XOTC:AMWI Quarterly Report 10-Q Filing - 8/31/2012

Effective Date 8/31/2012



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
 
FORM 10-Q
 
x
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
 
For the quarterly period ended August 31, 2012
 
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
 
For the transition period from _______, 20    , to ______, 20 .
 
Commission file number: 333-167743
 
Amwest Imaging Incorporated
(Exact name of registrant as specified in its charter)
 
Nevada
 
27-2336038
(State or Other Jurisdiction of
Incorporation or Organization)
 
(I.R.S. Employer
Identification No.)
   
815 John St. Suite 150
Evansville, IN
 
47713
(Address of Principal Executive Offices)
 
(Zip Code)
 
Registrant’s telephone number, including area code: (812) 250-4210
 
Securities registered pursuant to Section 12(b) of the Act:
None
 
Securities registered pursuant to Section 12 (g) of the Act:
Common Stock, par value $0.001 per share
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No x
 
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No x
 
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 ¨
 
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 (Section 232.405) during the preceding 12 months. Yes x No ¨
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
 
Large accelerated filer
o
 
Accelerated filer
o
       
Non-accelerated filer
o
(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 Act): Yes ¨ No x
 
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant was approximately $586,000 as of the last business day of the registrant’s most recently completed second fiscal quarter, based upon the closing sale price on the OTC:BB reported for such date. Shares of common stock held by each officer and director and by each person who owns 10% or more of the outstanding common stock have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.
 
As of October 18, 2012, the Registrant had 545,060,000 outstanding shares of its common stock, $0.001 par value.
 
Documents incorporated by reference: none
 


 
 

 
AMWEST IMAGING INCORPORATED
FORM 10-Q—INDEX
 
Part I – Financial Information
     
         
Item 1.
Financial Statements
    3  
           
 
Balance Sheets
    3  
           
 
Statements of Operations
    4  
           
 
Statement of Changes in Stockholders’ Equity
    5  
           
 
Statements of Cash Flows
    6  
           
 
Notes to Financial Statements
    7  
           
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operation
    17  
           
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
    22  
           
Item 4. .
Controls and Procedures
    22  
         
Part II – Other Information
       
           
Item 1.
Legal Proceedings
    24  
           
Item 1A  
Risk Factors     24  
           
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
    24  
           
Item 3.
Defaults Upon Senior Securities
    24  
           
Item 4.
Mine Safety Disclosures
    24  
           
Item 5.
Other Information
    24  
           
Item 6.
Exhibits
    25  
         
Signatures
    26  
 
 
2

 
 
PART I – FINANCIAL INFORMATION
 
Item 1. Financial Statements
 
AMWEST IMAGING INCORPORATED
BALANCE SHEETS
 
   
August 31,
   
February 29,
 
   
2012
   
2012
 
   
(unaudited)
   
(audited)
 
             
ASSETS
           
             
CURRENT ASSETS:
           
Cash and cash equivalents
  $ 192     $ 34,728  
Accounts receivable, net
    -       173  
Prepaid expenses and other current assets
    365,315       365,000  
Loan costs
    1,457       2,120  
Total Current Assets
    366,964       402,021  
                 
Software, net of amortization
    437,500       512,500  
                 
OTHER ASSETS:
               
Long-term portion of prepaid expenses
    151,976       335,041  
                 
Total Other Assets
    151,976       335,041  
                 
TOTAL ASSETS
  $ 956,440     $ 1,249,562  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY
               
                 
CURRENT LIABILITIES:
               
Accounts payable
  $ 117,100     $ 100,000  
Accrued expenses
    7,816       317  
Current portion of notes payable
    148,046       86,467  
Derivative Liability
    62,241       61,034  
Total Current Liabilities
    335,203       247,818  
                 
STOCKHOLDERS' EQUITY
               
                 
Preferred stock; $0.001 par value; 5,000,000 shares authorized; 0 shares issued
               
and outstanding
    -       -  
Common stock, $0.001 par value; 595,000,000 shares authorized; 532,560,000
               
 and  338,000,000 shares issued and outstanding, respectively
    532,560       532,560  
Capital in excess of par value
    778,989       804,461  
Accumulated deficit
    (690,312 )     (335,277 )
      621,237       1,001,744  
                 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
  $ 956,440     $ 1,249,562  

 
3

 
 
AMWEST IMAGING INCORPORATED
STATEMENTS OF OPERATIONS (UNAUDITED)
 
   
For the Three Months Ended
   
For the Six Months Ended
 
   
August 31,
   
August 31,
   
August 31,
   
August 31,
 
   
2012
   
2011
   
2012
   
2011
 
                         
REVENUE:
                       
Sales
  $ 973     $ -       2,331     $ -  
                                 
      973       -       2,331       -  
                                 
COST OF GOODS SOLD
    91,874               182,750          
                                 
GROSS MARGIN
    (90,901 )     -       (180,419 )     -  
                                 
OPERATING EXPENSES:
                               
Selling, general and administrative expenses
    80,741       4,453       180,870       19,453  
                                 
TOTAL OPERATING EXPENSES
    80,741       4,453       180,870       19,453  
                                 
LOSS FROM OPERATIONS
    (171,642 )     (4,453 )     (361,289 )     (19,453 )
                                 
OTHER EXPENSE (INCOME)
                               
Unrealized (gain) loss on derivative
    (49,210 )     -       (66,765 )     -  
Interest expense
    31,552       -       60,511       -  
                                 
TOTAL OTHER EXPENSE (INCOME)
    (17,658 )     -       (6,254 )     -  
                                 
NET LOSS
  $ (153,984 )   $ (4,453 )     (355,035 )   $ (19,453 )
 
                               
NET LOSS PER COMMON SHARE, BASIC AND DILUTED
  $ (0.00 )   $ (0.00 )     (0.00 )   $ (0.00 )
                                 
WEIGHTED AVERAGE NUMBER OF COMMON  SHARES OUTSTANDING, BASIC AND DILUTED
    532,560,000       338,000,000       532,560,000       338,000,000  

