UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

[X]	QUARTERLY REPORT UNDER TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2014

OR

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

Commission file number 000-53597

CEELOX, INC.

(Exact name of registrant as specified in its charter)

NEVADA

(State or other jurisdiction of incorporation or organization)

10801 Mastin, Suite 920, Bldg # 8, Overland Park, Kansas 66210

(Address of principal executive offices, including zip code.)

(913) 884-3705

(telephone number, including area code)

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 last 90 days. YES [X] NO [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (SS 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.

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

State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: 38,647,556 as of August 11, 2014.

PART I

ITEM 1. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

CEELOX, INC. AND SUBSIDIARY

June 30, 2014

			Page

PART I.

Item 1.	Condensed Consolidated Financial Statements.

		Balance Sheets as of June 30, 2014 (Unaudited) and December 31, 2013	F-1
		Statements of Operations For The Six Months and Three Months Ended June 30, 2014 and 2013 (Unaudited)	F-2
		Statements of Cash Flows For The Six Months Ended June 30, 2014 and 2013 (Unaudited)	F-3
		Notes to Condensed Consolidated Financial Statements (Unaudited)	F-4

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations.		17

Item 3.	Quantitative and Qualitative Disclosures About Market Risk.		20

Item 4.	Controls and Procedures.		20

PART II.

Item 1A.	Risk Factors.		20

Item 6.	Exhibits.		21

Signatures			22

-2-

CEELOX, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED BALANCE SHEETS

	June 30,			December 31
	2014			2013
	Unaudited
ASSETS
Current assets:
Cash	$	13,067		$	2,201
Prepaids and other current assets		7,272			7,333
Total current assets	$	20,339		$	9,534

LIABILITIES
Current liabilities:
Accounts payable and accrued liabilities	$	562,732		$	597,332
Notes payable and advances from related parties		1,188,387			955,282
Convertible note – bridge loan		206,689			200,656
Secured convertible note – in default		187,500			187,500
Derivative liabilities		6,040			1,875
Total current liabilities		2,151,348			1,942,645

STOCKHOLDERS' DEFICIT
Preferred stock, $0.0001 par value; 5,000,000 undesignated shares, authorized; none issued and outstanding
Common stock, $0.00001 par value: Authorized 100,000,000 shares; 38,647,556 and 38,647,556 shares issued and outstanding as of June 30, 2014 and December 31, 2013, respectively		387			387
Additional paid-in capital		25,350,255			25,350,255
Accumulated deficit		(27,078,044	)		(26,886,900	)
Controlling Interest		(1,727,402	)		(1,536,258	)
Non controlling interests		(403,607	)		(396,853	)
Total stockholders' deficit		(2,131,009	)		(1,933,111	)
Total liabilities and stockholders' deficit	$	20,339		$	9,534

See Notes to Condensed Consolidated Financial Statements

F-1

CEELOX, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

	For The Six Months Ended						For The Three Months Ended
	June 30,						June 30,
	2014			2013			2014			2013

Revenue	$			$			$			$

Operating costs and expenses:
Marketing, general and administrative		150,596			328,025			103,277			133,683
Total costs and expenses		150,596			328,025			103,277			133,683

Operating loss		(150,596	)		(328,025	)		(103,277	)		(133,683	)

Other income (expenses):
Interest and amortization of financing fees		(58,137	)		(151,649	)		(30,702	)		(28,444	)
Derivative income (expense)		(4,165	)		2,561			3,835			6,265
Other income		15,000			3,021			15,000
Total other income (expenses)		(47,302	)		(146,067	)		(11,867	)		(22,179	)

Net loss		(197,898	)		(474,092	)		(115,144	)		(155,862	)

Net loss attributable to non-controlling interest		6,754			16,036			3,888			5,016


Net loss attributable to common stockholders	$	(191,144	)	$	(458,056	)	$	(111,256	)	$	(150,846	)

Basic and diluted loss per share	$	(0.00	)	$	(0.01	)	$	(0.00	)	$	(0.00	)

Weighted average shares basic and diluted		38,647,556			38,643,136			38,647,556			38,638,667

See Notes to Condensed Consolidated Financial Statements

F-2

CEELOX, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	For The Six Months Ended
	June 30,
	2014			2013
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss:	$	(197,898	)	$	(474,092	)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of debt discount					100,467
Derivative expense		4,165			(2,561	)
Effect on cash of changes in operating assets and liabilities:
Prepaids and other current assets		63			10,809
Accounts payable and accrued liabilities		23,536			117,143
NET CASH USED IN OPERATING ACTIVITIES		(170,134	)		(248,234	)

CASH FLOW FROM FINANCING ACTIVITIES:
Proceeds from notes payable and advances from related parties		181,000			248,641
NET CASH PROVIDED BY FINANCING ACTIVITIES		181,000			248,641

