XOTC:TRWS Quarterly Report 10-Q Filing - 3/31/2012

Effective Date 3/31/2012

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC  20549

Form 10-Q
 


(Mark one)
x
Quarterly Report under Section 13 or 15(d) of the Securities Exchange Act of 1934
   
 
For the quarterly period ended March 31, 2012
   
o
Transition Report under Section 13 or 15(d) of the Securities Exchange Act of 1934
   
 
For the transition period from ______________ to _____________



Commission File Number: 33-56574
 
 
Truewest Corporation
(Exact name of registrant as specified in its charter)

Nevada
25-1605848
(State of incorporation)
(IRS Employer ID Number)

1600 West Golf Course, Midland, TX 79701
(Address of principal executive offices)
 

(432) 889-4477
(Issuer's telephone number)
 
211 West Wall Street, Midland, TX 79701
(Former name or former address, if changed since last report)
 


Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  YES  x  NO  o
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES  x  NO  o
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the 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
Smaller reporting company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): YES  x  NO  o
 
State the number of shares outstanding of each of the issuer's classes of common equity as of the latest practicable date: April 25, 2012: 450,800
 
Transitional Small Business Disclosure Format (check one): YES  o  NO  x
 
 
 

 
 
Truewest Corporation

Form 10-Q for the Quarter ended March 31, 2012

Table of Contents


 
Page
Part I - Financial Information
 
   
Item 1 - Financial Statements
3
   
Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations
13
   
Item 3 - Quantitative and Qualitative Disclosures About Market Risk
16
   
Item 4 - Controls and Procedures
16
   
   
Part II - Other Information
 
   
Item 1 - Legal Proceedings
16
   
Item 2 - Sales of Equity Securities and Use of Proceeds
16
   
Item 3 - Defaults Upon Senior Securities
16
   
Item 4 - (Removed and Reserved)
16
   
Item 5 - Other Information
16
   
Item 6 - Exhibits
16
   
Signatures
16
 
 
 
2

 

Part I

Item 1 - Financial Statements

TRUEWEST CORPORATION
(a development stage company)
Balance Sheets
March 31, 2012 and September 30, 2011


   
(Unaudited)
   
(Audited)
 
   
March 31,
   
September 30,
 
   
2012
   
2011
 
ASSETS
           
             
Current Assets
           
Cash on hand and in bank
  $ 5,625     $ 2,000  
Prepaid expenses
    600        
                 
    Total Current Assets
    6,225       2,000  
                 
    Total Assets
  $ 6,225     $ 2,000  
                 
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
               
                 
Liabilities
               
Current Liabilities
               
Accounts payable - trade
  $     $  
Note payable to controlling shareholder
    79,400       69,400  
Accrued interest payable to controlling stockholder
    19,024       16,810  
                 
    Total Liabilities
    98,424       86,210  
                 
                 
Commitments and Contingencies
               
                 
                 
Stockholders’ Equity (Deficit)
               
Preferred stock - $0.001 par value
               
50,000,000 shares authorized
               
None issued and outstanding
           
Common stock - $0.001 par value.
               
100,000,000 shares authorized.
               
450,800 shares issued and outstanding
    451       451  
Additional paid-in capital
    48,116,101       48,116,101  
Common stock warrants
    1,012       1,012  
Deficit accumulated during the development stage
    (48,209,763 )     (48,201,774 )
                 
    Total Stockholders’ Equity (Deficit)
    (92,199 )     (84,210 )
                 
    Total Liabilities and Stockholders’ Equity
  $ 6,225     $ 2,000  




The financial information presented herein has been prepared by management
without audit by independent certified public accountants.
The accompanying notes are an integral part of these financial statements.

 
3

 

TRUEWEST CORPORATION
(a development stage company)
Statements of Operations and Comprehensive Loss
Six and Three months ended March 31, 2012 and 2011 and
Period from July 5, 1989 (date of inception) through March 31, 2012

(Unaudited)


                           
Period from
 
   
Six
   
Six
   
Three
   
Three
   
July 5, 1989
 
   
months
   
months
   
months
   
months
   
(date of inception)
 
   
ended
   
ended
   
ended
   
ended
   
through
 
   
March 31,
   
March 31,
   
March 31,
   
March 31,
   
March 31
 
   
2012
   
2011
   
2012
   
2011
   
2012
 
                               
Revenues
  $     $     $     $     $  
                                         
Operating Expenses
                                       
General and administrative
    5,775       5,460       1,650       1,695       17,182,376  
Depreciation
                            91,495  
Research and development
                            10,556,405  
Technology and patent rights
                            2,650,000  
Expense related to warrant extensions
                            17,890,676  
Amortization of goodwill
                            535,057  
    Total operating expenses
    5,775       5,460       1,650       1,695       48,906,009  
                                         
Loss from operations
    (5,775 )     (5,460 )     (1,650 )     (1,695 )     (48,906,009 )
                                         
Other Income (Expense)
                                       