 
4

 
 
AMWEST IMAGING INCORPORATED
STATEMENTS OF STOCKHOLDERS' EQUITY
 
               
Capital in
               
Total
 
   
Common Stock
   
Excess of
   
Accumulated
   
Treasury
   
Stockholders'
 
   
Shares
   
Amount
   
Par Value
   
Deficit
   
Stock
   
Equity
 
                                     
Balance, February 28, 2011
    338,000,000     $ 338,000     $ (289,000.00 )   $ (29,230.00 )   $ -     $ 19,770  
                                                 
Shares issued for the acquisition of Instant Website Technology Inc.
    157,560,000       157,560       429,940       -       -       587,500  
                                                 
Stock based compensation
    27,000,000       27,000       110,000       -       -       137,000  
                                                 
Shares issued for Bion License
    10,000,000       10,000       620,000       -       -       630,000  
                                                 
Value of beneficial derivative conversion in note payable
    -       -       (66,479 )     -       -       (66,479 )
                                                 
                                                 
Net loss
                            (306,047 )             (306,047 )
                                                 
Balance, February 28, 2012
    532,560,000       532,560       804,461       (335,277 )     -       1,001,744  
                                                 
Value of beneficial derivative conversion in note payable (unaudited)
    -       -       (25,472 )     -       -       (25,472 )
                                                 
Net loss (unaudited)
    -       -       -       (355,035 )     -       (355,035 )
                                                 
Balance, August 31, 2012 (unaudited)
    532,560,000     $ 532,560     $ 778,989     $ (690,312 )   $ -     $ 621,237  
 
Note:  Retroactively restated for 26:1 forward stock split effective November 7, 2011
 
 
5

 
 
AMWEST IMAGING INCORPORATED
STATEMENTS OF CASH FLOWS (UNAUDITED)
 
   
For the Six Months Ended August 31,
 
   
2012
   
2011
 
             
CASH FLOWS FROM OPERATING ACTIVITIES:
           
Net loss
  $ (355,035 )   $ (19,453 )
Adjustments to reconcile net loss to net cash and cash equivalents
               
used by operating activities:
               
Amortization
    75,000       -  
Non-cash amortization for Bion License
    182,750       -  
Unrealized gain or loss on derivative
    (66,765 )     -  
Amortization of discount on convertible note payable
    54,079       -  
(Increase) decrease in:
               
Accounts receivable
    173       -  
Loan costs
    3,163       -  
Increase (decrease) in:
               
Accounts payable and accrued expenses
    24,599       (297 )
                 
Net cash used by operating activities
    (82,036 )     (19,750 )
                 
CASH FLOWS FROM INVESTING ACTIVITIES:
               
                 
Net cash used by investing activities
    -       -  
                 
CASH FLOWS FROM FINANCING ACTIVITIES:
               
Proceeds from issuance of notes payable
    40,000       -  
Proceeds from shareholder loans
    7,500       -  
                 
Net cash provided by financing activities
    47,500       -  
                 
Net decrease in cash and cash equivalents
    (34,536 )     (19,750 )
                 
Cash and cash equivalents, beginning of period
    34,728       20,067  
                 
Cash and cash equivalents, end of period
  $ 192     $ 317  
                 
SUPPLEMENTAL CASH FLOW INFORMATION:
               
Cash paid for interest
  $ -     $ -  
NON-CASH FINANCING AND INVESTING ACTIVITIES:
               
Issuance of note payable with a beneficial conversion feature
  $ 67,972     $ 0  
Issuance of note payable with a discount equivalent to the relative fair value of the accompanying warrant
  $ 42,500     $ 0  


 
6

 
 
Amwest Imaging Incorporated
 
Notes to Financial Statements
As of August 31, 2012 and for the
Three and Six Months Ended August 31, 2012 and 2011
 
1. Background Information

Amwest Imaging Inc. (“AMWI”, or the “Company”) is a technology company whose primary business is providing relationship-building tools and processes that help any business cultivate profitable relationships with customers, all through web based solutions.  Our Company is always working on new internet based technology.   Our current portfolio consists of My Restaurant Web, (www.myrestaurantweb.com),  Lok Drop (www.LokDrop.com), Zip Clik (www.ZipClik.com)

The Company derives its revenue by charging basic monthly fees for the use of these website tools and services, which all three of these technologies are currently creating revenue for the Company.  The Company's goal is to provide high end turnkey solutions to both businesses and private users of the internet.

My Restaurant Web

This web-based solution specifically addresses the needs of restaurants that desire a website with a strong emphasis on marketing and attracting new customers.  The primary component of this web-based solution, is an on-demand, fold out, turn-key website that is ready for immediate use. The websites designed are highly advanced, niche creations that exceed the needs of small businesses in the target markets. Following the website creation, design, and listing online, the client can utilize additional online tools to develop a marketing plan for its customer base implementing SMS technology (“texting”) and email marketing which is a must–have in today’s social networking environment.

We expect to expand the technology in the coming months to service several other industries.

Lok Drop

Lok Drop Online Storage provides a secure digital safe deposit box enabling entities to access, store, share and backup digital information in a secure, private and encrypted location.  It can be used to access and share critical data from anywhere in the world.

Zip Clik
 
Zip Clik provides Encryption Software for Skype & Other Voice over Internet Protocol (VOIP) Software.  Zip Clik software works by providing our own encryption at the time you start your VOIP conversation on any service. The encrypted version is then sent to the individual you are talking to, and then our software decrypts it back into voice as they receive it. This entire process is done instantly.   It is important to note that Skype works with the legal system to decrypt conversations.  The encryption does not protect your privacy nor conversations.
 
 
7

 

Formation History

Amwest Imaging Incorporated (the "Company"), was incorporated in the State of Nevada on April 7, 2010.