NET DECREASE IN CASH		10,866			407
CASH:
Beginning of period		2,201			4,718
End of period	$	13,067		$	5,125

See Notes to Condensed Consolidated Financial Statements

F-3

CEELOX, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(UNAUDITED)

1. Nature of Business

Ceelox, Inc. (the "Company") was incorporated on October 24, 2007 in Nevada. The Company's majority-owned subsidiary Ceelox, Inc. ("Ceelox Private") was incorporated in the State of Florida and commenced operations on September 17, 2003. Through the Company's majority-owned subsidiary, the Company offers software solutions and devices that deliver biometric identity-based user access authentication, verification, and data and email encryption. The Company's biometric authentication provides protection against identity theft, and our solutions also meet regulatory requirements for two-factor authentication.

Our business plan defines the focus of the company to work towards development or acquisition of an Internet based Cloud platform. This platform will become the foundation to launch a variety of services which can range from VOIP products, to online gaming, to financial services. The value of the approach is that the platform can be used to offer products directly to end users, i.e. B2C, B2B, or can be white labeled for 3rd party providers i.e. B2B2C.

2. Going Concern and Management's Plans

During the six months ended June 30, 2014, the Company was engaged in continued development of our business plan surrounding virtual credit card, social networking and mobile, security and continues to seek merger and acquisition candidates with synergies within these areas. As indicated in the accompanying condensed consolidated financial statements, at June 30, 2014 and December 31, 2013, the Company had $13,067 and $2,201 in cash, respectively, and $2,131,009 and $1,933,111 in negative working capital, respectively. For the six months ended June 30, 2014 and 2013, the Company had a net loss of $197,898 and $474,092, respectively, and utilized $170,134 and $248,234, respectively, in cash from operations. For the three months ended June 30, 2014 and 2013, the Company had a net loss of $115,144 and $155,862. 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 consolidated 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.

3. Basis of Presentation and Selected Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated interim financial statements included herein have been prepared in accordance with generally accepted accounting principles for interim period reporting in conjunction with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, these statements do not include all of the information required by generally accepted accounting principles for annual financial statements. In the opinion of management, all known adjustments (consisting of normal recurring accruals and reserves) necessary to present fairly the financial position, results of operations and cash flows as of and for the interim periods have been included. It is suggested that these condensed consolidated interim financial statements be read in conjunction with the consolidated financial statements and related notes in the Company's Form 10-K for the year ended December 31, 2013.

The operating results for the six months ended June 30, 2014 are not necessarily indicative of the results to be expected for the full year ending December 31, 2014.

F-4

CEELOX, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(UNAUDITED)

3. Basis of Presentation and Selected Significant Accounting Policies (continued)

Principles of Consolidation

The condensed consolidated interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") and in accordance with the SEC's accounting rules under Regulation S-X. All material inter-company accounts and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Fair Value of Financial Instruments

The fair value of the Company's assets and liabilities, which qualify as financial instruments under Financial Accounting Standards Board (FASB) guidance regarding disclosures about fair value of financial instruments, approximate the carrying amounts presented in the accompanying consolidated balance sheets.

Computation of Earnings (Loss) Per Share

A basic earnings (loss) per share is calculated by dividing the earnings (loss) by the weighted average number of common shares outstanding during the period. A diluted earnings (loss) per share is calculated by dividing the earnings (loss) by the weighted average number of common shares and potentially dilutive securities outstanding during the period. Potentially dilutive common shares consist of incremental common shares issuable upon exercise of stock options, warrants and shares issuable upon the conversion of convertible notes. The dilutive effect of the convertible notes is calculated under the if-converted method. The dilutive effect of outstanding shares is reflected in diluted earnings per share by application of the treasury stock method. This method includes consideration of the amounts to be paid by the employees, the amount of excess tax benefits that would be recognized in equity if the instruments were exercised and the amount of unrecognized stock-based compensation related to future services. No potential dilutive common shares are included in the computation of any diluted per share amount when a loss is reported. Accordingly, we did not include 12,624,397 and 12,676,045 of potentially dilutive options, warrants and convertible debt instruments at June 30, 2014 and 2013 respectively.

	For The Six Months Ended June 30,
	2014		2013
Potentially dilutive options		2,181,111		2,181,111
Potentially dilutive warrants		7,063,116		7,129,783
Potentially dilutive convertible instruments		3,380,170		3,365,151
		12,624,397		12,676,045

F-5

CEELOX, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(UNAUDITED)

3.	Basis of Presentation and Selected Significant Accounting Policies (continued)

Reclassifications

Certain reclassifications have been made to conform to the current year presentation.