Interest expense
    (2,214 )     (1,974 )     (1,117 )     (976 )     (355,629 )
Other income
                            1,043,722  
Other expense
                            (67,405 )
Equity in loss from unconsolidated subsidiaries
                            (575,412 )
Impairment loss
                            (690,124 )
Gain from sale of stock
                            1,341,094  
    Total other income (expense)
    (2,214 )     (1,974 )     (1,117 )     (976 )     696,246  
                                         
Loss before provision for income taxes
    (7,989 )     (7,434 )     (2,767 )     (2,671 )     (48,209,763 )
                                         
Provision for income taxes
                             
                                         
Net Loss
    (7,989 )     (7,434 )     (2,767 )     (2,671 )     (48,209,763 )
                                         
Comprehensive income
                             
                                         
Comprehensive Loss
  $ (7,989 )   $ (7,434 )   $ (2,767 )   $ (2,671 )   $ (48,209,763 )
                                         
Earnings per share of common stock outstanding
                                       
computed on net loss –
                                       
basic and fully diluted
  $ (0.02 )   $ (0.02 )   $ (0.01 )   $ (0.01 )        
                                         
Weighted-average number of shares outstanding -
                                       
basic and fully diluted
    450,800       450,800       450,800       450,800          




The financial information presented herein has been prepared by management
without audit by independent certified public accountants.
The accompanying notes are an integral part of these financial statements.

 
4

 

TRUEWEST CORPORATION
(a development stage company)
Statements of Cash Flows
Six months ended March 31, 2012 and 2011 and
Period from July 5, 1989 (date of inception) through March 31, 2012

(Unaudited)


               
Period from
 
               
July 5, 1989
 
   
Six months
   
Six months
   
(date of inception)
 
   
ended
   
ended
   
through
 
   
March 31,
   
March 31,
   
March 31,
 
   
2012
   
2011
   
2012
 
Cash Flows from Operating Activities
                 
Net loss for the period
  $ (7,989 )   $ (7,434 )   $ (48,209,763 )
Adjustments to reconcile net loss to net cash
                       
provided by operating activities
                       
    Depreciation and amortization
                626,552  
    Gain on sale of stock purchased for investment
                (1,341,094 )
    Warrants issued for services
                515,515  
    Expense related to warrant extensions
                17,890,676  
    Common stock issued for services
                138,950  
    Common stock issued for License and Marketing agreement
                80,000  
    Impairment loss
                704,491  
    Inventory deposit - BICO
                (1,000,000 )
    Equity in loss of unconsolidated subsidiaries
                575,412  
    Accrued interest contributed to equity
                324,879  
    Increase (Decrease) in
                       
    Prepaid expenses
    (600 )           (600 )
    Accounts payable
                 
    Accrued interest payable
    2,214       1,974       19,024  
Net cash used in operating activities
    (6,375 )     (5,460 )     (29,675,958 )
                         
Cash Flows from Investing Activities
                       
Purchase of property and equipment
                (303,746 )
Proceeds from sale of property and equipment
                175,000  
Net cash paid for common stock purchased for investment
                (459,500 )
Net activity on notes receivable from related parties
                (138,538 )
Net cash provided by (used in) investing activities
                (726,784 )
                         
Cash Flows from Financing Activities
                       
Cash received from notes payable to
                       
Former majority shareholder and others
                396,200  
Current majority shareholder
    10,000             79,400  
Convertible notes
                95,000  
Cash paid on notes payable
                (42,500 )
Cash received from sale of common stock
                11,096,834  
Cash received on Regulation S sale of common stock
                288,751  
Cash received on sale of common stock to BICO
                4,200,000  
Cash received on warrant exercises
                157,946  
Net activity on cash advanced to/received from BICO
                14,160,060  
Cash paid to acquire treasury stock
                (35,001 )
Cash contributed as capital to support operations
                11,677  
Net cash provided by financing activities
    10,000             30,408,367  
                         
Increase (Decrease) in Cash
    3,625       (5,460 )     5,625  
Cash at beginning of period
    2,000       10,695        
                         
Cash at end of period
  $ 5,625     $ 5,235     $ 5,625  


- Continued -




The financial information presented herein has been prepared by management
without audit by independent certified public accountants.
The accompanying notes are an integral part of these financial statements.

 
5

 

TRUEWEST CORPORATION
(a development stage company)
Statements of Cash Flows - Continued
Six months ended March 31, 2012 and 2011 and
Period from July 5, 1989 (date of inception) through March 31, 2012

(Unaudited)


               
Period from
 
               
July 5, 1989
 
   
Six months
   
Six months
   
(date of inception)
 
   
ended
   
ended
   
through
 
   
March 31,
   
March 31,
   
March 31,
 
   
2012
   
2011
   
2012
 
Supplemental Disclosure of Interest and Income Taxes Paid
                 
                   
Interest paid for the year
  $     $     $ 11,725  
Income taxes paid for the year
  $     $     $  
                         
                         
Supplemental Disclosure of Non-Cash Investing and Financing Activities
                       
                         
Issuance of 371,000 shares of common stock
                       
to satisfy $303,000 note payable
  $     $     $ 303,000  
Issuance of 3,000,000 shares of common stock
                       
to BICO in payment of intercompany debt
  $     $     $ 10,500,000  



The financial information presented herein has been prepared by management
without audit by independent certified public accountants.
The accompanying notes are an integral part of these financial statements.

