UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549





FORM
10-K





[X]
ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934





For the
fiscal year ended August 31, 2009





[  
] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934





For the
transition period from __________ to _________





Commission
file number: 333-156934





SUMOTEXT
INCORPORATED


(Name of
registrant in its charter)





Nevada
                    4822
                    26-0319491(State
      or jurisdiction
                    (Primary
      Standard
                    (IRS
      Employerof
      incorporation or
                    Industrial
      Classification
                    Identification
      No.)organization)
                    Code
      Number)





2100
Riverdale, Suite 200


Little Rock, Arkansas,
72202


(Address
of principal executive offices)





(800)
480-1248


(Registrant's
telephone number)





SECURITIES
REGISTERED PURSUANT TO SECTION 12(B) OF


THE
EXCHANGE ACT:





None.





SECURITIES
REGISTERED PURSUANT TO SECTION 12(G) OF


THE
EXCHANGE ACT:





Common
Stock, $0.0001 Par Value Per Share.





Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act. Yes [   ] No [X].





Check
whether the issuer is not required to file reports pursuant to Section 13 or
15(d) of the Exchange Act. Yes [   ] No [X]





Check
whether the issuer (1) filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for
such shorter periods that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days. Yes [X]
No [   ]





Check if
there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-K  contained in this form, and no disclosure will be
contained, to the best of the registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [X]





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   ̈    No   ̈





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.





Large
      accelerated filer [  ]
            Accelerated
      filer [  ]Non-accelerated
      filer  [  ]
            Smaller
      reporting company  [X]





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes [ ] No [X].





The
aggregate market value of the issuer's voting and non-voting common equity held
by non-affiliates computed by reference to the closing price of such common
equity on the Over-The-Counter Bulletin Board as of February 28, 2009, the end
of the issuer’s most recently completed second fiscal quarter, was $0 as there
was no market for the issuer’s common equity as of February 28,
2009.





As of
October 27, 2009, the registrant had 7,779,806 shares of common stock, $0.0001
par value per share, outstanding





TABLE
OF CONTENTS





PART
I





ITEM
      1. BUSINESS
            4ITEM
      1A. RISK FACTORS
            9ITEM
      2. PROPERTIES
            19ITEM
      3. LEGAL PROCEEDINGS
            19ITEM
      4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
            19





PART
II





ITEM
      5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
      ISSUER PURCHASES OF EQUITY SECURITIES
            20ITEM
      6. SELECTED FINANCIAL DATA
            21ITEM
      7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
      OF OPERATIONS
            21ITEM
      8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
            F-1ITEM
      9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
      FINANCIAL DISCLOSURE
            29ITEM
      9A. CONTROLS AND PROCEDURES
            29ITEM
      9B. OTHER INFORMATION
            30





PART
III




ITEM
      10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
            31ITEM
      11. EXECUTIVE COMPENSATION
            32ITEM
      12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
      RELATED STOCKHOLDER MATTERS
            34ITEM
      13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
            35ITEM
      14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
            37





PART
IV





ITEM
      15. EXHIBITS
            38SIGNATURES
            39





PART
I





FORWARD-LOOKING
STATEMENTS





CERTAIN
STATEMENTS IN THIS ANNUAL REPORT ON FORM 10-K (THIS "FORM 10-K"), CONSTITUTE
"FORWARD LOOKING STATEMENTS" WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES
ACT OF 1934, AS AMENDED, AND THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995 (COLLECTIVELY, THE "REFORM ACT"). CERTAIN, BUT NOT NECESSARILY ALL, OF SUCH
FORWARD-LOOKING STATEMENTS CAN BE IDENTIFIED BY THE USE OF FORWARD-LOOKING
TERMINOLOGY SUCH AS "BELIEVES", "EXPECTS", "MAY", "SHOULD", OR "ANTICIPATES", OR
THE NEGATIVE THEREOF OR OTHER VARIATIONS THEREON OR COMPARABLE TERMINOLOGY, OR
BY DISCUSSIONS OF STRATEGY THAT INVOLVE RISKS AND UNCERTAINTIES. SUCH
FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND
OTHER FACTORS WHICH MAY CAUSE THE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS OF
SUMOTEXT INCORPORATED ("THE COMPANY", "WE", “SUMOTEXT,” "US" OR "OUR") TO BE
MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS
EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. REFERENCES IN THIS FORM
10-K, UNLESS ANOTHER DATE IS STATED, ARE TO AUGUST 31, 2009.





ITEM
1. BUSINESS




History





The
Company was incorporated in Arkansas on June 8, 2007 as Reminderbox,
Inc.  The Company began selling its services to clients on January 8,
2008 under the brand name SUMOTEXT Incorporated. On September 10, 2008 the
Company converted into a Nevada corporation and contemporaneously changed its
name to SUMOTEXT Incorporated. Our mailing address is 2100 Riverdale, Suite
200, Little Rock, Arkansas, 72202, our telephone number is (800) 480-1248, and
our fax number is (501) 228-4482.





On or
about June 30, 2008, the Company’s shareholders approved a 16,740:1 forward
stock split of our issued and outstanding shares of common stock (the “Forward
Split”), with an effective date of June 30, 2008.  The effects of the
Forward Split are retroactively affected throughout this report, unless
otherwise noted.




The Company has never been
a party to a reverse merger or a public shell acquisition. Rather, in early
2009, we filed and gained effectiveness of our Form S-1 Registration Statement
with the SEC and became a fully reporting company. In April 2009, we obtained a
quotation for our common stock on the Over-The-Counter Bulletin Board ("OTCBB")
under the symbol SMXI.OB.




SUMOTEXT
owns the rights to the registered internet domain names “www.textmarketing.com”
and “www.sumotext.com,” which contain information that the Company does not
desire to be incorporated by reference into this report.




About Us





SUMOTEXT
is a short code application provider that enables legitimate businesses and
organizations to instantly launch product offers, promotions, and time-sensitive
alerts into the mobile channel via text messaging.  By reserving and
promoting identifiable keywords on a mobile short code, our clients leverage our
platform, carrier relationships, and carrier-compliant campaign management tools
to begin engaging their most valued customers and constituents on their mobile
device via text messaging.





The
Company believes that every business and organization that currently collects
email addresses will eventually begin collecting mobile ‘opt-ins’. The Company
believes that text message marketing is an efficient and cost-effective means to
distribute time-sensitive information and promotions to disbursed
groups.  Each of our packaged solutions is 'ready-to-go' and provides
our clients the reliability, real-time compliance, and flexibility they expect
from industry experts who do nothing but SMS (short message service) over short
codes.





Our
software service enables marketers to fully control keywords on short codes and
configure highly interactive campaigns and message flows that identify, attract,
profile, and reward their most valued customers. Not just for marketers,
organizational leaders also recognize what we believe, which is that no other
channel offers the immediate or ubiquitous reach of a text message alert. Our
powerful keyword and group management controls streamline communications
throughout the enterprise to increase attendance and participation while keeping
groups of employees, stakeholders and volunteers organized, informed, and
motivated.


-4-


The
Company’s service delivery platform and campaign management tools are incapable
of facilitating SPAM and were designed to impress and protect our client’s
customers. Our system was designed to ensure that our client’s campaigns remain
‘real-time’ compliant with the FTC's CAN-SPAM Act, the Mobile Marketing
Association's Code of Conduct, and the most stringent of all Operational
Playbooks published by any wireless carrier. Our system can only send and
receive text messages over a short code and only allows our clients to send text
messages to customers who have opted-in to their specific keyword program from
their hand set (mobile phone). Our system also adds "Reply STOP to Opt-out" to
the end of each message sent. This provides our client’s customers a constant
reminder that they are in complete control of the experience.





Our Client's
Problem





The
Pareto Principle – also known as the Law of the Vital Few – suggests that 80% of
a company’s sales come from 20% of its customers.  This principal was
the foundation for the gaming and casino industry’s highly successful marketing
strategy - the ‘Player’s Club’ (basically a way to track the wagering habits of
a casino’s customers with individualized “reward” cards). While similar customer
identification strategies have since been adopted by other business sectors, the
Company believes that until now, email and direct mail campaigns were the only
channels capable of leveraging these databases for targeted communications. With
the decline of e-mail read rates, and the high-costs and long lead times
associated with direct mail, the Company believes marketers and organizational
leaders need a more efficient and effective channel to identify, attract, and
reward their most valued customers.





Short
Codes





Taking
cues from Asia and Europe, U.S. wireless carriers (through the Cellular
Telecommunications and Internet Association (“CTIA”)) created the Common Short
Code Administration (“CSCA”) as an entity to regulate access to the SMS
channel.  A ‘Short Code’ is a 5 or 6 digit abbreviated phone number
that is used to address SMS.





Short
codes provide consumers a trusted method to ‘Opt-in’ and ‘Opt-out’ of marketing
campaigns and alert services.  Short codes also identify application
providers and content providers and keep spammers and unsolicited marketers out
of wireless networks. Each short code has to be independently approved,
provisioned, tested, and certified by each wireless carrier to gain access to
that network.





There are
two (2) major categories of short codes: standard rated codes and premium rated
codes. SUMOTEXT, Inc. currently operates standard rated short codes only. Unlike
‘premium’ short code programs which can add a subscription or content access
charge to a consumer’s phone bill (e.g. 99 cents to download a ring tone or
$4.99 for a monthly subscription service), standard rated short codes do not
charge the consumer to interact with the content provider’s program; though
standard message and data charges may apply. For standard rates short code
programs, the only charge to the consumer is based on the number of text message
credits which are included in their wireless carrier’s phone plan. If a consumer
has ‘unlimited’ text messaging as part of their plan, they will see no
additional charges from their wireless carrier to interact with a standard rated
short code program.





