CYBERMESH INTERNATIONAL CORP. - FORM 10-Q

Attached files

file	filename
EX-32 - EXHIBIT 32 - CYBERMESH INTERNATIONAL CORP.	ex32.htm
EX-31 - EXHIBIT 31 - CYBERMESH INTERNATIONAL CORP.	ex31.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended August 31, 2011

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: 000-52207

CYBERMESH INTERNATIONAL CORP.

(Exact name of registrant as specified in its charter)

NEVADA	98-0512139
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

2517 Indian Farm Lane NW, Albequerque, NM	87107
(Address of principal executive offices)	(Zip Code)

(888) 597-8899

(Registrant’s telephone number, including area code)

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate 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 o 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.

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 Exchange Act). Yes x No o

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:

Class		Outstanding on November 22, 2011
Common Stock, $0.001 par value		21,985,400

INDEX

PART I.	FINANCIAL INFORMATION

Item 1.	Consolidated Financial Statements	3
	Consolidated Balance Sheets – May 31, 2011 (Audited) and August 31, 2011 (Unaudited)	3
	Consolidated Statements of Operations - For the Three Month Periods Ended August 31, 2011 and 2010 (Unaudited)	4
	Consolidated Statements of Cash Flows - For the Three Month Periods Ended August 31, 2011 and 2010 (Unaudited)	5
	Notes to Consolidated Financial Statements (Unaudited)	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	18
Item 4.	Controls and Procedures	18

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings
Item 1A.	Risk Factors	18
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	18
Item 3.	Defaults upon Senior Securities	18
Item 4.	[Removed and Reserved]	18
Item 5.	Other Information	18
Item 6.	Exhibits	18
	Signatures	19

Cybermesh International Corp. and Subsidiary
(A Development Stage Company)
Consolidated Balance Sheets

Assets

	August 31, 2011			May 31, 2011
	(Unaudited)
Current Assets
Cash	$	2,657		$	-
Total Current Assets		2,657			-

Total Assets	$	2,657		$	-

Liabilities and Stockholders’ Deficit

Current Liabilities
Accounts payable and accrued liabilities	$	85,367		$	24,297
Convertible debt - net		23,296			1,117
Total Current Liabilities		108,663			25,414

Stockholders’ Deficit
Common stock ($0.001 par value, 200,000,000 shares authorized,
authorized; 21,985,400 shares issued and outstanding)		21,985			21,985
Additional paid in capital		831,868			565,168
Deficit accumulated during the development stage		(930,580	)		(583,288	)
Deficit accumulated prior to the development stage		(29,279	)		(29,279	)
Total Stockholders’ Deficit		(106,006	)		(25,414	)

Total Liabilities and Stockholders’ Deficit	$	2,657		$	-

See accompanying notes to consolidated financial statements

Cybermesh International Corp. and Subsidiary
(A Development Stage Company)
Consolidated Statements of Operations
(Unaudited)

	Three Months Ended August 31,						August 27, 2008 (inception) to
	2011			2010			August 31, 2011

General and administrative expenses	$	323,630		$	16,294		$	884,137

Interest expense		2,714			-			25,495
Loss on extinguishment of debt		2,948			-			2,948
Loss from joint venture		18,000			-			18,000

Net loss	$	(347,292	)	$	(16,294	)	$	(930,580	)

Net loss per common share - basic and diluted	$	(0.02	)	$	(0.00	)	$	(0.14	)

Weighted average number of common shares outstanding
during the period - basic and diluted		21,985,400			8,373,674			6,776,809

See accompanying notes to consolidated financial statements

Cybermesh International Corp. and Subsidiary
(A Development Stage Company)
Consolidated Statements of Cash Flows
(Unaudited)

	Three Months Ended August 31,						August 27, 2008 (inception) to
	2011			2010			August 31, 2011

CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(347,292	)	$	(16,294	)	$	(930,580	)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of debt discount		2,431			-			3,548
Interest forgiven under debt settlement		-			-			3,500
Impairment expense		-			-			100,000
Warrants issued in connection with formation of joint venture		250,000			-			250,000
Loss on extinguishment of debt		2,948			-			2,948
Loss from joint venture		18,000			-			18,000
(Increase)/Decrease in:
Deposits		-			-			-
Increase/(Decrease) in:
Accounts payable and accrued liabilities		61,070			6,037			187,275
Net Cash Used In Operating Activities		(12,843	)		(10,257	)		(365,309	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Cash paid in connection with formation of joint venture		(18,000	)		-			(18,000	)
Net Cash Used in Investing Activities		(18,000	)		-			(18,000	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of stock units, net		-			-			272,500
Proceeds from convertible debt		33,500			-			40,500
Proceeds from debt		-			10,234			127,835
Repayment of debt		-			-			(55,222	)
Net Cash Provided By Financing Activities		33,500			10,234			385,613

Net Increase (Decrease) in Cash		2,657			(23	)		2,304

Cash - Beginning of Period		-			3,935			353

Cash - End of Period	$	2,657		$	3,912		$	2,657

Supplemental Disclosure of Cash Flow Information
Cash Paid During the Period for:
Income Taxes	$	-		$	-		$	-
Interest	$	-		$	-		$	-

Supplemental Disclosure of Non Cash Investing and Financing Activities:

Debt discount - beneficial conversion feature	$	16,700		$	-		$	16,700
Debt forgiveness	$	-		$	-		$	75,838
Issuance of common stock for settlement of debt	$	-		$	-		$	118,671
Issuance of common stock for settlement of convertible debt	$	-		$	-		$	100,000

See accompanying notes to consolidated financial statements

Cybermesh International Corp. and Subsidiary

(A Development Stage Company)

Notes to Consolidated Financial Statements

August 31, 2011

Unaudited

Note 1 Basis of Presentation

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

The unaudited interim consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K, which contains the audited consolidated financial statements and notes thereto, together with the Management’s Discussion and Analysis, for the years ended May 31, 2011 and 2010. The interim results for the period ended August 31, 2011 are not necessarily indicative of results for the full fiscal year.

Note 2 Nature of Operations

Cybermesh International, Corp (the “Company”) was incorporated in the State of Nevada on September 27, 2004. The Company is located in Albuquerque NM and intends to engage in entertainment distribution and copyright protection services. See note 8.

Effective August 2008, the Company completed an acquisition of Omni Research Corporation. The name of the company was subsequently changed to Cybermesh Systems Inc. (“CMS Belize”). CMS Belize is a company incorporated under the laws of Belize in August 2008 and prior to being acquired; it had no prior operating history and no assets, liabilities or equity. CMS Belize is currently inactive.

On January 18, 2011, in a private transaction, an LLC acquired approximately 99% of the control shares. The change in control shareholder is not treated as a reverse recapitalization.

The Company is currently in the development stage and intends to raise additional debt and equity based financing, while trying to implement its business plan.

The Company’s fiscal year end is May 31.

Note 3 Summary of Significant Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

Cybermesh International Corp. and Subsidiary

(A Development Stage Company)

Notes to Consolidated Financial Statements

August 31, 2011

Unaudited

Such estimates for the period ended August 31, 2011 and 2010, and assumptions affect, among others, the following:

●estimated fair value of share based payments; and

●estimated valuation allowance for deferred tax assets, due to continuing and expected future losses

Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from estimates.

Risks and Uncertainties

The Company's operations are subject to risk and uncertainties including financial, operational, regulatory and other risks including the potential risk of business failure.

Investment in Joint Venture

The Company has entered into a Joint Venture with a third party to engage in the business of exploiting proprietary software designed to recapture royalties for unauthorized computer downloads of copyrighted material on the internet. The Company owns fifty percent of the joint venture and has recorded its investment on the equity basis of accounting. The Company’s proportionate share of expenses incurred by the Joint Venture is charged to the statement of operations and adjusted against the Investment in Joint Venture. Losses from the Joint Venture are only recognized until the investment in the Joint Venture is reduced to zero. Losses in excess of the investment must be restored from future profits before the Company can recognize its proportionate share of profits.

