PINX:COWI Quarterly Report 10-Q Filing - 6/30/2012

Effective Date 6/30/2012

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE OF 1934
 
For the quarterly period ended    June 30, 2012

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

FOR THE TRANSITION PERIOD FROM ________________ TO _________________

COMMISSION FILE NUMBER: 000-33231

COROWARE, INC.
 (EXACT NAME OF THE COMPANY AS SPECIFIED IN ITS CHARTER)

 

Delaware
95-4868120
(State or Other Jurisdiction
(I.R.S. Employer
of Incorporation)
Identification No.)

1410 Market Street, Suite 200
Kirkland, WA 98033
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

 (800) 641-2676
(ISSUER REGISTRANT TELEPHONE NUMBER)


Indicate by check mark whether the Company (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 Company was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes o No

Indicate by check mark whether the Company (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 Company was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  x Yes  o 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 the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 
Large accelerated filer o
Accelerated filer o
 
Non-accelerated filer o (Do not check if 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). Yeso No x

As of August 15, 2012 there were   13,118,653 shares of the issuer's $.0001 par value common stock outstanding.
 


 
 

 
 
COROWARE, INC.
June 30, 2012 QUARTERLY REPORT ON FORM 10-Q

TABLE OF CONTENTS

  PAGE
   
PART I – FINANCIAL INFORMATION
 
     Item 1. Consolidated Financial Statements 2
   
Consolidated Balance Sheets at June 30, 2012 (Unaudited) and December 31, 2011
2
   
Unaudited Consolidated Statements of Operations for the three and six months
ended June 30, 2012 and 2011
3
   
Unaudited Consolidated Statements of Cash Flows for the six months ended
June 30, 2012 and 2011
4
   
Notes to Unaudited Consolidated Financial Statements
6
     Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations 14
     Item 3.
Quantitative and Qualitative Disclosures About Market Risk 17
     Item 4.
Controls and Procedures 18
       
PART II – OTHER INFORMATION
 
Item 1.
Legal Proceedings 19
Item 1A.
Risk Factors 19
Item 2.
Unregistered Sales of Equity Securities and Use of Funds 19
Item 3.
Defaults Upon Senior Securities 19
Item 4.
Mine Safety Disclosures 20
Item 5.
Other Information 20
Item 6.
Exhibits 20
SIGNATURES
21

 
 

 
 
COROWARE, INC.
CONSOLIDATED BALANCE SHEETS

   
June 30, 2012
   
December 31, 2011
 
   
(Unaudited)
       
ASSETS
           
Current assets:
           
Cash
  $ 494     $ 522  
Accounts receivable, net
    154,141       129,438  
Inventory
    5,451       3,783  
Other current assets
    8,109       7,518  
Total current assets
    168,195       141,261  
                 
Property and equipment, net
    19,704       24,333  
Other assets, net
    11,398       6,927  
                 
TOTAL ASSETS
  $ 199,297     $ 172,521  
                 
LIABILITIES AND STOCKHOLDERS’ DEFICIT
 
                 
Current liabilities:
               
Lines of credit
  $ 126,882     $ 125,456  
Obligations collateralized by receivables
    96,347       107,730  
Accounts payable and accrued expenses
    4,894,441       4,442,906  
Accrued expenses, related parties
    148,109       111,466  
Notes payable
    211,232       202,232  
Notes payable, related parties
    203,445       208,913  
Derivative liability
    2,903,757       2,798,366  
Current maturities of convertible debt, net of discount
    2,413,537       2,206,247  
Redeemable preferred stock, Series B, $.001 par value, 10,000,000
shares authorized, 159,666 shares issued and outstanding as of
June 30, 2012 and December 31, 2011
    212,887       106,443  
Redeemable preferred stock, Series D, $.001 par value, 500,000
shares authorized, 100,000 shares issued and outstanding as of
June 30, 2012 and December 31, 2011
    117,647       75,901  
Redeemable preferred stock, Series E, $.001 par value, 1,000,000
shares authorized, 10,000 and -0- shares issued and outstanding,
respectively, as of June 30, 2012 and December 31, 2011
    10,000       -  
Small Business Administration Loan
    980,450       980,450  
Total current liabilities
    12,318,734       11,366,110  
                 
Long term liabilities:
               
Convertible debt, net of discount and current portion
    -       149,107  
Total liabilities
    12,318,734       11,515,217  
                 
Commitments
               
                 
Stockholders’ deficit:
               
Common stock, $.0001 par value, 3,000,000,000 shares authorized,
               
11,466,829 and 3,980,589 shares issued and 11,466,825  and 3,980,585 outstanding at June 30, 2012 and
               
    December 31, 2011, respectively
    1,147       398  
Additional paid-in capital
    16,396,164       16,159,171  
Accumulated deficit
    (28,481,048 )     (27,466,565 )
Treasury stock
    (35,700 )     (35,700 )
Total stockholders’ deficit
    (12,119,437 )     (11,342,696 )
                 
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT
  $ 199,297     $ 172,521  
 
The accompanying notes are an integral part of these consolidated financial statements.
 
 
2

 

COROWARE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three and Six Months ended June 30, 2012 and 2011
(Unaudited)
   
   
Three Months Ended June 30,
   
Six Months Ended June 30,
 
   
2012
   
2011
   
2012
   
2011
 
                         
Revenues
  $ 321,745     $ 517,765     $ 675,121     $ 888,269  
Cost of revenues
    199,530       297,088       412,019       559,402  
                                 
Gross profit
    122,215       220,677       263,102       328,867  
                                 
Operating expenses:
                               
General and administrative
    179,347       226,109       342,476       475,495  
Sales and marketing
    82,125       103,825       131,615       182,498  
Research and development
    31,591       40,451       45,082       86,190  
Depreciation and amortization
    3,000       7,431       6,000       17,081  
Total operating expenses
    296,063       377,816       525,173       761,264  
                                 
Loss from operations
    (173,848 )     (157,139 )     (262,071 )     (432,397 )
                                 
                                 
Other income (expense):
                               
Derivative expense
    (150,136 )     (1,359,527 )     (339,493 )     (459,958
Interest expense, net
    (172,097 )     (193,985 )     (379,389 )     (369,082 )
Gain (Loss) on settlement of
liabilities and mortgage note
    2,100       (1,449 )     2,100       (76,583 )
Gain (Loss) on convertible debt    
redemptions
            59,941       (35,630 )     75,403  
Total other expense
    (320,133 )     (1,495,020 )     (752,412 )     (830,220 )
                                 
Net loss
  $ (493,981 )   $ (1,652,159 )   $ (1,014,483 )   $ (1,262,617 )
                                 
Net loss per share:
                               
Basic
  (0.04   $ (0.65 )   (0.11   $ (0.71 )
Weighted average shares outstanding:
                               
Basic
    11,382,014       2,549,333       9,186,530       1,788,533  

 
3

 
 
COROWARE, INC.
 