Unlike
premium short codes, a standard rated short code can be shared by multiple
content providers if the program is managed by an approved application provider
like SUMOTEXT with a system capable of maintaining carrier compliance while
differentiating between program traffic through the use of unique keywords.
However, due to the growing number of programs being run over shared short
codes, wireless carriers continue to tighten requirements for the application
providers who offer these services and SUMOTEXT remains vigilant to meet these
requirements and enhance our service delivery platform with the features that
keep our clients ‘real-time’ compliant with all industry standards, best
practices, and unique carrier requirements.


-5-


Target
Markets





The
Company believes that text message marketing will appeal to any business that
currently collects email addresses from its customers. However, the most
compelling applications of short code programs are found when our clients have
time-sensitive information to distribute which is intended to motivate
customers, prospects, constituents, or employees to increase sales, attendance,
or participation.





When a
consumer opts-in to one of our client’s short code programs:





•
              Our
      client has identified someone very likely to buy, attend, or participate
      in the client’s service;•
              Our
      client has received permission to send them text
  messages;





•
              Our
      client can reach them instantly - anytime and anywhere - with a 95% read
      rate; and•
              Our
      client provides their customer a trusted method to ‘Opt-out’ at any
      time.





Customers




The
Company commercially launched its service on January 8, 2008. As of August 31,
2009, the Company serviced 502 unique, revenue-generating clients which include
467 ‘Small Business’ clients and 35 'Enterprise' clients.





Enterprise
clients are defined as non small business clients with multiple stores or
physical locations. For example, one (1) enterprise client may represent dozens
or even hundreds of physical locations or stores using our services under a
single corporate, co-op, franchisee, or agency billing account.





It is
common in SUMOTEXT’s industry to allow ‘small business’ clients access to
services on a month-to-month basis, while also paying SUMOTEXT higher
transactional fees. It is also common for larger 'Enterprise' clients, who
qualify for scale or volume discounts to sign annual agreements. SUMOTEXT
customarily provides its services to ‘small businesses’ without contracts on a
month-to-month basis and to 'Enterprise' clients through annual
contracts.





The
Company currently maintains a direct relationship with all of its clients and to
date has not allowed affiliates, entrepreneurs, independent consultants, or
third parties to market the Company’s platform and services under their own
brand. As such, SUMOTEXT believes that it exercises great control over its
clients’ programs and is confident that each program begins and remains
compliant. We feel this is an important distinction in an industry where many of
our competitors regularly ‘private label’ or ‘white label’ their platforms and
tools to entities and individuals for re-sell. Some of our competitors go
further and allow their resellers to resell keywords on an existing shared short
code – i.e. not require the re-seller to apply for their own short code.
SUMOTEXT believes this practice will continue to draw increased scrutiny from
the wireless carriers and that audit initiatives will lead to an end of this
practice.





The
Company believes that its direct sales model has several advantages including:
1) a more diversified revenue stream, 2) better communications, education, and
control over programs and program managers, 3) greater control over
modifications, enhancements, and custom solutions, and 3) greater control over
compliance – which we believe is of extreme importance since the wireless
carriers continue to tighten requirements for short code programs and several
carriers have begun reviewing and auditing existing programs. We believe that it
will be very difficult for companies that utilize re-sellers to control or
maintain satisfactory compliance across their short codes and
networks.





In the
future the Company may develop a channel sales strategy that may include working
with partners who license the Company’s service delivery platform under the
partner’s brand via a dedicated short code.





Partial Client
List





Our
diverse roster of clients include national retail and restaurant brands,
professional sports venues and teams, radio stations, political campaigns,
direct selling organizations, publishers, universities, school systems,
mega-churches, chambers, non-profits, and local small
businesses.


-6-


Nationally
recognized clients currently include L’Oreal USA, The National Republican
Senatorial Committee, Baylor University, Valero Energy Corporation, Tanger
Outlet Malls, Hard Rock Orlando, Hard Rock Times Square, Amateur Athletic Union
(AAU), UFC Gyms, The E-Center Utah, Maps.com, Second Baptist Church of Houston,
Malys, Thornton’s Oil, Westside Rentals, Pyramid Foods, NYPD Pizza, Worldwide
Golf (Roger Dunn), Mobile Press Wire, Simple Simons Pizza, Locos Bar &
Grill, and Famsa Inc.





Unlike
many of our competitors, SUMOTEXT does not list national brands as clients
unless a national marketing agreement is in place. However, our small business
clients include a growing list of co-ops, franchisees, and independent operators
of many other nationally recognized brands that include GNC Nutrition, Subway,
Smoothie King, Jersey Mikes, Play-n-Trade Video, Applebee's, Tan Republic,
Cici's Pizza, Rita's Ice, Chick-Fil-A, Java Dave's, Coyote Ugly, Little Caesars,
Melting Pot, Hardees, Papa's Pizza, Hollywood Tan, Hungry Howies, Taco King,
Dairy Queen, Arby's, Jack in the Box, and many others.





Competition





SUMOTEXT
is an Application Provider which represents one of five supplier groups in the
short code ecosystem:





1.
            CSCA – The Common Short
      Code Administration leases common short codes to Content Providers and
      Application Providers.2.
            Content Providers –
      Provide the services, promotions, news, alerts, and premium content that
      end-users request or subscribe to via SMS over a common short
      code.





3.
            Application Providers –
      Offer Content Providers connections to Connection Aggregators and provide
      ‘ready-to-go’ software and hosting solutions that help them quickly launch
      and manage mobile marketing and alert programs over short
      codes.4.
            Connection Aggregators –
      Have the exclusive and authorized connections to multiple wireless
      carriers and enable Content Providers and Application Providers to access
      these wireless networks from a single bind or connection (typically via
      SMPP).





5.
            Wireless Service
      Providers – Provide mobile phone service to consumers and
      individually provision (approve) short code programs seeking recognition
      on their network.





The
leading short code Application Providers are listed by the CSCA at http://usshortcodes.com/csc_applicators.html.
Within this list are connection aggregators, application providers that sell to
brands and organizations, and application providers who re-sell solutions to
other application providers. Within the specific category of Application
Providers that SUMOTEXT competes, some companies specialize in niche categories
that include mobile loyalty and rewards programs, mobile coupons, mobile
emergency alerts, mobile commerce, proximity marketing, location based services,
and content sponsored mobile ad networks. The Company believes its major direct
competitors include: iLoopMobile, MobileStorm, GoLiveMobile, 3CInteractive,
2ergo, HipCricket, and Mobivity.





Subscription
Revenues





We
currently derive substantially all of our revenue from fees associated with our
monthly subscription services, which are occasionally sold by our salaried
employees from leads generated through our marketing efforts, but are generally
sold by our independent sales representatives. Our representatives are
individually recruited, trained, and managed by the Company and are
strategically located through the U.S. Our representatives are compensated by
commission payments from the Company based on their status and the projected
value of each deal.





The
Company currently offers subscription plans for small businesses, enterprises,
and select industry verticals.


-7-


The
typical subscription is a monthly contract, although terms range up to 12
months. We bill a majority of our customers on a monthly basis through their
credit cards and bank accounts. Revenue is recognized as the services are
provided. These fees are deferred and recognized ratably over the customer's
expected service period. Deferred revenues represent the liability for advance
billings to customers for services not yet provided.





Cost of
Revenue





The
Company’s cost of revenue consists primarily of the expenses related to
providing our core service delivery platform which includes the salaries of
technical personnel associated with the maintenance and enhancement of our SMS
gateway and campaign management tools, our physical infrastructure and
application hosting expenses, and the fees we pay aggregators and wireless
carriers to connect to their networks which include connection fees, transaction
fees, and short code leases.





The
Company does not track research and development costs separately because its
technology architecture enables it to service substantially all of its customers
with a single version of its application which it tracks in cost of revenue.
Since we do not have to maintain multiple versions of our software, we are able
to constantly enhance our core service delivery platform with new features and
functions that are shared by our clients.





The
Company began developing a major new release of its service delivery platform in
November 2008. We were not able to release this new product version in the prior
quarter as planned due to our desire to continue testing and development of the
necessary associated CRM and back office modules we use to manage our clients.
However, we are nearing the completion of this new product release and plan to
release it before the end of the calendar year.





In the
near term we plan to maintain cost of revenue expenses; and in the long term, we
expect that cost of revenue as a percentage of total revenue will continue to
decrease.





Selling, General and
Administrative Expenses





The
Company tracks its selling, general and administrative expenses as follows: 1)
advanced commission payments to sales representatives, 2) salary and internal
personnel expenses related to executive management, recruiting and training,
sales management, billing, and client support, 3) non-personnel, external fees
and expenses related to corporate marketing including brand building, corporate
communications, advertising, association fees, trade shows, recruiting, search
engine optimization, company travel, and meals and entertainment,  4)
expenses related to being a fully reporting public company which include
external legal, accounting, audit, registrar, and filings, and 5) expenses
related to general office items including rent, utilities, telephone, office
supplies, printing, credit card processing fees, software, and other third party
services.





In the
near term we plan to maintain SG&A expenses; and in the long term we plan to
add more sales representatives as well as increase the velocity of sales per
representative which could significantly increase commission payments to sales
representatives and associated SG&A expenses.





Intellectual
Property





SUMOTEXT
Incorporated owns the rights to the registered internet domain names
“www.textmarketing.com” and “www.sumotext.com,” which contain information that
the Company does not desire to be incorporated by reference into this
Prospectus.  Other than these trademarks, the Company does not own any
patents or licenses related to its products or services or any copyrights or
additional trademarks.





