AMBICOM HOLDINGS, INC - FORM 10-Q

Attached files

file	filename
EX-31.1 - EXHIBIT 31.1 - AMBICOM HOLDINGS, INC	ex31_1.htm
EX-31.2 - EXHIBIT 31.2 - AMBICOM HOLDINGS, INC	ex31_2.htm
EX-32.1 - EXHIBIT 32.1 - AMBICOM HOLDINGS, INC	ex32_1.htm
EX-32.2 - EXHIBIT 32.2 - AMBICOM HOLDINGS, INC	ex32_2.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

T	QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended January 31, 2011

o	TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

For the transition period from ______ to __________

COMMISSION FILE NUMBER: 333-153402

AMBICOM HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

Nevada		26-2964607
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

500 Alder Drive. Milpitas, CA 95035 (408) 321-0822

(Address of principal executive offices)

(408) 321-0822

(Registrant’s Telephone Number, Including Area Code)

Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the issuer was required to file such reports), and (2)has been subject to such filing requirements for the past 90 days. Yes T 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 filer. See definition of “accelerated filer” and “large accelerated filer” in Rule 12b-2 of the Exchange Act (Check one):

Large Accelerated Filer o

Accelerated Filer o

Non-Accelerated Filer o

Smaller Reporting Company T

Indicate by check mark whether the registrant is a shell company as defined in Rule 12b-2 of the Exchange Act. Yes o No T

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: As of March 14, 2011, the registrant had 51,956,015 shares of common stock, par value $0.001 per share, issued and outstanding.

TABLE OF CONTENTS

		PAGE
PART I	FINANCIAL INFORMATION	4

ITEM 1.	FINANCIAL STATEMENTS	4

ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	18

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	22

ITEM 4.	CONTROLS AND PROCEDURES	22

PART II	OTHER INFORMATION	23

ITEM 1.	LEGAL PROCEEDINGS	23

ITEM 1A.	RISK FACTORS	23

ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	23

ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	23

ITEM 4.	(REMOVED AND RESERVED)	23

ITEM 5.	OTHER INFORMATION	23

ITEM 6.	EXHIBITS	23

SIGNATURES

EXHIBIT 31.1

EXHIBIT 31.2

EXHIBIT 32.1

EXHIBIT 32.2

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PART I

FINANCIAL INFORMATION

ITEM 1. Financial Statements

		Page
Condensed Consolidated Balance Sheets as of January 31, 2011 (Unaudited) and July 31, 2010 (Audited)		4

Condensed Consolidated Statements of Operations for the Three and Six Months Ended January 31, 2011 and 2010 (Unaudited)		5

Condensed Consolidated Statements of Cash Flows for the Six Months Ended January 31, 2011 and 2010 (Unaudited)		6

Notes to Condensed Consolidated Financial Statements for the Three and Six Months Ended January 31, 2011 and 2010 (Unaudited)		7

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AMBICOM HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

	January 31,			July 31,
ASSETS	2011			2010
	(Unaudited)			(Audited)
Current assets:
Cash and cash equivalents	$	58,369		$	165,848
Accounts receivable, net of allowance for doubtful accounts of $9,569 and $20,761 as of January 31, 2011, and July 31, 2010		1,185,728			639,910
Inventory		142,046			161,863
Other receivables, current		-			11,251
Prepaid expenses and other current assets		31,495			1,296
Total current assets		1,417,638			980,168

Property and equipment, net		10,474			16,293
Deposit		4,138			4,138
Total assets	$	1,432,250		$	1,000,599

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:
Accounts payable and accrued liabilities	$	44,644		$	89,047
Accounts payable - other		52,930			44,677
Deferred revenue		1,800			1,800
Due to related party		100,000			100,000
Line of credit payable		350,000			100,000
Notes payable - current portion		90,000			115,000
Total current liabilities		639,374			450,524

Notes payable		85,000			120,000

Total liabilities		724,374			570,524

Stockholders’ equity:
Common stock, $0.001 par value; 1,000,000,000 shares authorized; 51,956,015 and 51,750,000 shares issued and outstanding at January 31, 2011 and July 31, 2010, respectively		51,956			51,750
Preferred stock, Series A, $0.001 per share; 9,400,000 shares authorized; no shares issued and outstanding at January 31, 2011 and July 31, 2010, respectively		-			-
Preferred stock, Series B, $0.001 per share 2,600,000 shares authorized; 2,600,000 and 2,600,000 shares issued and outstanding at January 31, 2011 and July 31, 2010, respectively		2,600			2,600
Additional paid in capital		11,101,214			11,084,749
Accumulated deficit		(10,447,894	)		(10,709,024	)
Total stockholders’ equity		707,876			430,075
	$	1,432,250		$	1,000,599

The accompanying notes are an integral part of these financial statements.

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AMBICOM HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended January 31,						Six Months Ended January 31,
	2011			2010			2011			2010

Sales	$	1,268,148		$	870,604		$	2,203,161		$	1,648,257

Cost of sales		503,107			434,408			997,399			846,099

Gross profits		765,041			436,196			1,205,762			802,158

OPERATING EXPENSES
Depreciation		1,102			812			2,205			1,535
Professional fees		58,758			77,904			97,692			83,582
Selling and general expenses		417,216			306,650			785,613			542,811
Total operating expenses		477,076			385,366			885,510			627,928

Income from operations		287,965			50,830			320,252			174,230

Other income (expense)
Other income and expense, net		(34,073	)		(196	)		(46,424	)		(2,901	)
Interest expense, net		(6,908	)		(6,234	)		(12,519	)		(9,179	)
Net other income (expense)		(40,981	)		(6,430	)		(58,943	)		(12,080	)

Total income before income taxes		246,984			44,400			261,309			162,150

Income taxes		-			-			-			-

Net income	$	246,984		$	44,400		$	261,309		$	162,150

Net income per share - basic	$	0.005		$	0.002		$	0.005		$	0.008

Net income per share - diluted	$	0.005		$	0.002		$	0.005		$	0.007

Weighted average shares outstanding — basic		51,826,003			20,000,000			51,807,429			20,000,000

Weighted average shares outstanding — diluted		54,426,003			22,600,000			54,407,429			22,600,000

The accompanying notes are an integral part of these financial statements.