CONSOLIDATED STATEMENTS OF CASH FLOWS
 
For the Six Months Ended June 30, 2012 and 2011
 
(Unaudited)
 
             
   
2012
   
2011
 
             
CASH FLOWS FROM OPERATING ACTIVITIES
           
Net income (loss)
  $ (1,014,483 )   $ (1,262,617 )
Adjustments to reconcile net income to net cash flows
               
    from operating activities:
               
Depreciation and amortization
    6,000       17,081  
Amortization of debt discount
    131,064       116,928  
Amortization of deferred financing costs
    3,370       3,083  
Derivative (income) expense
    339,493       459,958  
(Gain) loss on convertible debt redemptions
    35,630       (75,403 )
Common stock issued for services
    8,000       3,300  
(Gain) loss on settlement of liabilities with stock
    (2,100 )     76,583  
Changes in operating assets and liabilities:
               
Accounts receivable, net
    (24,703 )     8,190  
Other current assets, net
    (2,258 )     (3,091 )
Accounts payable and accrued expenses
    468,122       636,440  
Accrued expenses, related parties
    36,643       (8,155 )
NET CASH FLOWS FROM OPERATING ACTIVITIES
    (15,222 )     (27,703 )
                 
CASH FLOWS FROM INVESTING ACTIVITIES
               
Purchase of property and equipment
    (1,371 )     -  
NET CASH FLOWS FROM INVESTING ACTIVITIES
    (1,371 )     -  
                 
                 
CASH FLOWS FROM FINANCING ACTIVITIES
               
Obligations collateralized by receivables
    (11,382 )     (36,024 )
Proceeds from lines of credit, net
    1,425       144  
Payments on notes payable
    -       (8,692 )
Payments on notes payable, related parties
    (5,468 )     (1,415 )
Payments on long-term debt
    -       (2,000 )
Proceeds from convertible debentures, net of financing costs
    12,990       80,000  
Proceeds from notes payable
    9,000       15,000  
Proceeds from sale of preferred stock, Series E
    10,000       -  
NET CASH FLOWS FROM FINANCING ACTIVITIES
    16,565       47,013  
                 
NET INCREASE IN CASH
    (28 )     19,310  
Cash, beginning of period
    522       -  
Cash, end of period
  $ 494     $ 19,310  
                 
 
Continued.
 
 
4

 
 
COROWARE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
For the Six Months Ended June 30, 2012 and 2011
(Unaudited)

 
   
2012
   
2011
 
             
SUPPLEMENTAL CASH FLOW INFORMATION
           
Interest paid
  $ -     $ -  
Income taxes paid
  $ -     $ -  
                 
NON-CASH INVESTING AND FINANCING TRANSACTIONS
               
Common stock issued for redemption of convertible debentures
  $ 207,859     $ 324,003  
Common stock issued in satisfaction of accrued liabilities
  $ 21,000     $ 280,851  
   
The accompanying notes are an integral part of these consolidated financial statements.
 
 
 
 
 
 
5

 
 
COROWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


NOTE 1 – BASIS OF PRESENTATION

The accompanying unaudited interim consolidated financial statements of CoroWare, Inc. (“CoroWare” or “the Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission (“SEC”), and should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s annual report filed with the SEC on Form 10-K for the year ended December 31, 2011.  The consolidated financial statements include the accounts of the Company and its wholly-owned operating subsidiary, CoroWare Technologies, Inc.  Also included in the consolidated statements are the Company’s inactive wholly-owned subsidiaries, Innova Robotics, Inc., Robotic Workspace Technologies, Inc., and Robotics Software Service, Inc. (herein referred to as the “Subsidiaries”).  In the opinion of management, all adjustments consisting of normal recurring adjustments necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein.  The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year.  Notes to the financial statements which would substantially duplicate the disclosure contained in the audited financial statements for the most recent fiscal year ended December 31, 2011 as reported in Form 10-K have been omitted.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Subsequent Events

The Company evaluated events occurring between the end of the current period and the date these financial statements were issued for potential subsequent event disclosures.

Recent Accounting Pronouncements

Management does not expect the impact of any other recently issued accounting pronouncements to have a material impact on its financial condition or results of operations.

Reclassifications

Certain 2011 balances have been restated to conform to current year presentation.

NOTE 3 – FINANCIAL CONDITION AND GOING CONCERN

The Company has a loss from operations for the six months ended June 30, 2012 of $1,014,483.  Because of this loss, the current working capital deficit, and the projection of additional losses for the remainder of 2012, the Company will require additional working capital to develop its business operations.

The Company intends to raise additional working capital through the use of public offerings and/or related party financings.

There are no assurances that the Company will be able to either (1) achieve a level of revenues adequate to generate sufficient cash flow from operations; or (2) obtain additional financing through either private placements, public offerings, bank financing and/or related party financing necessary to support the Company's working capital requirements. To the extent that funds generated from operations, any private placements, public offerings, bank financing and/or related party financings are insufficient, the Company will have to raise additional working capital. No assurance can be given that additional financing will be available or, if available, will be on terms acceptable to the Company.
 
 
6

 
 
These conditions raise substantial doubt about the Company's ability to continue as a going concern. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

NOTE 4 – ACCOUNTS RECEIVABLE FACTORING

On March 21, 2010, the Company established a $200,000 factoring line with an asset-based lender, CapeFirst Funding, LLC  (“Capefirst”) that is secured by accounts receivable that the Lender may accept and purchase from the Company.  The agreement calls for Capefirst to advance up to 80% of the net face amount of each assigned account or up to 50% of eligible assigned purchase orders.  The agreement calls for a maximum facility amount of $200,000 with a purchase fee of 2% of the net face amount of each assigned account and a collection fee of 0.1% compounded daily.  In the event of a dispute or in the event of fraud, misrepresentation, willful misconduct or negligence on the part of the Company, Capefirst may require the Company to immediately repurchase the assigned accounts at a purchase price that includes the amount of the assigned account plus the discount fee, interest and collection fee and may include a processing fee of 10%.  The combined balance due to factors as of June 30, 2012 and December 31, 2011 was $96,347 and $107,730.  Factor expense charged to operations for the three and six month periods ended June 30, 2012 aggregated $7,647and $19,016.