Employees





As of the
date of this filing, we have eight (8) full-time employees,
including six (6) employees at our primary office located in Little Rock,
Arkansas. We use contract employees and have approximately twenty (20) sales
representatives who are paid entirely on commissions.  We have a
consulting agreement with our Chief Executive Officer and Director, Timothy
Miller, and with our Chief Technology Officer, Eric Woods, who holds a
non-executive position with the Company, as described above.  We do
not have any agreements in place with our Secretary, Matthew
Lozeau.


-8-


Material
Agreements:





On our
about January 1, 2007, the Company entered into a Software Development and
Consulting Agreement with Timothy Miller, in his capacity as President of
Atreides, LLC (“Atreides”), which was amended in February and March 2009, to
clarify several of the provisions of the agreement. Timothy Miller is the
Chief Executive Officer, President and Director of the Company.  Mr.
Miller is also the sole officer and employee of Atreides, LLC. Mr. Miller
is also the sole officer and employee of Atreides.  Atreides does not
have any clients which compete with the Company.  Currently, Atreides
has no other clients besides the Company; however, Atreides has had other
clients in the past and may have additional clients in the future. Mr. Miller
performs services for the Company through Atreides instead of personally,
because operating as a limited liability company affords Mr. Miller certain tax
benefits, as well as increased liability protection, which he would not have if
he performed services for the Company in his own personal name. During the year
ending August 31, 2009, and during the year ending August 31, 2008, the Company
paid Atreides $115,041 and $76,000, respectively, for managing and training the
Company’s sales representatives which was recorded as selling, general and
administrative expenses.  All work products created or enhanced
through the Atreides agreement are owned by the Company.





On or
about January 1, 2007, the Company entered into a Software Development and
Consulting Agreement with Eric Woods in his capacity as President of
DataMethodology, LLC (“DataMethodology”), which was amended in February 2009, to
clarify several of the provisions of the agreement.  Eric Woods currently
holds 7.7% of the Company’s Common Stock.  Mr. Woods is the sole
officer and employee of DataMethodology, LLC.   DataMethodology does
not have any clients which compete with the Company. Currently, DataMethodology
has two (2) other clients besides the Company and those clients pay
DataMethodology software licensing fees for applications previously developed by
DataMethodology that are presently in use by those clients.  Mr. Woods
performs services for the Company through DataMethodology instead of personally,
because operating as a limited liability company affords Mr. Woods certain tax
benefits, as well as increased liability protection, which he would not have if
he performed services for the Company in his own personal name.  For
the year ended August 31, 2009, and for the year ended August 31, 2008, the
Company paid Datamethodology $124,200 and $82,015, respectively, for maintenance
and upgrading software related issues which was recorded as a cost of
revenue.  All work products created or enhanced through the
DataMethodology agreement are owned by the Company.





On April
9, 2009, SUMOTEXT entered into an agreement with International Sports
Properties, Inc. (“ISP”). The agreement was mutually terminated on July 9,
2009.





On April
16, 2009, the Company’s President, Timothy Miller, who is also a shareholder,
loaned the Company $100,000 which matures April 15, 2010 with interest only
payments due quarterly at 10% per annum.





Effective
July 1, 2009, Mr. Miller, loaned the Company $50,000 which matures July 2, 2010
with interest only payments due quarterly at 10% per annum.  Effective
August 3, 2009, Mr. Miller, loaned the Company $50,000 which matures August 4,
2010 with interest only payments due quarterly at 10% per
annum.  Effective August 27, 2009, Mr. Miller, loaned the Company
$75,000 which matures August 28, 2010 with interest only payments due quarterly
at 10% per annum.





ITEM 1A. RISK
FACTORS.





An
investment in our common stock is highly speculative, and should only be made by
persons who can afford to lose their entire investment in us. You should
carefully consider the following risk factors and other information in this
quarterly report before deciding to become a holder of our common stock. If any
of the following risks actually occur, our business and financial results could
be negatively affected to a significant extent.


-9-


WE HAVE FUTURE CAPITAL
NEEDS, INCLUDING $435,000 WHICH WE OWE TO OUR CHIEF EXECUTIVE OFFICER AND
ANOTHER SHAREHOLDER OF THE COMPANY, AND WITHOUT ADEQUATE CAPITAL WE MAY BE
FORCED TO CEASE OR CURTAIL OUR BUSINESS OPERATIONS.





We have
generated limited revenues to date and anticipate the need for approximately
$200,000 of additional funding to continue our business operations for the next
12 months and an additional $500,000 to significantly expand our operations, of
which there can be no assurance we will be able to raise.  We will
also require $160,000 to repay the Stevenson Note (defined below) and an
additional $275,000 to repay funds owed to our Chief Executive Officer, Timothy
Miller, which funds we do not currently have, provided however that we are
currently in negotiations with Mr. Stevenson and Mr. Miller to convert their
debt into shares of our common stock, of which there can be no
assurance.  We estimate that we can continue to operate through
November 30, 2009 with our cash on hand if no additional funding is
raised.





If
financing is available, it may involve issuing securities senior to our common
stock or equity financings, which are dilutive to holders of our common
stock.  In addition, in the event we do not raise additional capital
from conventional sources, such as our existing investors or commercial banks,
there is a likelihood that our growth will be restricted and we may be forced to
scale back or curtail implementing our business plan. If we are unable to raise
the additional funding we would be forced to eliminate certain employee
positions and significantly reduce our direct sales force whose advanced
commissions payments represent the vast majority of our quarterly negative cash
flows; and as a result, the value of our securities, if any, would likely become
worthless and we may be forced to abandon our business plan, sell all or
substantially all of our assets, cease filing with the Securities and Exchange
Commission and/or file for bankruptcy protection.   Even assuming we
raise the additional capital we require to continue our business operations, we
anticipate incurring net losses for the foreseeable future.





WE CURRENTLY GENERATE
LIMITED REVENUES AND HAVE NOT GENERATED A PROFIT SINCE
INCEPTION.





The
Company generated revenues of $608,610 for the year ended August 31, 2009 and
$83,477 for the year ended August 31, 2008, had a net loss of $725,571 for the
year ended August 31, 2009 and $486,645 for the year ended August 31, 2008, and
has not generated a profit since its inception in June 2007.  We make
no assurances that we will be able to generate substantial revenues in the
future and/or that we will be able to gain clients in the future to build our
business to the point that we generate a profit.





THE SUCCESS OF THE COMPANY
DEPENDS HEAVILY ON TIMOTHY MILLER AND HIS INDUSTRY KNOWLEDGE, RELATIONSHIPS, AND
EXPERTISE.





The
success of the Company will depend on the abilities of Timothy Miller, President
and Chief Executive Officer, to mange the business.   We have a
consulting agreement with Mr. Miller’s company, Atreides, LLC, which can be
terminated by either party at any time.  The loss of Mr. Miller will
have a material adverse effect on the business, results of operations and
financial condition of the Company.  In addition, the loss of Mr.
Miller may force the Company to seek a replacement who may have less experience,
fewer contacts, or less understanding of the business.  Further, we
can make no assurances that we will be able to find a suitable replacement for
Mr. Miller, which could force the Company to curtail its operations and/or cause
any investment in the Company to become worthless.  The Company
currently has a Software Development and Consulting Agreement with Mr. Miller,
as described below under “Material Agreements.”





OUR “AFFILIATES” EXERCISE
MAJORITY VOTING CONTROL OVER THE COMPANY AND THEREFORE EXERCISE CONTROL OVER
CORPORATE DECISIONS INCLUDING THE APPOINTMENT OF NEW
DIRECTORS.





Timothy
Miller, our sole Director and Chief Executive Officer and President can vote an
aggregate of 1,757,700 shares, currently equal to 22.6% of our outstanding
common stock.  Additionally, three other shareholders, Jim Stevenson,
Joe Miller and Doug Cooper, collectively can vote an aggregate of 4,093,497
shares, currently equal to 52.6% of our outstanding common
stock.  Therefore, Timothy Miller, Jim Stevenson, Joe Miller and Doug
Cooper, our “affiliates” are able to vote 75.2% of our outstanding shares of
common stock and therefore exercise control in determining the outcome of all
corporate transactions or other matters, including the election of Directors,
mergers, consolidations, the sale of all or substantially all of our assets, and
also the power to prevent or cause a change in control. Any investors who
purchase shares will be minority shareholders and as such will have little to no
say in the direction of the Company and the election of Directors. Additionally,
it will be difficult if not impossible for investors to remove Mr. Miller as a
Director of the Company, which will mean he will remain in control of who serves
as officers of the Company as well as whether any changes are made in the Board
of Directors. As a potential investor in the Company, you should keep in mind
that even if you own shares of the Company's common stock and wish to vote them
at annual or special shareholder meetings, your shares will likely have little
effect on the outcome of corporate decisions.


-10-


OUR LIMITED OPERATING
HISTORY MAKES IT DIFFICULT TO FORECAST OUR FUTURE RESULTS, MAKING ANY INVESTMENT
IN US HIGHLY SPECULATIVE.





We have a
limited operating history, and our historical financial and operating
information is of limited value in predicting our future operating
results.  We may not accurately forecast customer behavior and
recognize or respond to emerging trends, changing preferences or competitive
factors facing us, and, therefore, we may fail to make accurate financial
forecasts.  Our current and future expense levels are based largely on
our investment plans and estimates of future revenue.  As a result, we
may be unable to adjust our spending in a timely manner to compensate for any
unexpected revenue shortfall, which could then force us to curtail or cease our
business operations.