The Company's original principal business objective was to provide document digitization services to businesses. On September 6, 2011, the Company completed the transactions of the Share Exchange Agreement of September 6, 2011, between Amwest Imaging Incorporated, a Nevada corporation, and the shareholders of Instant Website Technology Inc. ("IWTI"). Accordingly, registrant acquired all of the issued and outstanding shares of Instant Website Technology Inc., in exchange for the issuance in the aggregate of 157,560,000 shares of common stock of the registrant. As a result of the Share Exchange Agreement, Instant Website Technology Inc., Inc. became a wholly-owned subsidiary of registrant.

Amwest acquired from Instant Website Technology Inc. the rights to all technology related to www.myrestaurantweb.com including  but not limited to, the Uniform Resource Locator (“URL”) and the website development tools; however, there were several modifications to the software that were required to facilitate revenue generation.  This is  why there was no immediate revenue after the purchase.  The entire interface to allow turnkey websites had to be developed, as well as  a new control panel and marketing capabilities for the site itself.  Additionally, no employees were retained post merger, the accounting system was not transitioned, there were no bank accounts provided, and there were minimal recurring customers as the majority of the historical revenue came from a one-time sale of the technology and custom software development.  It was determined that the assets acquired from Instant Website Technology Inc. did not constitute a business as there were several significant missing elements in the transferred assets that would be necessary to operate a business, including the simple ability to collect payments from the internet site.
 
2. Going Concern
 
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. For the six months ended August 31, 2012, the Company incurred a net loss of approximately $355,035 and approximately $306,047 for the year ended February 29, 2012.  As of August 31, 2012, the Company has an accumulated deficit of $690,312 andpositive working capital of $31,761; however, there are limited assets and minimal revenues to fund short term operating cash flow or service debt obligations.  The Company used $82,036 and $105,339 of cash from operations during the six months ended August 31, 2012 and the year ended February 29, 2012, respectively, which was funded by proceeds from the sale of stock and proceeds from the issuance of convertible derivative notes. There is no assurance that such financing will be available in the future. In view of these matters, there is substantial doubt that the Company will continue as a going concern. The Company is currently pursuing sources of short and long-term working capital.
 
The Company’s ability to continue as a going concern is highly dependent on our ability to obtain additional sources of cash flow sufficient to fund our working capital requirements. However, there can be no assurance that the Company will be successful in its efforts to secure such cash flow. Any failure by us to timely procure additional financing or investment adequate to fund our ongoing operations, including planned product development initiatives and commercialization efforts, will have material adverse consequences on our financial condition, results of operations and cash flows.
 
The financial statements of the Company do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern.
 
 
8

 
 
3. Significant Accounting Policies
 
The significant accounting policies followed are:
 
Use of estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
 
Cash and cash equivalents - The Company follows FASB Accounting Standards Codification (ASC)  305, “Cash and Cash Equivalents”, and considers currency on hand and demand deposits to be cash and considers short-term, highly liquid investments with original maturities of three months or less to be cash equivalents.  Cash and cash equivalents at August 31, 2012 and February 29, 2012 were  $192 and $34,728, respectively.
 
Financial Instruments - The Company's balance sheet includes certain financial instruments. The carrying amounts of current assets and current liabilities approximate their fair value because of the relatively short period of time between the origination of these instruments and their expected realization.
 
The Company follows Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 820 "Fair Value Measurements and Disclosures" (ASC 820) which defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity's own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:
 
·  
Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
 
·  
Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including 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; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means.
 
·  
Level 3 - Inputs that are both significant to the fair value measurement and unobservable.
 
 
9

 

 
Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of August 31, 2012 and February 29, 2012. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values due to the short-term nature of these instruments.  These financial instruments include accounts receivable, other current assets, accounts payable, accrued compensation and accrued expenses. Fair value of notes payable would be estimated based on current rates that would be available for debt of similar terms which is not significantly different from its stated value.

Accounts receivable - The Company currently supplies their web solutions on a monthly basis, billing on the month of services and collection on customer accounts through credit cards or direct payments. The Company does not issue credit on services provided, therefore has minimal accounts receivable. No allowance for doubtful accounts is considered necessary to be established for amounts that may not be recoverable, since there have been limited credit sales.
 
Long-lived assets - Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the book value of the asset may not be recoverable. The Company periodically evaluates whether events and circumstances have occurred that indicate possible impairment. When impairment indicators exist, the Company uses market quotes, if available or an estimate of the future undiscounted net cash flows of the related asset or asset group over the remaining life in measuring whether or not the asset values are recoverable. There have been no significant impairments of long-lived assets during the three months ended August 31, 2012.

Software development costs and capitalization - The Company accounts for software development costs in accordance with several accounting pronouncements, including FASB ASC 730, Research and Development, FASB ASC 350-40, Internal-Use Software, FASB 985-20, Costs of Computer Software to be Sold, Leased, or Marketed and FASB ASC 350-50, Website Development Costs. The Company has capitalized the cost of the technology license purchased from an unrelated third party. At the time of purchase the technology was available to be marketed. As such additional costs to customize, modify and betterment to the existing product was charged to expense as it was incurred Capitalized software costs are stated at cost. The estimated useful life of costs capitalized is evaluated for each specific project and is currently being amortized over five years. Amortization is computed on a straight line basis. The carrying amount of all long-lived assets is evaluated periodically to determine if adjustment to the amortization period or the unamortized balance is warranted. Based upon its most recent analysis, the Company believes that no impairment of the proprietary software existed at August 31, 2012.

Expenditures for software development costs incurred and expensed for the three months ended August 31, 2012 and August 31, 2011 was approximately $4,000 and none respectively.

Expenditures for software development costs incurred and expensed for the six months ended August 31, 2012 and August 31, 2011 was approximately $10,300 and none respectively.

