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EXCEL - IDEA: XBRL DOCUMENT - Ambient Water Corp | Financial_Report.xls |
EX-31 - CERTIFICATION - Ambient Water Corp | ex31a.htm |
EX-32 - CERTIFICATION - Ambient Water Corp | ex32b.htm |
EX-31 - CERTIFICATION - Ambient Water Corp | ex31b.htm |
EX-32 - CERTIFICATION - Ambient Water Corp | ex32a.htm |
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period ended March 31, 2012
OR
[ ] 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: 333-141927
MIP SOLUTIONS, INC.
(Exact name of registrant as specified in its charter)
NEVADA |
| 20-4047619 |
(State or other jurisdiction of incorporation) |
| (IRS Employer Identification No.) |
7721 East Trent Ave. Spokane Valley, WA |
| 99212 |
(Address of principal executive offices) |
| (Zip Code) |
(916) 293-6337
(Issuer's telephone number, including area code)
Indicate by check mark 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 at least the past 90 days. Yes [X] No [ ]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (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 [ ]
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:
Large accelerated filer [ ] | Accelerated filer [ ] |
Non-accelerated filer [ ] | Smaller reporting company [X] |
Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act.)
Yes [ X ] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: May 15, 2012 there were 30,945,275 shares of the Companys common stock were issued and outstanding.
1
MIP SOLUTIONS, INC.
FORM 10-Q
For the Quarter Ended March 31, 2012
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
ITEM 4. CONTROLS AND PROCEDURES
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
ITEM 4. MINE SAFETY DISCLOSURES
2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MIP SOLUTIONS, INC. |
|
|
|
|
|
(A Development Stage Company) |
|
|
|
|
|
BALANCE SHEETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
| March 31, |
| December 31, |
|
|
| 2012 |
| 2011 |
|
|
| (unaudited) |
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
CURRENT ASSETS |
|
|
|
|
|
Cash |
| $ | 57,377 | $ | 104,397 |
Interest Receivable |
|
| 14,768 |
| 6,575 |
Note receivable |
|
| 395,439 |
| 273,853 |
Total Current Assets |
|
| 467,584 |
| 384,825 |
|
|
|
|
|
|
TOTAL ASSETS |
| $ | 467,584 | $ | 384,825 |
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' (DEFICIT) |
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES |
|
|
|
|
|
Accounts payable |
| $ | 58,443 | $ | 33,898 |
Accrued expense |
|
| - |
| 9,035 |
Accrued interest |
|
| 6,454 |
| 4,307 |
Note payable |
|
| 50,317 |
| 50,317 |
Note payable - related party |
|
| 125,000 |
| 122,750 |
Common stock to be issued |
|
| 59,045 |
| 59,045 |
Total Current Liabilities |
|
| 299,259 |
| 279,352 |
|
|
|
|
|
|
COMMITMENTS AND CONTINGENCIES |
|
| - |
| - |
|
|
|
|
|
|
STOCKHOLDERS' (DEFICIT) |
|
|
|
|
|
Common stock, $0.001 par value; 50,000,000 shares authorized, 30,457,775 and 27,207,775 shares issued and outstanding, respectively |
|
| 30,459 |
| 27,209 |
Additional paid-in capital |
|
| 3,411,019 |
| 3,284,269 |
Deficit accumulated during the development stage |
|
| (3,273,154) |
| (3,206,005) |
Total Stockholders' Deficit |
|
| 168,324 |
| 105,473 |
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT) |
| $ | 467,584 | $ | 384,825 |
The accompanying notes are an integral part of these financial statements.
