202		3.02	$	.66		5,938,202	$	.66	$	0

Soupman, Inc. and Subsidiaries

Notes to Consolidation Financial Statements

May 31, 2014

(Unaudited)

Note 9 Commitments and Contingencies

Commitments

For the nine months ended May 31, 2014, the Company recorded royalty expense of $168,750 in connection with a royalty agreement (as further described in the Company’s Annual Report filed on Form 10-K for the year ended August 31, 2013.)

During the nine months ended May 31, 2014, the Company recorded compensation expense of $248,942 and $3,499, respectively, in connection with a June 2012 and December 2012 agreement, respectively (as further described in the Company’s Annual Report filed on Form 10-K for the year ended August 31, 2013.)

During the nine months ended May 31, 2014, the Company recorded compensation expense of $83,982 in connection with a January 2013 agreement (as further described in the Company’s Annual report filed on Form 10-K for the year ended August 31, 2013.)

Litigations, Claims and Assessments

On October 26, 2010, a third party action was filed against The Original Soupman, Inc. (“OSM”), certain principals of OSM and other third parties, Case Index #1-10-44670. On February 28, 2014 and order was entered by the court. Effective April 1, 2014, the action in U.S. Bankruptcy Court, Eastern District, New York was settled for $950,000, of which $350,000 was paid by OSM and $600,000 was paid by the D&O insurance carrier. In connection with the settlement agreement, the Company was released from approximately $290,000 in secured debt, which OSM had guaranteed in connection with its purchase of the assets of Soup Kitchen International (“SKI”); see Note 5(C).

Soupman, Inc. is one of several defendants in a lawsuit filed by Gourmet Sales and Marketing, LLC (“GSM”) in July 2011. GSM claims that it is owed $37,500 in sales commissions based upon an August 2009 sales and marketing agreement. Aside from the claim for an accounting, compensatory damages and/or punitive damages are demanded with respect to the other claims. The Company served its answer to the complaint in October 2011, in which it denied the allegations of the complaint with respect to the claims of liability and asserted numerous defenses and affirmative defenses. In November 2013, the Company served various counter-claims against GSM and its principals. The matter is still in the discovery and mediation phase of litigation. In the Company and its counsel’s opinion, the complaint lacks merit as the agreement that forms the basis of GSM’s claims may be invalid and unenforceable, GSM is not owed any money in relation to this agreement, and the Company believes that punitive damages are without basis and therefore has made no accrual for probable losses.

Note 10 Going Concern

As reflected in the accompanying financial statements, the Company had a net loss of approximately $1.8 million and net cash used in operations of approximately $1.1 million for the nine months ended May 31, 2014, and a working capital deficit of approximately $9.9 million and a stockholders’ deficit of approximately $9.8 million at May 31, 2014. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

The ability of the Company to continue its operations is dependent on management's plans, which may include the raising of capital through debt and/or equity markets with some additional funding from other traditional financing sources, including term notes, until such time that funds provided by operations are sufficient to fund working capital requirements. The Company may need to incur liabilities with certain related parties to sustain the Company’s existence.

The Company will require additional funding to finance the growth of its current and expected future operations as well as to achieve its strategic objectives. The Company believes its current available cash along with anticipated revenues will be insufficient to meet its cash needs for the near future. There can be no assurance that financing will be available in amounts or terms acceptable to the Company, if at all.

In response to these problems, management has taken the following actions:

●	seeking to raise $8 million in equity financing
●	seeking additional third party convertible debt financing
●	seeking to increase sales and distribution of Tetra Pak products
●	seeking to open new franchise locations
●	allocating sufficient resources to continue advertising and marketing efforts

Soupman, Inc. and Subsidiaries

Notes to Consolidation Financial Statements

May 31, 2014

(Unaudited)

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. These financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.

Note 11 Subsequent Events

Subsequent to May 31, 2014, the Company issued the following shares of its common stock, with fair market values based upon the quoted closing trading price on the issue dates:

●

40,000 shares of its common stock for cash, at issue price of $0.25 per share, having an aggregate fair market value of $10,000, and

●

20,000 shares of its common stock for services rendered, at issue prices of between $0.28-$0.29 per share, having in aggregate a fair market value of $5,700.

On July 3, 2014, the Company re-issued and extended until October 1, 2014, the maturity date of a $350,000 two-year convertible note previously issued in August 2012, and issued a new $280,000 promissory note (convertible at $0.60 per share) to the same note holder which also matures October 1, 2014. In connection with the foregoing, the Company issued the note holder 900,000 shares of restricted common stock having a fair value of $261,000.