 
6

 

TRUEWEST CORPORATION
(a development stage company)
Notes to Financial Statements
March 31, 2012 and September 30, 2011


Note A - Organization and Description of Business

Truewest Corporation (Company) was incorporated on July 5, 1989 as Diasense, Inc. in accordance with the Laws of the Commonwealth of Pennsylvania.

On January 22, 2007, the Company filed Articles of Merger and Plan of Merger with the Commonwealth of Pennsylvania and the State of Nevada to change the Company’s domicile from Pennsylvania to Nevada by means of a merger with and into a Nevada corporation formed on November 3, 2006 solely for the purpose of effecting the reincorporation.  The Articles of Incorporation and Bylaws of the Nevada corporation are the Articles of Incorporation and Bylaws of the surviving corporation.  Such Articles of Incorporation maintained the Company’s corporate name of Diasense, Inc. and modified the Company’s capital structure to allow for the issuance of up to 100,000,000 shares of $0.001 par value common stock and up to 50,000,000 shares of $0.001 par value preferred stock.  Although the merger documents were filed in both Pennsylvania and Nevada on January 22, 2007, the Commonwealth of Pennsylvania required completion of certain documents in order to issue a tax clearance certificate to complete the merger. The required tax clearance was not issued until March 22,, 2007 which formally completed the domicile relocation to Nevada.  The effect of this action is reflected in the accompanying financial statements as of the first day of the first period presented.

On March 19, 2008, the Company changed its corporate name to Truewest Corporation.

On August 29, 2006, the Company entered into a Voluntary Surrender Agreement whereby all of the Company's assets, which had previously been pledged as collateral to secure loan agreements by and between the Company and Company’s lender, who was also the Company’s majority shareholder, under which the Company was then in default, were repossessed.  Through the date of the Voluntary Surrender Agreement, the Company’s business efforts were focused on developing a noninvasive glucose sensor (Sensor).  The Sensor was proposed to use electromagnetic technology to measure the concentration of glucose in human tissue without requiring the user to take a blood sample.

The Company’s current principal business activity is to seek a suitable reverse acquisition candidate through acquisition, merger or other suitable business combination method.

The Company has never fully implemented any business plan(s) and, accordingly, is considered to be in the development stage.

Note B - Preparation of Financial Statements

The Company follows the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America and has a year-end of September 30.

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.

Management further acknowledges that it is solely responsible for adopting sound accounting practices, establishing and maintaining a system of internal accounting control and preventing and detecting fraud.  The Company’s system of internal accounting control is designed to assure, among other items, that 1) recorded transactions are valid; 2) valid transactions are recorded; and 3) transactions are recorded in the proper period in a timely manner to produce financial statements which present fairly the financial condition, results of operations and cash flows of the Company for the respective periods being presented.

During interim periods, the Company follows the accounting policies set forth in its annual audited financial statements filed with the U. S. Securities and Exchange Commission on its Annual Report on Form 10-KSB containing the Company’s financial statements for the year ended September 30, 2011.  The information presented within these interim financial statements may not include all disclosures required by generally accepted accounting principles and the users of financial information provided for interim periods should refer to the annual financial information and footnotes when reviewing the interim financial results presented herein.

 
7

 

TRUEWEST CORPORATION
(a development stage company)
Notes to Financial Statements - Continued
March 31, 2012 and September 30, 2011


Note B - Preparation of Financial Statements - Continued

In the opinion of management, the accompanying interim financial statements, prepared in accordance with the U. S. Securities and Exchange Commission’s instructions for Form 10-Q, are unaudited and contain all material adjustments, consisting only of normal recurring adjustments necessary to present fairly the financial condition, results of operations and cash flows of the Company for the respective interim periods presented.  The current period results of operations are not necessarily indicative of results which ultimately will be reported for the full fiscal year ending September 30, 2011.

Note C - Going Concern Uncertainty

On August 29, 2006, the Company entered into a Voluntary Surrender Agreement (Voluntary Surrender Agreement) with Dominion Assets, LLC (Dominion) whereby all of the Company's assets, which had previously been pledged as collateral to secure loan agreements under which the Company was then in default, were repossessed.  Dominion was, at that time, the majority shareholder of the Company.

The Company’s current principal business activity is to seek a suitable reverse acquisition candidate through acquisition, merger or other suitable business combination method.

The Company's continued existence is dependent upon its ability to generate sufficient cash flows from operations to support its daily operations as well as provide sufficient resources to retire existing liabilities and obligations on a timely basis.

The Company anticipates future sales of equity securities to facilitate either the consummation of a business combination transaction or to raise working capital to support and preserve the integrity of the corporate entity.  However, there is no assurance that the Company will be able to obtain additional funding through the sales of additional equity securities or, that such funding, if available, will be obtained on terms favorable to or affordable by the Company.