3
MIP SOLUTIONS, INC. |
|
|
|
|
|
|
(A Development Stage Company) |
|
|
|
|
|
|
STATEMENTS OF OPERATIONS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| From December 19, 2005 (Inception) to March 31, 2012 |
|
| Three Months Ended |
| Three Months Ended |
| |
|
| March 31, |
| March 31, |
| |
|
| 2012 |
| 2011 |
| |
|
| (unaudited) |
| (unaudited) |
| (unaudited) |
|
|
|
|
|
|
|
REVENUES | $ | - | $ | - | $ | - |
|
|
|
|
|
|
|
OPERATING EXPENSES |
|
|
|
|
|
|
Consulting |
| 39,500 |
| - |
| 1,329,775 |
Depreciation and amortization |
| - |
| 57 |
| 57,428 |
General and administrative |
| 730 |
| 1,254 |
| 199,824 |
Professional fees |
| 27,824 |
| 857 |
| 487,639 |
Research and development |
| - |
| - |
| 186,468 |
Officers and directors fees |
| - |
| - |
| 658,575 |
Option fee |
| - |
| - |
| 5,000 |
Travel and meals |
| 391 |
| - |
| 47,268 |
Royalty expense |
| - |
| - |
| 100,000 |
Lease termination expense |
| - |
| - |
| 178,687 |
Buyout provision payable |
| - |
| - |
| 37,500 |
TOTAL OPERATING EXPENSES |
| 68,445 |
| 2,168 |
| 3,288,164 |
|
|
|
|
|
|
|
LOSS FROM OPERATIONS |
| (68,445) |
| (2,168) |
| (3,219,719) |
|
|
|
|
|
|
|
OTHER INCOME (EXPENSE) |
|
|
|
|
|
|
Other income |
| 8,193 |
| - |
| 14,960 |
Interest expense |
| (4,647) |
| - |
| (118,832) |
Finance Expense |
| (2,250) |
| - |
| (4,500) |
Loss on disposition of assets |
| - |
| - |
| (7,826) |
Loss on impairment of assets |
| - |
| - |
| (125,731) |
Forgiveness of debt |
| - |
| - |
| 256,939 |
TOTAL OTHER INCOME |
| 1,296 |
| - |
| 15,010 |
|
|
|
|
|
|
|
LOSS BEFORE TAXES |
| (67,149) |
| (2,168) |
| (3,273,154) |
|
|
|
|
|
|
|
INCOME TAX EXPENSE |
| - |
| - |
| - |
|
|
|
|
|
|
|
NET LOSS | $ | (67,149) | $ | (2,168) | $ | (3,273,154) |
|
|
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|
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NET LOSS PER COMMON SHARE,BASIC AND DILUTED | $ | (0.00) | $ | (0.00) |
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE NUMBER OF COMMON STOCK SHARES OUTSTANDING, BASIC AND DILUTED |
| 30,457,775 |
| 20,419,115 |
|
|
The accompanying notes are an integral part of these financial statements.
4
MIP SOLUTIONS, INC. |
|
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|
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(A Development Stage Company) |
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|
STATEMENTS OF CASH FLOWS |
|
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|
|
|
|
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|
|
| Three Months Ended |
| Three Months Ended |
| From December 19, 2005 (Inception) to March 31, 2012 |
|
| March 31, |
| March 31, |
| |
|
| 2012 |
| 2011 |
| |
|
| (unaudited) |
| (unaudited) |
| (unaudited) |
|
|
|
|
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
|
Net loss | $ | (67,149) | $ | (2,168) |
| (3,273,154) |
Adjustments to reconcile net loss to net cash |
|
|
|
|
|
|
provided (used) by operating activities: |
|
|
|
|
|
|
Depreciation and amortization |
| - |
| 57 |
| 57,428 |
Loss on disposition of assets |
| - |
| - |
| 7,826 |
Loss on impairment of assets |
| - |
| - |
| 125,731 |
Common stock and warrants issued for services |
| - |
| - |
| 1,139,504 |
Interest expense for beneficial conversion feature |
| - |
| - |
| 1,087 |
Common stock issued for payables |
| - |
| - |
| 130,532 |
Forgiveness of debt |
| - |
| - |
| (256,939) |
Financing expense |
| 2,250 |
| - |
| 32,500 |
Debit discount |
| - |
| - |
| 11,956 |
Decrease (increase) in: |
|
|
|
|
|
|
Interest receivable |
| (8,193) |
| - |
| (14,768) |
Increase (decrease) in: |
|
|
|
|
|
|
License fee payable |
| - |
| - |
| (80,000) |
Accounts payable |
| 24,546 |
| 1,135 |
| 300,581 |
Accrued expense |
| (9,035) |
| - |
| 45,000 |
Accrued interest |
| 2,147 |
| - |
| 35,446 |
Accrued payroll |
| - |
| - |
| 413,622 |
Related party payable |
| - |
| - |
| 44,009 |
Royalty payable |
| - |
| - |
| 80,000 |
Common stock to be issued |
| - |
| - |
| 59,045 |
Net cash provided (used) by operating activities |
| (55,434) |
| (976) |
| (1,140,594) |