Recently Issued Accounting Standards

Management does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company's consolidated financial statements.

4. Convertible Notes Payable – Bridge Loans

In August of 2009 Ceelox Private entered into a convertible note subscription agreement with certain accredited investors. The offering was for $1.5 million in convertible notes and common stock purchase warrants.

The notes are due and payable upon the earlier of:

1.	Two years from the date of issuance
2.	The date of completion, by Ceelox Private, of a transaction pursuant to which it becomes a majority-owned subsidiary of a publicly-traded company along with a simultaneous financing in the minimum amount of $1,500,000 (for purposes hereof this shall be referred to as a "Reverse Merger"), or
3.	The date on which Ceelox Private is acquired in a non-Reverse Merger transaction whereby a non-affiliated third-party acquires 50% or more of Ceelox Private's capital stock ("Third-Party Acquisition").

Purchasers in this offering are granted warrants to purchase that number of shares of Common Stock equal to the principal amount of their note divided by the applicable conversion price of the notes as described above and the exercise price per share shall be equal to the conversion price of the notes. Upon the Merger, 777,451 of warrants were issuable under this agreement.

As of June 30, 2014 and December 31, 2013, the carrying amounts of convertible bridge notes, including accrued interest were $206,689 and $200,656, respectively. As of June 30, 2014, the convertible notes payable – bridge loans are considered in default.

On August 6, 2012 in a complaint filed in Johnson County Kansas, Ceelox was found in default in re-payment of the notes plus interest for three note holders in the total amount of $100,000. The Company does not currently have sufficient funds to repay the notes.

5. Notes Payable and Advances from Related Parties

On September 30, 2011, Ceelox received advances from a related party in the amount of $78,086. These advances are payable on demand and have an interest rate of 0.55%. These funds were advanced to the Company to pay fees related to various consulting agreements. The outstanding balance of these advances as of June 30, 2014 and December 31, 2013 amounted to $45,103 and $44,980, respectively. The outstanding balances included accrued interest of $681 and $559 as of June 30, 2014 and December 31, 2013, respectively. Interest expense for the six months ended June 30, 2014 and 2013 amounted to $123 and $123, respectively.

F-6

CEELOX, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(UNAUDITED)

5. Notes Payable and Advances from Related Parties (continued)

On December 31, 2011, Ceelox received additional advances from a related party in the amount of $73,947. These advances are payable on demand and have an interest rate of 0.55%. These funds were advanced to the Company to pay fees related for various consulting agreements. The outstanding balance of these advances as of June 30, 2014 and December 31, 2013 amounted to $74,978 and $74,774, respectively. The outstanding balances included accrued interest of $1,030 and $826 as of June 30, 2014 and December 31, 2013, respectively. Interest expense for the six months ended June 30, 2014 and 2013 amounted to $204 and $204, respectively.

On May 18, 2012, the Company sold a $125,000 convertible promissory note ("Note") to a related party. In connection with the sale of the Note the Company also issued to the related party a warrant to purchase shares of the Company's common stock ("Warrant"). The Note was due and payable on November 18, 2012 and bears interest at a rate of 13% per annum, all of which shall be paid on the maturity date. The Company may prepay the Note and accrued interest in whole or in part at any time prior to the maturity date without penalty. An event of default shall occur in the event the Company fails to make the principal and interest payment to the related party on or prior to the maturity date. The Warrant issued to the related party allows the related party to acquire up to 250,000 shares of the Company's common stock at a price of $0.10 per share for a period of five years from the date of issuance of the warrant. We have evaluated the terms and conditions of the warrants under the guidance of ASC 815, Derivatives and Hedging and determined that they achieved equity classification. The warrants did not contain any terms or feature that would preclude equity classification.

The purchase price allocation for the convertible notes resulted in a debt discount of $4,950. The discount on the notes will be amortized through periodic charges to interest expense over the term of the debenture using the effective interest method. As of June 30, 2014 the debt discount has been fully amortized. The purchase price allocation is as follows:

	Inception
Net proceeds	$	125,000
Carrying value		(120,050	)
Paid in capital (warrants)		(4,950	)

The warrants were recorded as a discount to the note and will be accreted to face value over the life of the loan.

Between August 8, 2012 and May 12, 2014, the Company received advances aggregating $792,849 from the same related party that purchased the $125,000 Note. These advances are subject to an interest rate of 13% per annum and are payable on demand. As of June 30, 2014 and December 31, 2013, the outstanding balance of the related party note and subsequent advances equaled $1,068,306 and $835,528, respectively. The outstanding balances included accrued interest of $150,456 and $98,679 as of June 30, 2014 and December 31, 2013, respectively. For the six months ended June 30, 2014 and 2013, the Company recorded $51,777 and $40,547, respectively in interest expense related to the related party note and subsequent advances.