OUR LOSSES RAISE DOUBT AS TO
WHETHER WE CAN CONTINUE AS A GOING CONCERN.





We had an
accumulated deficit of $1,234,930 and a working capital deficit of $363,982 as
of August 31, 2009, a net loss of $725,571 for the year ended August 31, 2009
and a net loss of $486,645 for the year ended August 31, 2008.  These
factors among others indicate that we may be unable to continue as a going
concern, particularly in the event that we cannot generate revenues, obtain
additional financing and/or attain profitable operations. The accompanying
financial statements do not include any adjustments that might result from the
outcome of this uncertainty and if we cannot continue as a going concern, your
investment in us could become devalued or worthless.





Our
independent certified public accountant has added an emphasis paragraph to its
report on our financial statements for the year ended August 31, 2009 regarding
our ability to continue as a going concern. Key to this determination is our
recurring net losses, an accumulated deficit, and a working capital deficiency.
The Company’s financial statements are prepared using principles applicable to a
going concern, which contemplates the realization of assets and liquidation of
liabilities in the normal course of business.  However, the Company does
not have significant cash or other material liquid assets, nor does it have an
established source of revenue sufficient to cover its operating costs and to
allow it to continue as a going concern.  The Company may, in the future,
experience significant fluctuations in its results of operations.





OUR INDUSTRY IS HIGHLY
COMPETITIVE.





The
mobile phone marketing industry is highly competitive and fragmented. The
Company expects competition to intensify in the future. The Company competes in
its market with numerous mobile application providers, many of which have
substantially greater financial, managerial and other resources than those
presently available to the Company. Numerous well-established companies are
focusing significant resources on providing mobile marketing services that
currently compete and will compete with the Company's services in the future.
The Company can make no assurance that it will be able to effectively compete
with these other companies or that competitive pressures, including possible
downward pressure on the prices we charge for our products and services, will
not arise. In the event that the Company cannot effectively compete on a
continuing basis or competitive pressures arise, such inability to compete or
competitive pressures will have a material adverse effect on the Company’s
business, results of operations and financial condition.


-11-


DEPRESSED
GENERAL ECONOMIC CONDITIONS OR ADVERSE CHANGES IN GENERAL ECONOMIC CONDITIONS
COULD ADVERSELY AFFECT OUR OPERATING RESULTS.IF
ECONOMIC OR OTHER FACTORS NEGATIVELY AFFECT THE SMALL AND MEDIUM-SIZED BUSINESS
SECTOR, OUR CUSTOMERS MAY BECOME UNWILLING OR UNABLE TO PURCHASE OUR SERVICES,
WHICH COULD CAUSE OUR REVENUE TO DECLINE AND IMPAIR OUR ABILITY TO OPERATE
PROFITABLY.




As our
business has grown, we have become increasingly subject to the risks arising
from adverse changes in domestic and global economic conditions. Uncertainty
about future economic conditions makes it difficult for us to forecast operating
results and to make decisions about future investments. For example, the
direction and relative strength of the global economy has recently been
increasingly uncertain due to softness in the residential real estate and
mortgage markets, volatility in fuel and other energy costs, difficulties in the
financial services sector and credit markets, continuing geopolitical
uncertainties and other macroeconomic factors affecting spending behavior. If
economic growth in the United States continues to be slowed, or if other adverse
general economic changes occur or continue, many customers may delay or reduce
technology purchases or marketing spending. This could result in reductions in
sales of our services and products, longer sales cycles, and increased price
competition.





Our
existing and target customers are small and medium-sized businesses. We believe
these businesses are more likely to be significantly affected by economic
downturns than larger, more established businesses. For instance, the current
global financial crisis affecting the banking system and financial markets and
the possibility that financial institutions may consolidate or go out of
business have resulted in a tightening in the credit markets, which could limit
our customers’ access to credit. Additionally, these customers often have
limited discretionary funds, which they may choose to spend on items other than
our services. If small and medium-sized businesses experience economic hardship,
or if they behave more conservatively in light of the general economic
environment, they may be unwilling or unable to expend resources to develop
their online presences, which would negatively affect the overall demand for our
services and products and could cause our revenue to decline.





THE MAJORITY OF OUR SERVICES
ARE SOLD ON A MONTH-TO-MONTH BASIS, AND IF OUR CUSTOMERS ARE UNABLE OR CHOOSE
NOT TO RENEW THEIR MONTHLY SUBSCRIPTIONS, OUR REVENUE MAY
DECREASE.




Typically,
our services are sold pursuant to month-to-month subscription agreements, and
our customers can generally cancel their subscriptions to our services at any
time with little or no penalty.  As a result, our results of
operations can fluctuate substantially on a month-to-month
basis.  Additionally, if a significant number of our customers were to
cancel their services, our results of operations could be adversely affected and
the value of our securities could decline in value or become
worthless.





OUR OPERATING RESULTS ARE
DIFFICULT TO PREDICT AND FLUCTUATIONS IN OUR PERFORMANCE MAY RESULT IN
VOLATILITY IN THE MARKET PRICE OF OUR COMMON STOCK.




Due to
our limited operating history, lack of working capital, our evolving business
model, and the unpredictability of our emerging industry, our operating results
are difficult to predict. We could experience fluctuations in our operating and
financial results due to a number of factors, such as:




•
            our
      ability to retain and increase sales to existing customers, attract new
      customers, and satisfy our customers’
  requirements;




•
            the
      renewal rates for our services;





•
            our
      ability to hire, train and retain members of our sales
    force;


-12-


•
            our
      ability to continue to advance commission payments to our sales
      representatives;•
            the
      rate of expansion and effectiveness of our sales
  force;




•
            technical
      difficulties or interruptions in our
services;




•
            general
      economic conditions; and




•
            the
      availability of additional investment in our services or
      operations.





These
factors and others all tend to make the timing and amount of our revenue
unpredictable and may lead to greater period-to-period fluctuations in revenue
than we have experienced historically.




While we
expect to see continued quarterly growth in sales revenue and net new client
additions, as a result of these factors, and in light of current global and U.S.
economic conditions, we believe that our quarterly revenue and results of
operations are likely to vary significantly in the future and that
period-to-period comparisons of our operating results may not be meaningful. The
results of one quarter may not be relied on as an indication of future
performance. If our quarterly revenue or results of operations fall below the
expectations of investors or securities analysts, the price of our common stock
could decline substantially.




WE HAVE A RISK OF SYSTEM AND
INTERNET FAILURES, WHICH COULD HARM OUR REPUTATION, CAUSE OUR CUSTOMERS TO SEEK
REIMBURSEMENT FOR SERVICES PAID FOR AND NOT RECEIVED, AND CAUSE OUR CUSTOMERS TO
SEEK ANOTHER PROVIDER FOR SERVICES.





We must
be able to operate the systems that manage our network around the clock without
interruption. Our operations will depend upon our ability to protect our network
infrastructure, equipment, and customer files against damage from human error,
fire, earthquakes, hurricanes, floods, power loss, telecommunications failures,
sabotage, intentional acts of vandalism and similar events. Our networks are
currently subject to various points of failure. For example, a problem with one
of our routers (devices that move information from one computer network to
another) or switches could cause an interruption in the services that we provide
to some or all of our customers. In the past, we have experienced periodic
interruptions in service. We have also experienced, and in the future we may
continue to experience, delays or interruptions in service as a result of the
accidental or intentional actions of Internet users, current and former
employees, or others. Any future interruptions could:





·
            Cause
      customers or end users to seek damages for losses
  incurred;





·
            Require
      the Company to replace existing equipment or add redundant
      facilities;





·
            Damage
      the Company’s reputation for reliable
service;





·
            Cause
      existing customers to cancel their contracts;
or





·
            Make
      it more difficult for the Company to attract new
  customers.





OUR DATA CENTERS ARE
MAINTAINED BY THIRD PARTIES.





A
substantial portion of the network services and computer servers we utilize in
the provision of services to customers are housed in data centers owned by other
third party service providers. We obtain Internet connectivity for those
servers, and for the customers who rely on those servers through the owners of
those data centers. In the future, we may house other servers and hardware items
in facilities owned or operated by other service providers.




A
disruption in the ability of one of these service providers to provide service
to us could cause a disruption in service to our customers. A service provider
could be disrupted in its operations through a number of contingencies,
including unauthorized access, computer viruses, accidental or intentional
actions, electrical disruptions, and other extreme conditions. Although we
believe we have taken adequate steps to protect our business through contractual
arrangements with our service providers, we cannot eliminate the risk of a
disruption in service resulting from the accidental or intentional disruption in
service by a service provider. Any significant disruption could cause
significant harm to us, including a significant loss of customers. In addition,
a service provider could raise its prices or otherwise change its terms and
conditions in a way that adversely affects our ability to support our customers
or could result in a decrease in our financial performance.


-13-


WE DO NOT MAINTAIN DIRECT
CONNECTIONS TO THE NETWORKS OF THE WIRELESS CARRIERS WHO ULTIMATELY SEND AND
RECEIVE SMS MESSAGES TO AND FROM THE HANDSETS OF THEIR WIRELESS SUBSCRIBERS.
INSTEAD, WE RELY HEAVILY ON THE RELIABILITY, SECURITY, AND PERFORMANCE OF OUR
INDUSTRY’S CONNECTION AGGREGATORS. ANY DIFFICULTIES IN MAINTAINING CONNECTIONS
TO OUR AGGREGATOR, OR ANY DIFFICULTIES BY OUR AGGREGATOR TO MAINTAIN CONNECTIONS
TO THE NETWORKS OF WIRELESS CARRIERS MAY RESULT IN SERVICE
INTERRUPTIONS.