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
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|
|
|
|
Purchase of equipment |
| - |
| - |
| (20,755) |
Purchase of license |
| - |
| - |
| (65,000) |
Purchase of patents |
| - |
| - |
| (29,972) |
Sale of asset |
| - |
| - |
| 9,960 |
Investment in notes receivable |
| (121,586) |
| - |
| (441,627) |
Payment |
| - |
| - |
| 46,189 |
Net cash provided (used) by investing activities |
| (121,586) |
| - |
| (501,205) |
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
Common stock and warrants for cash, net of fees |
| 130,000 |
| - |
| 1,242,225 |
Proceeds from note payable |
| - |
| 976 |
| 533,196 |
Repayment of note payable |
| - |
| - |
| (76,245) |
Net cash provided by financing activities |
| 130,000 |
| 976 |
| 1,699,176 |
|
|
|
|
|
| - |
Net increase (decrease) in cash and cash equivalents |
| (47,020) |
| - |
| 57,377 |
|
|
|
|
|
|
|
Cash, beginning of period |
| 104,397 |
| - |
| - |
Cash, end of period | $ | 57,377 | $ | - | $ | 57,377 |
The accompanying notes are an integral part of these financial statements.
5
MIP SOLUTIONS, INC. |
|
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(A Development Stage Company) |
|
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|
|
|
STATEMENTS OF CASH FLOWS |
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|
| Three Months Ended |
| Three Months Ended |
| From December 19, 2005 (Inception) to March 31, 2012 |
|
| March 31, |
| March 31, |
| |
|
| 2012 |
| 2011 |
| |
|
| (unaudited) |
| (unaudited) |
| (unaudited) |
|
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|
|
|
|
SUPPLEMENTAL CASH FLOW INFORMATION: |
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|
Interest paid | $ | - | $ | - | $ | - |
Income taxes paid | $ | - | $ | - | $ | - |
NON-CASH TRANSACTIONS: |
|
|
|
|
|
|
Equipment issued for accounts payable |
| - | $ | - |
| 7,372 |
Issuance of warrant with note payable |
| - | $ | - |
| 4,500 |
Common stock issued for license |
| - | $ | - |
| 550 |
Common stock issued for patent |
| - | $ | - |
| 1,122 |
Common stock issued for note payable & accrued interest |
| - | $ | - |
| 332,733 |
Common stock issued for asset |
| - | $ | - |
| 60,200 |
Common stock issued for officers & directors fees |
| - | $ | - |
| 413,389 |
Common stock issued for accounts payable |
| - | $ | - |
| 34,980 |
Common stock issued for accrued expense |
| - | $ | - |
| 45,000 |
Common stock issued for note payable - related party |
| - | $ | - |
| 28,009 |
The accompanying notes are an integral part of these financial statements.
6
MIP SOLUTIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED NOTES TO THE FINANCIAL STATEMENTS MARCH 31, 2012
NOTE 1 BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared by MIP Solutions, Inc. (the Company) in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial reporting, as well as the instructions to Form 10-Q. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP may have been condensed or omitted. In the opinion of our management, all adjustments, consisting of only normal recurring accruals, necessary for a fair presentation of the financial position, results of operations and cash flows for the fiscal periods presented have been included. The information included in this 10-Q should be read in conjunction with the audited financial statements and notes to the financial statements included in our Annual Report filed on Form 10-K for the year ended December 31, 2011.
Reclassifications: Certain financial statement amounts for the prior period have been reclassified to conform to the current period presentation. These reclassifications had no effect on the net loss or accumulated deficit as previously reported.
Use of Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Uncertainties with respect to such estimates and assumptions are inherent in the preparation of our financial statements. Actual results could differ from these estimates and assumptions and could have a material effect on the reported amounts of our financial position and results of operation.