The aggregate outstanding balance of all the notes payable and related party advances issued from September 30, 2011 through May 12, 2014 amounted to $1,188,377 and $955,282 as of June 30, 2014 and December 31, 2013, respectively. As of June 30, 2014 and December 31, 2013, the related parties have not required repayment of these notes and advances. The related parties have agreed that the balances will either be paid back or converted into common stock upon completion of a financial raise that the Company is currently seeking.

F-7

CEELOX, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(UNAUDITED)

6. Secured Convertible Note Financing

As reported in the Company's Form 8-K filed with the SEC on February 22, 2012: On February 16, 2012 the Company entered into a securities purchase agreement with one investor for the purchase and sale of a convertible promissory note ("Note") in the principal amount of $187,500 and a warrant to purchase shares of the Company's common stock. The number of warrant shares exercisable is equal to the number of shares equal to 20% of the quotient obtained by dividing (i) the principal amount of the Note ($187,500) by (ii) the Conversion Price of the Company's common stock. Additionally, the Company entered into a security agreement with the investor whereby the Company's obligation to repay the Note is secured by all of the Company's assets.

After the payment of fees, expenses and the prepayment of interest, the Company received net proceeds of $104,625.

Pursuant to the terms of the Note, the maturity date of the Note was February 16, 2013 ("Maturity Date") and all of the interest due under the Note during the initial term was prepaid by the Company upon issuance of the Note. The number of shares into which the Note may be converted shall be determined by dividing the conversion amount of the Note by the conversion price. The conversion price shall be determined as follows: (i) a 25% discount from the price per share (denominated in US dollars) at which the common stock is sold in a Qualified Offering (such price at which the common stock is sold in a Qualified Offering is referred to as the "Offering Price") if the Qualified Offering occurs on or before the six (6) month anniversary of the final Closing Date; (ii) a 40% discount from the Offering Price if a Qualified Offering occurs after the six (6) month anniversary of the final Closing Date but on or before the twelve (12) month anniversary of the final Closing Date; or (iii) the greater of (x) a 40% discount from the VWAP of the common stock over the five (5) trading days prior to conversion, and (y) $0.10 per share if a Qualified Offering does not occur on or prior to the twelve (12) month anniversary of the final Closing Date. For purposes hereof, the final Closing Date shall be the earlier of February 28, 2012 and the sale of an aggregate of $500,000 principal amount of the Notes. As of June 30, 2014, the only conversion option available to the holder is $0.10 per share since a Qualified Offering did not occur on or prior to the twelve (12) month anniversary of the final Closing Date. As of June 30, 2014, this note is in default. However, the Company is in negotiations with a third party to secure financing and has targeted the quarter ended September 30, 2014 to repay the Note provided a financing is consummated.

The Company issued a five year warrant to the investor pursuant to which the investor shall have the right to acquire additional shares of the Company's common stock. The number of shares of common stock issuable upon exercise of the warrant shall be determined by dividing the principal amount of the Note by the Conversion Price (as defined above pursuant to the Note) multiplied by twenty percent (20%).

Accounting for the Secured Convertible Notes

We have evaluated the terms and conditions of the secured convertible note and warrants under the guidance of ASC 815, Derivatives and Hedging. Both the embedded conversion feature and detachable warrants have a variable conversion price, which precludes these instruments from being indexed to the Company's own stock. As a result, both the embedded conversion feature and warrants require classification as liabilities.

F-8

CEELOX, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(UNAUDITED)

6. Secured Convertible Note Financing (continued)

Accounting for the Secured Convertible Notes (continued)

The following tables reflect the allocation of the purchase on the financing dates:

	$187,500
Secured Convertible Note	Face Value
Proceeds	$	104,625
Day one derivative expense		119,722
Embedded conversion feature		(251,852	)
Warrant derivative liability		(55,370	)
Prepaid interest		24,375
Deferred finance fees		58,500
Carrying value	$	-

Discounts (premiums) on the convertible notes arise from (i) the allocation of basis to other instruments issued in the transaction, (ii) fees paid directly to the creditor and (iii) initial recognition at fair value, which is lower than face value. Discounts (premiums) are amortized through charges (credits) to interest expense over the term of the debt agreement.

For the six months ended June 30, 2014 and 2013, the Company recorded interest expense related to the amortization of debt discount in the amount of $0 and $100,467, respectively. The carrying value of the secured convertible note as of June 30, 2014 and December 31, 2013 was $187,500 and $187,500, respectively.