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AMBICOM HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended January 31,

	2011			2010
	(Unaudited)
Cash flows from operating activities:
Net income	$	261,309		$	162,150
Net income items not affecting cash:
Depreciation and amortization		2,205			1,535
Stock-based compensation		16,515			-
Reduction in bad debt reserve		(11,192	)		-
Provision for inventory loss		20,082			-

Decrease / (Increase) in operating assets:
Accounts receivable		(534,626	)		(222,367	)
Inventory		(264	)		(125,529	)
Other receivables		13,665			4,811
Prepaid expense		(30,200	)		79,946

Increase / (Decrease) in operating liabilities:
Accounts payable - trade		(33	)		(102,758	)
Accrued payable - other		(34,422	)		(4,080	)
Unearned revenue		-			-

Net cash used in operating activities		(296,961	)		(206,292	)

Cash flows from investing activities:
Payment of notes to related parties		-			(165,000	)
Capital expenditures		(518	)		(5,349	)

Net cash used in investing activities		(518	)		(170,349	)

Cash flows from financing activities:
Proceeds from sale of common stock		-			333,624
Proceeds from line of credit		250,000			(56,000	)
Payments on notes payable		(60,000	)		200,000
Cash used in reverse merger, net of cash received		-			26,125

Net cash provided by financing activities		190,000			503,749

Net increase (decrease) in cash and cash equivalents		(107,479	)		127,108
Cash and cash equivalents, beginning of year		165,848			136,213

Cash and cash equivalents, end of year	$	58,369		$	263,321

Supplemental information:
Income taxes paid	$	451		$	-
Interest paid	$	12,519		$	9,179

The accompanying notes are an integral part of these financial statements.

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AMBICOM HOLDINGS, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JANUARY 31, 2011 AND 2010

(UNAUDITED)

NOTE 1 – Organization and Principal Activities

AmbiCom Holdings, Inc. (“AmbiCom Holdings” or the ‘Company”) was incorporated as Med Control, Inc. (“Med Control”) under the laws of the State of Nevada on July 1, 2008. Med Control was a development stage enterprise until January 15, 2010. All of Med Control’s activities prior to January 15, 2010 related to its organization, initial funding and share issuances. On January 15, 2010, Med Control Inc. changed its name to AmbiCom Holdings Inc.

On January 15, 2010, Med Control, Inc. (the “Registrant”) authorized its Articles of Incorporation (the “Amendment”) to change its name to AmbiCom Holdings, Inc., to increase the number of its authorized shares of capital stock from 75,000,000 to 1,050,000,000 shares of which 1,000,000,000 were designated common stock and 50,000,000 were designated preferred stock, par value $0.001 per share (the “Preferred Stock”) and to effect a forward-split such that 131.2335958 shares of Common Stock were issued for every 1 share of Common Stock issued and outstanding immediately prior to filing of the amendment (the “Forward Split”).

On January 15, 2010, the Company acquired AmbiCom Acquisition Corp. a privately owned Nevada corporation (“AmbiCom”), pursuant to an Agreement and Plan of Share Exchange (the “Exchange”). AmbiCom was organized under the laws of the State of Nevada on July 29, 2008. AmbiCom is a holding company whose operating company, AmbiCom, Inc., is a designer and developer of wireless products focusing on the wireless medical industry. AmbiCom’s wireless modules and devices are based on its innovative application software and Wi-Fi or Bluetooth technologies.

Pursuant to the terms of the Exchange, the Company acquired AmbiCom from the AmbiCom equity holders in exchange for an aggregate of 20,000,000 newly issued shares of Common Stock, 2,600,000 shares of Series B Preferred Stock, an option to purchase 5,500,000 shares of Common Stock and 2,350,000 shares of Series A Preferred Stock at the purchase price of $.01 per share, and warrants to purchase 500,000 shares of Common Stock at the exercise price of $0.50 per share (collectively, the “Exchange Shares”). As a result of the Exchange, the AmbiCom equity holders surrendered all of their issued and outstanding capital stock of AmbiCom in consideration for the Exchange Shares and AmbiCom became a wholly-owned subsidiary of the Company.

Simultaneously upon the Closing, the Company closed an offering (the “Offering”) of its Common Stock at a price of $0.40 per share for an aggregate of 1,250,000 shares of Common Stock for aggregate offering price of $500,000.

In addition, contemporaneously with the Closing, the Company and our former principal stockholder, Ms. Kato, split-off its wholly owned subsidiary, MCI Acquisition Corp., a newly-formed Nevada corporation (“MCAC”), whereby the Company assigned all of its previous operating assets to MCAC in consideration for the assumption of all of the Company’s liabilities to Ms. Kato, who is currently the principal shareholder of MCI and the retirement and cancellation of Ms. Kato’s 6,000,000 shares of Common Stock pursuant to the terms and conditions of a split-off agreement by and among the Company, Ms. Kato, and MCAC (the “Split-Off Agreement”).

Following the issuance of the Exchange Shares and the retirement of Ms. Kato’s shares pursuant to the Split-Off Agreement, the former stockholders of AmbiCom and/or their designees now beneficially own approximately fifty-five percent (55%) of the total outstanding shares of Common Stock, and after giving effect to the conversion of the Series B in accordance with their respective terms (and the satisfaction of certain conditions to the conversion of such shares) seventy-six percent (76%) of the total outstanding shares of Common Stock on a fully-diluted basis.

On August 11, 2010, we issued 50,000 fully-paid shares of common stock to our public relations consultant in settlement of a debt for services provided.

In September, 2010, the Board decided to close our branch operation in Taiwan in order to reduce administration expenses. The branch was established in 1998 to supervise purchasing and international logistics on products sourced in Asia for re-sale in the United States. The Company does not expect the expenses associated with closure to exceed $10,000 which will be recognized in the period the expense is incurred.

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In September, 2010, the Company entered into an engagement agreement with Chardan Capital Markets LLC, to provide investment banking services in connection with the sale of up to $2 million in common stock. The agreement provides for a contingent fee of 7% on closing, the issuance of five year warrants for 3% of the amount raised on the same terms as the amount raised, and reimbursement of out-of-pocket expenses up to $10,000. The closing is expected to occur during the third fiscal quarter of 2011.

On October 6, 2010 AmbiCom Inc. was merged into AmbiCom Acquisition Corp.

On October 11, 2010 AmbiCom Acquisition Corp. was merged into AmbiCom Holdings Inc.

On December 14, 2010, the Company entered into a definitive agreement to acquire E-Care Technology Co., Ltd, a Taiwan Corporation.

On January 31, 2011, the Company issued a 6% stock dividend on its Preferred B stock.

In January 2011, the Company entered into a lease agreement beginning March 1, 2011 to relocate our offices to 500 Alder Drive in Milpitas, CA.

Details of the Company’s subsidiaries as of January 31, 2011 are as follows:

Name	Place and Date of Establishment/ Incorporation	Relationships	Principal Activities

AmbiCom Technology,	Nevada	Wholly-owned	Planned acquisition company
Inc.	May 17, 2010	subsidiary of AmbiCom

Inter-company accounts and transactions have been eliminated in consolidation.

NOTE 2 – Basis of Presentation

The accompanying consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and accounting principles generally accepted in the United States for interim financial information. The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements. Actual results could differ from those estimates. Significant estimates made in preparing the financial statements include revenue recognition and costs of revenue, inventory valuations, long-lived and intangible asset valuations and loss contingencies. In the opinion of management, the financial statements include all adjustments (which are of a normal and recurring nature) necessary for the fair presentation of the results of the interim periods presented.