NOTE 5 - CONVERTIBLE DEBT

The following table illustrates the carrying value of convertible debt:
 
   
June 30, 2012
   
December 31,
2011
 
$2,825,000 Yorkville financing
  $ 471,543     $ 478,258  
$   600,000 Yorkville financing
    600,000       600,000  
$   300,000 Yorkville financing
    300,000       300,000  
$     75,000 Collins financing
    39,169       34,679  
$     27,500 Asher financing
    21,696       19,951  
$     10,750 Barclay financing
    10,750       10,750  
$       9,750 Tangiers financing
    7,812       8,524  
$   170,562 Ratzker financing
    103,140       79,319  
$     67,042 Harvey financing
    67,043       62,675  
$     89,383 Cariou financing
    84,838       83,077  
$    10,000 Tangiers financing
    -       7,895  
$    15,000 Tangiers financing
    -       10,764  
$    65,000 Panache financing
    52,500       29,602  
$    15,000 Panache financing
    15,000       5,612  
$  567,200 Westmount financing
    537,318       537,318  
$  170,561 Redwood financing
    74,989       69,788  
$    21,962 Premier financing
    21,805       17,142  
$    21,000 Tangiers financing
    3,434       -  
$    5,000 Tangiers financing
    2,500       -  
      2,413,537       2,355,354  
Less:  Current portion of convertible debt
    (2,413,537 )     (2,206,247 )
Long term portion of convertible debt
  $ -     $ 149,107  

There were no modifications to any terms nor any conversions on these debentures during the three month period ending June 30, 2012.
 
 
7

 
 
The following tables illustrate the fair value adjustments that were recorded related to the derivative financial instruments associated with the convertible debenture financings:
 

   
Three Months ended June 30, 2012
 
Derivative income (expense):
 
Inception
   
Fair Value
Adjustments
   
Redemptions
   
Total
 
$2,825,000 Yorkville financing (a)
    -       6,837       -       6,837  
$   600,000 Yorkville financing
    -       (231,635 )     -       (231,635 )
$   300,000 Yorkville financing
    -       -       -       -  
$     75,000 Collins financing
    -       (7,358 )     -       (7,358 )
$     27,500 Asher financing (b)
    -       (3,026 )     -       (3,026 )
$     10,750 Barclay financing (c)
    -       (10,054 )     -       (10,054 )
$       9,750 Tangiers financing (d)
    -       (221 )     -       (221 )
$   170,562 Ratzker financing (e)
    -       (2,239 )     -       (2,239 )
$     67,042 Harvey financing (f)
    -       4,101       -       4,101  
$     89,383 Cariou financing (g)
    -       5,333       -       5,333  
$    10,000 Tangiers financing (i)
    -       -       -       -  
$    15,000 Tangiers financing (j)
    -       -       -       -  
$    65,000 Panache financing (k)
    -       (6,570 )     -       (6,570 )
$    15,000 Panache financing (l)
    -       (130 )     -       (130 )
$  567,200 Westmount financing (m)
    -       102,857       -       102,857  
$  170,561 Redwood financing (n)
    -       18,127       -       18,127  
$   21,962 Premier financing
    -       (1,632 )     -       (1,632 )
$   21,000 Tangiers financing
    -       11,915       -       11,915  
$     5,000 Tangiers financing
    -       70       -       70  
Preferred stock, Series B
    -       -       -       -  
Preferred stock, Series D
    -       (36,511 )     -       (36,511 )
      -       150,136       -       150,136  


   
Three Months ended June 30, 2011
 
Derivative income (expense):
 
Inception
   
Fair Value
Adjustments
   
Redemptions
   
Total
 
$2,825,000 Yorkville financing
  $ -     $ (295,509 )   $ (12,825 )   $ (308,334 )
$   600,000 Yorkville financing
    -       40,020       -       40,020  
$   300,000 Yorkville financing
    -       -       -       -  
$     75,000 Collins financing
    -       7,220       (5,616 )     1,604  
$     27,500 Asher financing
    -       (3,603 )     -       (3,603 )
$     10,750 Barclay financing
    -       (2,055 )     -       (2,055 )
$       9,750 Mackie financing
    -       2,278       -       2,278  
$   170,562 Ratzker financing
    -       (176,285 )     -       (176,285 )
$     67,042 Harvey financing
    -       (491 )     -       (491 )
$     89,383 Cariou financing
    -       3,879       -       3,879  
$    10,000 Tangiers financing
    -       (9,615 )     -       (9,615 )
$    15,000 Tangiers financing
    -       (12,287 )     -       (12,287 )
$    25,000 Tangiers financing
    (1,662 )     22,462       -       20,800  
$    65,000 Panache financing
    (35,880 )     23,460       (11,352 )     (23,772 )
$    15,000 Panache financing
            3,836       -       3,836  
$  567,200 Westmount financing
    -       (529,205 )     (42,054 )     (571,259 )
$  170,561 Redwood financing
    -       (341,906 )     (67,492 )     (409,398 )
Preferred stock, Series B
            85,155       -       85,155  
    $ (37,542 )   $ (1,182,646 )   $ (139,339 )   $ (1,359,527 )

 
8

 

   
Six Months ended June 30, 2012
 
Derivative income (expense):
 