Once technological feasibility of new products or features and functions of current products, which extend its useful life is established, the cost incurred until release to production are capitalized and amortized over a five year useful life. There were no amounts capitalized during the three or six months ended August 31, 2012 or the three or six months ended August 31, 2011. Amortization expenses related to capitalized software and charged to operations for the three months ended August 31, 2012 and three months ended August 31, 2011 were approximately $37,500 and none respectively.  Amortization expenses related to capitalized software and charged to operations for the six months ended August 31, 2012 and six months ended August 31, 2011 were approximately $75,000 and none respectively.

 
10

 

Share-based Payments - Share-based payments to employees, including grants of employee stock or stock options are recognized as compensation expense in the financial statements based on their fair values, in accordance with FASB ASC Topic 718, Share-based Payments. That expense is recognized over the period during which an employee is required to provide services in exchange for the award, known as the requisite service period (usually the vesting period). The Company had no common stock options or common stock equivalents granted or outstanding for all periods presented. The company may issue shares as compensation in the future periods for employee services.

The Company may issue restricted stock to consultants for various services. Cost for these transactions will be measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. The value of the common stock is to be measured at the earlier of (i) the date at which a firm commitment for performance by the counterparty to earn the equity instruments is reached or (ii) the date at which the counterparty's performance is complete. The company has issue shares as compensation in the future period for services associated with the registration of the common shares.

Revenue recognition - The Company recognizes revenue on arrangements in accordance with FASB ASC No. 605, Revenue Recognition. In all cases, revenue is recognized only when the price is fixed or determinable, persuasive evidence of an arrangement exists, the service is performed and collectability is reasonably assured.

Consideration for future services are made by customers in advance of those services being provided. All accounts are currently on a month to month service, therefore revenue is recognized ratably over the period that the services are subscribed, the current month. The Company does not offer annual or other term agreements; therefore there is no unearned portion or deferral of revenue. Services are billed in advance of the period those services are provided.

The Company has not issued guarantees or other warrantees on the advertising subscription success or results. The Company has not experienced any refund requests or committed to any adjustments for terminated subscriptions. The Company does not believe that there is any required liability.

Advertising – The costs of advertising are expensed as incurred. Advertising expense was approximately $6,000 and none for the three months ended August 31, 2012 and August 31, 2011, respectively. The costs of advertising are expensed as incurred. Advertising expense was approximately $13,400 and none for the six months ended August 31, 2012 and August 31, 2011, respectively.  Advertising expenses, when incurred are to be included in the Company's operating expenses.

Commitment and contingencies –The Company follows FASB ASC 450-20, Loss Contingencies” to report accounting for contingencies.  Liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated.
 
Related parties - The Company follows FASB ASC 850, Related Party Disclosures for the identification of related parties and disclosure of related party transactions.
 
 
11

 
 
Income taxes - The Company follows FASB ASC 740, Income Taxes, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns.  Under this method, deferred tax assets and liabilities are based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.

Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized.  Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.  The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the Statements of Operations in the period that includes the enactment date.
 
As of August 31, 2012, the Company had no unrecognized tax benefits or related interest and penalties. We will include future interest and penalties associated with any unrecognized benefits within provision for income taxes on the Statements of Operations, if applicable. We do not anticipate any unrecognized benefits in the next 12 months that would result in a material change to our financial position.
 
Loss per share - Basic and diluted loss per share are computed based on the weighted-average common shares and common share equivalents outstanding during the period. Common share equivalents consist of stock options, warrants and convertible notes payable. There were no common share equivalents excluded from the computation of diluted earnings per share for the three and six months ended August 31, 2012 and August 31 2011, respectively, because their effect is anti-dilutive.

Recent Accounting Pronouncements

Except for rules and interpretive releases of the SEC under authority of federal securities laws and a limited number of grandfathered standards, the FASB Accounting Standards Codification(TM) ("ASC") is the sole source of authoritative GAAP literature recognized by the FASB and applicable to the Company. Management has reviewed the aforementioned rules and releases and believes any effect will not have a material impact on the Company's present or future consolidated financial statements.

 
12

 
 
4. Software development costs and capitalization
 
The Company has capitalized the cost of acquiring their technology for internal and external use. The purchase price was valued at the agreed upon price with the unrelated party.  Newly developed software was also capitalized based on our accounting policy.  Acquired and Developed software costs consist of the following, as of August 31, 2012:

   
August 31,
2012
   
February 29, 2012
 
Acquired Software
  $ 587,500     $ 587,500  
Less accumulated amortization
    150,000       75,000  
    $ 437,500     $ 512,500  
 
2013
  $ 75,000  
2014
    150,000  
2015
    150,000  
2016
    62,500  
2017
    -  
         
Thereafter
    -  
         
    $ 437,500  
 
5.  Notes payable
 
   
August 31,
2012
   
February 28, 2012
 
Asher note payable
  $ 42,500     $ 42,500  
Asher note payable (2)
    42,500          
Advanced Capital Management note payable
    45,000       45,000  
Shareholder note payable
    25,000       25,000  
Shareholder advance
    17,500       10,000  
Total debt
    172,500       112,500  
Debt discount
    24,454       36,033  
                 
Total note payable
  $ 148,046     $ 86,467  

 
13

 
 
The Asher note payable was issued in January of 2012 and is a convertible promissory note for $42,500. The note pays interest at 8% per annum, and principal and accrued interest is due on the maturity date of October 19, 2012. The conversion option price associated with the note has a 45 percent discount to the market price of the stock. The market price is based on the average of the two lowest trading prices during a fifteen day period prior to conversion. The note is convertible at any time after 180 days.
 
The Asher note payable (2) was issued in March of 2012 and is a convertible promissory note for $42,500. The note pays interest at 8% per annum, and principal and accrued interest is due on the maturity date of December 20, 2012. The conversion option price associated with the note has a 45 percent discount to the market price of the stock.The market price is based on the average of the two lowest trading prices during a fifteen day period prior to conversion. The note is convertible at any time after 180 days.
 
The Advanced Capital Management note payable was issued in December of 2011 for $45,000. The note pays no interest unless in default, and principal is due on the maturity date of December 6, 2012.
 