7. Derivative Financial Instruments

The components of warrant derivative liability as reflected in the consolidated balance sheets as of June 30, 2014 and December 31, 2013 are as follows:

	June 30, 2014					December 31, 2013
Secured convertible note giving rise to derivative financial instruments:	Indexed Shares		Fair Values			Indexed Shares		Fair Values
Embedded conversion feature		3,125,000				$	3,125,000		$
Warrant derivative liability		625,000			6,040		625,000			1,875
		3,750,000		$	6,040		3,750,000		$	1,875

F-9

CEELOX, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(UNAUDITED)

7. Derivative Financial Instruments (continued)

The following table summarizes the effects on our gain (loss) associated with changes in the fair values of our derivative financial instruments by type of financing for the six months ended June 30, 2014 and 2013:

Secured convertible note financing giving rise to derivative financial instruments and the income effects:	Six Months Ended June 30, 2014			Six Months Ended June 30, 2013
Embedded conversion feature	$			$	2,488
Warrant derivative liability		(4,165	)		73

Total derivative gain (loss)	$	(4,165	)	$	2,561

The following table summarizes the effects on our gain (loss) associated with changes in the fair values of our derivative financial instruments by type of financing for the three months ended June 30, 2014 and 2013:

Secured convertible note financing giving rise to derivative financial instruments and the income effects:	Three Months Ended June 30, 2014		Three Months Ended June 30, 2013
Embedded conversion feature	$		$
Warrant derivative liability		3,835		6,265

Total derivative gain (loss)	$	3,835	$	6,265

8. Fair Value Considerations

GAAP establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. As presented in the tables below, this hierarchy consists of three broad levels:

Level 1 valuations:

Quoted prices in active markets for identical assets and liabilities.

Level 2 valuations:

Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; and model-derived valuations whose inputs or significant value drivers are observable.

Level 3 valuations:

Significant inputs to valuation model are unobservable.

We follow the provisions of ASC 820, Fair Value Measurements and Disclosures, with respect to our financial instruments. As required by ASC 820, assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to their fair value measurement. Our derivative financial instruments which are required to be measured at fair value on a recurring basis under of ASC 815 are all measured at fair value using Level 3 inputs. Level 3 inputs are unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

F-10

CEELOX, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(UNAUDITED)

8. Fair Value Considerations (continued)

The following table presents information about the Company's liabilities measured at fair value as of June 30, 2014 and December 31, 2013:

	Financial Measurements Using
June 30, 2014	Level 1	Level 2	Level 3		Total
Liabilities
Warrant derivative liabilities	$	$	$	6,040	$	6,040
Embedded conversion feature
	$	$	$	6,040	$	6,040

December 31, 2013
Liabilities
Warrant derivative liabilities	$	$	$	1,875	$	1,875
Embedded conversion feature
	$	$	$	1,875	$	1,875

Both the embedded conversion feature and warrants were valued using a binomial-lattice-based valuation model. The lattice-based valuation technique was utilized because it embodies all of the requisite assumptions (including the underlying price, exercise price, term, volatility, and risk-free interest-rate) that are necessary to fair value these instruments. For forward contracts that contingently require net-cash settlement as the principal means of settlement, we project and discount future cash flows applying probability-weighted to multiple possible outcomes. Estimating fair values of derivative financial instruments requires the development of significant and subjective estimates that may, and are likely to, change over the duration of the instrument with related changes in internal and external market factors. In addition, option-based techniques are highly volatile and sensitive to changes in the trading market price of our common stock. Because derivative financial instruments are initially and subsequently carried at fair values, our income will reflect the volatility in these estimate and assumption changes.

Significant assumptions in valuing the warrant liability were as follows as of June 30, 2014:

	Warrants
Exercise price	$	0.06
Volatility		307.54	%
Equivalent term (years)		2.64
Risk-free interest rate		0.47	%

Significant assumptions in valuing the warrant liability were as follows as of December 31, 2013:

	Warrants
Exercise price	$	0.06
Volatility		284.96	%
Equivalent term (years)		3.13
Risk-free interest rate		0.78	%

F-11

CEELOX, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(UNAUDITED)

8. Fair Value Considerations (continued)

The following table sets forth a reconciliation of changes in the fair value of financial liabilities classified as Level 3 in the fair value hierarchy:

	2014			2013
Balance as of January 1	$	(1,875	)	$	(8,700	)
Total gains or losses (realized or unrealized):
Included in earnings		(4,165	)		(3,704	)
Balance as of June 30	$	(6,040	)	$	(12,404	)

9. Equity Activity

Warrants:

The Company had outstanding warrants at June 30, 2014 and December 31, 2013 totaling 7,063,116. The warrants expire at various dates ranging from August 21, 2014 through May 18, 2017 and have an average exercise price of $0.15.