Inception
   
Fair Value
Adjustments
   
Redemptions
   
Total
 
$2,825,000 Yorkville financing
    -       (69,619 )     (6,029 )     (75,648 )
$   600,000 Yorkville financing
    -       (127,350 )     -       (127,350 )
$   300,000 Yorkville financing
    -       -       -       -  
$     75,000 Collins financing
    -       (7,964 )     -       (7,964 )
$     27,500 Asher financing
    -       (3,090 )     -       (3,090 )
$     10,750 Barclay financing
    -       (10,265 )     -       (10,265 )
$       9,750 Tangiers financing
    -       (9,918 )     -       (9,918 )
$   170,562 Ratzker financing
    -       (963 )     (2,429 )     (3,392 )
$     67,042 Harvey financing
    -       (11,247 )     -       (11,247 )
$     89,383 Cariou financing
    -       (11,379 )     -       (11,379 )
$    10,000 Tangiers financing
    -       18,941       (7,213 )     11,728  
$    15,000 Tangiers financing
    -       15,822       (12,450 )     3,372  
$    65,000 Panache financing
    -       5,734       (5,881 )     (147 )
$    15,000 Panache financing
    -       1,122       -       1,122  
$  567,200 Westmount financing
    -       87,145       -       87,145  
$  170,561 Redwood financing
    -       57,302       (68,201 )     (10,899 )
$   21,962 Premier financing
    -       (8,236 )     -       (8,236 )
$   21,000 Tangiers financing
    (18,480 )     11,741       -       11,741  
$     5,000 Tangiers financing
    (9,417 )     5,729       (4,708 )     (8,396 )
Preferred stock, Series B
    -       (106,444 )     -       (106,444 )
Preferred stock, Series D
    -       (41,746 )     -       (41,746 )
    (27,897 )   (204,685 )   (106,911 )   (339,493 )

   
Six Months ended June 30, 2011
 
Derivative income (expense):
 
Inception
   
Fair Value
Adjustments
   
Redemptions
   
Total
 
$2,825,000 Yorkville financing
  $ -     $ 306,603     $ (23,917 )   $ 282,686  
$   600,000 Yorkville financing
    -       197,253       -       197,253  
$   300,000 Yorkville financing
    -       26       -       26  
$     75,000 Collins financing
    -       4,585       (22,742 )     (18,157 )
$     27,500 Asher financing
    (9,229 )     (4,189 )     -       (13,418 )
$     10,750 Barclay financing
    (1,619 )     985       -       (634 )
$       9,750 Mackie financing
    -       (1,388 )     -       (1,388 )
$   170,562 Ratzker financing
    -       (41,245 )     -       (41,245 )
$     67,042 Harvey financing
    -       (491 )     -       (491 )
$     89,383 Cariou financing
    -       3,879       -       3,879  
$    10,000 Tangiers financing
    -       (9,615 )     -       (9,615 )
$    15,000 Tangiers financing
    -       (12,287 )     -       (12,287 )
$    25,000 Tangiers financing
    (1,662 )     22,462       -       20,800  
$    65,000 Panache financing
    (35,880 )     23,460       (11,352 )     (23,772 )
$    15,000 Panache financing
            3,836       -       3,836  
$  567,200 Westmount financing
    -       (529,205 )     (42,054 )     (571,259 )
$  170,561 Redwood financing
    -       (341,906 )     (67,492 )     (409,398 )
Preferred stock, Series B
    -       133,226       -       133,226  
    $ (48,390 )   $ (244,011 )   $ (167,557 )   $ (459,958 )
 
 
9

 
 
The following table illustrates the components of derivative liabilities:

   
As of June 30, 2012
 
   
Compound
Derivative
   
Warrant
Liability
   
Total
 
$2,825,000 Yorkville financing
  $ 677,629     $ -     $ 677,628  
$   600,000 Yorkville financing
    715,494       3,990       719,484  
$   300,000 Yorkville financing
    -       -       -  
$     75,000 Collins financing
    48,636       -       48,636  
$     27,500 Asher financing
    36,418       -       36,418  
$     10,750 Barclay financing
    18,207       -       18,207  
$       9,750 Mackie financing
    15,180       -       15,180  
$   170,562 Ratzker financing
    204,697       -       204,697  
$     67,042 Harvey financing
    50,044       -       50,044  
$     89,383 Cariou financing
    63,328       -       63,328  
$    65,000 Panache financing
    80,415       -       80,415  
$    15,000 Panache financing
    11,721       -       11,721  
$  567,200 Westmount financing
    698,755       -       698,755  
$  170,561 Redwood financing
    230,026       -       230,026  
$    21,962 Premier financing
    17,790       -       17,790  
$    21,000 Tangiers financing
    27,739       -       27,739  
$      5,474 Tangiers financing
    3,688       -       3,688  
    2,899,767     3,990      $ 2,903,757  

The following table illustrates the components of derivative liabilities at December 31, 2011:

   
Compound
derivative
   
Warrant
 liability
   
Total
 
$2,825,000 Yorkville financing
  608,013     -     608,013  
$   600,000 Yorkville financing
    586,883       5,250       592,133  
$   300,000 Yorkville financing
    -       -       -  
$     75,000 Collins financing
    40,672       -       40,672  
$     27,500 Asher financing
    33,328       -       33,328  
$     10,750 Barclay financing
    7,942       -       7,942  
$       9,750 Mackie financing
    5,262       -       5,262  
$   170,562 Ratzker financing
    203,734       -       203,734  
$     67,042 Harvey financing
    38,797       -       38,797  
$     89,383 Cariou financing
    51,949       -       51,949  
$    10,000 Tangiers financing
    18,941       -       18,941  
$    15,000 Tangiers financing
    15,821       -       15,821  
$    65,000 Panache financing
    86,149       -       86,149  
$    15,000 Panache financing
    12,843       -       12,843  
$  567,200 Westmount financing
    785,900       -       785,900  
$  170,561 Redwood financing
    287,328       -       287,328  
$    21,962 Premier financing
    9,554       -       9,554  
    2,793,116     5,250     246,872,862  

 
10

 

The following table summarizes the number of common shares indexed to the derivative financial instruments as of June 30, 2012:
 
 
Financing or other contractual arrangement:
 
Conversion
Features
   
Warrants
   
Total
 
$2,825,000 Yorkville financing
    55,042,498       -       55,042,498  
$   600,000 Yorkville financing
    58,118,292       262,500       58,380,792  
$   300,000 Yorkville financing
    398       167       565  
$     75,000 Collins financing
    3,486,994       -       3,486,994  
$     27,500 Asher financing
    2,786,393       -       2,786,393  
$     10,750 Barclay financing
    1,392,287       -       1,392,287  
$       9,750 Tangiers financing
    1,174,895       -       1,174,895  
$   170,562 Ratzker financing
    14,563,986       -       14,563,986  
$     67,042 Harvey financing
    3,854,915       -       3,854,915  
$     89,383 Cariou financing
    4,878,185       -       4,878,185  
$    65,000 Panache financing
    6,149,326       -       6,149,326  
$    15,000 Panache financing
    952,168       -       952,168  
$  567,200 Westmount financing
    56,758,585       -       56,758,585  
$  170,561 Redwood financing
    16,633,635       -       16,633,635  
$    21,962 Premier financing
    1,370,388       -       1,370,388  
$    21,000 Tangiers financing
    2,136,406       -       2,136,406  
$      5,000 Tangiers financing
    284,091       -       284,091  
Preferred Stock, Series B
    10,644,400       -       10,644,400  
Preferred Stock, Series D
    5,882,353       -       5,882,353  
Preferred Stock, Series E
    500,000       -       500,000  
      246,610,195       262,667       246,872,862  