For financial accounting purposes, the acquisition was a reverse acquisition of the Company by AmbiCom, under the purchase method of accounting, and was treated as a recapitalization with AmbiCom as the acquirer. Upon consummation of the Exchange, the Company adopted the business plan of AmbiCom. Accordingly, the condensed consolidated statements of operations include the results of operations of AmbiCom and its subsidiaries from August 1, 2008 and 2009, and the results of operations of Med Control from the acquisition date.

NOTE 3 – Summary of Significant Accounting Policies

The summary of significant accounting policies is presented to assist in understanding the Company’s financial statements. These accounting policies conform to generally accepted accounting principles and have been consistently applied in the preparation of the financial statements.

a) Description of Business - The Company is a leading designer and developer of wireless technologies which emphasize wireless medical and other wireless products.

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b) Segment Information - The Company follows ASC Topic 280, “Disclosures about Segments of an Enterprise and Related Information.” Topic 280 requires that a company report financial and descriptive information about its reportable operating segments. Operating segments are components of an enterprise for which separate financial information is available and is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The Company’s chief operating decision maker currently evaluates the Company’s operations from a number of different operational perspectives including but not limited to a client by client basis. The Company derives all significant revenues from a single reportable operating segment of business. Accordingly, the Company does not report more than one segment; nevertheless, management evaluates, at least annually, whether the Company continues to have one single reportable segment.

c) Use of Estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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 may differ from those estimates, and the differences may be material to the financial statements. Estimates are used primarily in determining the depreciable lives of fixed assets, and inventory valuation. In addition, estimates form the basis for the reserves for sales allowances, accounts receivable and inventory. Various assumptions go into the determination of these estimates. The process of determining significant estimates requires consideration of factors such as historical experience and current and expected economic conditions.

d) Cash and Cash Equivalents - The Company considers all highly liquid investments and time deposits with original maturities of three months or less when purchased to be cash equivalents. All cash and cash equivalents are maintained with nationally recognized financial institutions.

e) Allowance for Doubtful Accounts - An allowance for doubtful accounts is computed based on the Company’s historical experience and management’s analysis of possible bad debts. Accounts receivable are shown net of an allowance for doubtful accounts of $9,569 as of January 31, 2011 and $20,761 as of July 31, 2010, respectively.

f) Inventories - Inventories are stated at the lower of cost or market on an average basis. Inventory reserves are recorded for damaged, obsolete, excess and slow-moving inventory. Market value of inventory is estimated based on the impact of market trends, an evaluation of economic conditions and the value of current orders relating to the future sales of this type of inventory. As of January 31, 2011 and July 31, 2010, the value of the inventory reserve was $63,171 and $42,381, respectively.

g) Income Taxes - The Company accounts for income taxes pursuant to the FASB ASC Topic 740, "Accounting for Uncertainty in Income Taxes", (“Topic 740”). Topic 740 clarifies the accounting for uncertainty in income taxes recognized in the Company’s financial statements in accordance with generally accepted accounting principles. The calculation of the Company's tax provision involves the application of complex tax rules and regulations within multiple jurisdictions. The Company's tax liabilities include estimates for all income-related taxes that the Company believes are probable and that can be reasonably estimated. To the extent that the Company’s estimates are understated, additional charges to the provision for income taxes would be recorded in the period in which the Company determines such understatement. If the Company's income tax estimates are overstated, income tax benefits will be recognized when realized. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. Topic 740 prescribes a recognition threshold and measurement attributes for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.

h) Revenue Recognition - The majority of the Company's product revenues are recognized upon shipment or delivery and acceptance of products by customers, when pervasive evidence of a sales arrangement exists, the price is fixed or determinable, the title has transferred and collection of resulting receivables is reasonably assured. For merchandise products, the Company recognizes revenue upon shipment of products, when title is passed and the amount collectible can reasonably be determined. All amounts billed to a customer related to shipping and handling are classified as revenue, while all costs incurred by the Company for shipping and handling are classified as selling expenses.

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i) Research and Development Costs - Research and development costs are expensed as incurred.

j) Stock-Based Compensation - The Company adopted ASC Topic 718 “Share-Based Payment”. As permitted, the Company elected to adopt disclosure-only provisions of ASC 718 in accordance with generally accepted accounting principles. Under the provisions of Topic ASC 718, compensation expense is recognized based on the fair value of options on the grant date.

k) Fair Value of Financial Instruments - ASC Topic 820, “Fair Value Measurements”, requires disclosure of the level within the fair value hierarchy in which fair value measurements in their entirety fall, segregating fair value measurements using quoted prices in active markets for identical assets or liabilities (Level 1), significant other observable inputs (Level 2), and significant unobservable inputs (Level 3). The Company's financial instruments consist of cash and cash equivalents, short-term trade receivables and payables. The carrying values of cash and cash equivalents and short-term trade receivables and payables approximate fair value due to their short-term nature.

l) Translation of Foreign Currency - The Company accounts for its foreign operations in accordance with ASC Topic 830, “Foreign Currency Translation”. For the branch, non-monetary balance sheet items and related income statements items are translated at historical exchange rates, while monetary balance sheet items are translated at current exchange rates. Income statement items, other than monetary, are translated at the weighted average exchange rate during the year. Deferred taxes are not provided on translation gains and losses where the Company expects earnings of a foreign branch to be permanently reinvested.

m) Concentration - Financial instruments which potentially subject the Company to concentrations of credit risk are primarily accounts receivable. The Company performs ongoing credit evaluations of its customers’ financial condition. If the collection of the receivable becomes doubtful, the Company establishes a reserve in an amount determined appropriate for the perceived risk. The Company maintains its cash accounts at commercial banks. From time to time, cash balances maintained in such banks may exceed the insured amount by the Federal Deposit Insurance Corporation (FDIC). As of January 31, 2011 and July 31, 2010, management does not believe they are exposed to any significant risk on their cash balances. The Company’s products are primarily sold to global medical device companies. These customers can be significantly affected by changes in economic, competitive or other factors. The Company makes substantial sales to a relatively few, large customers, where company is seeking to capture more business from other targeted medical device companies.

One customer accounted for $1,010,000 (85%) of receivables at January 31, 2011 while two customers accounted for $370,011 (56%) and $139,400 (21%), as of July 31, 2010, respectively.

One customer accounted for $1,015,800 (80%) of revenue for the three months ended January 31, 2011 and $676,311 (78%) of revenue for the three months ended January 31, 2010, respectively. One customer accounted for $1,589,800 (72%) of the revenues for the six months ended January 31, 2011 and $1,041,111 (63%) of the revenues for the six months ended January 31, 2010 respectively.

Four vendors accounted for $9,000 (20%), $7,945 (18%), $7,650 (17%), and $5,317 (12%) of accounts payable as of January 31, 2011 and three vendors accounted for $35,000 (39%), $18,000 (20%) and $10,684 (12%) as of July 31, 2010, respectively.

One vendor accounted for $447,300 (98%) of the purchases for the three months ended January 31, 2011, and one vendor accounted for $488,475 (90%) of the purchase for the three months ended January 31, 2010, respectively. One vendor accounted for $837,203 (87%) of the purchases for the six months ended January 31, 2011, and one vendor accounted for $877,500 (92%) of the purchase for the six months ended January 31, 2010, respectively.