NOTE 2 EARNINGS PER SHARE
We follow financial accounting standards which require the calculation of basic and diluted earnings per share. Basic earnings per share is calculated by dividing net income or loss available to common stockholders by the weighted average number of common shares outstanding and does not include the impact of any potentially dilutive common stock equivalents. Diluted earnings per share reflect the potential dilution of securities that could share in our earnings through the conversion of common shares issuable via outstanding stock options and stock warrants. Total outstanding common stock equivalents at March 31, 2012 and December 31, 2011 were 11,125,000 and 7,875,000, respectively. If we incur losses in the period presented, or conversion into common shares is anti-dilutive, basic and dilutive earnings per share are equal.
NOTE 3 INCOME TAXES
For the year ended December 31, 2011, we recognized an estimated deferred tax asset of $1,089,000 and a corresponding valuation allowance offsetting the balance. Each quarter we review the valuation and have determined that there is a change in the tax asset and corresponding valuation allowance of $24,000 for the quarter ending March 31, 2012.
NOTE 4 GOING CONCERN
As shown in the accompanying financial statements, the Company had negative working capital and an accumulated deficit of $3,273,154 as of March 31, 2012. These factors raise substantial doubt about the Companys ability to continue as a going concern. However, the Company is currently pursuing a business acquisition that is developing technology that, if successful, will mitigate these factors. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be necessary in the event the company cannot continue in existence.
NOTE 5 NOTES RECEIVABLE
On September 29, 2011, December 31, 2011 and March 31, 2012 respectively the Company executed notes receivable for $242,106, $77,935 and $121,586 to AWG. To date AWG has made payments in the amount of $46,189. The notes bear interest of 12%, are unsecured and due on June 1, 2012. As of March 31, 2012, the balance was $395,439. As of March 31, 2012 accrued interest receivable was $14,768. Interest income earned during the period ending March 31, 2012 was $8,193.
7
MIP SOLUTIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED NOTES TO THE FINANCIAL STATEMENTS MARCH 31, 2012
NOTE 6 - COMMON STOCK AND WARRANTS
During the quarter ended March 31, 2012, the company issued 3,250,000 units comprised of one share of common stock and one common stock purchase warrant for $130,000. The warrants have a one year term. The table below provides the details of these transactions:
| Date | Number Of Shares | Amount Received |
Common stock and warrants issued for shares at $0.04 per share | 01/05/2012 | 250,000 | $ 10,000 |
Common stock and warrants issued for shares at $0.04 per share | 02/02/2012 | 625,000 | 25,000 |
Common stock and warrants issued for shares at $0.04 per share | 02/16/2012 | 250,000 | 10,000 |
Common stock and warrants issued for shares at $0.04 per share | 03/14/2012 | 375,000 | 15,000 |
Common stock and warrants issued for shares at $0.04 per share | 03/22/2012 | 500,000 | 20,000 |
Common stock and warrants issued for shares at $0.04 per share | 03/26/2012 | 1,250,000 | 50,000 |
Totals shares issued for the period ended March 31, 2012 |
| 3,250,000 | $ 130,000 |
The Company utilized the Black-Scholes model with a risk-free interest rate of 1.2%; expected volatility of 115%; expected term of five years; and zero dividend yields. As of March 31, 2012, there were 11,125,000 warrants outstanding and exercisable at $0.06.
NOTE 7 COMMITMENTS & CONTINGENCIES
On July 27, 2011, the Company entered into a non-binding letter of intent to enter into a new business combination transaction with AWG International, Inc. (AWG), a Nevada corporation, with a view to enter into a new acquisition agreement to acquire AWG as an operating subsidiary. To date, a definitive acquisition agreement has not been executed. The Company is conducting "due diligence" review and AWG has provided its financial statements for auditing procedures. The "due diligence" review and completion of AWG audited financial statements are conditions which must be satisfied before entering into a formal definitive acquisition agreement with AWG. As of March 31, 2012, the Company is still pursuing this possible business combination.