The embedded conversion features associated with our convertible debentures are valued based on the number of shares that are indexed to that liability. Keeping the number of shares constant, the liability associated with the embedded conversion features increases as our share price increases and, likewise, decreases when our share price decreases.  In the same manner, derivative expense is created when our share price increases and derivative income is created when our share price decreases.

During the six months ended June 30, 2012, conversions were as follows:

 
Financing or other contractual arrangement:
 
Principal
converted
   
Shares Issued
   
Gain (Loss)
Recorded
 
                   
$2,825,000 Yorkville convertible note financing
  $ 6,715       79,000,000     $ 4,844  
$      65,000 Panache convertible note financing
    4,100       82,000,000       (7,316 )
$    170,562 Ratzker convertible note financing
    3,900       60,000,000       (2,531 )
$      10,000 Tangiers convertible note financing
    10,000       100,000,000       2,033  
$      15,000 Tangiers convertible note financing
    15,000       150,000,000       7,715  
$    170,561 Redwood convertible note financing
    38,900       599,230,765       (27,108 )
$        5,474 Tangiers convertible note financing
    2,500       100,000,000       (13,267 )
 
  $ 81,115       1,170,230,765     $ (35,630 )

 
11

 

As noted above, the following notes are in default:  the remaining balance of the $2,825,000 financing, the $600,000 and $300,000 Yorkville financings, the $75,000 Collins financing, the $27,500 Asher financing, the $10,750 Barclay financing, the $567,200 Westmount financing, the $67,042 Harvey financing, the $65,000 and $15,000 Panache financings, the $21,962 Premier financings and the $89,383 Cariou financing.  However, the terms of the agreements allow conversion of the debt during periods of default.  In computing the derivative liability associated with the conversion, one of the inputs is maturity of the instruments which, in this case, is technically in the past.  Accordingly, management has estimated a debt maturity date of ten months from the period-end date for purposes of the derivative liability calculations.

NOTE 6 - OTHER STOCKHOLDERS’ EQUITY

a)
Stock Options:

The following table summarizes stock option activity:
   
Total
Options
   
Weighted
Average Price
 
Outstanding, December 31, 2011
    38,164     $ 2.97  
Granted
    -       -  
Cancelled
    -       -  
Forfeited
    -       -  
Exercised
    -       -  
Outstanding, June 30, 2012
    38,164     $ 2.97  
Exercisable at June 30, 2012
    38,164     $ 2.97  

b)
Outstanding warrants:

At June 30, 2012, the Company had the following warrants outstanding:

 
Grant Date
Expiration Date
Warrants Granted
Exercise Price
$   300,000 financing
03/19/08
03/19/13
167
$1,200

c)
Issuance of common stock:

The following table summarizes common stock issued for services during the six month period ended June 30:
   
2012
   
2011
 
   
Shares
   
Value
   
Shares
   
Value
 
Employee compensation
    -     $ -       5,000     $ 3,300  
Legal services
    400,000       8,000                  
      400,000     $ 8,000       5,000     $ 3,300  

The following table summarizes other common stock issued during the six month period ended June 30:
 
   
2012
   
2011
 
   
Shares
   
Value
   
Shares
   
Value
 
Satisfaction of payables
    300,000     $ 6,000       718,157     $ 246,401  
Redemption of convertible debenture
    -       -       203,174       79,056  
Notes payable
    -       -       366,824       78,604  
      300,000     $ 6,000       1,288,155     $ 404,061  

As a result of the issuances noted above, substantial dilution of existing stockholders’ interests has occurred.

 
12

 
 
d)
Dividends on preferred stock:
 
At June 30, 2012 and December 31, 2011, there were cumulative undeclared dividends to Preferred Series B shareholders of $43,908 and $39,917, respectively, the obligation for which is contingent on declaration by the board of directors.
 
e)
Preferred Stock, Series E:
 
On March 9, 2012 the Board approved by unanimous written consent an amendment to the Corporation’s Certificate of Incorporation to designate the rights and preferences of Series E Preferred Stock.  There are 1,000,000 shares of Series E Preferred Stock authorized with a par value of $0.001.  Each share of Series E Preferred Stock has a stated value equal to $1.00 and shall be entitled to receive dividends at the rate of 5% per annum on the stated value before dividends are declared on any other outstanding shares of stock of the Company.  These preferred shares rank higher than the common shares and pari passu with all other classes of preferred stock.  Each outstanding share of Series E Preferred Stock shall be convertible into the number of shares of the Corporation’s common stock determined by dividing the Stated Value by the Conversion Price which is defined as $0.0001.  Mandatory conversion can be demanded by the Company prior to October 1, 2013.  The holders of the Series E Preferred Stock shall have no voting power. 
 
During the quarter ending June 30, 2012, 10,000 shares of Series E preferred shares were sold for $10,000.

f)
Increase in Authorized Shares and Change in Par Value:
 
On November 11, 2011, the Majority Stockholders authorized an increase in the number of authorized shares of common stock from nine hundred million (900,000,000) shares of common stock to three billion (3,000,000,000) shares of common stock.  In addition, the par value of common stock changed from a par value $0.001 per share to a par value $0.0001 per share.   This change was effective January 3, 2012.  All common share amounts within this document have been adjusted to reflect this change.
 
g)
Reverse split:
 
On July 6, 2012, the Company effected a one-for-two hundred (1:200) reverse split of the Company’s Common Stock.  All common share amounts within this document have been adjusted to reflect this change.
 

NOTE 7 – COMMITMENTS

The Company leases its principal operating facilitates in Kirkland, Washington under a 5 year operating lease which runs through July 31, 2015 and provides for monthly payments of $3,735 with a built in annual escalation clause increasing monthly rent by $249 at each anniversary date.
 