RECENT ACCOUNTING PRONOUNCEMENTS

In June 2009, the FASB issued new accounting guidance related to accounting standards codification and the hierarchy of GAAP the “FASB Accounting Standards Codification” (“Codification”), to become the single official source of authoritative U.S. generally accepted accounting principles (“GAAP”) to be applied by nongovernmental entities, superseding existing FASB, American Institute of Certified Public Accountants (“AICPA”), Emerging Issues Task Force (“EITF”), and related accounting literature. Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under authority of federal securities laws are also sources of authoritative U.S. GAAP for SEC registrants. This guidance reorganizes the previously issued GAAP pronouncements into accounting topics and displays them using a consistent structure. The subsequent issuances of new standards will be in the form of Accounting Standards Updates that will be included in the Codification. The guidance is effective for the Company as of the interim period ended September 30, 2009. As the Codification was not intended to change or alter existing GAAP, it did not have an impact on the Company’s consolidated financial statements. The only impact will be that references to authoritative accounting literature will be in accordance with the new numbering system prescribed by the Codification.

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In August 2009, the FASB issued the FASB Accounting Standards Update No. 2009-04 “Accounting for Redeemable Equity Instruments - Amendment to Section 480-10-S99” which represents an update to section 480-10-S99, distinguishing liabilities from equity, per EITF Topic D-98, Classification and Measurement of Redeemable Securities. The Company does not expect the adoption of this update to have a material impact on its consolidated financial position, results of operations or cash flows.

In August 2009, the FASB issued the FASB Accounting Standards Update No. 2009-05 “Fair Value Measurement and Disclosures Topic 820 – Measuring Liabilities at Fair Value”, which provides amendments to subtopic 820-10, Fair Value Measurements and Disclosures – Overall, for the fair value measurement of liabilities. This update provides clarification that in circumstances in which a quoted price in an active market for the identical liability is not available, a reporting entity is required to measure fair value using one or more of the following techniques: 1. A valuation technique that uses: a. The quoted price of the identical liability when traded as an asset b. Quoted prices for similar liabilities or similar liabilities when traded as assets. 2. Another valuation technique that is consistent with the principles of topic 820; two examples would be an income approach, such as a present value technique, or a market approach, such as a technique that is based on the amount at the measurement date that the reporting entity would pay to transfer the identical liability or would receive to enter into the identical liability. The amendments in this update also clarify that when estimating the fair value of a liability, a reporting entity is not required to include a separate input or adjustment to other inputs relating to the existence of a restriction that prevents the transfer of the liability. The amendments in this update also clarify that both a quoted price in an active market for the identical liability when traded as an asset in an active market when no adjustments to the quoted price of the asset are required are Level 1 fair value measurements. The Company does not expect the adoption of this update to have a material impact on its consolidated financial position, results of operations or cash flows.

In September 2009, the FASB issued the FASB Accounting Standards Update No. 2009-08 “Earnings Per Share – Amendments to Section 260-10-S99”,which represents technical corrections to topic 260-10-S99, Earnings per share, based on EITF Topic D-53, Computation of Earnings Per Share for a Period that includes a Redemption or an Induced Conversion of a Portion of a Class of Preferred Stock and EITF Topic D-42, The Effect of the Calculation of Earnings per Share for the Redemption or Induced Conversion of Preferred Stock. The Company does not expect the adoption of this update to have a material impact on its consolidated financial position, results of operations or cash flows.

In September 2009, the FASB issued the FASB Accounting Standards Update No. 2009-09 “Accounting for Investments-Equity Method and Joint Ventures and Accounting for Equity-Based Payments to Non-Employees”. This update represents a correction to Section 323-10-S99-4, Accounting by an Investor for Stock-Based Compensation Granted to Employees of an Equity Method Investee. Additionally, it adds observer comment Accounting Recognition for Certain Transactions Involving Equity Instruments Granted to Other Than Employees to the Codification. The Company does not expect the adoption to have a material impact on its consolidated financial position, results of operations or cash flows.

In September 2009, the FASB issued the FASB Accounting Standards Update No. 2009-12 “Fair Value Measurements and Disclosures Topic 820 – Investment in Certain Entities That Calculate Net Assets Value Per Share (or Its Equivalent)”, which provides amendments to Subtopic 820-10, Fair Value Measurements and Disclosures-Overall, for the fair value measurement of investments in certain entities that calculate net asset value per share (or its equivalent). The amendments in this update permit, as a practical expedient, a reporting entity to measure the fair value of an investment that is within the scope of the amendments in this update on the basis of the net asset value per share of the investment (or its equivalent) if the net asset value of the investment (or its equivalent) is calculated in a manner consistent with the measurement principles of Topic 946 as of the reporting entity’s measurement date, including measurement of all or substantially all of the underlying investments of the investee in accordance with Topic 820. The amendments in this update also require disclosures by major category of investment about the attributes of investments within the scope of the amendments in this update, such as the nature of any restrictions on the investor’s ability to redeem its investments a the measurement date, any unfunded commitments (for example, a contractual commitment by the investor to invest a specified amount of additional capital at a future date to fund investments that will be make by the investee), and the investment strategies of the investees. The major category of investment is required to be determined on the basis of the nature and risks of the investment in a manner consistent with the guidance for major security types in U.S. GAAP on investments in debt and equity securities in paragraph 320-10-50-1B. The disclosures are required for all investments within the scope of the amendments in this update regardless of whether the fair value of the investment is measured using the practical expedient. The Company does not expect the adoption to have a material impact on its consolidated financial position, results of operations or cash flows.

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In January 2010, the FASB issued Accounting Standards Update No. 2010-01 “Equity Topic 505 – Accounting for Distributions to Shareholders with Components of Stock and Cash”, which clarifies that the stock portion of a distribution to shareholders that allows them to elect to receive cash or stock with a potential limitation on the total amount of cash that all shareholders can elect to receive in the aggregate is considered a share issuance that is reflected in EPS prospectively and is not a stock dividend for purposes of applying Topics 505 and 260 (Equity and Earnings Per Share (“EPS”)). Those distributions should be accounted for and included in EPS calculations in accordance with paragraphs 480-10-25- 14 and 260-10-45-45 through 45-47 of the FASB Accounting Standards codification. The amendments in this Update also provide a technical correction to the Accounting Standards Codification. The correction moves guidance that was previously included in the Overview and Background Section to the definition of a stock dividend in the Master Glossary. That guidance indicates that a stock dividend takes nothing from the property of the corporation and adds nothing to the interests of the stockholders. It also indicates that the proportional interest of each shareholder remains the same, and is a key factor to consider in determining whether a distribution is a stock dividend.