Beneficial Conversion Feature

For convertible debt issued in 2011, the convertible feature (See Note 5) indicated a rate of conversion that was below market value. As a result, the Company recorded a "beneficial conversion feature" ("BCF") and related debt discount.

When the Company records a BCF, the relative fair value of the BCF would be recorded as a debt discount from the face amount of the respective debt instrument. The discount would be amortized to interest expense over the life of the debt.

Cybermesh International Corp. and Subsidiary

(A Development Stage Company)

Notes to Consolidated Financial Statements

August 31, 2011

Unaudited

Debt Discount

These items are amortized over the life of the debt to interest expense. If a conversion, extinguishment or repayment of the underlying debt occurs, a proportionate share of these amounts is expensed.

Fair Value of Financial Instruments

Fair value is the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact business and considers assumptions that marketplace participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance.

The guidance also establishes a fair value hierarchy for measurements of fair value as follows:

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

●

Level 2 - inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

●	Level 3 – unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The Company's financial instruments generally approximate their fair values as of August 31, 2011 and May 31, 2011 due to the short-term nature of these instruments.

Share-based payments

Generally, all forms of share-based payments, including stock option grants, warrants, restricted stock grants and stock appreciation rights are measured at their fair value on the awards’ grant date, based on estimated number of awards that are ultimately expected to vest. Share-based compensation awards issued to non-employees for services rendered are recorded at either the fair value of the services rendered or the fair value of the share-based payment, whichever is more readily determinable.

Cybermesh International Corp. and Subsidiary

(A Development Stage Company)

Notes to Consolidated Financial Statements

August 31, 2011

Unaudited

Earnings per share

Basic earnings (loss) per share is computed by dividing net income (loss) by weighted average number of shares of common stock outstanding during each period. Diluted earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during the period. The Company has the following dilutive securities:

Warrants: 5,000,000

Since the Company had a net loss for the period, the effect of dilution associated with these common stock equivalents would be anti-dilutive, as a result, basic and diluted loss per share are equivalent.

Income Taxes

Provisions for federal and state income taxes are calculated based on reported pre-tax earnings and current tax law.

Significant judgment is required in determining income tax provisions and evaluating tax positions. The Company periodically assess its liabilities and contingencies for all periods that are currently open to examination or have not been effectively settled based on the most current available information. When it is not more likely than not that a tax position will be sustained, the Company records its best estimate of the resulting tax liability and any applicable interest and penalties in the consolidated financial statements.

Deferred tax assets and liabilities are recorded for temporary differences between the tax basis of assets and liabilities and their reported amounts in the consolidated financial statements using statutory rates in effect for the year in which the differences are expected to reverse. The Company presents the tax effects of these deferred tax assets and liabilities separately for each major tax jurisdiction.

The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that the changes are enacted. The Company records a valuation allowance to reduce deferred tax assets when it is more likely than not that some portion of the asset may not be realized. The Company evaluates its deferred tax assets and liabilities on a periodic basis.

Recent Accounting Pronouncements

There are no recent accounting pronouncements that are expected to have an effect on the Company’s consolidated financial statements.

Cybermesh International Corp. and Subsidiary

(A Development Stage Company)

Notes to Consolidated Financial Statements

August 31, 2011

Unaudited

Note 4 Going Concern

As reflected in the accompanying consolidated financial statements, the Company has a net loss of $347,292 and net cash used in operations of $12,843 for the three months ended August 31, 2011; and a working capital deficit and stockholders’ deficit of $106,006 at August 31, 2011. The Company is in the development stage and has not generated any revenues.

The ability of the Company to continue as a going concern is dependent on Management's plans, which include potential asset acquisitions, mergers or business combinations with other entities, further implementation of its business plan and continuing to raise funds through debt or equity raises. The Company will likely rely upon related party debt or equity financing in order to ensure the continuing existence of the business.

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

Note 5 Debt

(A)	Loans Payable

Fiscal Year End May 31, 2008

In connection with a transaction that occurred in 2008, the Company issued a convertible note for $100,000. Maturity of the note had various provisions, one of which was termination. On August 22, 2008, the note became due on demand.