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

The following analysis of our consolidated financial condition and results of operations for the quarter ended May 31, 2014 should be read in conjunction with the consolidated financial statements, including footnotes, and other information presented elsewhere in this Quarterly Report on Form 10-Q and the risk factors and the financial statements and the other information set forth in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on November 14, 2013.

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help the reader understand our results of operations and financial condition.

Cautionary Note Regarding Forward-Looking Statements

This report and other documents that we file with the Securities and Exchange Commission contain forward-looking statements that are based on current expectations, estimates, forecasts and projections about our future performance, our business, our beliefs and our management’s assumptions. Statements that are not historical facts are forward-looking statements. Words such as “expect,” “outlook,” “forecast,” “would,” “could,” “should,” “project,” “intend,” “plan,” “continue,” “sustain”, “on track”, “believe,” “seek,” “estimate,” “anticipate,” “may,” “assume,” and variations of such words and similar expressions are often used to identify such forward-looking statements, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are not guarantees of future performance and involve risks, assumptions and uncertainties, including, but not limited to, those described in our reports that we file or furnish with the Securities and Exchange Commission. Should one or more of these risks or uncertainties materialize, or should any of the underlying assumptions prove incorrect, actual results may vary materially from those indicated or anticipated by such forward-looking statements. Accordingly, you are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date they are made. Except to the extent required by law, we undertake no obligation to update publicly any forward-looking statements after the date they are made, whether as a result of new information, future events, changes in assumptions or otherwise.

Overview

Our Company manufactures and sells soups under the brand name “Original Soupman®”. Our soups are packaged in innovative Tetra Recart shelf stable cartons and are sold in the canned soup aisle of grocery stores, where most “heat & serve” retail soup purchases are made. The market size for our product in the US is approximately $6 billion annually.

We believe our sales will increase as soup consumers can now compare and choose Soupman’s famous soups over other typical inferior tasting canned soups. We also believe we will capture the health conscience consumers, aware of recent reports warning that canned products contain BPA, a known cancer-causing agent. Tetra Recart packaging is BPA free, sustainable and recyclable.

We also sell the Original Soupman soups in bulk 8 lb. frozen “heat ‘n serve” pouches to our franchised and licensed restaurants. We have franchised and licensed restaurants in specifically designated heavy traffic locations such as the Mohegan Sun Casino in Connecticut. Our newest Original Soupman Delicatessen & Restaurant is at the Resorts Casino Hotel in Atlantic City.

We also sell Original Soupman 8lb. bulk soups and other food products to the New York City Public school system, City University of New York, College of Staten Island and others. The products include vegetarian items, such a Mexicali Beans, Stewed Pinto Beans and Curried Chick Peas with Tomatillos, all of which are low-fat, low-sodium, and high in dietary fiber, and designed to taste great.

Results of Operations

There were no unusual or infrequent events or transactions, or significant economic changes that materially affected the amount of reported income or expenses from operations and nor is the Company aware of any known uncertainties that it reasonably expects will have a material impact income or expenses from operations, other than in the normal course of business such as seasonality.

Nine Months Ended May 31, 2014

The following table summarizes our operating results for the nine months ended May 31, 2014 and 2013, respectively. All amounts have been rounded to the nearest thousandth.

	2014			2013
Revenue	$	2,630,000		$	1,906,000
Cost of Sales		2,179,000			1,504,000
Gross Profit		451,000			402,000
Operating Expenses		2,816,000			3,787,000
Loss From Operations		(2,365,000	)		(3,385,000	)
Other Income (Expense)		536,000			325,000
Net Loss (including non-controlling interest)	$	(1,830,000	)	$	(3,060,000	)

Revenue

Soup sales accounted for approximately 96% and 92% of overall revenue for the nine months ended May 31, 2014 and 2013, respectively, while franchise revenues accounted for the remaining 4% and 8%, respectively. Our revenue increased approximately 38% for the nine months ended May 31, 2014 as compared to the nine months ended May 31, 2013, primarily due to an increase in customers and the continued introduction of our new varieties to the Tetra Recart line of soups.

For the nine months ended May 31, 2014, our Tetra Recart line of soups accounted for approximately $1,483,000 (59%) of total soup sales. Soups sold to our franchisees and the New York City school system accounted for approximately $669,000 (26%) and $383,000 (15%), respectively, of total revenue. Our year-over-year soup sales increased approximately 45%, primarily attributable to an increase in Tetra Recart sales.