In January 2010, the FASB issued the FASB Accounting Standards Update No. 2010-02 “Consolidation Topic 810 – Accounting and Reporting for Decreases in Ownership of a Subsidiary – a Scope Clarification”, which provides amendments to Subtopic 810-10 and related guidance within U.S. GAAP to clarify that the scope of the decrease in ownership provisions of the Subtopic and related guidance applies to the following:

A subsidiary or group of assets that is a business or nonprofit activity

A subsidiary that is a business or nonprofit activity that is transferred to an equity method investee or joint venture

An exchange of a group of assets that constitutes a business or nonprofit activity for a non-controlling interest in an entity (including an equity method investee or joint venture).

The amendments in this Update also clarify that the decrease in ownership guidance in Subtopic 810-10 does not apply to the following transactions even if they involve businesses:

Sales of in-substance real estate. Entities should apply the sale of real estate guidance in Subtopics 360-20 (Property, Plant, and Equipment) and 976-605 (Retail/Land) to such transactions.

Conveyances of oil and gas mineral rights. Entities should apply the mineral property conveyance and related transactions guidance in Subtopic 932-360 (Oil and Gas-Property, Plant, and Equipment) to such transactions.

If a decrease in ownership occurs in a subsidiary that is not a business or nonprofit activity, an entity first needs to consider whether the substance of the transaction causing the decrease in ownership is addressed in other U.S. GAAP, such as transfers of financial assets, revenue recognition, exchanges of nonmonetary assets, sales of in substance real estate, or conveyances of oil and gas mineral rights, and apply that guidance as applicable. If no other guidance exists, an entity should apply the guidance in Subtopic 810-10.

Management does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying financial statements.

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NOTE 4 – Liquidity and Shareholders’ Equity

Cash and cash equivalents were $58,369 and $165,848 at January 31, 2011 and July 31, 2010, respectively. Our working capital was $778,264 and $529,644 at January 31, 2011 and July 31, 2010, respectively.

Preferred Stock

The Company's Amended Articles of Incorporation authorizes the issuance of 50,000,000 shares of Preferred Stock, par value $0.001 per share, subject to any limitations prescribed by law, without further vote or action by the stockholders, to issue from time to time shares of preferred stock in one or more series. Each such series of Preferred Stock shall have such number of shares, designations, preferences, voting powers, qualifications, and special or relative rights or privileges as shall be determined by the Company's board of directors, which may include, among others, dividend rights, voting rights, liquidation preferences, conversion rights and preemptive rights.

Series A Convertible Preferred Stock

The Company has authorized a total of 9,400,000 shares of Series A Convertible Preferred Stock (the “Series A”). The Series A is convertible at any time into shares of the Company’s common stock at the conversion rate of one share of Common Stock per each share of Series A converted. If the Company reports net income in two of the four years following the Exchange, the Series A shall be convertible into Common Stock at the conversion rate of two shares of Common Stock per each share of Series A converted. The Series A is treated on an “as converted” basis for both voting and liquidation rights. There are options to acquire 2,350,000 shares of Series A issued and outstanding.

6% Series B Convertible, Redeemable Preferred Stock

The Company has authorized a total of 2,600,000 shares of 6% Series B Convertible, Redeemable Preferred Stock (the “Series B”). The Series B accrues annual dividends at the rate of 6% per year in shares of Common Stock at the dividend conversion rate of $1.00. The Series B, together with any unpaid dividends, is convertible at any time into shares of the Company’s common stock at the conversion rate of one share of Common Stock per each share of Series B converted. Following the second anniversary of the Exchange, the Series B, together with any unpaid dividends, shall be convertible into Common Stock at the conversion price of forty cents ($0.40) or seventy percent (70%) of the daily volume weighted average price of the Common Stock for the twenty trading days immediately prior to the conversion. The Series B is redeemable by the Company, at any time prior to December 31, 2015, in cash at the redemption rate of $1.00 per share of Series B plus any accrued and unpaid dividends. On December 31, 2015, all outstanding shares of Series B shall be redeemed by the Company at a per share redemption price equal to $1.00 per share of Series B plus an amount of Common Stock equal to the amount of the accrued and unpaid dividend thereon. The Series B has a liquidation preference of $2,600,000 and ranks prior to the Series A and the Common Stock. The Series B votes on an “as converted” basis. There are currently 2,600,000 shares of Series B outstanding.

Warrants

As of January 31, 2011, there were warrants outstanding to purchase 500,000 shares of Common Stock at the exercise price of $0.50.

Options

As of the Exchange date, there were fully vested options outstanding to purchase 5,500,000 shares of Common Stock and 2,350,000 shares of Series A Preferred Stock, both at a purchase price of $.01 per share. On April 27, 2010 the Board granted a non cash bonus to Mr. Kenneth Cheng of $55,000 upon receipt of which, all 5,500,000 options for Common Stock were exercised.

For the year ended July 31, 2010, based on the fair value of stock options granted during the year, the Company recognized stock option expense of $41,861. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions: risk-free interest rate of 1.79%; volatility of 70%; expected life of 4 years; and, all option grants without payment of dividends.

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2010 Equity Incentive Plan

On January 15, 2010, our Board and Stockholders approved and adopted the 2010 Equity Incentive Plan (the “2010 Plan”). A copy of the 2010 Plan was attached as Exhibit [10.4] to Form 8-K filed with the Securities and Exchange Commission on January 22, 2010.

The 2010 Plan is intended to promote the interests of the Company by attracting and retaining exceptional employees, consultants, directors, officers and independent contractors (collectively referred to as the “Participants”), and enabling such Participants to participate in the long-term growth and financial success of the Company. Under the 2010 Plan, the Company may grant stock options, which are intended to qualify as “incentive stock options” under Section 422 of the Internal Revenue Code of 1986, as amended (the “Incentive Stock Options”), non-qualified stock options (the “Nonqualified Stock Options”), stock appreciation rights (“SARs”) and restricted stock awards (the “Restricted Stock Awards”), which are restricted shares of Common Stock (the Incentive Stock Options, the Nonqualified Stock Options, the SARs and the Restricted Stock Awards are collectively referred to as “Incentive Awards”). Incentive Awards may be granted pursuant to the 2010 Plan for 10 years from the Effective Date.

From time to time, the Company may issue Incentive Awards pursuant to the 2010 Plan. Each of the awards will be evidenced by and issued under a written agreement. In accordance with the rules of the plan, the exercise price of options granted shall be not less than 110% of the average of the closing price for the 30 days preceding the grant date.

The Board reserved a total of 2,277,778 shares of our Common Stock for issuance under the 2010 Plan. If an incentive award granted under the 2010 Plan expires, terminates, is unexercised or is forfeited, or if any shares are surrendered to us in connection with an incentive award, the shares subject to such award and the surrendered shares will become available for further awards under the Plan.

The number of shares subject to the 2010 Plan, any number of shares subject to any numerical limit in the 2010 Plan, and the number of shares and terms of any Incentive Award may be adjusted in the event of any change in our outstanding Common Stock by reason of any stock dividend, spin-off, stock split, reverse stock split, recapitalization, reclassification, merger, consolidation, liquidation, business combination or exchange of shares, or similar transaction.