If no additional operating capital is received during the next twelve months, the Company will be forced to rely on existing cash in the bank and upon additional funds loaned by management and/or significant stockholders to preserve the integrity of the corporate entity at this time.  In the event, the Company is unable to acquire advances from management and/or significant stockholders, the Company’s ongoing operations would be negatively impacted.

It is the intent of management and significant stockholders to provide sufficient working capital necessary to support and preserve the integrity of the corporate entity.  However, no formal commitments or arrangements to advance or loan funds to the Company or repay any such advances or loans exist.  There is no legal obligation for either management or significant stockholders to provide additional future funding.

While the Company is of the opinion that good faith estimates of the Company’s ability to secure additional capital in the future to reach our goals have been made, there is no guarantee that the Company will receive sufficient funding to sustain operations or implement any future business plan steps.

Note D - Summary of Significant Accounting Policies

1.
Cash and cash equivalents

For Statement of Cash Flows purposes, the Company considers all cash on hand and in banks, certificates of deposit and other highly-liquid investments with maturities of three months or less, when purchased, to be cash and cash equivalents.

2.
Property and Equipment

Property and equipment were recorded at historical cost.  These costs were depreciated over the estimated useful lives of the individual assets using the straight-line method, generally seven to thirty-nine years.

 
8

 

TRUEWEST CORPORATION
(a development stage company)
Notes to Financial Statements - Continued
March 31, 2012 and September 30, 2011


Note D - Summary of Significant Accounting Policies - Continued

2.
Property and Equipment - continued

Gains and losses from disposition of property and equipment are recognized as incurred and are included in operations.

In accordance with the provisions required by the Property, Plant and Equipment Topic of the FASB Accounting Standards Codification whereby the Company follows the policy of evaluating all property and equipment as of the end of each reporting quarter.  Effective September 30, 2006, the Company had no assets subject to this accounting pronouncement.

3.
Income Taxes

The Company files income tax returns in the United States of America and may file, as applicable and appropriate, various state(s).  With few exceptions, the Company is no longer subject to U.S. federal, state and local, as applicable, income tax examinations by regulatory taxing authorities for years before 2008.  The Company does not anticipate any examinations of returns filed since 2008.

The Company uses the asset and liability method of accounting for income taxes.  At March 31, 2012 and September 31, 2011, the deferred tax asset and deferred tax liability accounts, as recorded when material to the financial statements, are entirely the result of temporary differences.  Temporary differences generally represent differences in the recognition of assets and liabilities for tax and financial reporting purposes, primarily accumulated depreciation and amortization, allowance for doubtful accounts and vacation accruals.

The Company has adopted the provisions required by the Income Taxes topic of the FASB Accounting Standards Codification.  The Codification Topic requires the recognition of potential liabilities as a result of management’s acceptance of potentially uncertain positions for income tax treatment on a “more-likely-than-not” probability of an assessment upon examination by a respective taxing authority.  As a result of the implementation of Codification’s Income Tax Topic, the Company did not incur any liability for unrecognized tax benefits.

4.
Earnings (loss) per share

Basic earnings (loss) per share is computed by dividing the net income (loss) available to common stockholders by the weighted-average number of common shares outstanding during the respective period presented in our accompanying financial statements.

Fully diluted earnings (loss) per share is computed similar to basic income (loss) per share except that the denominator is increased to include the number of common stock equivalents (primarily outstanding options and warrants).

Common stock equivalents represent the dilutive effect of the assumed exercise of the outstanding stock options and warrants, using the treasury stock method, at either the beginning of the respective period presented or the date of issuance, whichever is later, and only if the common stock equivalents are considered dilutive based upon the Company’s net income (loss) position at the calculation date.

At March 31, 2012 and 2010, and subsequent thereto, the Company’s outstanding warrants are considered to be common stock equivalents; however, the issued and outstanding warrants are considered anti-dilutive due to the Company’s net operating loss position.

5.
Treasury Stock

The Company accounts for treasury stock acquisitions and sales pursuant to the tenets of the Equity Topic of the FASB Accounting Standards Codification whereby treasury stock acquisitions are first charged against par value and any excess purchase price is first charged to additional paid-in capital and then to retained earnings.  Any subsequent sale of treasury stock is first credited to par value and any excess is credited to additional paid-in capital.

 
9

 

TRUEWEST CORPORATION
(a development stage company)
Notes to Financial Statements - Continued
March 31, 2012 and September 30, 2011


Note D - Summary of Significant Accounting Policies - Continued

6.
Research and development costs

Research and development expenses were charged to operations as incurred.  Patents, Licenses and Marketing Agreements acquired from the Company’s former parent company were charged to operations as acquired.

7.
Pending and/or New Accounting Pronouncements

The Company is of the opinion that any pending accounting pronouncements, either in the adoption phase or not yet required to be adopted, will not have a significant impact on the Company's financial position or results of operations.