Future non-cancelable minimum lease payments are as follows:
 
Years Ending December 31,
     
2012
    37,101  
2013
    52,041  
2014
    55,029  
2015
    33,117  
    $ 177,288  

NOTE 8 – SUBSEQUENT EVENTS
 
(a) $17,500 Asher financing:
 
On August 9, 2012, the Company entered into a $17,500 Convertible Note Agreement with an unrelated third party (“Asher”).  The note calls for interest at 8% through the maturity date of May 13, 2013.   The holder of the debenture may, at any time, convert amounts outstanding under the debenture into shares of common stock of the Company at a conversion rate equal to 50% of the average of the lowest 3 trading price in the 30 days prior to the conversion date.
 
(b) $20,000 Asher financing:
 
On August 2, 2012, Cariou sold a $20,000 tranche of his convertible debenture to Asher. The Company then executed a new $20,000 Convertible Note Agreement with Asher. The note calls for interest at 10%. The holder of the debenture may, at any time, convert amounts outstanding under the debenture into shares of common stock of the Company at a conversion rate equal to 40% of the average of the lowest trading price in the 30 days prior to the conversion date.
 
(c) $7,000 Cariou financing:
On August 3, 2012, the Company entered into a $7,000 Convertible Note Agreement with an ex-employee (“Cariou”). The note calls for interest at 10% through the maturity date February 3, 2013. The holder of the debenture may, at any time, convert amounts outstanding under the debenture into shares of common stock of the Company at a conversion rate equal to the average closing bid prices for the Common Stock for the 5 trading days prior to the conversion date.
 
(d) On July 6, 2012, the Company effected a one-for-two hundred (1:200) reverse split of the Company’s Common Stock.  All common share amounts within this document have been adjusted to reflect this change.

 
 
13

 
 
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may" "should," "expect," "plan," "anticipate," "believe," "estimate," "predict," "potential" or "continue," the negative of such terms, or other comparable terminology. These statements are only predictions. Actual events or results may differ materially from those in the forward-looking statements as a result of various important factors. Although we believe that the expectations reflected in the forward-looking statements are reasonable, they should not be regarded as a representation by CoroWare, Inc., or any other person, that such expectations will be achieved. The business and operations of CoroWare, Inc. are subject to substantial risks, which increase the uncertainty inherent in the forward-looking statements contained in this report.
 
BACKGROUND

CoroWare, Inc ("CoroWare" or "the Company") is a public holding company whose principal subsidiary, CoroWare Technologies, Inc. ("CTI"), has expertise in information technology consulting, mobile robotics, and affordable telepresence.  Through its subsidiary, the Company delivers custom engineering services, hardware and software products, and subscription services that benefit customers in North America, Europe, Asia, Australia and the Middle East.  Their customers span multiple industry sectors and are comprised of universities, software and hardware product development companies, and non-profit organizations.  The company also maintains a Near Shore practice which is comprised of multiple subcontracting companies with whom the company maintains close working relationships.  Through these relationships, the Company is able to provide services in South America.

COROWARE TECHNOLOGIES, INC.

CTI is a software professional services company with a strong focus on Information Technology integration and robotics integration, business automation solutions, and unmanned systems solutions to its customers in North America and Europe.

CTI’s expertise includes the deployment and integration of computing platforms and applications, as well as the development of unmanned vehicle software and solutions for customers in the research, commercial, and homeland security market segments.  CTI shall continue to offer its high value software systems development and integration services that complement the growing trend in outsourced software development services in Asia, Latin America, and Eastern Europe.

CoroWare Technologies comprises three separately managed lines of business:
 
 
·
CoroWare Business Solutions:  IT and lab management; business intelligence, software architecture, design and development; content delivery; partner and program management.
 
·
Robotics and Automation:   Custom engineering such as visualization, simulation and software development; and mobile robot platforms for university, government and corporate researchers..
 
·
Enhanced Collaboration Solution:  Collaboration and conferencing products, solutions and subscription services.

The Company’s revenues are principally derived from standing contracts that include Microsoft (partner management and IT professional services), and other customers whose product development groups require custom software development and consulting companies. Existing contract revenues vary month by month based on the demands of the clients. The Company’s collaboration effort is in the early stages of growth and will require additional working capital to compete effectively against new entrants in this rapidly growing market.
 
 
14

 
 
RESULTS OF OPERATIONS

THREE MONTHS ENDED JUNE 30, 2012 COMPARED TO THREE MONTHS ENDED JUNE 30, 2011:

During the three-month period ended June 30, 2012 (the "2012 Period") revenues were $321,745 compared to revenues of $517,765 during the three-month period ended June 30, 2012 (the "2011 Period").  Our revenues were significantly lower compared to the previous year as customers delayed spending on software development services for IT consulting and software development projects as well as capital expenditures until later in the calendar year.

Cost of revenues was $199,530 for the 2012 Period compared to $297,088 for the 2011 Period. Cost of revenues represents primarily labor and labor-related costs in addition to overhead costs.  Gross profit on these 2012 revenues amounted to $122,215 (38.0% gross profit percentage) compared to $220,677 (42.6% gross profit percentage) for the 2011 Period.

Research and development was $31,951 (9.9% of gross revenues) for the 2012 Period compared to $40,451 (7.8% of gross revenues) in the 2011 Period.  The increased research and development investment resulted from new software development and testing initiatives, including CoroWare Analytics and Reporting for Vidyo which was announced in July 2012.

Operating expenses were $296,063 during the 2012 Period compared to $377,816 during the 2011 Period.  General and Administration expenses were reduced by 21%, to $179,347 in the 2012 Period compared to $226,109 for the 2011 Period as the Company continued to reduce its executive compensation and public company expenses.  Sales and marketing expenses were reduced by 21% to $82,125 in the 2012 Period compared to $103,825 for the 2011 Period as the Company further refined sales compensation plans to bring them in line with the Company’s cost of sales objectives.  Loss from operations was $173,848 during the 2012 Period compared to $157,139 in the 2011 Period.