Under the terms of the license agreement with The Johns Hopkins University, the Company will be held responsible to pay JHU/APL fees and/or royalties when they achieve certain milestones, related to annual net sales and total funds raised from external investors. On August 2, 2010 the Company entered into a Mutual Termination Agreement with JHU/APL (See Note 8).
In 2008, the Company contracted for services which required the issuance of additional common stock. The services and the common stock to be issued were valued at $41,045. The original commitment was for the issuance of 62,500 shares of common stock. As of March 31, 2012, the Company had not issued this stock.
NOTE 8 - NOTES PAYABLE
On September 29, 2011, the Company borrowed $150,000 from Coghlan Family Corporation ("CFC") evidenced by a promissory note bearing interest at the rate of twelve (12%) interest due on March 29, 2012. During the fourth quarter of 2011, the Company paid $25,000 on this notes principal. Additionally, in connection with a $150,000 loan made by CFC, the Company granted Coghlan 150,000 common stock purchase warrants exercisable at $0.06 which will expire October 1, 2016. The value ascribed to these warrants was $4,500 and was recorded in equity. The debt discount is to be amortized over the life of the loan and $4,500 was amortized through March 31, 2012.
Additionally, the note was to be secured with the issuance of a Series A Preferred Stock which would provide the lender with voting control of the Company in the event of a default. The Company did not designate or issue the Series A Preferred Stock. On April 12, 2012, CFC extended the due date to June 1, 2012 and agreed to permit the Company to defer amending its articles of incorporation providing for a super voting Series A preferred stock until such time as CFC gives the Company formal written notice of a default. Management anticipated that the super voting Series A Preferred Stock would be defined as 1,000,000 shares with 500 votes each. CFC acknowledged that as of May 9, 2012, the note is in good standing. As of March 31, 2012, the accrued interest was $2,624.
During 2010 and 2011, the Company borrowed various sums from AWG. As of March 31, 2012, the Company owed AWG $30,317 under a demand loan with interest accruing at a rate of 12%. As of March 31, 2012 and March 31, 2011, the accrued interest was $3,830 and $0 respectively.
8
MIP SOLUTIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED NOTES TO THE FINANCIAL STATEMENTS MARCH 31, 2012
On August 2, 2010 the Company entered into a Mutual Termination Agreement with JHU/APL. Under the terms of the agreement the Company will pay $20,000 and 600,000 restricted common shares, valued at $18,000, to JHU/APL as settlement of all amounts owed, within 20 days of a proposed reverse takeover by AWG, as settlement for $131,633 of debt. As of March 31, 2012, the $20,000 note remains outstanding and the $18,000 of common stock is still classified as common stock to be issued.
NOTE 9 - SUBSEQUENT EVENTS
The Company evaluated events occurring subsequent to March 31, 2012, identifying those that are required to be disclosed as follows:
During the second quarter of 2012, the Company sold 487,500 units as part of the ongoing $500,000 non-public private placement of units comprised of one share of common stock and one common stock purchase warrant for $0.04 per unit. The remaining warrants will be exercisable at $0.06 per share and are subject to the Company's call provisions. The offering is limited to investors with whom the Company's management has substantive and pre-existing relationships. As of May 9, 2012 the Company raised an additional $19,500 from these sales.
On April 30, 2012, 500,000 warrants were exercised at $0.06 per share raising an additional $30,000.
The Company is still pursuing its interest in AWG and is currently engaged in subsequent due diligence as of May 9, 2012.
9
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Results of Operations for the Quarter Ended March 31, 2012 and March 31, 2011
Net Sales
The Company is a development stage company and has no revenue.
Net Loss
The Company had a net loss of $67,149 for the quarter ended March 31, 2012 compared to a net loss of $2,168 for the quarter ended March 31, 2011. The increase was primarily due to an increase in consulting and professional services.
Operating Expenses
The Company incurred total operating expenses of $68,445 for the quarter ended March 31, 2012 compared to total operating expenses of $2,168 for the quarter ended March 31, 2011.
Consulting expenses increased $ 39,500 from $ -0- for the quarter ended March 31, 2011 to $39,500 for the quarter ended March 31, 2012 was primarily due to fees paid for business consulting assistance related to the Company's proposed acquisition of AWG International, Inc.