The Shareholder note payable was issued in December of 2012 for $25,000. The note pays interest at 1% per annum, and principal and accrued interest is due on the maturity date of December 15, 2012.

Share holder advances are considered payable on demand and are non-interest bearing. The Company owed $17,500 to a shareholder as of August 31, 2012. No interest has been accrued or imputed on these debts, as management believes that interest expense would be immaterial in the interim periods.
 
6.  Derivative liability

In January and March of 2012 the Company issued convertible promissory notes for $42,500 and $42,500, respectively. The notes pay interest at 8% per annum, and principal and accrued interest is due on the maturity dates of October 19, 2012 and December 20, 2012, respectively. The conversion option price associated with the notes has a 45 percent discount to the market price of the stock. The market price is based on the average of the two lowest trading prices during a fifteen day period prior to conversion. The notes are convertible at any time after 180 days. As a result of the variable feature associated with the conversion option, pursuant to ASC Topic 815, the Company bifurcated the conversion option, and utilized the Black Scholes model to determine the fair value of the conversion option. At the issuance date, the Company recorded a debt discount and derivative liability of approximately $42,500 and $108,979, respectively for the note issued in January.  At the issuance date, the Company recorded a debt discount and derivative liability of approximately $42,500 and $67,972 for the notes issued in January and March, respectively. The debt discount will be amortized over the life of the notes.

The Company recognized approximately $28,100 and $54,100 of interest expense related to amortization of the debt discount during the three and six months ended, August 31, 2012, respectively. As of August 31, 2012 the unamortized discount related to the notes was $24,454. The derivative liability will be adjusted to fair value each reporting period with unrealized gain (loss) reflected in other income and expense. The unrealized gain associated with the derivative liability was approximately $49,210 and $66,765 for the three months and six months ended August 31, 2012, respectively.
 
 
14

 

Liabilities measured at fair value on a recurring basis by level within the fair value hierarchy as of August 31, 2012 and February 29, 2012 related to the above derivative liability are as follows:

   
Fair Value Measurements at
August 31, 2012 (1)
   
Fair Value Measurements
at February 29, 2012 (1)
 
   
Using Level 2
   
Total
   
Using Level 2
   
Total
 
Liabilities:
                       
Derivative liabilities
 
$
(62,241
)
 
$
(62,241
)
 
$
(61,034
)
 
$
(61,034
)
Total liabilities
 
$
(62,241
)
 
$
(62,241
)
 
$
(61,034
)
 
$
(61,034
)

 
(1)
The Company did not have any assets or liabilities measured at fair value using Level 1 or Level 3 of the fair value hierarchy as of August 31, 2012 or February 29, 2012.

The Company’s derivative liabilities are classified within Level 2 of the fair value hierarchy. The Company utilizes the Black-Scholes Option Pricing Model to value the derivative liabilities utilizing observable inputs such as the Company’s common stock price, the exercise price of the warrants, and expected volatility, which is based on historical volatility. The Black-Scholes model employs the market approach in determining fair value.
 
7. Income Taxes
 
There is no current or deferred income tax expense or benefit for the years ended August 31, 2012 and August 31, 2011.
 
As of August 31, 2012 and February 29, 2012, the Company had federal and state net operating loss carry-forwards totaling approximately $243,201 and $92,539, respectively, which begin expiring in 2032. The Company has established a valuation allowance to fully reserve all deferred tax assets at August 31, 2012 and February 29, 2012 because it is more likely than not that the Company will not be able to utilize these assets.  The change in the valuation allowance for the six months ended August 31, 2012 was an increase of $150,662.
 
As of August 31, 2012, the Company has not performed an IRC Section 382 study to determine the amount, if any, of its net operating losses that may be limited as a result of the ownership change percentages during 2011. However, the Company will complete the study prior to the utilization of any of its recorded net operating losses.
 
8. Related Party Transactions

In support of the Company's efforts and cash requirements, it is relying on advances from related parties until such time that the Company can support its operations or attains adequate financing through sales of its equity or traditional debt financing. Amounts represent advances or amounts paid in satisfaction of certain liabilities as they come due. The advances are considered temporary in nature and have not been formalized by a promissory note. Shareholder advances are considered payable on demand and is non-interest bearing. The Company owed $17,500 to a shareholder as of August 31, 2012. No interest has been accrued or imputed on these debts, as management believes that interest expense would be immaterial during the interim periods.
 
 
15

 

The majority shareholder has pledged his support to fund continuing operations; however, there is no written commitment to this effect. The Company is dependent upon the continued support of this shareholder.

The Company does not have employment contracts with its key employees, including the majority shareholder who is the Chief Executive,  Chief Accounting,  and Chief Technical Officer.

The amounts and terms of the above transactions may not necessarily be indicative of the amounts and terms that would have been incurred had comparable transactions been entered into with independent third parties.
 
9. Commitments and Contingencies

Our offices are located at 815 John Street, Suite 150, Evansville, Indiana. We have a Lease Agreement which expires in December 2014 for approximately 5,000 square feet at a monthly rental of $2,300. We are responsible, with others, for common area maintenance. We believe that the space is adequate for our current operations and additional space is available, if required, at approximately the same cost and expense.

Some of the officers and directors of the Company are involved in other business activities and may, in the future, become involved in other business opportunities that become available. They may face a conflict in selecting between the Company and other business interests. The Company has not formulated a policy for the resolution of such conflicts.

From time to time the Company may become a party to litigation matters involving claims against the Company. Management believes that there are no current matters that would have a material effect on the Company's financial position or results of operations.

The Company is not currently a party to any pending legal proceedings. In the ordinary course of business the Company may become a party to various legal proceedings generally involving contractual matters, infringement actions, product liability claims and other matters.
 
10. Subsequent Events
 
On September 27, 2012, the Company was notified of Asher Enterprise, Inc. conversion of $12,000 of principal for 12,500,000 shares of Company common stock.  The board of directors authorized the issuance of common shares for the principal amount of $12,000.