Total other expense was $320,133 during the 2012 Period compared to Total other expense of $1,495,020 in the 2011 Period.  Other income (expense) is comprised primarily of derivative income and amortization of debt discount and deferred finance costs.  Derivative expense in the 2012 Period was $150,136 compared to Derivative expense of $1,359,527 in the 2011 Period.  Keeping the number of shares constant, the liability associated with the embedded conversion features increases as our share price and volatility increases and, likewise, decreases when our share price and share price volatility decreases.  Derivative income (expense) displays the inverse relationship.  During the 2012 Period, the share price remained consistent ($0.02 at March 31, 2012 versus $0.02 at June 30, 2012) with a slight increase in the volatility which resulted in an insignificant change in the calculated Monte Carlo values.  The derivative expense in the 2012 Period is primarily due to Fair value adjustments to the embedded conversion features.  Interest expense for the three month 2012 Period is $172,097 compared to $193,985 for the three month 2011 Period.  The debt discount was amortized using the effective interest method.  Under this method, the amount of amortization increases exponentially as the underlying carrying value of the amortized debt increases.

Net Loss for the 2012 Period was $493,981 compared to a net loss of $1,652,159 for the 2011 Period.

Basic weighted average shares outstanding were 11,382,014 during the 2012 Period compared to 2,549,333 in the 2011 Period.  There is no fully diluted calculation for the 2012 Period or the 2011 Period as the effect would be anti-dilutive.
 
SIX MONTHS ENDED JUNE 30, 2012 COMPARED TO SIX MONTHS ENDED JUNE 30, 2011:

During the six-month period ended June 30, 2012 (the "2012 Period") revenues were $675,121 compared to revenues of $888,269 during the six-month period ended June 30, 2012 (the "2011 Period").  Our revenues were 24% lower compared to the previous year as customers delayed spending on software development services for IT consulting and software development projects as well as capital expenditures until later in the calendar year.

Cost of revenues was $412,019 for the 2012 Period compared to $559,402 for the 2011 Period. Cost of revenues represents primarily labor and labor-related costs in addition to overhead costs.  Gross profit on these 2012 revenues amounted to $263,102 (39% gross profit percentage) compared to $328,867  (37% gross profit percentage) for the 2011 Period.
 
 
15

 
 
Research and development was $45,082 (6.7% of gross revenues) for the 2012 Period compared to $86,190 (9.7% of gross revenues) in the 2011 Period.

Operating expenses were $525,173 during the 2012 Period compared to $761,264 during the 2011 Period.  General and Administration expenses were reduced by 28% to $342,476 in the 2012 Period compared to $475,495 for the 2011 Period as the Company reduced its executive compensation and public company auditing expenses.  Sales and marketing expenses were reduced by 28% to $131,615 in the 2012 Period compared to $182,498 for the 2011 Period as the Company further adjusted sales compensation plans to bring them in line with the Company’s cost of sales objectives.  Loss from operations was $262,071 during the 2012 Period compared to $432,397 in the 2011 Period.

Total other expense was $752,412 during the 2012 Period compared to other expense of $830,220 in the 2011 Period.  Other income (expense) is comprised primarily of derivative income and amortization of debt discount and deferred finance costs.  Derivative expense in the 2012 Period was $339,493 compared to derivative expense of $459,958 in the 2011 Period.  Keeping the number of shares constant, the liability associated with the embedded conversion features increases as our share price and volatility increases and, likewise, decreases when our share price and share price volatility decreases.  Derivative income (expense) displays the inverse relationship.  During the 2012 Period, the share price remained consistent ($.02 at December 31, 2011 versus $0.02 at June 30, 2012) with a slight increase in the volatility which resulted in an insignificant change in the calculated Monte Carlo values.  The derivative expense in the 2012 Period is primarily due to expense recognized in connection with redemptions on various debentures during the Period.  Interest expense for the six month 2012 Period is $379,389 compared to $369,082 for the six month 2011 Period.  The debt discount was amortized using the effective interest method.  Under this method, the amount of amortization increases exponentially as the underlying carrying value of the amortized debt increases.

Net Loss for the 2012 Period was $1,014,483 compared to a net loss of $1,262,617 for the 2011 Period.

Basic weighted average shares outstanding were 9,186,530 during the 2012 Period compared to 1,788,533 in the 2011 Period.  There is no fully diluted calculation for the 2012 Period or the 2011 Period as the effect would be anti-dilutive.
 
LIQUIDITY AND CAPITAL RESOURCES

At June 30, 2012, we had current assets of $168,195, current liabilities of $12,318,734, negative working capital of ($12,150,539) and an accumulated deficit of $28,481,048.  For the six months ending June 30, 2012, we had net cash flows used in operating activities of ($15,222), net cash flows used in investing activities of ($1,371), and net cash flows provided by financing activities of $16,565.

 
16

 
 
We will need to obtain additional capital in order to expand operations and become profitable. In order to obtain capital, we may need to sell additional shares of our common stock or borrow funds from private lenders. There can be no assurance that we will be successful in obtaining additional funding. We will still need additional capital in order to continue operations until we are able to achieve positive operating cash flow. Additional capital is being sought, but we cannot guarantee that we will be able to obtain such investments. Financing transactions may include the issuance of equity or debt securities, obtaining credit facilities, or other financing mechanisms.  If we do not obtain additional capital, we may cease operations.

However, even if we are able to raise the funds required, it is possible that we could incur unexpected costs and expenses, fail to collect significant amounts owed to us, or experience unexpected cash requirements that would force us to seek alternative financing. Furthermore, if we issue additional equity or debt securities, stockholders may experience additional dilution or the new equity securities may have rights, preferences or privileges senior to those of existing holders of our common stock. If additional financing is not available or is not available on acceptable terms, we will have to curtail our operations.
 
OFF-BALANCE SHEET ARRANGEMENTS
 
We do not have any off balance sheet arrangements that are reasonably likely to have a current or future effect on our financial condition, revenues, results of operations, liquidity or capital expenditures.

 
CONTRACTUAL OBLIGATIONS
 
The following table sets forth the contractual obligations of the Company as of December 31, 2011:
 
   
Payments due by Period
 
Contractual Obligations
 
Total
   
Less than 1 year
   
1-3 years
   
3-5 years
   
More than 5
years
 
Convertible debt, net
  $ 2,292,410     $ 2,292,410     $ -     $ -     $ -  
Notes payable
    263,133       263,133       -       -       -  
Notes payable, related parties
    292,812       292,812       -       -       -  
Operating leases
    235,305       46,065       101,094       88,146       -  
Long –term debt
    982,450       982,450       -       -       -  
  Total
  $ 4,066,110     $ 3,876,870     $ 101,094     $ 88,146     $ -  


EFFECT OF RECENT ACCOUNTING PRONOUNCEMENTS

Refer to Form 10-K for the year ended December 31, 2011.


ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As a smaller reporting company, as defined in Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we are not required to provide the information required by this item.
 
 
17

 
 
ITEM 4. CONTROLS AND PROCEDURES
 

Evaluation of Disclosure Controls and Procedures
With the participation of Lloyd T. Spencer, who serves as the Chief Executive Officer (the principal executive officer) and Interim Chief Financial Officer (the principal financial officer); the Company’s management has evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of the end of the quarterly period covered by this Quarterly Report on Form 10-Q. As of the end of the period covered by this Report, we conducted an evaluation, under the supervision and with the participation of our chief executive officer and interim chief financial officer, of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934). Based on this evaluation, our chief executive officer and interim chief financial officer concluded that our disclosure controls and procedures are not effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.    The ineffectiveness of our disclosure controls and procedures is the result of certain deficiencies in internal controls constituting material weaknesses as discussed below.

The Company has historically had limited operating revenue and, as such, all accounting and financial reporting operations have been and are currently performed by a limited number of individuals.  The parties that perform the accounting and financial reporting operations are the only parties with any significant knowledge of generally accepted accounting principles. Thus, we lack segregation of duties in the period-end financial reporting process. This lack of additional accounting/auditing staff with significant knowledge of generally accepted accounting principles in order to properly segregate duties could result in ineffective oversight and monitoring and the possibility of a misstatement within the consolidated financial statements. However, the material weaknesses identified did not result in the restatement of any previously reported financial statements or any other related financial disclosure, nor does management believe that it had any effect on the accuracy of the Company's consolidated financial statements for the current reporting period.

 The Company is currently reviewing its policies and is evaluating its disclosure controls and procedures so that it will be able to determine the changes it can and should make to make such controls more effective.

Changes in Internal Controls over Financial Reporting

There were no changes in the Company's internal control over financial reporting during the Company's last fiscal quarter that have materially affected, or are likely to materially affect, the Company's internal control over financial reporting.
 
 
18

 
 
Part II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

None.

ITEM 1A. RISK FACTORS

As a smaller reporting company, as defined in Rule 12b-2 of the Exchange Act, we are not required to provide the information required by this item.
 
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF FUNDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES
 
(a)
As of the balance sheet date the company is in arrears in the payment of dividends related to its Series B preferred stock in the amount of $15,969.

(b)
At June 30, 2012, we are in default on the remaining of the original $2,825,000 Secured Convertible Debenture presently held by Yorkville Advisors, LLC.  Yorkville currently holds $395,628 of the first tranche and $82,630 of the third tranche.  The remainder of the first tranche was assigned to a third party (“Ratzker”) who amended the terms in March 2011 extending the maturity date to March 2013.  During the second quarter of 2011, Ratzker assigned 50% of his note to another third party (“Redwood”).  The second trance was assigned to a third party who did not amend the terms.  The note is still in default.  The debenture accrued interest at 10% per annum thru March 25, 2008 at which time the interest rate was increased to 14% per annum.  The debenture is convertible at the option of the holder into shares of CoroWare, Inc. common stock.

(c)
As of June 30, 2012, we are in default on our Secured Convertible Debenture presently held by Yorkville Advisors, LLC in the face amount of $600,000.  The debenture accrued interest at 14% per annum and is convertible at the option of the holder into shares of CoroWare, Inc. common stock.

(d)
As of June 30, 2012, we are in default on our Secured Convertible Debenture presently held by Yorkville Advisors, LLC in the face amount of $300,000.  The debenture accrued interest at 14% per annum and is convertible at the option of the holder into shares of CoroWare, Inc. common stock.

(e)
As of June 30, 2012, we are in default on our Unsecured Convertible Debenture presently held by Barclay Lyons in the face amount of $10,750.  The debenture accrued interest at 21% through the maturity date of July 28, 2011 with default interest at 35% thereafter.  The debenture is convertible at the option of the holder into shares of CoroWare, Inc. common stock.
(f)
As of June 30, 2012, we are in default on our Unsecured Convertible Debenture presently held by Martin Harvey in the face amount of $67,042.  The debenture accrued interest at 10% through the maturity date of May 2, 2011 with default interest at 15% thereafter.  The debenture is convertible at the option of the holder into shares of CoroWare, Inc. common stock.
(g)
As of June 30, 2012, we are in default on our Unsecured Convertible Debenture presently held by Thomas Collins in the face amount of $39,170.  The debenture accrues interest at 15% and is convertible at the option of the holder into shares of CoroWare, Inc. common stock.
 
(h)
As of June 30, 2012, we are in default on our Unsecured Convertible Debenture presently held by Premier IT Solutions in the face amount of $21,962.  The debenture accrues interest at 10% through the maturity date of March 5, 2012 and accrues default interest at 15% thereafter.  The note is convertible at the option of the holder into shares of CoroWare, Inc., common stock.
 
 
19

 

(i)
As of June 30, 2012, we are in default on two notes payable aggregating $100,000.  The notes accrued interest at 8% through the maturity date of February 2003 with default interest at 15% thereafter.  The notes are convertible at the option of the holder into shares of CoroWare, Inc. common stock.
 
 
ITEM 4. MINE SAFETY DISCLOSURES
 
None.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

31
Certification of Periodic Financial Reports by Lloyd Spencer in satisfaction of Section 302 of the Sarbanes-Oxley Act of 2002
32
Certification of Periodic Financial Reports by Lloyd Spencer in satisfaction of Section 906 of the Sarbanes-Oxley Act of 2002 and 18 U.S.C. Section 1350
 
 
 
 
 
 
 
20

 

SIGNATURES


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

 
  CoroWare, Inc.  
       
       
       
  /s/  Lloyd T. Spencer   
Dated:  August 20, 2012
Lloyd T. Spencer, Chief Executive Officer and  
   
Interim Chief Financial Officer
(Principal Executive Officer and Principal
Accounting and Financial Officer)
 
       

 
 
 
 
21

PINX:COWI Quarterly Report 10-Q Filling

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

PINX:COWI Quarterly Report 10-Q Filing - 6/30/2012
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