Professional fees increased $26,967 from $857 for the quarter ended March 31, 2011 to $27,824 for the quarter ended March 31, 2012 primarily as a result of engaging an attorney and certified public accountants to assist the Company with the preparation of its periodic reporting requirements.
The Companys general and administrative expenses decreased $524 from $1,254 for the quarter ended March 31, 2011 to $730 for the quarter ended March 31, 2012. The decrease resulted primarily from a reduction in internal corporate activity.
Interest Expense
The Company recorded an increase in interest expense of $4,647 for the quarter ended March 31, 2012 from no interest for the quarter ending March 31, 2011. This interest was primarily due the funds borrowed from Coghlan Family Corporation.
The Company has no off-balance sheet arrangements.
Liquidity and Capital Resources
At March 31, 2012, the Company had $57,377 in cash, total current assets of $467,584, total current liabilities of $299,259 and total stockholders' equity of $168,324 compared to no cash, total current assets of $289, current liabilities of $150,803 and total stockholders' deficit of $150,514 for the period ending March 31, 2011.
The Companys unaudited financial statements for the quarter ended March 31, 2012 contain a going concern qualification. As discussed in Note 4 of the Notes to Financial Statements, the Company has incurred losses and has not demonstrated the ability to generate cash flows from operations to satisfy its liabilities and sustain operations. Because of these conditions, the independent auditors have raised substantial doubt about the Companys ability to continue as a going concern.
The Company experienced negative cash flow used in operations during the fiscal quarter ended March 31, 2012 of $55,434 compared to negative cash flow used in operations for the year ended March 31, 2011 of $976.
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On September 29, 2011, the Company borrowed $150,000 from Coghlan Family Corporation ("CFC") evidenced by a promissory note bearing interest at the rate of twelve (12%) interest due on March 29, 2012. During the fourth quarter of 2011, the Company paid $25,000 on this notes principal. Additionally, in connection with a $150,000 loan made by CFC, the Company granted Coghlan 150,000 common stock purchase warrants exercisable at $0.06 which will expire October 1, 2016. The value ascribed to these warrants was $4,500 and was recorded in equity. The debt discount is to be amortized over the life of the loan and $4,500 was amortized through March 31, 2012.
Additionally, the note was to be secured with the issuance of a Series A Preferred Stock which would provide the lender with voting control of the Company in the event of a default. The Company did not designate or issue the Series A Preferred Stock. On April 12, 2012, CFC extended the due date to June 1, 2012 and agreed to permit the Company to defer amending its articles of incorporation providing for a super voting Series A preferred stock until such time as CFC gives the Company formal written notice of a default. Management anticipated that the super voting Series A Preferred Stock would be defined as 1,000,000 shares with 500 votes each. CFC acknowledged that as of May 9, 2012, the note is in good standing. As of March 31, 2012, the accrued interest was $2,624.
On September 29, 2011, December 31, 2011 and March 31, 2012 respectively, the Company loaned money to AWG International, Inc. ("AWG"). AWG executed notes payable to the Company in the amounts of $242,106, $77,935 and $121,586. To date, AWG has made payments in the amount of $46,189. The notes bear interest of 12%, are unsecured and due on June 1, 2012. As of March 31, 2012 the balance was $395,439. As of March 31, 2012 accrued interest receivable was $14,768. Interest income earned during the period ending March 31, 2012 was $8,193.
To date, the Company has met its working capital needs through funds received from shareholder loans, the sale of private equity and incursion of debt. Until operations become profitable, the Company must continue to sell equity or incur debt.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not required for smaller reporting companies.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
In connection with the preparation of this report on Form 10-Q, an evaluation was carried out by the Companys management, with the participation of the chief executive officer and the chief financial officer, of the effectiveness of the Companys disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (Exchange Act)) . Disclosure controls and procedures are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Commissions rules and forms, and that such information is accumulated and communicated to management, including the chief executive officer and the chief financial officer, to allow timely decisions regarding required disclosures.
Based on that evaluation, the Companys management concluded, as of the end of the period covered by this report, that the Companys disclosure controls and procedures were not effective in recording, processing, summarizing, and reporting information required to be disclosed, within the time periods specified in the Commissions rules and forms, and such information was accumulated and communicated to management, including the chief executive officer and the chief financial officer, to allow timely decisions regarding required disclosures.