On January 19, 2011, the Company converted the $100,000 demand note at $0.01/share, for 10,000,000 shares of common stock. There was no gain or loss recorded upon conversion.

Fiscal Year End May 31, 2009

The Company received advances of $86,697 from a third party. The advances were unsecured, bore interest at 6%, and were due on demand. The Company repaid $30,222.

The Company received advances of $36,500 from shareholders. The advances were unsecured, non-interest bearing and were due on demand. The Company repaid $25,000.

Fiscal Year End May 31, 2010

The Company received advances of $4,638 from a third party. The advances were unsecured, bore interest at 6%, and were due on demand. As of May 31, 2011, the debt was converted into shares of common stock and was included in the total conversion of $118,671 discussed in the subsequent paragraph.

Cybermesh International Corp. and Subsidiary

(A Development Stage Company)

Notes to Consolidated Financial Statements

August 31, 2011

Unaudited

Fiscal Year End May 31, 2011

In June 2010, the Company converted $118,671 in debt and accrued liabilities due to related parties at $0.01/share, into 11,867,100 shares of common stock. There was no gain or loss recorded upon conversion.

During the year ended May 31, 2011, debt and accrued liabilities with related parties totaling $75,838 was forgiven and charged to additional paid in capital.

In April 2011, the Company received advances of $7,000 in connection with the Equity Line Financing Agreement (see Note 6). The advances bears interest at 6% and are due within 1 year from the date the agreement was executed. The advances and accrued interest may be converted into common stock at a price of $0.05/share. The conversion price was modified to $0.02/share (see Note 6).

Three Months Ended August 31, 2011

On August 25, 2011, the Company amended the Equity Line Financing Agreement that it entered into on March 28, 2011. The purchase price for the common stock was reduced from $0.05/share to $0.02/share, and the number of shares available for sale was increased from 20,000,000 to 30,000,000. The amended Agreement terminates on August 25, 2012, upon maximum investment, or upon earlier termination as stated in the Agreement.

On the commitment date (March 28, 2011), the Company had already recognized a BCF of $7,000, and recorded amortization of $1,117 for the year ended May 31, 2011. The reduction in exercise price did not affect the accounting for these debt issuances as the Company had recorded the maximum debt discount, as a result, the application of extinguishment accounting would not be necessary.

During the three months ended August 31, 2011, the Company received advances of $33,500. These advances bear interest at 6% and are due on August 25, 2012. These advances and accrued interest may be converted into common stock at a price of $0.02/ share based upon the modification of exercise price discussed above. Of the $33,500 advanced, $21,000 originally had the $0.05/share exercise price.

Included in the $21,000 discussed above, for $20,000 of the debt, the Company determined that since the exercise price of the debt was reduced from $0.05/share to $0.02/share, this effectively represented debt instruments being exchanged with substantially different terms and applied debt extinguishment accounting, resulting in a $2,948 loss on extinguishment of debt, determined as follows:

Cybermesh International Corp. and Subsidiary

(A Development Stage Company)

Notes to Consolidated Financial Statements

August 31, 2011

Unaudited


Face amount of new debt	$	20,000
Face amount of original debt		(20,000	)
BCF recorded as debt discount – original debt		(3,200	)
Amortization of BCF to interest expense – prior to extinguishment		252
Loss on extinguishment of debt	$	2,948

The Company compared the BCF recorded as a debt discount of both the old and new debt. The Company determined that the BCF recorded as a debt discount associated with the new debt instruments exceeded the BCF recorded as a debt discount of the old debt instruments by more than 10%. As such, extinguishment accounting was used. Because of no new proceeds being raised in connection with this modification, no additional debt discount was recorded; however, the previously unamortized debt discount was amortized in full.

In the three months ended August 31, 2011, the Company recognized a BCF of $16,700 (prior to modification), and recorded amortization of $2,431.