Our SMS
gateway and campaign management tools that underlie our ability to deliver our
services require connections to the networks of wireless carriers are made
through connection aggregators. The reliability and continuous availability of
these connections are critical to our business, and any interruptions would harm
our reputation, profitability, and ability to conduct business.





WE RELY ON THE CONTINUED
PROVISIONING OF OUR SHARED AND DEDICATED SHORT CODES ON THE NETWORKS OF WIRELESS
CARRIERS.





A
substantial portion of our revenue is derived from services provided over a
shared short code. Though we are vigilant to follow carrier guidelines and have
taken great care to design our campaign management tools to keep our client’s
campaigns ‘real-time’ compliant with the Federal Trade Commission’s (the FTC's)
CAN-SPAM Act, the Mobile Marketing Association's Code of Conduct, and the most
stringent of all Operational Playbooks published by any wireless carrier, there
remains a possibility that our short codes could be de-provisioned by any single
carrier. If our shared short codes were to be de-provisioned by any major
carrier network for any length of time, it would significantly affect our
ability to conduct business while we pursued resolution and relief from damages
through legal channels.




WE FACE INTENSE AND GROWING
COMPETITION. IF WE ARE UNABLE TO COMPETE SUCCESSFULLY, OUR BUSINESS WILL BE
SERIOUSLY HARMED.




The
market for our services and products is competitive and has relatively low
barriers to entry. Our competitors vary in size and in the variety of services
they offer. We encounter competition from a wide variety of companies which
include companies with similar ‘in-house’ capabilities, as well as competition
from those that license or private-label solutions from those
companies.





In
addition, due to relatively low barriers to entry in our industry, we expect the
intensity of competition to increase in the future from other established and
possibly better funded companies. Increased competition may result in price
reductions, reduced gross margins, and loss of market share, any one of which
could seriously harm our business. We also expect that competition will increase
as a result of industry consolidations and formations of alliances among
industry participants.





Many of
our current and potential competitors have longer operating histories,
significantly greater financial, technical, marketing and other resources,
greater brand recognition and, we believe, a larger installed base of customers.
These competitors may be able to adapt more quickly to new or emerging
technologies and changes in customer requirements. They may also be able to
devote greater resources to the promotion and sale of their services and
products than we can. If we fail to compete successfully against current or
future competitors, our revenue could increase less than anticipated or decline,
and our business could be harmed.


-14-


IF OUR SECURITY MEASURES ARE
BREACHED, OUR SERVICES MAY BE PERCEIVED AS NOT BEING SECURE, AND OUR BUSINESS
AND REPUTATION COULD SUFFER.




Our
services involve the storage and transmission of our customers’ proprietary
information. Although we employ technical and internal control procedures to
assure the security of our customers’ data, we cannot guarantee that these
measures will be sufficient for this purpose. If our security measures are
breached as a result of third-party action, employee error or otherwise, and as
a result our customers’ data becomes available to unauthorized parties, we could
incur liability and our reputation would be damaged, which could lead to the
loss of current and potential customers. If we experience any breaches of our
network security or sabotage, we might be required to expend significant capital
and other resources to remedy, protect against or alleviate these and related
problems, and we may not be able to remedy these problems in a timely manner, or
at all. Because techniques used by outsiders to obtain unauthorized network
access or to sabotage systems change frequently and generally are not recognized
until launched against a target, we may be unable to anticipate these techniques
or implement adequate preventative measures.




IF WE CANNOT ADAPT TO
TECHNOLOGICAL ADVANCES, OUR SERVICES AND PRODUCTS MAY BECOME OBSOLETE AND OUR
ABILITY TO COMPETE WOULD BE IMPAIRED.




Changes
in our industry occur very rapidly, including changes in the way mobile phones
and carrier networks operate. As a result, our services and products could
become obsolete. The introduction of competing products employing new
technologies and the evolution of new industry standards could render our
existing products or services obsolete and unmarketable. To be successful, our
services and products must keep pace with technological developments and
evolving industry standards, address the ever-changing and increasingly
sophisticated needs of our customers, and achieve market acceptance. If we are
unable to develop new services, or enhancements to our services on a timely and
cost-effective basis, or if new services or products or enhancements do not
achieve market acceptance, our business would be seriously harmed.




PROVIDING MOBILE MARKETING
SERVICES TO SMALL AND MEDIUM-SIZED BUSINESSES DESIGNED TO ALLOW THEM TO BUILD
MOBILE LOYALTY, REWARDS, AND ALERT PROGRAMS IS A NEW AND EMERGING MARKET; IF
THIS MARKET FAILS TO DEVELOP, WE WILL NOT BE ABLE TO GROW OUR
BUSINESS.




Our
success depends on a significant number of small and medium-sized businesses
that desire to sustain mobile loyalty, rewards, and alert programs with their
customers. The market for our services and products is relatively new. If small
or medium-sized businesses determine that subscribing to these services is not
giving their businesses an advantage, they would be less likely to renew their
subscriptions. If the market for our services fails to grow or grows more slowly
than we currently anticipate, or if our services and products fail to achieve
widespread customer acceptance, our business would be seriously
harmed.





ANY GROWTH COULD STRAIN OUR
RESOURCES AND OUR BUSINESS MAY SUFFER IF WE FAIL TO IMPLEMENT APPROPRIATE
CONTROLS AND PROCEDURES TO MANAGE OUR GROWTH.




Growth in
our business may place a strain on our management, administrative, and sales and
marketing infrastructure. If we fail to successfully manage our growth, our
business could be disrupted, and our ability to operate our business profitably
could suffer. Growth in our employee base may be required to expand our customer
base and to continue to develop and enhance our services. To manage growth of
our operations and personnel, we would need to enhance our operational,
financial, and management controls and our reporting systems and procedures.
This would require additional personnel and capital investments, which would
increase our cost base. The growth in our fixed cost base may make it more
difficult for us to reduce expenses in the short term to offset any shortfalls
in revenue.


-15-


OUR ARTICLES OF
INCORPORATION, AS AMENDED, AND BYLAWS LIMIT THE LIABILITY OF, AND PROVIDE
INDEMNIFICATION FOR, OUR OFFICERS AND DIRECTORS.





Our
Articles of Incorporation, generally limit our officers' and Directors' personal
liability to the Company and its stockholders for breach of fiduciary duty as an
officer or Director except for breach of the duty of loyalty or acts or
omissions not made in good faith or which involve intentional misconduct or a
knowing violation of law. Our Articles of Incorporation, as amended, and Bylaws
provide indemnification for our officers and Directors to the fullest extent
authorized by the Nevada General Corporation Law against all expense, liability,
and loss, including attorney's fees, judgments, fines excise taxes or penalties
and amounts to be paid in settlement reasonably incurred or suffered by an
officer or Director in connection with any action, suit or proceeding, whether
civil or criminal, administrative or investigative (hereinafter a "Proceeding")
to which the officer or Director is made a party or is threatened to be made a
party, or in which the officer or Director is involved by reason of the fact
that he or she is or was an officer or Director of the Company, or is or was
serving at the request of the Company as an officer or director of another
corporation or of a partnership, joint venture, trust or other enterprise
whether the basis of the Proceeding is alleged action in an official capacity as
an officer or Director, or in any other capacity while serving as an officer or
Director. Thus, the Company may be prevented from recovering damages for certain
alleged errors or omissions by the officers and Directors for liabilities
incurred in connection with their good faith acts for the
Company.  Such an indemnification payment might deplete the Company's
assets. Stockholders who have questions regarding the fiduciary obligations of
the officers and Directors of the Company should consult with independent legal
counsel. It is the position of the Securities and Exchange Commission that
exculpation from and indemnification for liabilities arising under the
Securities Act of 1933, as amended, and the rules and regulations thereunder is
against public policy and therefore unenforceable.





WE WILL INCUR INCREASED
COSTS IN CONNECTION WITH COMPLIANCE WITH SECTION 404 OF THE SARBANES OXLEY ACT,
AND OUR MANAGEMENT WILL BE REQUIRED TO DEVOTE SUBSTANTIAL TIME TO NEW COMPLIANCE
INITIATIVES.





We are
subject to among other things, the periodic reporting requirements of Section
15(d) of the Securities Exchange Act of 1934, as amended, and will incur
significant legal, accounting and other expenses in connection with such
requirements.  The Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley
Act") and new rules subsequently implemented by the SEC have imposed various new
requirements on public companies, including requiring changes in corporate
governance practices. As such, our management and other personnel will need to
devote a substantial amount of time to these new compliance initiatives.
Moreover, these rules and regulations will increase our legal and financial
compliance costs and will make some activities more time-consuming and costly.
In addition, the Sarbanes-Oxley Act requires, among other things, that we
maintain effective internal controls for financial reporting and disclosure of
controls and procedures. Our compliance with Section 404 will require that we
incur substantial accounting expense and expend significant management efforts.
We currently do not have an internal audit group, and we will need to hire
additional accounting and financial staff with appropriate public company
experience and technical accounting knowledge. Moreover, if we are not able to
comply with the requirements of Section 404 in a timely manner, or if we or our
independent registered public accounting firm identifies deficiencies in our
internal controls over financial reporting that are deemed to be material
weaknesses, the market price of our stock could decline, and we could be subject
to sanctions or investigations by the SEC or other regulatory authorities, which
would require additional financial and management resources.