Note E - Fair Value of Financial Instruments

The carrying amount of cash, accounts receivable, accounts payable and notes payable, as applicable, approximates fair value due to the short term nature of these items and/or the current interest rates payable in relation to current market conditions.

Interest rate risk is the risk that the Company’s earnings are subject to fluctuations in interest rates on either investments or on debt and is fully dependent upon the volatility of these rates.  The Company does not use derivative instruments to moderate its exposure to interest rate risk, if any.

Financial risk is the risk that the Company’s earnings are subject to fluctuations in interest rates or foreign exchange rates and are fully dependent upon the volatility of these rates.  The company does not use derivative instruments to moderate its exposure to financial risk, if any.

Note F - Note Payable to Officer/Director

On September 29, 2006, the Company and it’s sole officer and director, Glenn A. Little, acknowledged that outside funds are necessary to support the corporate entity and comply with the periodic reporting requirements of the Securities Exchange Act of 1934, as amended.  To this end, Mr. Little agreed to lend the Company up to$50,000 with a maturity period not to exceed two (2) years from the initial funding date at an interest rate of 6.0% per annum.  Through March 31, 2012 and September 30, 2011, respectively, Mr. Little has advanced approximately $79,400 and $69,400 under this agreement.  This loan matured on September 30, 2008 and is currently repayable upon demand.  At this time, Mr. Little has made no demand for payment.

Note G - Income Taxes

The components of income tax (benefit) expense for each of the six months ended March 31, 2012 and 2010 and for the period from July 5, 1989 (date of inception) through March 31, 2012, are as follows:

               
(Unaudited)
 
               
Period from
 
               
July 5, 1989
 
   
Six months
   
Six months
   
(date of inception)
 
   
ended
   
ended
   
through
 
   
March 31,
   
March 31,
   
March 31,
 
   
2011
   
2010
   
2011
 
Federal:
                 
Current
  $     $     $  
Deferred
                 
                   
State:
                       
Current
                 
Deferred
                 
                   
    Total
  $     $     $  

 
10

 

TRUEWEST CORPORATION
(a development stage company)
Notes to Financial Statements - Continued
March 31, 2012 and September 30, 2011


Note G - Income Taxes - Continued

Concurrent with a September 2006 change in control, the Company has a net operating loss carryforward for future periods of approximately $145,000.  The ultimate amount and availability of any future net operating loss carryforwards may be subject to limitations set forth by the Internal Revenue Code. Factors such as the number of shares ultimately issued within a three year look-back period; whether there is a deemed more than 50 percent change in control; the applicable long-term tax exempt bond rate; continuity of historical business; and subsequent income of the Company all enter into the annual computation of allowable annual utilization of the carryforwards.

The Company's income tax expense (benefit) for each of the six months ended March 31, 2012 and 2010 and for the period from July 5, 1989 (date of inception) through March 31, 2012, respectively, differed from the statutory federal rate of 34 percent as follows:

               
(Unaudited)
 
               
Period from
 
               
July 5, 1989
 
   
Six months
   
Six months
   
(date of inception)
 
   
ended
   
ended
   
through
 
   
March 31,
   
March 31,
   
March 31,
 
   
2011
   
2010
   
2011
 
                   
Statutory rate applied to income before income taxes
  $ (2,700 )   $ (2,500 )   $ (16,391,000 )
Increase (decrease) in income taxes resulting from:
                       
State income taxes
                 
Other, including reserve for deferred tax asset
                       
and application of net operating loss carryforward
    2,700       2,500       16,391,000  
                         
    Income tax expense
  $     $     $  

Temporary differences, consisting primarily of statutory deferrals of expenses for organizational costs, statutory differences in the depreciable/amortizable lives for property and equipment and patents and the recognition of expense charges related to the issuance of warrants, between the financial statement carrying amounts and tax bases of assets and liabilities give rise to deferred tax assets and/or liabilities.  As of March 31, 2012 and September 30, 2011, respectively, after taking the September 2006 change in control into consideration:

   
March 31,
   
September 30,
 
   
2012
   
2011
 
Deferred tax assets
           
Net operating loss carryforwards
  $ 49,200     $ 46,500  
Less valuation allowance
    (49,200 )     (46,500 )
                 
    Net Deferred Tax Asset
  $     $  





(Remainder of this page left blank intentionally)

 
11

 

TRUEWEST CORPORATION
(a development stage company)
Notes to Financial Statements - Continued
March 31, 2012 and September 30, 2011


Note H - Stock Warrants

On September 18, 2006, the Company entered into a unit purchase agreement (Unit Purchase Agreement) to sell 1,000 Units to Glenn A. Little (Little) for $125,000 cash.  Each Unit consisted of 11,100 shares of common stock and 500 common stock purchase warrants or an aggregate of 11,100,000 shares of common stock and 500,000 common stock purchase warrants.  There were no commissions or underwriting discounts paid in conjunction with this transaction and the Company believes that the shares and warrants were exempt from registration under Section 4(2) of the Securities Act of 1933 as amended.