Reported revenues are net of slotting fees (a fee charged by supermarkets in order to have our product placed on their shelves) and sales discounts (early payment discounts). Slotting fees for nine months ended May, 31 2014 and 2013, respectively, were approximately $275,000 and $220,000, while sales discounts for the same periods were approximately $48,000 and $31,000.

Cost of Sales

Cost of sales, for the nine months ended May 31, 2014 and 2013, included freight of approximately $230,000 and $119,000, respectively. Cost of sales represents costs associated with soup sales only; the Company had no cost of sales associated with franchise activities.

For the nine months ended May 31, 2014 and 2013, cost of sales as a percent of soup sales stayed relatively flat at 86%. Although our slotting fees increased by approximately $55,000, we moved production from Canada to the US in the third quarter of fiscal 2014, which resulted in lower production costs and hence lower cost of sales. Cost of sales as a percent of soup sales is negatively impacted by slotting fees and sales discounts, which lower the reportable revenue, thus increasing the percentage.

We expect our cost of sales (specifically the cost of ingredients, packaging and freight) on all our products to continue to decrease in 2014 as we have now transitioned to a United States based production facility.

Operating Expenses

Year -over-year operating expenses as a percentage of revenue decreased approximately 92% (from 199% to 107%) for the nine months ended May 31, 2014 as compared to the nine months ended May 31, 2013 primarily due to an increase in sales and a reduction in overhead. Major components of our operating expenses for the nine months ended May 31, 2014 consisted of approximately $928,000 in stock based compensation and stock issued for services, $700,000 for payroll and payroll related expenses, $502,000 in professional fees, $169,000 in royalty fees, $134,000 in promotional fees, $113,000 in business travel, $72,000 in insurance expense and $49,000 in sales commissions.

Other Income (Expense)

For the nine months ended May 31, 2014, other income was approximately $535,000 compared to approximately $325,000 for the nine months ended May 31, 2013. The year-over-year change was approximately $210,000 and was due primarily to an approximately $1,409,000 increase in the change in fair value of derivative liabilities, an approximately $291,000 in debt settlements, offset primarily by an approximately $1,212,000 gain from the deconsolidation of a VIE, and increases of approximately $165,000 for a forbearance agreement, $91,000 in interest expense and $67,000 in prepayment of debt penalties.

Net Loss

Our net loss for the nine months ended May 31, 2014 as compared to the nine months ended May 31, 2013 decreased approximately $1,230,000 (or 40%) primarily due to factors discussed above regarding Revenue, Cost of Sales, Operating Expenses and Other Expenses. Net loss attributable to Soupman for the nine months ended May 31, 2014 was approximately $1,797,000 or $0.05 per share (basic and diluted).

Three Months Ended May 31, 2014

The following table summarizes our operating results for the three months ended May 31, 2014 and 2013, respectively. All amounts have been rounded to the nearest thousandth.

	2014			2013
Revenue	$	756,000		$	496,000
Cost of Sales		557,000			387,000
Gross Profit		199,000			109,000
Operating Expenses		700,000			1,613,000
Loss From Operations		(501,000	)		(1,504,000	)
Other Income (Expense)		175,000			959,000
Net Loss (including non-controlling interest)	$	(326,000	)	$	(545,000	)

Revenue

Soup sales accounted for approximately 96% and 91% of overall revenue for the three months ended May 31, 2014 and 2013, respectively, while franchise revenues accounted for the remaining 4% and 9%, respectively. Our revenue increased approximately 52% for the three months ended May 31, 2014 as compared to the three months ended May 31, 2013, primarily due to an increase in customers and the continued introduction of our new varieties to the Tetra Recart line of soups and an increase in our sales to the New York City school program, partially offset by a decrease in franchise revenues.

For the three months ended May 31, 2014, our Tetra Recart line of soups accounted for approximately $316,000 (43%) of total soup sales. Soup sold to the New York City school system and our franchisees accounted for approximately $211,000 (29%) and $200,000 (28%), respectively. Our year-over-year soup sales increased approximately 60% primarily attributable to the continued increase in our Tetra Recart line and an increase in New York City school system sales as we introduced two new items to the menu in January and they were included for the full current quarter.

Reported revenues are net of slotting fees (a fee charged by supermarkets in order to have the product placed on their shelves) and sales discounts (early payment discounts). Slotting fees for three months ended May 31, 2014 and 2013, respectively, were approximately $63,000 and $34,000, while sales discounts for the same periods were approximately $12,000 and $17,000.