ANY FAILURES OF THE MOBILE
TELECOMMUNICATIONS NETWORK, THE INTERNET OR OUR TECHNOLOGY MAY REDUCE USE OF OUR
SERVICES.





Our
business depends on our ability to maintain the satisfactory performance,
reliability and availability of our technology. Any server interruptions,
break-downs or system failures, including failures caused by sustained power
shutdowns, floods or fire causing loss or corruption of data or malfunctions of
software or hardware equipment, or other events outside our control that could
result in a sustained shutdown of all or a material portion of the mobile
networks, the Internet or our technology platform, could adversely impact our
ability to provide our services to customers and decrease our
revenues.


-16-


THE MAJORITY OF THE
COMPANY’S CLIENT RELATIONSHIPS ARE ON A MONTH-TO-MONTH BASIS AND THEREFORE
SUBJECT TO CANCELLATION TERMINATION OR NON-RENEWAL AT ANY TIME FOR ANY
REASON.





The
Company commercially launched its service on January 8, 2008.  As of
August 31, 2009, the Company serviced 502 unique, revenue generating
clients.  However, the Company does not enter into contracts with its
small business clients and/or only enters into month-to-month contracts as is
the usual business practice in the Company’s industry.  As a result,
approximately 68 percent of Company’s revenue is currently derived from clients
who could cancel or terminate their relationships with the Company without any
significant notice at any time for any reason.  Consequently, the
Company’s revenues could decrease or decline significantly and the Company could
be forced to curtail or abandon its business operations, which could cause any
investment in the Company to become worthless.





Risks Relating To the
Company’s Securities





WE HAVE NEVER ISSUED CASH
DIVIDENDS IN CONNECTION WITH OUR COMMON STOCK AND HAVE NO PLANS TO ISSUE
DIVIDENDS IN THE FUTURE.





We have
paid no cash dividends on our common stock to date and it is not anticipated
that any cash dividends will be paid to holders of our common stock in the
foreseeable future.  While our dividend policy will be based on the
operating results and capital needs of our business, it is anticipated that any
earnings will be retained to finance our future expansion.





INVESTORS MAY FACE
SIGNIFICANT RESTRICTIONS ON THE RESALE OF OUR COMMON STOCK DUE TO FEDERAL
REGULATIONS OF PENNY STOCKS.





Our
common stock will be subject to the requirements of Rule 15(g)9, promulgated
under the Securities Exchange Act as long as the price of our common stock is
below $5.00 per share. Under such rule, broker-dealers who recommend low-priced
securities to persons other than established customers and accredited investors
must satisfy special sales practice requirements, including a requirement that
they make an individualized written suitability determination for the purchaser
and receive the purchaser's consent prior to the transaction. The Securities
Enforcement Remedies and Penny Stock Reform Act of 1990, also requires
additional disclosure in connection with any trades involving a stock defined as
a penny stock. Generally, the Commission defines a penny stock as any equity
security not traded on an exchange or quoted on NASDAQ that has a market price
of less than $5.00 per share. The required penny stock disclosures include the
delivery, prior to any transaction, of a disclosure schedule explaining the
penny stock market and the risks associated with it. Such requirements could
severely limit the market liquidity of the securities and the ability of
purchasers to sell their securities in the secondary market.





In
addition, various state securities laws impose restrictions on transferring
"penny stocks" and as a result, investors in the common stock may have their
ability to sell their shares of the common stock impaired.





SHAREHOLDERS MAY BE DILUTED
SIGNIFICANTLY THROUGH OUR EFFORTS TO OBTAIN FINANCING AND SATISFY OBLIGATIONS
THROUGH THE ISSUANCE OF ADDITIONAL SHARES OF OUR COMMON
STOCK.





We have
no committed source of financing. Wherever possible, our Board of Directors will
attempt to use non-cash consideration to satisfy obligations. In many instances,
we believe that the non-cash consideration will consist of restricted shares of
our common stock. Our Board of Directors has authority, without action or vote
of the shareholders, to issue all or part of the authorized but unissued shares
of common stock. In addition, if a trading market develops for our common stock,
we may attempt to raise capital by selling shares of our common stock, possibly
at a discount to market. These actions will result in dilution of the ownership
interests of existing shareholders, may further dilute common stock book value,
and that dilution may be material. Such issuances may also serve to enhance
existing management’s ability to maintain control of the Company because the
shares may be issued to parties or entities committed to supporting existing
management.


-17-


STATE SECURITIES LAWS MAY
LIMIT SECONDARY TRADING, WHICH MAY RESTRICT THE STATES IN WHICH AND CONDITIONS
UNDER WHICH SHAREHOLDERS CAN SELL OUR SHARES.





Secondary
trading in our common stock may not be possible in any state until the common
stock is qualified for sale under the applicable securities laws of the state or
there is confirmation that an exemption, such as listing in certain recognized
securities manuals, is available for secondary trading in the state. If we fail
to register or qualify, or to obtain or verify an exemption for the secondary
trading of, the common stock in any particular state, the common stock could not
be offered or sold to, or purchased by, a resident of that state. In the event
that a significant number of states refuse to permit secondary trading in our
common stock, the liquidity for the common stock could be significantly
impacted.





BECAUSE WE ARE NOT SUBJECT
TO COMPLIANCE WITH RULES REQUIRING THE ADOPTION OF CERTAIN CORPORATE GOVERNANCE
MEASURES, OUR STOCKHOLDERS HAVE LIMITED PROTECTIONS AGAINST INTERESTED DIRECTOR
TRANSACTIONS, CONFLICTS OF INTEREST AND SIMILAR MATTERS.





The
Sarbanes-Oxley Act of 2002, as well as rule changes proposed and enacted by the
SEC, the New York and American Stock Exchanges and the Nasdaq Stock Market, as a
result of Sarbanes-Oxley, require the implementation of various measures
relating to corporate governance. These measures are designed to enhance the
integrity of corporate management and the securities markets and apply to
securities that are listed on those exchanges or the Nasdaq Stock Market.
Because we are not presently required to comply with many of the corporate
governance provisions and because we chose to avoid incurring the substantial
additional costs associated with such compliance any sooner than legally
required, we have not yet adopted these measures.





Because
our Directors are not independent directors, we do not currently have
independent audit or compensation committees. As a result, our Directors have
the ability to, among other things, determine their own level of compensation.
Until we comply with such corporate governance measures, regardless of whether
such compliance is required, the absence of such standards of corporate
governance may leave our stockholders without protections against interested
director transactions, conflicts of interest, if any, and similar matters and
any potential investors may be reluctant to provide us with funds necessary to
expand our operations.





We intend
to comply with all corporate governance measures relating to director
independence as and when required. However, we may find it very difficult or be
unable to attract and retain qualified officers, Directors and members of board
committees required to provide for our effective management as a result of the
Sarbanes-Oxley Act of 2002. The enactment of the Sarbanes-Oxley Act of 2002 has
resulted in a series of rules and regulations by the SEC that increase
responsibilities and liabilities of Directors and executive officers. The
perceived increased personal risk associated with these recent changes may make
it more costly or deter qualified individuals from accepting these
roles.





WE CURRENTLY HAVE A LIMITED
PUBLIC MARKET FOR OUR SECURITIES WHICH MAY BE VOLATILE AND
ILLIQUID.





In April
2009, we obtained quotation for our common stock on the Over-The-Counter
Bulletin Board (“OTCBB”) under the symbol SMXI.OB.  However, there is
currently a limited public market for our common stock, and we can make no
assurances that there will be demand for our common stock in the future. If
there is a market for our common stock in the future, we anticipate that such
market would continue to be illiquid and would be subject to wide fluctuations
in response to several factors, including, but not limited to:





(1)
            actual
      or anticipated variations in our results of operations;(2)
            our
      ability or inability to generate new revenues;(3)
            the
      number of shares in our public float;(4)
            increased
      competition; and(5)
            conditions
      and trends in the market for mobile marketing
  services.


-18-


Furthermore,
our stock price may be impacted by factors that are unrelated or
disproportionate to our operating performance. These market fluctuations, as
well as general economic, political and market conditions, such as recessions,
interest rates or international currency fluctuations may adversely affect the
market price and liquidity of our common stock.





NEVADA LAW AND OUR ARTICLES
OF INCORPORATION AUTHORIZE US TO ISSUE SHARES OF COMMON STOCK, WHICH SHARES MAY
CAUSE SUBSTANTIAL DILUTION TO OUR SHAREHOLDERS.





Pursuant
to our Articles of Incorporation, we have 100,000,000 shares of common stock
authorized. As of October 27, 2009, we had 7,779,806 shares of common stock
issued and outstanding. As a result, our Board of Directors has the ability to
issue a large number of additional shares of common stock without shareholder
approval, which if issued would cause substantial dilution to our then
shareholders.  As a result, the issuance of shares of common stock may
cause the value of our securities to decrease and/or become
worthless.





ITEM
2. PROPERTIES





On
January 22, 2009, the Company entered into a Sub-Sub Lease Agreement to rent
approximately 1,325 usable square feet of office space at 2100 Riverdale Drive,
Little Rock, Arkansas. The lease has a term of 17 months, beginning on February
1, 2009 and ending on June 30, 2010. The monthly rental cost during the term of
the lease is $1,670, plus the Company’s pro-rata proportion of the utility costs
of the buildings total utilities, plus an additional payment equal to the
Company’s cost of the office space build out relating to the leased office
space, not to exceed $1,980, financed over the 17 month term of the lease at the
rate of 5% per annum.