The following is a summary of the Company’s convertible debt at August 31, 2011:

	August 31, 2011			May 31, 2011
Debt issued (face value)	$	40,500		$	7,000
BCF recorded as debt discount		(23,700	)		(7,000	)
Debt discount written off related to extinguishment of debt		2,948			-
Amortization – May 31, 2011		1,117			-
Amortization - August 31, 2011		2,431			1,117
Net carrying amount of convertible debt	$	23,296		$	1,117

Note 6 Equity Agreement

Cybermesh International Corp. and Subsidiary

(A Development Stage Company)

Notes to Consolidated Financial Statements

August 31, 2011

Unaudited

Note 7 Stockholders’ Deficit

Fiscal Year End May 31, 2009 and prior

In September 2008, the Company sold 5,800 units for $290,000. Each unit consisted of 1 share of common stock and 1 warrant. The warrants were exercisable for 2 years, and expired in September 2010.

						Weighted
				Weighted		Average
				Average		Remaining
				Exercise		Contractual	Intrinsic
	Warrants			Price		Life in Years	Value

Balance - 5/31/10		5,800		$	100
Granted		-			-
Forfeited/Cancelled		(5,800	)		-
Exercised		-			-
Balance - 5/31/11 - outstanding		-			-	-
Balance - 5/31/11 - exercisable		-		$	-	-	-

Fiscal Year End May 31, 2010

In August 2009, the Company executed a reverse stock split resulting in 15,000,000 shares issued and outstanding be restated to 118,300 shares. All share and per share amounts prior to the stock split have been retroactively restated.

Fiscal Year End May 31, 2011

On June 28, 2010, the Company increased its authorized common shares from 15,000,000 to 200,000,000.

Cybermesh International Corp. and Subsidiary

(A Development Stage Company)

Notes to Consolidated Financial Statements

August 31, 2011

Unaudited

Warrants

The following is a summary of the Company’s warrant activity:

					Weighted
			Weighted		Average
			Average		Remaining
			Exercise		Contractual		Intrinsic
	Warrants		Price		Life in Years		Value
Balance - 5/31/11 - outstanding		-		-		-		-
Balance - 5/31/11 - exercisable		-		-		-		-
Granted		5,000,000		0.001		9.97
Forfeited/Cancelled		-		-
Exercised		-		-
Balance - 8/31/11 - outstanding		5,000,000	$	0.001		9.97	$	245,000
Balance - 8/31/11 - exercisable		5,000,000	$	0.001		9.97	$	245,000

Note 8 Joint Venture

On August 16, 2011, the Company entered into an agreement to form a Joint Venture (“JV”).

The JV intends to engage in the business of exploiting proprietary software designed to recapture royalties for unauthorized computer downloads of copyrighted material on the Internet. The other party will exclusively license software to the JV and the Company will contribute $500,000 to the JV. Each company will own 50% of the JV.

Additionally, the Company granted 10-year warrants to the other party, as consideration for the formation of the JV, to purchase 5,000,000 shares of the Company’s common stock at an exercise price of $0.001 per share. All warrants were fully vested on the grant date.

The warrants have a fair value of $250,000, based upon the black-scholes option-pricing model. The Company used the following weighted average assumptions:

Expected dividends		0%
Expected volatility		240%
Expected term		10 year
Risk free interest rate		2.23%

Cybermesh International Corp. and Subsidiary

(A Development Stage Company)

Notes to Consolidated Financial Statements

August 31, 2011

Unaudited

The Company has accounted for its investment in the JV using the equity method of accounting. During the three months ended August 31, 2011, the Company contributed $18,000 to fund JV related expenses. The JV’s year-to-date expenses were $39,130 of which the Company’s share of $19,565 has been reflected in the accompanying statement of operations as the proportionate share of losses from the JV, but is limited to the Company’s total investment of $18,000 since losses are only recognized to the extent of the investment in the JV. The JV has not yet been formed; however, the Company has paid expenses as if the JV had been formed.

Note 9 Commitments

Employment Agreements – Chief Executive Officer and Secretary

In January 2011, the Company executed employment agreements containing the following provisions:

Term of contract	3 years
Salary	$24,000 - $120,000
Salary deferral	All salaries commenced on June 15, 2011, the date the Company received its initial funding.