Cost of Sales

Cost of sales, for the three months ended May 31, 2014 and 2013, included freight of approximately $111,000 and $50,000, respectively. Cost of sales represents costs associated with soup sales only; the Company had no cost of sales associated with franchise activities.

For the three months ended May 31, 2014 and 2013, cost of sales as a percent of soup sales decreased approximately 9% (from 86% to 77%). Although our slotting fees increased, we moved production from Canada to the US in the third quarter of fiscal 2014, which resulted in lower production costs, and hence lower cost of sales. Cost of sales as a percent of soup sales is negatively impacted by slotting fees and sales discounts, which lower the reportable revenue, thus increasing the percentage.

Operating Expenses

Year -over-year operating expenses as a percentage of revenue decreased approximately 232% (from 325% to 93%) for the three months ended May 31, 2014 as compared to the three months ended May 31, 2013 primarily due to an increase in sales and a reduction in overhead particularly reductions in stock based compensation and stock issued for services. Major components of our operating expenses for the three months ended May 31, 2014 consisted primarily of approximately $276,000 in stock based compensation and stock issued for services, $157,000 in payroll and payroll related expenses, $104,000 in professional fees, $64,000 in insurance expense, $40,000 in promotional fees and $56,000 in royalty fees.

Other Income (Expense)

For the three months ended May 31, 2014, other income was approximately $174,000 compared to other income of approximately $959,000 for the three months ended May 31, 2013. The year-over-year change was approximately $785,000 and was attributable to a reduction of approximately $1,212,000 from the gain on a deconsolidation of a VIE, partially offset by an approximately $458,000 increase in change in fair value of derivative liabilities.

Net Loss

Our net loss for the three months ended May 31, 2014 as compared to the three months ended May 31, 2013 decreased approximately $219,000 (or 40%) primarily due to factors discussed above regarding Revenue, Cost of Sales, Operating Expenses and Other Expenses. Net loss attributable to Soupman for the three months ended May 31, 2014 was approximately $299,000 or $0.01 per share (basic and diluted).

Liquidity and Capital

The following table summarizes our working capital as of May 31, 2014 and August 31, 2013; all amounts have been rounded to the nearest thousandth.

	May 31, 2014			August 31, 2013
Current assets	$	1,042,000		$	779,000
Current liabilities	$	10,960,000		$	11,564,000
Working capital (deficit)	$	(9,918,000	)	$	(10,785,000	)

At May 31, 2014, we had cash of approximately $169,000 as compared to approximately $115,000 at August 31, 2013. Our working capital deficit decreased approximately $867,000, primarily due to increases in accounts payable and accrued liabilities of approximately $1,048,000 and increases of approximately $140,000, $82,000 and $54,000 in accounts receivable, inventory and cash, respectively offset by decreases of approximately $1,512,000 and $139,000 in derivative liabilities and debt.

For the nine months ended May 28, 2014, net cash used in operating activities was approximately $1, 058,000 as compared to approximately $1,333,000 for the nine months ended May 31, 2013. For the nine months ended May 31, 2014, our primary uses of net cash from operating activities were from losses sustained in normal operations of approximately $1,830,000, an increase in the fair market value of derivative liabilities of approximately $1,843,000, a gain from the write down of debt of approximately $291,000, and increase in accounts receivable – net and inventory of approximately $197,000. These were offset by increases in accounts payable and accrued expenses of approximately $1,167,000, stock issued for compensation and services of approximately $928,000, amortization of debt discount of approximately $717,000 and stock issued for forbearance of approximately $165,000.

For the nine months ended May 31, 2014, net cash used in investing activities was approximately $48,000 all related to advances to franchisees.

For the nine months ended May 31, 2014, net cash provided by financing activities was approximately $1,160,000, which primarily included approximately $1,022,000 from the issuance of convertible notes, $776,000 from the sale of common stock, offset by approximately $638,000 used for the repayment of debt.