ITEM
3. LEGAL PROCEEDINGS





From time
to time, we may become party to litigation or other legal proceedings that we
consider to be a part of the ordinary course of our business. We are not
currently involved in legal proceedings that could reasonably be expected to
have a material adverse effect on our business, prospects, financial condition
or results of operations. We may become involved in material legal proceedings
in the future.





ITEM
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS





No
matters were submitted to a vote of security holders during the fiscal quarter
ended August 31, 2009.


-19-


PART
II





ITEM
5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES





On April
29, 2009, we obtained quotation for our common stock on the Over-The-Counter
Bulletin Board (“OTCBB”) under the symbol SMXI.OB; however, a limited number of
shares of our common stock have traded to date and there is currently a limited
public market for our common stock.





The
Company's common stock is considered a "penny stock" as defined in the
Commission's rules promulgated under the Exchange Act. The Commission's rules
regarding penny stocks impose additional sales practice requirements on
broker-dealers who sell such securities to persons other than established
customers and accredited investors (generally persons with net worth in excess
of $1,000,000 or an annual income exceeding $200,000 or $300,000 jointly with
their spouse). For transactions covered by the rules, the broker-dealer must
make a special suitability determination for the purchaser and receive the
purchaser's written agreement to the transaction prior to the sale. Thus the
Rules affect the ability of broker-dealers to sell the Company's shares should
they wish to do so because of the adverse effect that the Rules have upon
liquidity of penny stocks. Unless the transaction is exempt under the Rules,
under the Securities Enforcement Remedies and Penny Stock Reform Act of 1990,
broker-dealers effecting customer transactions in penny stocks are required to
provide their customers with (i) a risk disclosure document; (ii) disclosure of
current bid and ask quotations if any; (iii) disclosure of the compensation of
the broker-dealer and its sales personnel in the transaction; and (iv) monthly
account statements showing the market value of each penny stock held in the
customer's account. As a result of the penny stock rules, the market liquidity
for the Company's securities may be severely adversely affected by limiting the
ability of broker-dealers to sell the Company's securities and the ability of
purchasers of the securities to resell them.





DESCRIPTION
OF CAPITAL STOCK





We have
authorized capital stock consisting of 100,000,000 shares of common stock,
$0.0001 par value per share (“Common Stock”) and 10,000,000 shares of preferred
stock, $0.0001 par value per share (“Preferred Stock”).





Common
Stock





The
holders of outstanding shares of Common Stock are entitled to receive dividends
out of assets or funds legally available for the payment of dividends of such
times and in such amounts as the board from time to time may
determine.  Holders of Common Stock are entitled to one vote for each
share held on all matters submitted to a vote of shareholders.  There
is no cumulative voting of the election of Directors then standing for
election.  The Common Stock is not entitled to pre-emptive rights and
is not subject to conversion or redemption.  Upon liquidation,
dissolution or winding up of our company, the assets legally available for
distribution to stockholders are distributable ratably among the holders of the
Common Stock after payment of liquidation preferences, if any, on any
outstanding payment of other claims of creditors.  Each outstanding
share of Common Stock is duly and validly issued, fully paid and
non-assessable.





Preferred
Stock





Shares of
Preferred Stock may be issued from time to time in one or more series, each of
which shall have such distinctive designation or title as shall be determined by
our Board of Directors (“Board of Directors”) prior to the issuance of any
shares thereof.  Preferred Stock shall have such voting powers, full
or limited, or no voting powers, and such preferences and relative,
participating, optional or other special rights and such qualifications,
limitations or restrictions thereof, as shall be stated in such resolution or
resolutions providing for the issue of such class or series of Preferred Stock
as may be adopted from time to time by the Board of Directors prior to the
issuance of any shares thereof.  The number of authorized shares of
Preferred Stock may be increased or decreased (but not below the number of
shares thereof then outstanding) by the affirmative vote of the holders of a
majority of the voting power of all the then outstanding shares of our capital
stock entitled to vote generally in the election of the Directors, voting
together as a single class, without a separate vote of the holders of the
Preferred Stock, or any series thereof, unless a vote of any such holders is
required pursuant to any Preferred Stock Designation.


-20-


Options,
Warrants and Convertible Securities





In
October 2008, we issued an aggregate of 142,857 units to Doug Cooper, each unit
consisting of one share of our Common Stock and one warrant to purchase one
share of our Common Stock at an exercise price of $0.70 per share for
cash.  The warrants expire in October 2011.  Mr. Cooper is
currently a 16.9% shareholder of the Company, including the warrants to purchase
142,857 shares he holds and assuming their exercise.  Other than the
warrants to purchase 142,857 shares held by Mr. Cooper, the Company currently
has no other outstanding options, warrants or convertible
securities.





ITEM
6. SELECTED FINANCIAL DATA





Not
required pursuant to Item 301 of Regulation S-K.





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





The
following discussion should be read in conjunction with our financial
statements.





PLAN
OF OPERATION FOR THE NEXT TWELVE MONTHS





Like many
other businesses, we have been adversely affected by the ongoing global economic
crisis – though we believe that it has only slowed our continued growth. 
During periods of declining economic conditions, retail marketers (our primary
target market) are often the first to experience reductions in demand for their
products and in turn begin reducing their existing advertising budgets.
Additionally, a challenging economic environment contributes to delays in
purchasing decisions for the new technologies that the Company offers. As such,
the Company continues to focus its marketing initiatives on identifying likely
'early adopters' as we continue to take actions to control costs and manage cash
flows.





The Company believes it will be able to
continue to grow both its customer base and revenues from existing customers in
spite of the economic recession and the general lack of market acceptance of
text messaging as an effective marketing channel. Although we have not yet generated net
income, we believe that we will be able to continue to attract new clients while
our existing clients expand their deployment, promotion, and use of our
services.  We believe that our small monthly burn rate in comparison
to those competitors with similar capabilities, revenues, client references, and
brand awareness as us, will enable us to continue to attract capital through the
sale of debt or equity securities which will in turn enable us to weather the
current global economic downturn; though we can not provide any
assurances.




Key Business
Metrics





Management
periodically reviews certain key business metrics to evaluate the effectiveness
of our operational strategies, allocate resources and maximize the financial
performance of our business. These key business metrics include the following,
which are reported and compared quarter-to-quarter.  Management does
not believe that a comparison of the metrics from August 31, 2009 to 2008 would
be useful to investors as the Company only began commercial activities in
January 2008, and had only limited customers as of August 31, 2008.





Base
Recurring Monthly Subscription Plan Fees





As of
August 31, 2009, the Company had 502 clients that were scheduled for $79,752 in
base recurring monthly subscription plan fees, which includes approximately
$6,000 in fees to lease common short codes which the Company sometimes collects
from its clients on behalf of the CSCA.  This represents an increase of
$16,793 or 22% in base recurring monthly subscription plan fees when compared to
the prior quarter ended May 31, 2009.





Base
monthly subscription plan fees do not include account set-up fees, professional
service fees, or transaction fees which are additional usage charges when our
clients exceed the base number of messages included in their subscription plan.
The Company rarely charges professional service fees.


-21-


Net
Client Additions





We
maintain and grow our subscriber base through a combination of adding new
clients and retaining existing clients. We define net client additions in a
particular period as the gross number of new clients added during the period,
less client cancellations during the period. The Company does not normally offer
an introductory free trial period, but when it does, it only counts as new
clients those clients whose subscriptions have extended beyond the free trial
period. Additionally, we do not count clients that have canceled their monthly
subscription plan or are not current in their payments if we have unsuccessfully
attempted to contact the client for more than 30 days.





We review
this metric to evaluate whether we are performing within our business plan. An
increase in net client additions could signal an increase in subscription
revenue, higher customer retention, and an increase in the effectiveness of our
sales efforts. Similarly, a decrease in net client additions could signal
decreased subscription revenue, lower customer retention, and a decrease in the
effectiveness of our sales efforts. Net subscriber additions above or below our
business plan could have a long-term impact on our operating results due to the
subscription nature of our business.





During
the quarter ending August 31, 2009, the Company netted 100 new clients in
addition to the 402 existing clients the Company claimed at the end of the prior
quarter for a total of 502 unique paying clients at the end of the
quarter.





Monthly
Turnover





Monthly
turnover is a metric we measure each quarter, and which we define as customer
cancellations in the quarter divided by the sum of the number of subscribers at
the beginning of the quarter and the gross number of new subscribers added
during the quarter, divided by three. Customer cancellations in the quarter
include cancellations from gross subscriber additions, which is why we include
gross subscriber additions in the denominator. In measuring monthly turnover, we
use the same conventions with respect to free trials and subscribers who are not
current in their payments as described above for net subscriber additions.
Monthly turnover is the key metric that allows management to evaluate whether we
are retaining our existing subscribers in accordance with our business plan. An
increase in monthly turnover may signal deterioration in the quality of our
service, or it may signal a behavioral change in our subscriber base. Lower
monthly turnover signals higher customer retention. Though this metric is
valuable internally, we do not believe that it completely reflects the quality
of our services as there are always some clients who enroll in our programs with
the intention of launching, but never actually begin supporting their mobile
marketing programs with marketing materials or employee training and therefore
cancel their plan.





During
the quarter ending August 31, 2009, the Company had a monthly turnover rate of
4.0% based on 402 existing clients at the end of the prior period, 165 new
client enrollments during the period, and 65 total cancellations during the
period.





Critical
Accounting Policies:





Cash
and Cash Equivalents




The
Company considers all highly liquid investments with an original maturity of
three months or less at the date of purchase to be cash
equivalents.





Concentration
of Credit Risk




The
Company maintains its cash accounts with financial institutions where, at times,
deposits exceed federal insurance limits.  As of August 31, 2009 the
cash accounts did not exceed the federal insurance limit of
$250,000.