Currently, the Company is accruing the salary until cash flows improve. As of August 31, 2011, $32,977 is included in accounts payable and accrued liabilities.

Note 10 Subsequent Events

In September, October and November of 2011, the Company received advances of $58,600. The advances bear interest at 6% and are due on August 25, 2012. The advances and accrued interest may be converted into common stock at a price of $0.02/ share. The Company is determining the value of the related BCF.

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Cautionary Notice Regarding Forward Looking Statements

We desire to take advantage of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. This filing contains a number of forward-looking statements which reflect management’s current views and expectations with respect to our business, strategies, products, future results and events, and financial performance. All statements made in this filing other than statements of historical fact, including statements addressing operating performance, events, or developments which management expects or anticipates will or may occur in the future, including statements related to revenues, profitability, new products, adequacy of funds from operations, statements expressing general optimism about future operating results, and non-historical information, are forward looking statements. In particular, the words “believe,” “expect,” “intend,” “anticipate,” “estimate,” “may,” variations of such words, and similar expressions identify forward-looking statements, but are not the exclusive means of identifying such statements, and their absence does not mean that the statement is not forward-looking. These forward-looking statements are subject to certain risks and uncertainties, including those discussed below. Our actual results, performance or achievements could differ materially from historical results as well as those expressed in, anticipated, or implied by these forward-looking statements. We do not undertake any obligation to revise these forward-looking statements to reflect any future events or circumstances.

Readers should not place undue reliance on these forward-looking statements, which are based on management’s current expectations and projections about future events, are not guarantees of future performance, are subject to risks, uncertainties and assumptions (including those described below), and apply only as of the date of this filing. Our actual results, performance or achievements could differ materially from the results expressed in, or implied by, these forward-looking statements. Factors which could cause or contribute to such differences include, but are not limited to, the risks discussed in our prior SEC filings, including our Annual Report on Form 10-K for the fiscal year ended May 31, 2011, as amended, and in the press releases and other communications to shareholders issued by us from time to time which attempt to advise interested parties of the risks and factors which may affect our business. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

Current Business

On August 16, 2011, Cybermesh International Corp. (“we” or the “Company”) entered into a Joint Venture Agreement (“Agreement”) with ContentX Technologies, LLC, a California limited liability company (“ContentX”), whereby the parties will create a joint venture Nevada limited liability company with the name CTX/CYTL, LLC (“Joint Venture”). The Joint Venture will engage in the business of exploiting ContentX’s proprietary software (“Software”) designed to recapture royalties for unauthorized computer downloads of copyrighted material on the Internet.

Pursuant to the terms of the amended Agreement, ContentX has exclusively licensed the Software to the Joint Venture and we shall contribute $500,000 to the Joint Venture, and each party shall own 50% of the Joint Venture. Additionally, we shall issue to ContentX a warrant to purchase 5,000,000 shares of Company common stock at an exercise price per share of $0.001.

We are in the process of raising our $500,000 capital contribution for the Joint Venture. The Joint Venture has not yet been formed.

Critical Accounting Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. The application of GAAP involves the exercise of varying degrees of judgment. The resulting accounting estimates will not always precisely equal the related actual results. Management considers an accounting estimate to be critical if:

• assumptions are required to be made; and

• changes in estimates could have a material effect on our consolidated financial statements.

We have determined that the calculation of the fair value of equity securities issued for services and the estimated valuation allowance for deferred tax assets, due to continuing and expected future losses meet those criteria of a significant estimate. See Note 3 of the consolidated financial statements.

Plan of Operation

The Company’s plan of operation is to build the Joint Venture with ContentX in the entertainment industry, which plans to secure contracts with copyright holders to convert illegal file sharers into paying customers. The Company is also looking at opportunities with niche demographics in the media space.

Results of Operations

Three Months Ended August 31, 2011 Compared to 2010

Revenues

We generated no revenues from our operations for the three months ended August 31, 2011 and 2010 or since inception. We cannot determine at this time when we will be in a position to generate revenues.