Current and Future Financing Needs

We have incurred a stockholders’ deficit of approximately $9.8 million through May 31, 2014 and have incurred a net loss of approximately $1.8 million for the nine months ended May 31, 2014. We have incurred negative cash flow from operations since inception and have primarily financed our operations through the sale of stock and the issuance of notes. At May 31, 2014, we had a net short-term debt of approximately $5.8 million and a working capital deficit of approximately $9.8 million. These factors raise substantial doubt about our ability to continue as a going concern. During the nine months ended May 31, 2014, we raised approximately $1,774,000 from the issuance of our common stock and notes and since then we have raised an additional $290,000. Our debt - net of approximately $5.8 million includes a guarantee of Soup Kitchen International’s (“SKI”) debt of $2.7 million, none of which is past due. We have spent, and expect to continue to spend, substantial amounts in connection with implementing our business strategy, including the promotion of our new shelf stable Tetra Pak carton soups and our advertising and marketing campaigns. The actual amount of funds we will need to operate is subject to many factors, some of which are beyond our control. We do not have sufficient cash to operate our business at the current level for the next twelve months and insufficient cash to achieve our business goals. If our anticipated sales for the next few months do not meet our expectations, our existing resources will not be sufficient to meet our cash flow requirements. Furthermore, if our expenses exceed our anticipations or our sales revenue is insufficient we will need additional funds to implement our business plan. We will not be able to fully establish our business if we do not have adequate working capital so we will need to raise additional funds, whether through a stock offering or otherwise.

We are currently seeking a capital raise of $8 million. While we believe we will require approximately $8,000,000 to implement our full business strategy, we believe that if we are able to raise no less than $1,500,000, it will be sufficient to support our operations for the next 12 months. If we are unable to raise the entire $8,000,000, we will be forced to reduce our marketing and promotion efforts unless current sales increase enough to support implementing our full business plan. We believe that at $5,000,000 in sales, our operations would be self-sustaining and cash flow positive. We use co-packers to manufacture our products, have no bricks and mortar and rent inexpensive office space. Many of our fixed costs are minimal and will remain unchanged regardless of how much money we are able to raise. If we are forced to reduce our marketing and promotion efforts because we are unable to raise the entire $8,000,000, and current sales do not increase enough to support implementing our full business plan, our revenues will likely be less than had we been able to implement our full program, and as a direct result our income may suffer, and may not be sufficient to cover our negative cash flow, negatively affecting our liquidity.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Not applicable.

Item 4. Controls and Procedures.

Disclosure Controls and Procedures

The Company has adopted and maintains disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in the reports filed under the Exchange Act, such as this Form 10-Q, is collected, recorded, processed, summarized and reported within the time periods specified in the rules of the Securities and Exchange Commission. The Company’s disclosure controls and procedures are also designed to ensure that such information is accumulated and communicated to management to allow timely decisions regarding required disclosure. As required under Exchange Act Rule 13a-15, the Company’s management, including the Principal Executive Officer and Principal Financial Officer, has conducted an evaluation of the effectiveness of disclosure controls and procedures as of the end of the period covered by this report. Based upon that evaluation, the Company’s CEO and CFO concluded that the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including the Company’s CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

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

During the quarter ended May 31, 2014, we issued the following shares of our common stock, with fair value based upon the quoted closing trading price on the issue date:

477,798 shares of common stock for services rendered, having an aggregate fair market value of $179,120;

1,990,000 shares of restricted common stock to accredited investors at an issue prices of between $0.20 and $0.25 per share for a fair value of $423,600;

3,020,658 shares of common stock upon the conversion of certain convertible debt and accrued interest, having an aggregate fair market value of $682,819; and

40,000 shares as a commitment fee having a fair value of $13,600.

The securities issued upon conversion of the debt were issued pursuant to an exemption provided by Section 3(a)(9) of the Securities Act. The securities issued for services rendered and sold to accredited investors as described above were issued pursuant to Section 4(a) (2) of the Securities Act. The holders represented their intention to acquire the securities for investment only and not with a view towards distribution. The holders were given adequate information about us to make an informed investment decision. We did not engage in any general solicitation or advertising. We directed our transfer agent to issue the stock certificates with the appropriate restrictive legend affixed to the restricted stock.

Item 3. Defaults upon Senior Securities.

None.

Item 4. Mine Safety Disclosure

Not Applicable

Item 5. Other Information.

None.

Item 6. Exhibits.

Exhibit
Number		Description

31.1*		Certification of the Principal Executive Officer, Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*		Certification of the Principal Financial Officer, Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1*		Certification of the Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act

32.2*		Certification of the Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act

101.INS**		XBRL Instance

101.XSD**		XBRL Schema

101.PRE**		XBRL Presentation

101.CAL**		XBRL Calculation

101.DEF**		XBRL Definition

101.LAB**		XBRL Label

*	Filed herewith

**	Filed herewith electronically

SIGNATURES

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

	SOUPMAN, INC.

Date: July 15, 2014	By:	/s/ Lloyd Sugarman
		Lloyd Sugarman
		Chief Executive Officer and Director (Principal Executive Officer)

	SOUPMAN, INC.

Date: July 15, 2014	By:	/s/ Robert Bertrand
		Robert Bertrand
		President & CFO (Principal Financial Officer)