On February 21, 2012, the Company entered into an agreement with a firm for non-exclusive investment banking and financial advisory services. As consideration for these services, pursuant to the Agreement, the Company agreed to issue (i) 400,000 restricted common shares, payable in four equal quarterly installments beginning on the date of execution of this Agreement, (ii) fees associated with the raising of capital of 10% cash and 10% in warrants on equity-linked capital raised (i.e., common equity, preferred equity, convertible debt, debt with warrants), and 3% cash and no warrants on straight debt capital raised and (iii) fees associated with merger and acquisitions of 5% of the consideration up to $5 million, 3% of the consideration between $5-10 million, and 1% of consideration above $10 million. At the Company's discretion, $5,000 may be paid in lieu of the restricted shares as quarterly compensation. The warrants will be struck at a 20% premium to the valuation of the financing event, a five-year expiration, and a cashless exercise feature. The term of the agreement is 12 months and can be terminated upon 10 days written notice without cause by either the Company or the firm at any time before the Expiration Date. On May 4, 2012, the Company issued 100,000 shares of common stock to an investing banking group in accordance with the terms of the agreement. On January 9, 2013, as consideration for these services, pursuant to the Agreement, the Company issued the final installment of 100,000 shares of common stock to an investing banking group.

F-12

CEELOX, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(UNAUDITED)

9. Equity Activity (continued)

Stock Option Plans

As of January 1, 2010 Ceelox Private had one stock option plan under which grants were outstanding. Grants under the stock option plan typically had a requisite service period of 36 months, straight-line or graded vesting schedules and expired not more than ten years from date of grant. The Plan was approved by the Ceelox Private board on January 2, 2007.

On February 12, 2010, at the time of the reverse merger, the Company adopted the 2010 Stock Option Plan (the "Plan") providing for stock-based incentive compensation to eligible employees, executive officers and non-employee directors and consultants. Grants under the Plan typically have a requisite service period of 36 months, straight-line or graded vesting schedules and expire not more than ten years from date of grant.

As of June 30, 2014, 3,957,778 shares of the 6,000,000 shares approved under the Company's Plan remain available for grant.

During the periods ended June 30, 2014 and December 31, 2013, there were no options issued under the plan.

The number of options outstanding for periods ended June 30, 2014 and December 31, 2013 was 2,181,111 and 2,181,111, respectively.

Officer Compensation

On October 3, 2013, the Board of Directors approved the issuance of 5,000,000 shares of restricted common stock to an officer. The stock was granted for past services and was valued at $0.01 per share. In the quarterly period ended December 31, 2013, the stock-compensation expense of $50,000 is recorded in the statement of operations under general and administrative expenses.

F-13

CEELOX, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(UNAUDITED)

10. Mergers and Acquisitions

On October 25, 2012, the Company entered into an asset purchase agreement ("Agreement") with Send Global Corporation, a Michigan corporation ("Send Global"), and iTeknik Holding Corporation, a Wyoming corporation and the Parent company of Send Global ("Parent," and together with Send Global, the "Sellers," and each a "Seller"). The Company s agreed to purchase substantially all of the assets of Send Global in exchange for: (i) $1,750,000 in cash, less the audit adjustment amount, if any, less the audit costs, (ii) either the additional payment of Five Hundred thousand dollars ($500,000) or the issuance of twelve million (12,000,000) shares of the Company's common stock ("Common Stock Consideration"). On April 25, 2013, the Company and Send Global agreed to extend the closing date from April 25, 2013 to May 25, 2013. Since the passage of May 25th date, the transaction has expired and no additional discussions ensued. For the year ended December 31, 2013 and 2012, financing fees incurred on this acquisition agreement amounted to $125,000 in each year.

On November 27, 2012, the Company entered into an asset purchase agreement ("Agreement" or "Asset Sale") with AllCom, a Nevada corporation ("AllCom" or "Seller"). The Company has agreed to purchase all of the assets ("Purchased Assets") of AllCom ("Acquisition") in exchange for the issuance of that number of shares of Common Stock such that, following such issuance, the Seller shall own forty-eight percent (48%) of all the issued and outstanding shares of Common Stock of the Company as of the closing date of the Acquisition, (the "Closing Purchase Price"). On March 28, 2013, the Company and AllCom agreed to extend the termination date of the agreement to April 30, 2013. Since the passage of April 30^th date, the transaction has expired and no additional discussions ensued.

Both transactions have expired and no additional discussions ensued. The Company has turned their attention to the business plan and product set defined in Footnote 1.

11. Subsequent Events

No events occurred subsequent to June 30, 2014 that would require adjustment to the accompanying financial statements or footnotes other than those disclosed in the notes above and the event listed below

F-14

ITEM 2.