 
16

 
 
ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS
 
THIS FILING CONTAINS FORWARD-LOOKING STATEMENTS. THE WORDS “ANTICIPATED,” “BELIEVE,” “EXPECT,” “PLAN,” “INTEND,” “SEEK,” “ESTIMATE,” “PROJECT,” “WILL,” “COULD,” “MAY,” AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. THESE STATEMENTS INCLUDE, AMONG OTHERS, INFORMATION REGARDING FUTURE OPERATIONS, FUTURE CAPITAL EXPENDITURES, AND FUTURE NET CASH FLOW. SUCH STATEMENTS REFLECT THE COMPANY’S CURRENT VIEWS WITH RESPECT TO FUTURE EVENTS AND FINANCIAL PERFORMANCE AND INVOLVE RISKS AND UNCERTAINTIES, INCLUDING, WITHOUT LIMITATION, GENERAL ECONOMIC AND BUSINESS CONDITIONS, CHANGES IN FOREIGN, POLITICAL, SOCIAL, AND ECONOMIC CONDITIONS, REGULATORY INITIATIVES AND COMPLIANCE WITH GOVERNMENTAL REGULATIONS, THE ABILITY TO ACHIEVE FURTHER MARKET PENETRATION AND ADDITIONAL CUSTOMERS, AND VARIOUS OTHER MATTERS, MANY OF WHICH ARE BEYOND THE COMPANY’S CONTROL. SHOULD ONE OR MORE OF THESE RISKS OR UNCERTAINTIES OCCUR, OR SHOULD UNDERLYING ASSUMPTIONS PROVE TO BE INCORRECT, ACTUAL RESULTS MAY VARY MATERIALLY AND ADVERSELY FROM THOSE ANTICIPATED, BELIEVED, ESTIMATED, OR OTHERWISE INDICATED. CONSEQUENTLY, ALL OF THE FORWARD-LOOKING STATEMENTS MADE IN THIS FILING ARE QUALIFIED BY THESE CAUTIONARY STATEMENTS AND THERE CAN BE NO ASSURANCE OF THE ACTUAL RESULTS OR DEVELOPMENTS.
 
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and related notes appearing elsewhere herein. This discussion and analysis contains forward-looking statements including information about possible or assumed results of our financial conditions, operations, plans, objectives and performance that involve risk, uncertainties and assumptions. The actual results may differ materially from those anticipated in such forward-looking statements. For example, when we indicate that we expect to increase our product sales and potentially establish additional license relationships, these are forward-looking statements. The words “expect”, “anticipate”, “estimate” or similar expressions are also used to indicate forward-looking statements. The following discussions should be read in conjunction with our financial statements and the notes thereto presented in “Item 1 – Financial Statements” and our audited financial statements and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our report on Form 10-K for the year ended February 29, 2012.
 
The Company cautions readers that in addition to important factors described elsewhere, the following important facts, among others, sometimes have affected, and in the future could affect, the Company’s actual results, and could cause the Company’s actual results during 2013 and beyond, to differ materially from those expressed in any forward-looking statements made by, or on behalf of, the Company.
 
This Management’s Discussion and Analysis or Plan of Operation presents a review of the operating results and financial condition of the Company for the three and six month periods ended August 31, 2012 and 2011. This discussion and analysis is intended to assist in understanding the financial condition and results of operation of the Company and its subsidiary. This section should be read in conjunction with the consolidated financial statements and the related notes.
 
 
17

 
 
RESULTS OF OPERATIONS
 
COMPARISON OF THE RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED AUGUST 31, 2012 AND 2011

General
 
The Company’s net sales increased to $973 for the three months ended August 31, 2012, an increase of $973 or 100%, from no revenue for the three months ended August 31, 2011.  Operations began in the fourth quarter of last year and Management believes the revenue will continue to grow and is devoting its efforts to increase sales through sales representatives, paid sales leads and advertising.   

Gross profit for the operations decreased (90,901) to $(90,901) for the three months ended August 31, 2012 from none for the three months ended August 31, 2011.  Operations began in the fourth quarter of last year.

Selling, general and administrative expenses increased to $80,741 for the three months ended August 31, 2012 from $4,453 for the three months ended August 31, 2011, an increase of $76,288.  Management believes selling, general and administrative expenses will continue to increase while Management is building the business and will stabilize in the first quarter of next year.
  
The Company incurred net loss of 153,984 for the three months ended August 31, 2012 compared to $4,453 net loss for the three months ended August 31, 2011.

COMPARISON OF THE RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED AUGUST 31, 2012 AND 2011

General
 
The Company’s net sales increased to $2,331 for the six months ended August 31, 2012, an increase of $2,331 or 100%, from no revenue for the six months ended August 31, 2011.  Operations began in the fourth quarter of last year and Management believes the revenue will continue to grow and is devoting its efforts to increase sales through sales representatives, paid sales leads and advertising.   

Gross profit for the operations decreased (180,419) to $(180,419) for the six months ended August 31, 2012 from none for the six months ended August 31, 2011.  Operations began in the fourth quarter of last year.

Selling, general and administrative expenses increased to $180,870 for the six months ended August 31, 2012 from $19,453 for the six months ended August 31, 2011, an increase of $161,417.  Management believes selling, general and administrative expenses will continue to increase while Management is building the business and will stabilize in the first quarter of next year.
  
The Company incurred net loss of 355,035 for the six months ended August 31, 2012 compared to $19,453 net loss for the six months ended August 31, 2011.

 
18

 
 
LIQUIDITY AND CAPITAL RESOURCES
 
The Company finances its operations primarily through sales of its online products and services, sales of its common stock, the issuance of convertible promissory notes, unsecured promissory notes and license agreements.
 
Our historical revenues have not been sufficient to sustain our operations. We have not achieved profitability since inception and we expect to continue to incur net losses and generate negative cash flow from operations until we can produce sufficient revenues to cover our costs. Sufficient revenues are not expected for several years. Our profitability will require the successful commercialization of our online products and services and any future software or services we develop. No assurances can be given when this will occur.
 