Changes in Internal Controls over Financial Reporting
There have been no changes in internal control over financial reporting (as defined in Rule 13a-15(f) Exchange Act) during the period ended March 31, 2012 that materially affected, or are reasonably likely to materially affect, the Companys internal control over financial reporting.
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Limitations
Our management, including our Chief Executive Officer and Principal Financial Officer, does not expect that our disclosure controls or internal controls over financial reporting will prevent all errors or all instances of fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system's objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and any design may not succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures. Because of the inherent limitation of a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
PART II
ITEM 1.
LEGAL PROCEEDINGS
There are no legal proceedings pending against the Company to the knowledge of management.
ITEM 2.
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
During the quarter ended March 31, 2012, the Company sold 3,250,000 units which was continuation of the equity securities offering commenced in 2011. The securities were sold to six accredited investors for $130,000. The unit offering commenced August 17, 2011. The Offering consisted of 12,500,000 units comprised of one (1) share of common stock and one (1) common stock purchase warrant for four ($0.04) cents per unit. The warrants are exercisable at six (0.06) cents per share. The common stock purchase warrant is subject to the Company's call if the stock trades above eight (0.08) cents per share and there is an effective registration statement registering the common stock underlying the warrants.
During the second quarter of 2012, the Company sold an additional 487,500 units as part of the ongoing $500,000 non-public private placement of units comprised of one share of common stock and one common stock purchase warrant for $0.04 per unit. The remaining warrants will be exercisable at $0.06 per share and are subject to the Company's call provisions. As of May 9, 2012 the Company raised an additional $19,500 from these sales.
On April 30, 2012, 500,000 warrants were exercised at $0.06 per share raising an additional $30,000.
The Company relied on the transaction exemption afforded by Section 4(2) of the Securities Act of 1933, as amended, and Regulation D Rule 506. The Units are restricted securities which may not be publicly sold unless registered for resale with the Securities and Exchange Commission or exempt from the registration requirements of the Securities Act of 1933, as amended.
ITEM 3.
DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4.
MINE SAFETY DISCLOSURES
Not applicable.
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ITEM 5.
OTHER INFORMATION
On July 27, 2011, the Company entered into a non-binding letter of intent to enter into a new business combination transaction with AWG International, Inc. (AWG), a Nevada corporation, with a view to enter into a new acquisition agreement to acquire AWG as an operating subsidiary. To date, a definitive acquisition agreement has not been executed. The Company is conducting "due diligence" review and AWG has provided its financial statements for auditing procedures. The "due diligence" review and completion of AWG audited financial statements are conditions which must be satisfied before entering into a formal definitive acquisition agreement with AWG. As of March 31, 2012, the Company is still pursuing this possible business combination.
ITEM 6.
EXHIBITS
Exhibit 31.1 Certification required by Rule 13a-14(a) or Rule 15d-14(a)
Exhibit 31.2 Certification required by Rule 13a-14(a) or Rule 15d-14(a)
Exhibit 32.1 Certification required by Rule 13a-14(b) or Rule 15d-14(b) and section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350
Exhibit 32.2 Certification required by Rule 13a-14(b) or Rule 15d-14(b) and section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350
101*
The following financial information from our Quarterly Report on Form 10-Q for the quarter ended March 31, 2012 formatted in Extensible Business Reporting Language (XBRL): (i) the Balance Sheets, (ii) the Statements of Operations, (iii) the Statements of Cash Flows, and (v) Notes to Financial Statements
_____________________
*
In accordance with Rule 406T of Regulation S-T, the XBRL information in Exhibit 101 to this quarterly report on Form 10-Q shall not be deemed to be filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (Exchange Act), or otherwise subject to the liability of that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: May 17, 2012
MIP Solutions, Inc.
(Registrant)
/s/ Gary McDonald /s/ Jeffrey Lamberson
By:________________________________
________________________________
Gary McDonald
Jeffrey Lamberson
Chief Executive Officer
President, Chief Financial Officer
(Principal Accounting Officer)
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