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

This section of this quarterly report includes a number of forward-looking statements that reflect our current views with respect to future events and financial performance. Forward-looking statements are often identified by words like: believe, expect, estimate, anticipate, intend, project and similar expressions, or words which, by their nature, refer to future events. You should not place undue certainty on these forward-looking statements, which apply only as of the date of our prospectus. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or our predictions.

Overview

We were originally formed for the purpose of developing and marketing advanced fingerprint biometric technology and encryption software solutions. Our biometric identification and encryption software solutions provide innovative and new ways for customers to securely access, store, send and receive confidential information. We commenced marketing our products in the first half of 2007 following more than three years of technology and product development. We have invested over $12 million in the operations of the business including research and development, product development and marketing of our products.

As announced on Form 8-K filed with the SEC on January 27, 2012, Ceelox completed the fulfillment of the demand notice from CIP, LLC. In this agreement, Ceelox converted over $9 million in debt to 24 million shares of common stock and turned over all intellectual property and software to CIP. Since that time Ceelox has continued development of its business plan surrounding virtual credit card, social networking, and mobile, security. Ceelox will continue to seek merger and acquisition candidates with synergies within these areas. Ceelox is currently in discussions with CIP and will seek to license and/or purchase the intellectual property from CIP as appropriate to complete their new product rollout.

On October 25, 2012, the Company entered into an asset purchase agreement ("Agreement") with Send Global Corporation, a Michigan corporation ("Send Global"), and iTeknik Holding Corporation, a Wyoming corporation and the Parent company of Send Global ("Parent," and together with Send Global, the "Sellers," and each a "Seller"). The Company has agreed to purchase substantially all of the assets of Send Global in exchange for: (i) $1,750,000 in cash, less the audit adjustment amount, if any, less the audit costs, (ii) either the additional payment of Five Hundred thousand dollars ($500,000) or the issuance of twelve million (12,000,000) shares of the Company's common stock ("Common Stock Consideration"). On April 25, 2013, the Company and Send Global agreed to extend the closing date from April 25, 2013 to May 25, 2013. Since the passage of May 25th date, the transaction has expired and no additional discussions ensued. For the year ended December 31, 2013 and 2012, financing fees incurred on this acquisition agreement amounted to $125,000 in each year.

Both transactions have expired and no additional discussions ensued. The Company has turned their attention to the business plan and product set defined in the following paragraphs.

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In addition, the cloud foundation could also leverage the products developed by Ceelox aimed at protecting users from hackers that steal their login/authentication credentials that put them at risk of losing their identity, loss of money, false purchases, etc. These types of applications and services are susceptible to the man-in-the-middle threats but are cured though the Ceelox' parallel key infrastructure approach. This cloud approach along with any one of the enabled services could produce significant revenues.

The Company continues its efforts to obtain financing to achieve its business objectives. Even though the task has taken longer than anticipated, the Company remains focused on securing financing to provide needed operating funds.

Results of Operations

Six Months Ended June 30, 2014 Compared with Six Months Ended June 30, 2013

Net Revenue

For the six months ended June 30, 2014 and 2013 the Company had no revenues respectively. No sales occurred in either period as a result of the Company's focus on continued product development and securing funding to execute its business plan.

Total Operating Costs and Expenses

Our total costs and expenses which consist of payroll and related benefits, consulting expenses, and administrative expenses decreased by $177,429 or 54% for the six months ended June 30, 2014 from the six months ended June 30, 2013. In connection with our acquisition strategy, we incurred expired acquisition costs $0 and $125,000 for the six months ended June 30, 2014 and 2013, respectively. Compensation expense is $81,100 and $ 81,824 for the six months ended June 30, 2014 and 2013.

Loss from Operations

Our operating loss for the six months ended June 30, 2014 was $150,596 compared to a loss of $328,025 for the six months ended June 30, 2013. In connection with our acquisition strategy, we incurred expired acquisition costs $0 and $125,000 for the six months ended June 30, 2014 and 2013, respectively.

Interest Expense

Interest expense and related financing fees for the six months ended June 30, 2014 was $58,137 compared to $151,649 for the six months ended June 30, 2013, a decrease of $93,512 or 62%. Interest expense on the notes payable and advances from related parties amounted to $52,104 and $41,497 for the six months ended June 30, 2014 and 2013, respectively. Interest expense on the convertible bridge loans was $6,033 for the six months ended June 30, 2014 compared to $6,033 for the six months ended June 30, 2013. Interest expense on the secured convertible note financing, which related the amortization of debt discount and deferred finance fees, totaled $0 for the six months ended June 30, 2014 versus $104,119 for the six months ended June 30, 2013.