A loan was obtained from Asher in March of 2012 and is a convertible promissory note for $42,500. The note pays interest at 8% per annum, and principal and accrued interest is due on the maturity date of December 20, 2012. The conversion option price associated with the note has a 45 percent discount to the market price of the stock. The market price is based on the average of the two lowest trading prices during a fifteen day period prior to conversion. The note is convertible at any time after 180 days.
 
Any future financing may result in substantial dilution to existing shareholders, and future debt financing, if available, may include restrictive covenants or may require us to grant a lender a security interest in any of our assets not already subject to an existing security interest. To the extent that we attempt to raise additional funds through third party collaborations and/or licensing arrangements, we may be required to relinquish some rights to our technologies or products currently in various stages of development, or grant licenses or other rights on terms that are not favorable to us. Any failure by us to timely procure additional financing or investment adequate to fund our ongoing operations, including planned product development initiatives and commercialization efforts, will have material adverse consequences on our financial condition, results of operations and cash flows.
 
We will be dependent upon our existing cash of $192 at August 31, 2012, product sales and additional debt and equity issuances to finance our operations through the next 12 months. We must raise additional capital in the amount of approximately $500,000 net of expenses, during the next twelve months in order to fund our working capital requirements in accordance with our existing plans through 2013.   If we are unable to raise these funds, we may be required to delay our development plans, and curtail our expenditures.
 
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. For the six months ended August 31, 2012, the Company incurred a net loss of $355,035.  As of August 31, 2012, the Company has an accumulated deficit of $690,312. The Company used $82,036 and $19,750 of cash from operations during the six months ended August 31, 2012 and 2011, respectively, which was funded primarily by proceeds from issuance of debt and stock.  There is no assurance that such financing will be available in the future. In view of these matters, there is substantial doubt that the Company will continue as a going concern.
 
The Company’s ability to continue as a going concern is highly dependent on our ability to obtain additional sources of cash flow sufficient to fund our working capital requirements. However, there can be no assurance that the Company will be successful in its efforts to secure such cash flow. Any failure by us to timely procure additional financing or investment adequate to fund our ongoing operations, including planned product development initiatives and commercialization efforts, will have material adverse consequences on our financial condition, results of operations and cash flows.
 
 
19

 
 
The financial statements of the Company do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern.
 
Statements of Cash Flows
 
Cash and cash equivalents as of August 31, 2012 was approximately $192 compared to approximately $34,728 as of August 31, 2011. Cash is primarily used to fund our working capital requirements.
 
Net cash used in operating activities was approximately $82,036 for the six months ended August 31, 2012 compared to approximately $19,750 for the same period in 2011.
 
Net cash provided by financing activities was approximately $47,500 for the six months ended August 31, 2012 compared to none during the same period in 2011. During the six months ended August 31, 2012, we received net proceeds of $47,500 from the issuance of debt.

SEASONALITY
 
The diversity of operations in the software segment protects it from seasonal trends.
 
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
 
The preparation of the accompanying financial statements and related disclosures in conformity with U.S. GAAP requires us to make judgments, assumptions and estimates that affect the amounts reported in the accompanying financial statements and the accompanying notes. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. When making these estimates and assumptions, we consider our historical experience, our knowledge of economic and market factors and various other factors that we believe to be reasonable under the circumstances. Actual results could differ from these estimates.  Management has discussed the selection of critical accounting policies and estimates with our Board of Directors, and the Board of Directors has reviewed our disclosure relating to critical accounting policies and estimates in this quarterly report on Form 10-Q.  The following critical accounting policies are significantly affected by judgments, assumptions and estimates used in the preparation of the financial statements:
 
The significant accounting policies followed are:

SOFTWARE DEVELOPMENT COSTS AND CAPITAL TECHNOLOGY

The Company accounts for software development costs in accordance with several accounting pronouncements, including FASB ASC 730, Research and Development, FASB ASC 350-40, Internal-Use Software, FASB 985-20, Costs of Computer Software to be Sold, Leased, or Marketed and FASB ASC 350-50, Website Development Costs. The Company has capitalized the cost of the technology license purchased from an unrelated third party. At the time of purchase the technology was available to be marketed. As such additional costs to customize, modify and betterment to the existing product was charged to expense as it was incurred Capitalized software costs are stated at cost. The estimated useful life of costs capitalized is evaluated for each specific project and is currently being amortized over five years. Amortization is computed on a straight line basis. The carrying amount of all long-lived assets is evaluated periodically to determine if adjustment to the amortization period or the unamortized balance is warranted. Based upon its most recent analysis, the Company believes that no impairment of the proprietary software existed at August 31, 2012.
 
 
20

 

Expenditures for software development costs incurred and expensed for the three months ended August 31, 2012 and August 31, 2011 was approximately $4,000 and none respectively.

Expenditures for software development costs incurred and expensed for the six months ended August 31, 2012 and August 31, 2011 was approximately $10,300 and none respectively.

Once technological feasibility of new products or features and functions of current products, which extend its useful life is established, the cost incurred until release to production are capitalized and amortized over a five year useful life. There were no amounts capitalized during the three or six months ended August 31, 2012 or the three or six months ended August 31, 2011. Amortization expenses related to capitalized software and charged to operations for the three months ended August 31, 2012 and three months ended August 31, 2011 were approximately $37,500 and none respectively.  Amortization expenses related to capitalized software and charged to operations for the six months ended August 31, 2012 and six months ended August 31, 2011 were approximately $75,000 and none respectively.

REVENUE RECOGNITION

The Company recognizes revenue on arrangements in accordance with FASB ASC No. 605, Revenue Recognition. In all cases, revenue is recognized only when the price is fixed or determinable, persuasive evidence of an arrangement exists, the service is performed and collectability is reasonably assured.