On May 1, 2008, a total of 398,800 warrants, including 367,075 warrants held by Glenn A. Little, were exercised at a price of $0.10 per share which resulted in the issuance of 398,800 shares of restricted, unregistered common stock for a gross proceeds of $39,880.  There were no commissions or underwriting discounts paid in conjunction with this transaction and the Company believes that the shares issued upon the exercise of the corresponding warrants were exempt from registration under Section 4(2) of the Securities Act of 1933, as amended.

The common stock purchase warrants can be exercised at any time from their issuance on September 18, 2006 through September 18, 2011 at an exercise price of $0.10 per share.  The Company assigned a value of $5,000 to these warrants.

   
Number of
   
Weighted
 
   
Warrant shares
   
Average Price
 
             
Balance at October 1, 2010
    101,200     $ 0.10  
Issued
           
Exercised
           
Expired
           
                 
Balance at September 30, 2011
    101,200     $ 0.10  
Issued
           
Exercised
           
Expired
           
                 
Balance at March 31, 2012
    101,200     $ 0.10  

Note I - Subsequent Events

Management has evaluated all activity of the Company through April 26, 2012 (the issue date of the financial statements) and concluded that no subsequent events have occurred that would require recognition in the financial statements or disclosure in the notes to financial statements.




(Remainder of this page left blank intentionally)

 
12

 

Part I - Item 2

Management’s Discussion and Analysis of Financial Condition and Results of Operations

(1) Caution Regarding Forward-Looking Information

Certain statements contained in this quarterly filing, including, without limitation, statements containing the words "believes", "anticipates", "expects" and words of similar import, constitute forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.

Such factors include, among others, the following: international, national and local general economic and market conditions: demographic changes; the ability of the Company to sustain, manage or forecast its growth; the ability of the Company to successfully make and integrate acquisitions; raw material costs and availability; new product development and introduction; existing government regulations and changes in, or the failure to comply with, government regulations; adverse publicity; competition; the loss of significant customers or suppliers; fluctuations and difficulty in forecasting operating results; changes in business strategy or development plans; business  disruptions; the ability to attract and retain qualified personnel; the ability to protect technology; and other factors referenced in this and previous filings.

Given these uncertainties, readers of this Form 10-Q and investors are cautioned not to place undue reliance on such forward-looking statements. The Company disclaims any obligation to update any such factors or to publicly announce the result of any revisions to any of the forward-looking statements contained herein to reflect future events or developments.

(2) Background

The Company was initially incorporated as Diasense, Inc. on July 5, 1989 in accordance with the Laws of the Commonwealth of Pennsylvania.

On January 22, 2007, the Company filed Articles of Merger and Plan of Merger with the Commonwealth of Pennsylvania and the State of Nevada to change the Company’s domicile from Pennsylvania to Nevada by means of a merger with and into a Nevada corporation formed on November 3, 2006 solely for the purpose of effecting the reincorporation.  The Articles of Incorporation and Bylaws of the Nevada corporation are the Articles of Incorporation and Bylaws of the surviving corporation.  Such Articles of Incorporation maintained the Company’s corporate name of Diasense, Inc. and modified the Company’s capital structure to allow for the issuance of up to 100,000,000 shares of $0.001 par value common stock and up to 50,000,000 shares of $0.001 par value preferred stock.  Although the merger documents were filed in both Pennsylvania and Nevada on January 22, 2007, the Commonwealth of Pennsylvania required completion of certain documents in order to issue a tax clearance certificate to complete the merger. The required tax clearance was not issued until March 22, 2007 which formally completed the domicile relocation to Nevada.  The effect of this action is reflected in the accompanying financial statements as of the first day of the first period presented.

On March 19, 2008, the Company changed its corporate name to Truewest Corporation.

On August 29, 2006, the Company entered into a Voluntary Surrender Agreement with Dominion whereby all of the Company's assets, which had previously been pledged as collateral to secure loan agreements were repossessed.  Through the date of the Voluntary Surrender Agreement, the Company’s business efforts were focused on developing a noninvasive glucose sensor (Sensor).  The Sensor was proposed to use electromagnetic technology to measure the concentration of glucose in human tissue without requiring the user to take a blood sample.

The Company has never fully or successfully implemented any business plan(s) and, accordingly, is considered to be in the development stage.

The Company’s current business plan is to locate and combine with an existing, privately-held company which is profitable or, in management's view, has growth potential, irrespective of the industry in which it is engaged.  A combination may be structured as a merger, consolidation, exchange of the Company's common stock for stock or assets or any other form which will result in the combined enterprise's becoming a publicly-held corporation.

(3) Plan of Operations

The Company had no revenue for either of the three month periods ended March 31, 2012 and 2011, respectively.

General and administrative expenses of approximately $5,800 and $5,500 for the six  month periods ended March 31, 2012 and 2011, respectively, have been directly related maintaining the corporate entity and maintaining compliance with the Securities Exchange Act of 1934, as amended.  During the quarter ended March 31, 2012, the Company incurred general and administrative expenses of approximately $1,650 and $1,695, respectively.  The Company incurs minor quarterly fluctuations in the expenditure levels based, primarily, in fluctuations in professional fees related to the Company’s periodic filings.