On September 1, 2010, 840,000 options were granted to eight employees at an exercise price of $0.20 per share. Using the Black-Scholes option pricing model with the following assumptions: risk-free interest rate of 1.79%; volatility of 40%; expected life of 10 years; and, all option grants without payment of dividends, we recognized a non-cash stock compensation charge of $8,515 in the six months ended January 31, 2011 in connection with the issuance and vesting of these options. At January 31, 2011, 1,437,778 options remain available for future grant under the Plan.

Common Stock

On April 30, 2010, the Company Amended and Restated its Articles of Incorporation to authorize the issuance of up to 1,000,000,000 shares of common stock, $.001 par value per share, of which 51,956,015 shares and 51,750,000 shares were outstanding as of January 31, 2011 and July 31, 2010, respectively.

NOTE 5 – Related Party Transactions and Gain on Settlement

Shareholder

The Company had notes payable to related parties of $100,000 as of both January 31, 2011 and July 31, 2010, respectively. The notes were unsecured, and are repayable as follows:

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	January 31, 2011		July 31, 2010
Note payable to a shareholder, bearing interest at 10% per annum. The principal is due in September 2011.	$	70,000	$	70,000

Note payable to a shareholder, bearing interest at 10% per annum. The principal and interest is due in January 2011.		30,000		30,000

Total	$	100,000	$	100,000

Litigation settlement

The Company had an ongoing litigation over accounts receivable and payable with Ambeon Corporation, a related party by virtue of common ownership. The dispute started in 2004 and was settled in favor of the Company under the Shih Lin District Court of Taiwan on August 20, 2008. The Company agreed to pay a sum of $560,000 and the remaining disputed payable balances were decreased in favor of the Company, and settlement income of $843,572 was realized in year 2008. As of January 31, 2011, the company has paid $385,000 towards the settlement. The remaining minimum payments due under the settlement are as follows:

Year Ending July 31:
2011		115,000
2012		60,000
2013		60,000

Total	$	235,000

NOTE 6 – Property and Equipment

Property and equipment are stated at cost. Depreciation is calculated using the straight-line method over the following estimated useful lives of the assets: furniture and fixtures –seven years; machinery and equipment –five years; software – five years. Major additions and betterments are capitalized and repairs and maintenance are charged to operations in the period incurred. Depreciation expense for the three months ended January 31, 2011 and 2010 was $1,102 and $812, respectively. Depreciation expense for the six months ended January 31, 2011 and 2010 was $2,205 and $1,535, respectively.

NOTE 7 – Revolving Line of Credit

On July 14, 2010 the Company completed negotiations for a secured line of bank credit for up to one million dollars. Advances under the credit line will be secured on substantially all of the Company’s assets, be subject to interest at 1% above the Wall Street Journal prime rate index, and be subject to the following restrictive covenants: (i) the current ratio shall not be less than 1.2 times; (ii) the debt to tangible net worth ratio shall not exceed 2.5 times; (iii) the quarterly EBITDA shall not be less than $25,000; and (iv) the security value of certain selected accounts receivable will be limited depending on their concentration. The credit line will expire on July 14, 2011. At January 31, 2011, the Company had drawn $350,000 under this credit line, and was in compliance with the note covenants.

The Company incurred interest expense of $12,519 and $9,179 during the six months ended January 31, 2011, and 2010, respectively.

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NOTE 8 - Notes Payable

Notes payable, which are unsecured, consist of the following as of January 31, 2011 and July 31, 2010:

Notes Payable Consist of the Following at:

	January 31, 2011		July 31, 2010
Note payable to Ambeon Corporation, a related party by virtue of common ownership, bearing interest at 5% per annum.	$	175,000	$	235,000

Note payable to a shareholder, bearing interest at 10% per annum. The principal and interest in due in Jan 2011.		30,000		30,000

Note payable to an employee, bearing interest at 10% per annum. The principal is due in Sep 2011.		70,000		70,000

Total notes payable		275,000		335,000

Less current portion
Due to related party		100,000		100,000
Due to third party		90,000		115,000
		190,000		215,000

Long-term notes payable	$	85,000	$	120,000

NOTE 9 – Income Taxes

The consolidated income tax expense for the years ended July 31, 2010 and 2009 was determined based upon estimates of the Company’s consolidated effective income tax rates for the years ending July 31, 2010 and 2009, respectively. The difference between the consolidated effective income tax rate and the U.S. federal statutory rate is primarily attributable to state income taxes, and the effect of certain permanent differences.

FASB Topic 740, Accounting for Uncertainty in Income Taxes, prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Generally accepted accounting principles require that the Company recognizes in the financial statements a liability for tax uncertainty if it is not more likely than not that the position will be sustained on audit, based on the technical merits of the position. They also provide guidance on de-recognition, classification, interest and penalties, accounting in interim periods and disclosure. The Company has not recorded any liability for unrecognized tax benefits as of July 31, 2010. There have been no material changes in unrecognized tax benefits at January 31, 2011.

The Company’s tax returns are subject to examination by federal, state and foreign taxing authorities. As of July 31, 2010, the statute of limitations for examining the Company’s federal income tax returns has not expired for the years ended December 31, 2006 through 2009. As of July 31, 2010, the statutes of limitation for tax examinations in the state of California have not expired for tax returns filed for the years ended December 31, 2005 through 2009. As of July 31, 2010, the statute of limitation for tax examinations in Taiwan have not expired for tax returns filed for the years December 31, 2004 through 2009.

We did not make any provision for income taxes in the six months ended January 31, 2011. Our effective tax rate takes into consideration federal and state minimum tax rates, foreign taxes and NOL carry-forwards.

The company has accumulated NOLs of $1.6 million, which, if unutilized, will begin to expire in 2018. Future tax benefits, which may arise as a result of these losses, have not been recognized in these financial statements, and have been offset by a valuation allowance since there is no assurance that we will be able to utilize these NOLs. Details of future income tax assets are as follows:

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NOTE 10 – Commitments and Contingencies

The Company leases its office and warehouse. The Company signed a new lease for its office and warehouse effective March 1, 2011 at a new location. The maturity date for the lease is May 2016. The minimum rental commitments under the lease are as follows:

Year Ending July 31:
2011		53,324
2012		53,696
2013		55,133
2014		56,570
2015		58,007
2016		49,537

Total	$	326,267

The rent expense for the three months ended January 31, 2011 and 2010 was $19,233 and $15,150, respectively. The rent expense for the six months ended January 31, 2011 and 2010 was $34,833 and $30,300, respectively.

NOTE 11 – Subsequent Events

None.