Expenses

Our total general and administration expenses were $323,630 for the three months ended August 31, 2011 compared to $16,294 for the same period ended August 31, 2010. The increase is primarily due to an increase in professional fees in the amount of $18,680, transfer agent fees of $5,375, officer payroll of $30,000, which commenced during this quarter after the company received initial debt funding, a loss on earnings from Joint Venture of $18,000 and expenses related to warrants issued of $250,000. Expenses incurred were to sustain operations at basic minimal levels until such time where we start generating revenue from the joint venture.

Liquidity and Capital Resources

As of August 31, 2011, we had cash of $2,657; and a negative working deficit of $106,006. Based on current operations, over the next 12 months, the Company will require approximately $360,000 to sustain operations at basic minimal levels.

The Company is in the development stage, has not yet generated any revenues and has an accumulated deficit prior to the development stage of $29,279 and an accumulated deficit during the development stage of $930,580 at August 31, 2011. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern.

The ability of the Company to continue its operations is dependent on the successful execution of management's plans, which include generating revenue from the joint venture and draw downs from the equity line agreement both of which are noted in the notes to the consolidated financial statements, and with some additional funding from other traditional financing sources, including term notes, until such time that funds provided by operations are sufficient to fund working capital requirements.

In June 2010, $ 118,671 of our current liabilities consisting of shareholder and consultant loans and related interest were settled by issuance of 11,867,100 common shares at $ 0.01. There was no gain or loss in debt settlement. On January 19, 2011 the Company converted the $100,000 demand note, at $0.01/share, into 10,000,000 shares of common stock.

Cash used in operating activities

Cash used in operating activities for the three months ended August 31, 2011 and 2010 was $12,843 and $10,257, respectively.

From August 27, 2008 to August 31, 2011, we used net cash of $365,309 in operating activities.

Cash used in investing activities

Cash used in investing activities for the three months ended August 31, 2011 and 2010 was $18,000 and $0, respectively.

From August 27, 2008 to August 31, 2011, we used net cash of $18,000 in investing activities.

Cash used in investing activities related to the payment of expenses for the JV. See note 8 of the consolidated financial statements.

Cash flow from financing activities

Cash provided by financing activities for the three months ended August 31, 2011 and 2010 was $33,500 and $10,234, respectively. The increase is primarily due to advances from our equity line.

From August 27, 2008 to August 31, 2011, we received $385,613 through financing activities; $272,500 from the net sale of our common shares and warrants and $113,113 in net proceeds from debt.

Material Commitments

On August 16, 2011, we executed a Joint Venture Agreement with a California limited liability company whereby both companies will create a joint venture Nevada limited liability company. Pursuant to the terms of the agreement, we will contribute $500,000 and grant 10-year fully vested warrants to purchase 5,000,000 shares of our company’s common stock at $0.001/share, in exchange for 50% ownership of the joint venture. As of August 31, 2011, the joint venture was not formed.

Off Balance Sheet Arrangements

We have no off balance sheet arrangements.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Not applicable.

Item 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures. Our management has evaluated, under the supervision and with the participation of our chief executive officer and chief financial officer, the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report pursuant to Rule 13a-15(b) and 15d-15 under the Securities Exchange Act of 1934 (the “Exchange Act”). Based on that evaluation, our chief executive officer and chief financial officer have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures are effective in ensuring that information required to be disclosed in our Exchange Act reports is (1) recorded, processed, summarized and reported in a timely manner, and (2) accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting. There have been no changes in our internal control over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings. - None

Item 2. Unregistered 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.

Exhibit Number		Description of Document

31*		Certification of Chief Executive Officer/Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32 *		Certification of Chief Executive Officer/ Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 USC. Section 1350).
*		Filed herewith.

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.

Date: November 22, 2011		CYBERMESH INTERNATIONAL CORP

		/s/ John Samuel Porter

		John Samuel Porter
		Chief Executive Officer, Chief Financial Officer, Director

CYBERMESH INTERNATIONAL CORP. - FORM 10-Q - November 22, 2011

Attached files

CYBERMESH INTERNATIONAL CORP. Reports