Consideration for future services are made by customers in advance of those services being provided. All accounts are currently on a month to month service, therefore revenue is recognized ratably over the period that the services are subscribed, the current month. The Company does not offer annual or other term agreements; therefore there is no unearned portion or deferral of revenue. Services are billed in advance of the period those services are provided.

The Company has not issued guarantees or other warrantees on the advertising subscription success or results. The Company has not experienced any refund requests or committed to any adjustments for terminated subscriptions. The Company does not believe that there is any required liability.

IMPAIRMENT OF LONG-LIVED AND INTANGIBLE ASSETS
 
Long-lived and intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the book value of the asset may not be recoverable. The Company periodically evaluates whether events and circumstances have occurred that indicate possible impairment. When impairment indicators exist, the Company uses market quotes, if available or an estimate of the future undiscounted net cash flows of the related asset or asset group over the remaining life in measuring whether or not the asset values are recoverable. There have been no significant impairments of long-lived and intangible assets during the two-year period ended August 31, 2012.
 
TAXES
 
Income taxes are provided for the tax effects of transactions reported in the financial statements and consist of taxes currently due plus deferred taxes resulting from temporary differences. Such temporary differences result from differences in the carrying value of assets and liabilities for tax and financial reporting purposes. The deferred tax assets and liabilities represent the future tax consequences of those differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.
 
 
21

 
 
As of August 31, 2012, the Company had no unrecognized tax benefits or related interest and penalties. We will include future interest and penalties associated with any unrecognized benefits within provision for income taxes on the Statements of Operations, if applicable. We do not anticipate any unrecognized benefits in the next 12 months that would result in a material change to our financial position.
 
NEW ACCOUNTING PRONOUNCEMENTS
 
For a description of recent accounting standards, including the expected dates of adoption and estimated effects, if any, on our financial statements, see “Note 3: Recent Accounting Pronouncements” in Part I, Item 1 of this Form 10-Q.
 
ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
Not applicable.
 
ITEM 4CONTROLS AND PROCEDURES
 
Disclosure Controls and Procedures
 
Evaluation of Disclosure Controls and Procedures
 
Under the supervision and with the participation of our management, including our President  and our Chief Accounting Officer, carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Management conducted its evaluation based on the framework in Internal Control Over Financial Reporting Guidance for Smaller Public Companies issued by the Committee on Sponsoring Organizations of the Treadway Commission (COSO). Based upon such evaluation, the President and Chief Accounting Officer have concluded that, as of the end of such period, the Company’s disclosure controls and procedures were not effective as required under Rules 13a-15(e) and 15d-15(e) under the Exchange Act. This conclusion by the Company’s President and Chief Accounting Officer does not relate to reporting periods after August 31, 2012.
 
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our President and Chief Accounting Officer, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.
 
 
22

 
 
Limitations on the Effectiveness of Controls
 
Our disclosure controls and procedures are designed to provide reasonable, not absolute, assurance that the objectives of our disclosure control system are met. Because of inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within a company have been detected. Based on their evaluation as of the end of the period covered by this report, management concluded that our disclosure controls and procedures were sufficiently effective to provide reasonable assurance that the objectives of our disclosure control system were met.
 
Management’s Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) of the Company. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.

The Company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate.

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.

The Chief Accounting Officer has determined that material weaknesses exist during the six months ended August 31, 2012, due to the lack of an independent Audit Committee, Financial Disclosure Controls, as well as a lack of segregation of duties, i.e. all of the accounting tasks are performed by a single individual. Currently, the Company’s President reviews all transactions. Until the Company raises additional capital, it cannot remediate these weaknesses.

We determined that our disclosure controls and procedures were ineffective at August 31, 2012 and that we had material weaknesses in the design of our internal control over financial reporting as of such date.  We believe that we have started the process of remediating the material weakness in our financial reporting through the contracting with consultants to provide such services.  These additional outsourced services have improved our ability to financially report, however there continues to be several material weaknesses in our internal processes.
 
Changes in Internal Control Over Financial Reporting

No change in the Company’s internal control over financial reporting occurred during the year ended February 29, 2012, that materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

 
23

 
 
PART II
 
ITEM 1. LEGAL PROCEEDINGS
 
None.
 
ITEM 1A. RISK FACTORS
 
Not applicable.
 
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
 
During the six months ended August 31, 2012, there was no modification of any instruments defining the rights of holders of the Company’s common stock and no limitation or qualification of the rights evidenced by the Company’s common stock as a result of the issuance of any other class of securities or the modification thereof.
 
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
 
None.
 
ITEM 4. MINE DISCLOSURES
 
Not  Applicable.
 
ITEM 5. OTHER MATTERS
 
None
 
 
24

 
 
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
 
EXHIBIT INDEX
 
 
Incorporated
Documents
  
 
SEC Exhibit Reference
  
 
Sequentially
Numbered
       
31.1
  
Certification of the Chief Financial Officer
  
31.1
       
31.2
  
Certification of the Chief Executive Officer
  
31.2
       
32.1
  
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of the Chief Financial Officer
  
32.1
       
32.2
  
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of the Chief Executive Officer
  
32.2
 
(b) Reports on Form 8-K
 
None
 
 
25

 
 
SIGNATURES
 
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 
 
AMWEST IMAGING INCORPORATED
 
       
Date: October 20, 2012
By:
/s/ Jason Gerteisen 
 
   
Jason Gerteisen,
President (Principle Executive Officer)
 
       
Date: October 20, 2012
By:
/s/ Jason Gerteisen 
 
   
Jason Gerteisen
Chief Financial Officer
(Principle Accounting Officer)
 
 
 
26

XOTC:AMWI Quarterly Report 10-Q Filling

XOTC:AMWI Stock - Get Quarterly Report SEC Filing of XOTC:AMWI stocks, including company profile, shares outstanding, strategy, business segments, operations, officers, consolidated financial statements, financial notes and ownership information.

Content Partners
XOTC:AMWI Quarterly Report 10-Q Filing - 8/31/2012
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