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ITEM 2. Management’s Discussion and Analysis of Plans of Operations

Forward Looking Statements

Statements in the following discussion and throughout this report that are not historical in nature are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. You can identify forward-looking statements by the use of words such as the words “expect,” “anticipate,” “estimate,” “may,” “will,” “should,” “intend,” “believe,” and similar expressions. Although we believe the expectations reflected in these forward-looking statements are reasonable, such statements are inherently subject to risk and we can give no assurances that our expectations will prove to be correct. Actual results could differ from those described in this report because of numerous factors, many of which are beyond our control. These factors include, without limitation, those described as “Risk Factors.” We undertake no obligation to update these forward-looking statements to reflect events or circumstances after the date of this report or to reflect actual outcomes.

The following discussion and analysis of our plan of operations should be read in conjunction with our financial statements and related notes appearing elsewhere in this report. This discussion and analysis contain forward-looking statements that involve risks, uncertainties and assumptions. Actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including, but not limited to, those presented under the heading of “Risk Factors” and elsewhere in this annual report.

Acquisition and Reorganization

On January 15, 2010, the acquisition of AmbiCom was completed, and the business of AmbiCom was adopted as our business. As such, the following Management Discussion is focused on the current and historical operations of AmbiCom, and excludes the prior operations of the Registrant.

Overview

AmbiCom is a designer and developer of wireless products focusing on Wi-Fi and Bluetoothâ applications for the medical and healthcare industry. AmbiCom purchases standard wireless products and designs and develops features and packaging to customize these products to their target OEM markets. The Company believes that there are unique opportunities as a result of the sheer size of the wireless healthcare market and the Company’s innovative approach and exemplary customer service. AmbiCom will also continue to develop and explore solutions for non-healthcare applications although these are not material at present.

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Results of Operations

The following table sets forth, for the periods indicated, certain financial data as a percentage of total revenue:

	Three Months Ended January 31,						Six Months Ended January 31,
	2011			2010			2011			2010


Sales		100.0	%		100.0	%		100.0	%		100.0	%

Cost of sales		39.7	%		49.9	%		45.3	%		51.3	%

Gross profits		60.3	%		50.1	%		54.7	%		48.7	%

OPERATING EXPENSES
Depreciation		0.1	%		0.1	%		0.1	%		0.1	%
Professional fees		4.6	%		8.9	%		4.4	%		5.1	%
Selling and general expenses		32.9	%		35.2	%		35.7	%		32.9	%
Total operating expenses		37.6	%		44.2	%		40.2	%		38.1	%

Income from operations		22.7	%		5.9	%		14.5	%		10.6	%

Other income (expense)
Other income and expense, net		-2.7	%		0.0	%		-2.1	%		-0.2	%
Interest expense, net		-0.5	%		-0.7	%		-0.6	%		-0.6	%
Net other income (expense)		-3.2	%		-0.7	%		-2.7	%		-0.8	%

Total income before income taxes		19.5	%		5.2	%		11.8	%		9.8	%

Income taxes		0.0	%		0.0	%		0.0	%		0.0	%

Net income (loss)		19.5	%		5.2	%		11.8	%		9.8	%

Revenue

Revenue is derived from sales of our wireless device products. These products consist of routers, Compact flash Adapters/Modules, USB Adapters/Modules, Mini PCI Modules, PCI Express Mini Modules and mobile wireless products. The Company operates in a market characterized by long term growth prospects as businesses adopt the convenience of wireless connectivity and switch from traditional wired solutions. We provide optimized wireless products to the medical industry which has concentrated on using wireless solutions as a way to reduce healthcare costs as a whole. Total revenue for the three and six months ended January 31, 2011 and 2010 is summarized in the following table:

Three Months Ended January 31,									Six Months Ended January 31,
2011		2010		Change in Dollars		Change in Percent			2011		2010		Change in Dollars		Change in Percent

$	1,268,148	$	870,604	$	397,544		46	%	$	2,203,161	$	1,648,257	$	554,904		34	%

Our sales grew by 34% in the six months ended January 31, 2011 compared to the six months ended January 31, 2010, mainly as a result of the market growth trend which we expect to continue through 2011 and beyond. Sales grew by 46% in the three months ended January 31, 2011 compared to the three months ended January 31, 2010.

Customer Concentration Information

One customer accounted for more than 10% of total revenue for the six months ended January 31, 2011, and one customer accounted for more than 10% for the six months ended January 31, 2010. One customer accounted for more than 10% of total revenue for the three months ended January 31, 2011, and one customer accounted for more than 10% for the three months ended January 31, 2010.

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Cost of Sales

Our cost of sales consists primarily of the amounts paid to third-party manufacturers for the products we purchase for re-sale together with related packaging costs. Our cost of sales for the three and six months ended January 31, 2011 and 2010 are summarized in the following table:

Three Months Ended January 31,									Six Months Ended January 31,
2011		2010		Change in Dollars		Change in Percent			2011		2010		Change in Dollars		Change in Percent

$	503,107	$	434,408	$	68,699		16	%	$	997,399	$	846,099	$	151,300		18	%

Our cost of sales increased 18% in the six months ended January 31, 2011 compared to the six months ended January 31, 2010. Our cost of sales grew at a lower rate than the rate of our revenues primarily due to customers purchasing different product mixes that offer the Company greater margins. Cost of sales increased by 16% in the three months ended January 31, 2011 compared to the three months ended January 31, 2010.

Gross Profit & Gross Margin

Our gross profit increased by 50% from $802,158 in the six months ended January 31, 2010 to $1,205,762 in the six months ended January 31, 2011 primarily as a result of the increase in sales volume and product mix purchased by customers. Due to the higher rate of growth of revenue over cost of sales, our gross margin increased to 54.7% for the six months ended January 31, 2011. Our gross profit increased by 75% from $436,196 for the three months ended January 31, 2010 to $765,041 for the three months ended January 31, 2011. The Company does not necessarily expect gross margins to remain at this level in 2011 and our gross margin will continue to be affected by a variety of factors, including the product mix that our customers demand, changes in supply costs, outsourcing costs for ongoing projects, the average sales prices realized on sales of our products, and the stage of our product life cycle.

Operating Expenses

Three Months Ended January 31,									Six Months Ended January 31,
2011		2010		Change in Dollars		Change in Percent			2011		2010		Change in Dollars		Change in Percent

$	477,076	$	385,366	$	91,710		24	%	$	885,510	$	627,928	$	257,582		41	%

Our operating expenses are categorized to include depreciation, professional fees and selling, general and administrative expenses. Overall operating expenses increased by $91,710 for the three months ended January 31, 2011 from the comparable period in 2010, an increase of 24%. For the six months ended January 31, 2011, operating expenses increased by $257,582 or 41% over the comparable period in 2010.

Depreciation expense was $2,205 for the six months ended January 31, 2011 and $1,535 for the six months ended January 31, 2010. Our depreciation rate policy remained unchanged. The increase was due to additional fixed assets purchased during that time.

Our professional fees increased to $97,692 in the six months ended January 31, 2011 from $83,582 in the six months ended January 31, 2010. Professional fees are a significant part of our operating expenses as a direct result of our reporting and filing requirements as a public company since the merger in 2010.