 
13

 

It is anticipated that future expenditure levels may increase as the Company intends to fully comply with it’s periodic reporting requirements.

Earnings per share for the respective six and three month periods ended March 31, 2012 and 2011 were approximately $(0.02), $(0.02), $(0.01) and $(0.01), respectively, based on the weighted-average shares issued and outstanding at the end of each respective period.

The Company does not expect to generate any meaningful revenue or incur operating expenses for purposes other than fulfilling the obligations of a reporting company under the Securities Exchange Act of 1934 unless and until such time that the Company’s operating subsidiary begins meaningful operations.

(4) Plan of Business

General

The Company intends to locate and combine with an existing, privately-held company which is profitable or, in management's view, has growth potential, irrespective of the industry in which it is engaged.  However, the Company does not intend to combine with a private company which may be deemed to be an investment company subject to the Investment Company Act of 1940.  A combination may be structured as a merger, consolidation, exchange of the Company's common stock for stock or assets or any other form which will result in the combined enterprise's becoming a publicly-held corporation.

Pending negotiation and consummation of a combination, the Company anticipates that it will have, aside from carrying on its search for a combination partner, no business activities, and, thus, will have no source of revenue.  Should the Company incur any significant liabilities prior to a combination with a private company, it may not be able to satisfy such liabilities as are incurred.

If the Company's management pursues one or more combination opportunities beyond the preliminary negotiations stage and those negotiations are subsequently terminated, it is foreseeable that such efforts will exhaust the Company's ability to continue to seek such combination opportunities before any successful combination can be consummated.  In that event, the Company's common stock will become worthless and holders of the Company's common stock will receive a nominal distribution, if any, upon the Company's liquidation and dissolution.

Combination Suitability Standards

In its pursuit for a combination partner, the Company's management intends to consider only combination candidates which are profitable or, in management's view, have growth potential.  The Company's management does not intend to pursue any combination proposal beyond the preliminary negotiation stage with any combination candidate which does not furnish the Company with audited financial statements for at least its most recent fiscal year and unaudited financial statements for interim periods subsequent to the date of such audited financial statements, or is in a position to provide such financial statements in a timely manner.  The Company will, if necessary funds are available, engage attorneys and/or accountants in its efforts to investigate a combination candidate and to consummate a business combination.  The Company may require payment of fees by such combination candidate to fund the investigation of such candidate.  In the event such a combination candidate is engaged in a high technology business, the Company may also obtain reports from independent organizations of recognized standing covering the technology being developed and/or used by the candidate.  The Company's limited financial resources may make the acquisition of such reports difficult or even impossible to obtain and, thus, there can be no assurance that the Company will have sufficient funds to obtain such reports when considering combination proposals or candidates.  To the extent the Company is unable to obtain the advice or reports from experts, the risks of any combined enterprise's being unsuccessful will be enhanced.  Furthermore, to the knowledge of the Company's officers and directors, neither the candidate nor any of its directors, executive officers, principal stockholders or general partners:

(1)  
will have been convicted of securities fraud, mail fraud, tax fraud, embezzlement, bribery, or a similar criminal offense involving misappropriation or theft of funds, or be the subject of a pending investigation or indictment involving any of those offenses;

(2)  
will have been subject to a temporary or permanent injunction or restraining order arising from unlawful transactions in securities, whether as issuer, underwriter, broker, dealer, or investment  advisor,  may be the  subject of any  pending investigation or a defendant in a pending lawsuit arising from or based upon allegations of unlawful transactions in securities; or

 
14

 

(3)  
will have been a defendant in a civil action which resulted in a final judgement against it or him awarding damages or rescission based upon unlawful practices or sales of securities.

The Company's officers and directors will make these determinations by asking pertinent questions of the management of prospective combination candidates.  Such persons will also ask pertinent questions of others who may be involved in the combination proceedings.  However, the officers and directors of the Company will not generally take other steps to verify independently information obtained in this manner which is favorable.  Unless something comes to their attention which puts them on notice of a possible disqualification which is being concealed from them, such persons will rely on information received from the management of the prospective combination candidate and from others who may be involved in the combination proceedings.

(5) Liquidity and Capital Resources

At September 30, 2011 and December 31, 2010, the Company had a working capital deficit of approximately $(1,219,000) and $(1,126,000), respectively.  Included in this working capital deficit are loans and accrued interest payable to the Company’s controlling stockholder aggregating approximately $1,216,000 and $1,126,000, respectfully, at September 30, 2011 and December 31, 2010.

It is the belief of management and significant stockholders that, should the need arise, they will provide sufficient working capital necessary to support and preserve the integrity of the corporate entity.  However, there is no legal obligation for either management or significant stockholders to provide additional future funding.  Further, the Company is at the mercy of future economic trends and business operations for the Company’s majority stockholder to have the resources available to support the Company.  Should this pledge fail to provide financing, the Company has not identified any alternative sources.  Consequently, there is substantial doubt about the Company's ability to continue as a going concern.