Liquidity and Capital Resources

As of June 30, 2014, we had a working capital deficit of $2,131,009 as compared to a working capital deficit of $1,888,111 as of December 31, 2013. In the past we have relied on sales of our equity and debt instruments to raise funds for our working capital requirements including related party advances from our majority stockholder. We will need to raise additional capital in order to implement our business plan and will seek to sell additional equity and/or debt to accomplish this objective. There can be no assurance that we will be able to raise funds sufficient to carry out our business plan, or that if funds are available to us that they will be on acceptable terms.

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Operating Activities

Cash used in operations of $170,134 during the six months ended June 30, 2014 was primarily a result of our $197,898 net loss reconciled with our net non-cash expenses relating to derivative expense and accrued interest. Cash used in operations of $248,234 during the six months ended June 30, 2013 was primarily a result of our $474,092 net loss reconciled with our net non-cash expenses relating to derivative expense, accrued interest, and amortization expense

Investing Activities

There were no investing activities during the six months ended June 30, 2014 and 2013, respectively.

Financing Activities

During the six months ended June 30, 2014, we generated proceeds of $181,000 from our financing activities which consisted of: proceeds from related party advances.

Seasonality Results

We do not expect to experience any seasonality in our operating results

Results of Operations

Three Months Ended June 30, 2014 Compared with Three Months Ended June 30, 2013

Net Revenue

For the three months ended June 30, 2014 and 2013 the Company had no revenues respectively. No sales occurred in either period as a result of the Company's focus on continued product development and securing funding to execute its business plan.

Total Operating Costs and Expenses

Our total costs and expenses which consist of payroll and related benefits, consulting expenses, and administrative expenses decreased by $30,406 or 23% for the three months ended June 30, 2014 from the three months ended June 30, 2013. In connection with our acquisition strategy, we incurred expired acquisition costs $0 and $125,000 for the three months ended June 30, 2014 and 2013, respectively. Compensation expense is $40,369 and $ 40,369 for the three months ended June 30, 2014 and 2013.

Loss from Operations

Our operating loss for the three months ended June 30, 2014 was $103,277 compared to a loss of $133,683 for the three months ended June 30, 2013. In connection with our acquisition strategy, we incurred expired acquisition costs $0 and $125,000 for the three months ended June 30, 2014 and 2013, respectively.

Interest Expense

Interest expense and related financing fees for the three months ended June 30, 2014 was $30,702 compared to $28,444 for the three months ended June 30, 2013, an increase of $2,258 or 8%. Interest expense on the notes payable and advances from related parties amounted to $27,669 and $25,411 for the three months ended June 30, 2014 and 2013, respectively. Interest expense on the convertible bridge loans was $3,033 for the three months ended June 30, 2014 compared to $3,033 for the three months ended June 30, 2013.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rates

We are not being exposed to market risks relating to changes in interest rates because all outstanding debt bears interest at a fixed rate. We currently do not engage in any interest rate hedging activity and have no intention of doing so in the foreseeable future.

Foreign Exchange

The company has no exposure to foreign exchange fluctuations.

Inflation

Inflationary factors such as increases in the cost of our product and overhead costs may adversely affect our operating results. Although we do not believe that inflation has had a material impact on our financial position or results of operations to date, a high rate of inflation in the future may have an adverse effect on our ability to maintain current levels of gross margin and selling, general and administrative expenses as a percentage of net sales if the selling prices of our products do not increase with these increased costs.

ITEM 4. CONTROLS AND PROCEDURES.

We maintain "disclosure controls and procedures," as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the "Exchange Act"), that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. We conducted an evaluation (the "Evaluation"), under the supervision and with the participation of our Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO"), of the effectiveness of the design and operation of our disclosure controls and procedures ("Disclosure Controls") as of the end of the period covered by this report pursuant to Rule 13a-15 of the Exchange Act. Based on this Evaluation, Mr. Grannell, our CEO, and Mr. Moore, our CFO, concluded that our Disclosure Controls were not effective as of the end of the period covered by this report. The small size of our company does not provide for the desired separation of control functions, and we do not have the required closing process related to the preparation of consolidated financial statements. As of June 30, 2014 we do not believe that our disclosure controls and procedures were effective.

Changes in Internal Controls

There have been no changes in our control over financial reporting that materially affected, or is reasonably likely to material affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1A. RISK FACTORS

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

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ITEM 6. EXHIBITS

The following documents are included herein:

Exhibit No.	Document Description
31.1	Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

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

32.1	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following person on behalf of the Registrant and in the capacities on this 11^th day of August, 2014.

	CEELOX INC.
	(the "Registrant")


	By:	MARK L. GRANNELL
		Mark L. Grannell
		Chief Executive Officer and Chief Operating Officer


	By:	WILLIAM P. MOORE
		William P. Moore
		Secretary, Treasurer and Chief Financial Officer

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Ceelox Inc. 10-Q