Selling, general and administrative expenses consist primarily of salaries and associated costs for employees in finance, human resources, sales, information technology and administrative activities. In addition, selling, general and administrative expenses may from time to time include charges relating to insurance or stock-based compensation under Statement of Financial Accounting Standards No. 123(R), “Share-Based Payment.” Our selling, general and administrative expenses increased by $242,802 or 45% to $785,613 in the six months ended January 31, 2011 from $542,811 in the six months ended January 31, 2010.

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Of this increase, approximately $100,000 was due to an increase in headcount and salary cost, approximately $75,000 was due to increased R&D expenditures, and the remainder was mainly due to increased public relations costs and travel expenses as the Company expands business with new customers and to increase awareness of the Company.

Income from Operations

Income from operations indicates the amount available from operating activities after we have deducted our operating expenses from our gross profit. Our income from operations increased from $174,230 in the six months ended January 31, 2010 to $320,252 in the six months ended January 31, 2011, with increases in revenue and gross profit offset by a smaller increase in selling, general and administrative expenses. Income from operations increased from $50,830 for the three months ended January 31, 2010 to $287,965 for the three months ended January 31, 2011.

Other Income and Expenses

Other income and expenses arise from non operating events and transactions, principally interest charges. Other income and expense, net, was a net expense of $58,943 for the six months ended January 31, 2011 compared to a net expense of $12,080 for the six months ended January 31, 2010. Other income and expenses, net, was a net expense of $40,981 for the three months ended January 31, 2011 compared to a net expense of $6,430 for the three months ended January 31, 2010.

Provision for Income Taxes

Our effective tax rate for the years ended July 31, 2010 and 2009 was 42.8%. We made no provisions for income taxes in either the first six months of 2011 or 2010 as we had significant NOL carry-forwards to cover our liability for the these periods.

Net Income

Net income for the three and six months ended January 31, 2011 and 2010 is summarized in the following table:

Three Months Ended January 31,									Six Months Ended January 31,
2011		2010		Change in Dollars		Change in Percent			2011		2010		Change in Dollars		Change in Percent

$	246,984	$	44,400	$	202,584		456	%	$	261,309	$	162,150	$	99,159		61	%

For the six months ended January 31, 2011, net income was $261,309, an increase of 61% compared to the six months ended January 31, 2010 net income of $162,150. The increase in net income for the six months ended January 31, 2011compared to six months ended January 31, 2010 was primarily due to increased profit margin from customer purchasing mix increasing more than our increases in operating expenses. Net income for the three months ended January 31, 2011 and 2010 was $246,984 and $44,400, respectively.

Capital Resources and Liquidity

Cash and cash equivalents were $58,369 at January 31, 2011 and $165,848 at July 31, 2010. The net decrease in cash over the period was primarily due to the increase of accounts receivables stemming from increased sales in the period that had not yet been collected as of January 31, 2011 in conjunction with the increased cost of sales associated with the Company’s increased sales volume. Our total current assets increased 45% to $1,417,638 at January 31, 2011 from $980,168 at July 31, 2010 while our current liabilities increased by 42% to $639,374 at January 31, 2011 from $450,524 at July 31, 2010. Total working capital increased to $778,264 at January 31, 2011 compared to $529,644 at July 31, 2010, an increase of $248,620..

The Company negotiated a $1 million secured line of bank credit as of July 14, 2010, and at January 31, 2011, the balance outstanding under this facility was $350,000. The covenants relating to the line of credit include monthly unaudited, and annual audited compliance certifications requiring a minimum current asset to current liability ratio of 1:2, a maximum debt to tangible net worth ratio of 2.5:1, and a minimum quarterly EBITDA of at least $25,000. We are in compliance with the covenants as of January 31, 2011. We believe that we have access to sufficient working capital to serve our business needs during the next twelve months.

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Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

Critical Accounting Policies

The process of preparing financial statements requires the use of estimates on the part of our management. The estimates used by management are based on our historical experiences combined with management’s understanding of current facts and circumstances. Certain of our accounting policies are considered critical as they are both important to the portrayal of our financial condition and results and require significant or complex judgment on the part of management. For a description of what we believe to be our most critical accounting policies and estimates, please refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of our Annual Report on Form 10-K, for the year ended July 31, 2010, which was filed with the Securities and Exchange Commission on November 15, 2010.

Critical accounting policies affecting us, the critical estimates made when applying them, and the judgments and uncertainties affecting their application have not changed materially since July 31, 2010.

Recent Accounting Pronouncements

See Note 3 “Summary of Significant Accounting Policies” in the Notes to the Unaudited Condensed Consolidated Financial Statements for a full description of relevant recent accounting pronouncements including the respective expected dates of adoption.

ITEM 3 . Quantitative and Qualitative Disclosures about Market Risk

Not applicable to smaller reporting companies.

ITEM 4 . Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Company’s Principal Executive Officer and Principal Financial Officer, has evaluated 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) under the Securities Exchange Act of 1934 (the “Exchange Act”). Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer, same person, has 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 Controls

There has been no change in the Company’s internal controls over financial reporting that occurred during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

Internal control systems, no matter how well designed and operated, have inherent limitations. Therefore, even a system which is determined to be effective cannot provide absolute assurance that all control issues have been detected or prevented. Our systems of internal controls are designed to provide reasonable assurance with respect to financial statement preparation and presentation.

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PART II

OTHER INFORMATION

ITEM 1. Legal Proceedings

Year Ending July 31:
2011		115,000
2012		60,000
2013		60,000

Total	$	235,000

The Company is not a party and its property is not subject to any other material pending legal proceedings nor is the Company aware of any threatened or contemplated proceeding by any governmental authority against the Company.

ITEM 1A. Risk Factors

Not required for a "smaller reporting company".

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		Exhibit Title

31.1		Certification by John Hwang pursuant to Rule 13a-14(a) promulgated under the Securities Exchange Act of 1934.

31.2		Certification by John Hwang pursuant to Rule 13a-14(a) promulgated under the Securities Exchange Act of 1934.

32.1*		Certification by John Hwang pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2*		Certification by John Hwang pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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As contemplated by SEC Release No. 33-8212, these exhibits are furnished with this quarterly report on Form 10-Q and are not deemed filed with the Securities and Exchange Commission and are not incorporated by reference in any filing of AmbiCom Holdings, Inc. under the Securities Act of 1933 or the Securities Exchange Act of 1934, including this quarterly report, whether made before or after the date hereof and irrespective of any general incorporation language in any filings.

SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Quarterly Report on Form 10-Q report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: March 14, 2011	By:	/s/ John Hwang
		Name: John Hwang
		Its: Chief Executive Officer and Principal Executive Officer and Director

Date: March 14, 2011	By:	/s/ John Hwang
		Name: John Hwang
		Its: Chief Financial Officer, and Principal Financial and Accounting Officer

Date: March 14, 2011	By:	/s/ Kenneth Cheng
		Kenneth Cheng, Director

AMBICOM HOLDINGS, INC - FORM 10-Q - March 14, 2011

Attached files

AMBICOM HOLDINGS, INC Reports