The Company's need for working capital may change dramatically as a result of any business acquisition or combination transaction.  There can be no assurance that the Company will identify any such business, product, technology or company suitable for acquisition in the future.  Further, there can be no assurance that the Company would be successful in consummating any acquisition on favorable terms or that it will be able to profitably manage the business, product, technology or company it acquires.

The Company has no current plans, proposals, arrangements or understandings with respect to the sale or issuance of additional securities prior to the location of a merger or acquisition candidate.  Accordingly, there can be no assurance that sufficient funds will be available to the Company to allow it to cover the expenses related to such activities.

Regardless of whether the Company’s cash assets prove to be inadequate to meet the Company’s operational needs, the Company might seek to compensate providers of services by issuances of stock in lieu of cash.

(6) Critical Accounting Policies

Our financial statements and related public financial information are based on the application of accounting principles generally accepted in the United States (“GAAP”).  GAAP requires the use of estimates; assumptions, judgments and subjective interpretations of accounting principles that have an impact on the assets, liabilities, revenue and expense amounts reported.  These estimates can also affect supplemental information contained in our external disclosures including information regarding contingencies, risk and financial condition.  We believe our use of estimates and underlying accounting assumptions adhere to GAAP and are consistently and conservatively applied.  We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances.  Actual results may differ materially from these estimates under different assumptions or conditions. We continue to monitor significant estimates made during the preparation of our financial statements.

Our significant accounting policies are summarized in Note D of our financial statements.  While all these significant accounting policies impact our financial condition and results of operations, we view certain of these policies as critical. Policies determined to be critical are those policies that have the most significant impact on our financial statements and require management to use a greater degree of judgment and estimates.  Actual results may differ from those estimates. Our management believes that given current facts and circumstances, it is unlikely that applying any other reasonable judgments or estimate methodologies would cause effect on our consolidated results of operations, financial position or liquidity for the periods presented in this report.

(7) Effect of Climate Change Legislation

The Company currently has no known or identified exposure to any current or proposed climate change legislation which could negatively impact the Company’s operations or require capital expenditures to become compliant.  Additionally, any currently proposed or to-be-proposed-in-the-future legislation concerning climate change activities, business operations related thereto or a publicly perceived risk associated with climate change could, potentially, negatively impact the Company’s efforts to identify an appropriate target company which may wish to enter into a business combination transaction with the Company.

 
15

 

Item 3 - Quantitative and Qualitative Disclosures About Market Risk

In future periods, the Company may become subject to certain market risks, including changes in interest rates and currency exchange rates.  At the present time, the Company has no identified exposure and does not undertake any specific actions to limit exposures, if any.

Item 4 - Controls and Procedures

Disclosure Controls and Procedures.  Our management, under the supervision and with the participation of our Chief Executive and Financial Officer (Certifying Officer), has evaluated the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15 promulgated under the Exchange Act as of the end of the period covered by this Quarterly Report.  Disclosure controls and procedures are controls and procedures 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 Commission’s rules and forms and include controls and procedures designed to ensure that information we are required to disclose in such reports is accumulated and communicated to management, including our Certifying Officer, as appropriate, to allow timely decisions regarding required disclosure.  Based upon that evaluation, our Certifying Officer concluded that as of such date, our disclosure controls and procedures were not effective to ensure that the information required to be disclosed by us in our reports is recorded, processed, summarized and reported within the time periods specified by the SEC due to a weakness in our controls more fully disclosed in our Annual Report on Form 10-K.  However, our Certifying Officer believes that the financial statements included in this report fairly present, in all material respects, our financial condition, results of operations and cash flows for the respective periods presented.

Changes in Internal Control over Financial Reporting.  There was no change in our internal control over financial reporting that occurred during the quarter ended March 31, 2012 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting which internal controls will remain deficient until such time as the Company completes a merger transaction or acquisition of an operating business at which time management will be able to implement effective controls and procedures.

Part II - Other Information

Item 1 - Legal Proceedings

None

Item 2 - Sales of Equity Securities and Use of Proceeds

None

Item 3 - Defaults upon Senior Securities

None

Item 4 - (Removed and Reserved)

Item 5 - Other Information

None

Item 6 - Exhibits
 
31.1 Certification pursuant to Section 302 of Sarbanes-Oxley Act of 2002
 
32.1 Certification pursuant to Section 906 of Sarbanes-Oxley Act of 2002
 
101 Interactive data files pursuant to Rule 405 of Regulation S-T.

 
16

 

SIGNATURES

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

   
Truewest Corporation
     
     
Dated: April 26, 2012 
 
/s/ Glenn A. Little
   
Glenn A. Little
   
President, Chief Executive Officer,
   
Chief Financial Officer and Sole Director


 
17

 

XOTC:TRWS Quarterly Report 10-Q Filling

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

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XOTC:TRWS Quarterly Report 10-Q Filing - 3/31/2012
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