Revenue
Recognition




The
Company generates revenue through monthly service, support, and transaction
fees. The Company’s revenue transactions include set-up fees, recurring monthly
subscription plan fees, short code lease fees, and overage fees when a client
exceeds the base number of message transactions included in their plan. The
Company recognizes revenue when persuasive evidence of an arrangement exists,
performance has occurred, the fee is fixed or determinable, and collectability
is probable.


-22-


The
Company recognizes revenue in accordance with Emerging Issues Task Force (EITF)
Issue No. 00-3, Application of AICPA Statement of Position No. 97-2, Software
Revenue Recognition, to Arrangements That Include the Right to Use Software
Stored on Another Entity’s Hardware, and Staff Accounting Bulletin No. 104,
Revenue Recognition in the Financial Statements. EITF Issue No. 00-3 states that
a software element covered by SOP 97-2 is only present in a hosting arrangement
if the customer has the contractual right to take possession of the software at
any time during the hosting period without significant penalty and it is
feasible for the customer to either run the software on its own hardware or
contract with another party unrelated to the vendor to host the software. The
Company’s hosting arrangements do not allow the customer the contractual right
to take possession of the software during the hosting period; accordingly, the
hosting arrangements are considered service contracts. Revenues are recognized
as the subscription services are provided.  Amounts collected prior to
subscription use being provided are recorded as deferred revenue.





Property
and Equipment




Property
and equipment is stated at cost and depreciated using the straight-line method
over the estimated life of the assets, ranging from one to ten years. The cost
of normal maintenance and repairs is charged to expense as incurred and
expenditures for major improvements are capitalized at cost. Gains or losses on
the disposition of assets are reflected in the income statement at the time of
disposal.





Impairment
of Long-Lived Assets




The
Company applies the provisions of Statement of Financial Accounting Standard No.
144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” SFAS No.
144 requires that long-lived assets be reviewed for impairment whenever events
or changes in circumstances indicate that the carrying amount of an asset may
not be recoverable through the estimated undiscounted cash flows expected to
result from the use and eventual disposition of the assets. Whenever any such
impairment exists, an impairment loss will be recognized for the amount by which
the carrying value exceeds the fair value. During 2009 and 2008, there was no
impairment of long-lived assets.





Internally
Developed Software




Statement
of Position (SOP) No. 98-1, Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use, requires all costs related to the
development of internal-use software other than those incurred during the
application development stage to be expensed as incurred. Costs incurred during
the application development stage are capitalized and amortized over the
estimated useful life of the software. Internally developed software costs are
amortized on a straight-line basis over the estimated useful life of the
software.  During the year ended August 31, 2009 and period ended
August 31, 2008 the Company capitalized developed software costs of $0 and
$79,415, respectively.





Income
Taxes




Income
taxes are accounted for under Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes," which is an asset and liability approach
that requires the recognition of deferred tax assets and liabilities for the
expected future tax consequences of events that have been recognized in the
Company's financial statements or tax returns.





For the
period ended August 31, 2008, the Company was an S corporation under the
provisions of the Internal Revenue Code of 1986, as amended.  For
federal and state income tax purposes, the Company was not subject to tax on its
income.  The Company’s income and/or loss flows through to the
shareholders of the Company and is taxed to them individually.  On
August 31, 2008, the Company revoked the election to be treated as an S
corporation.  For the period ended August 31, 2009, income taxes are
provided for the tax effects of transactions reported in the financial
statements and consist of taxes currently due plus deferred taxes of operating
losses that are available to offset future taxable income.





Fair
Value of Financial Instruments




Accounting
principles generally accepted in the United States of America require disclosing
the fair value of financial instruments to the extent practicable for financial
instruments, which are recognized or unrecognized in the balance sheet. The fair
value of the financial instruments disclosed herein is not necessarily
representative of the amount that could be realized or settled, nor does the
fair value amount consider the tax consequences of realization or settlement. In
assessing the fair value of these financial instruments, the Company uses a
variety of methods and assumptions, which were based on estimates of market
conditions and risks existing at that time. For certain instruments, including
cash, accounts payable, accrued liabilities and convertible notes payable, it
was estimated that the carrying amount approximated fair value for the majority
of these instruments because of their short maturity. The fair value of the
Company's property and equipment is estimated to approximate their net book
values. The Company has implemented SFAS statements number 157 and 159 in these
financial statements, the impact of these pronouncements has not been
material.


-23-


Use
of Estimates




The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
financial statements and the reported amounts of revenue and expenses during the
reporting period. Among the more significant estimates included in these
financial statements are the estimated allowance for doubtful accounts
receivable, valuation allowance for deferred tax assets, impairment of
long-lived assets and intangible and the valuation of warrants and restricted
stock grants. Actual results could materially differ from those
estimates.





Advertising




The
Company expenses advertising costs as they are incurred. The total advertising
costs expensed for the year ended August 31, 2009 and for the period ended
August 31, 2008 were $3,345 and $20,716, respectively.





Earnings
(Loss) Per Share




Statement
of Financial Accounting Standards FASB No. 128, “Earnings per Share”, which
replaces the calculation of primary and fully diluted earnings (loss) per share
with basic and diluted earnings (loss) per share, is used to calculate earnings
per share. Basic earnings (loss) per share includes no dilution and is computed
by dividing income (loss) available to common stockholders by the weighted
average number of shares outstanding during the period. Diluted earnings (loss)
per share reflect the potential dilution of securities that could share in the
earnings of an entity, similar to fully diluted earnings (loss) per
share.  For the years ended August 31, 2009 and August 31, 2008, there
was no variance between basic and diluted and no potentially dilutive
securities.





Stock
Split




On June
30, 2008 the Company implemented a 16,740 to 1 forward stock
split.  The par value of the common stock changed from $1.00 to $.0001
per share.  All shares and per share amounts have been restated in the
financial statements and in the notes to the financial statements for all
periods presented to reflect the forward stock split.





Recent
Accounting Pronouncements





In May
2009, the FASB issued SFAS 165 (“SFAS 165”), “Subsequent Events.” This
pronouncement establishes standards for accounting for and disclosing subsequent
events (events which occur after the balance sheet date but before financial
statements are issued or are available to be issued). SFAS 165 requires an
entity to disclose the date subsequent events were evaluated and whether that
evaluation took place on the date financial statements were issued or were
available to be issued. It is effective for interim and annual periods ending
after June 15, 2009. The Company adopted SFAS 165 effective June 30, 2009 and
the adoption did not have a material impact on its consolidated financial
statements. The date through which subsequent events have been evaluated is
November 4, 2009, the date on which the financial statements were
issued.




In June
2009, the FASB issued SFAS 168 (“SFAS 168”), “The FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting Principles.”
SFAS 168 will become the source of authoritative U.S. generally accepted
accounting principles (GAAP) recognized by the FASB to be applied by
nongovernmental entities. Rules and interpretive releases of the Securities and
Exchange Commission (SEC) under authority of federal securities laws are also
sources of authoritative GAAP for SEC registrants. On the effective date of this
Statement, the Codification will supersede all then-existing non-SEC accounting
and reporting standards. All other non grandfathered non-SEC accounting
literature not included in the Codification will become non authoritative. This
statement is effective for financial statements issued for interim and annual
periods ending after September 15, 2009. The Company does not expect the
adoption of FAS 168 to have an impact on the Company’s results of operations,
financial condition or cash flows.


-24-


In
September 2006, the SEC staff issued Staff Accounting
Bulletin No. 108, Considering the Effects of Prior
Year Misstatements when Quantifying Misstatements in Current Year Financial
Statements(“SAB 108”). SAB 108 establishes an approach that
requires quantification of financial statement misstatements based on the
effects of the misstatements on each of the Company’s consolidated financial
statements and the related financial statement disclosures. SAB 108 is
effective for the year ending February 28, 2009.





In
December 2007, the Financial Accounting Standards Board issued FASB Statement
No. 141 (Revised 2007), Business Combinations (“SFAS 141R”). SFAS 141R
provides additional guidance on improving the relevance, representational
faithfulness, and comparability of the financial information that a reporting
entity provides in its financial reports about a business combination and its
effects. This Statement applies prospectively to business combinations for
which the acquisition date is on or after the beginning of the first annual
reporting period beginning on or after December 15, 2008.





We
adopted the Financial Accounting Standards Board’s (FASB) Statement of Financial
Accounting Standard (SFAS) No. 157,Fair Value
Measurement  at inception. SFAS 157 defines fair value,
establishes a framework for measuring fair value and expands disclosure of fair
value measurements. SFAS 157 applies under other accounting pronouncements that
require or permit fair value measurements and accordingly, does not require any
new fair value measurements. SFAS No. 157 clarifies that fair value is an exit
price, representing the amount that would be received to sell an asset or paid
to transfer a liability in an orderly transaction between market participants.
As such, fair value is a market-based measurement that should be determined
based on assumptions that market participants would use in pricing an asset or
liability. As a basis for considering such assumptions, SFAS No. 157 established
a three-tier fair value hierarchy, which prioritizes the inputs used in
measuring fair value as follows:





            Level
      1. Observable inputs such as quoted prices in active
    markets;






            Level
      2. Inputs, other than the quoted prices in active markets, that are
      observable either directly or indirectly;
and






            Level
      3. Unobservable inputs in which there is little or no market data, which
      require the reporting entity to develop its own
    assumptions.








The
FASB’s SFAS No. 159,The Fair
Value Option for Financial Assets and Financial Liabilities, including an
Amendment of SFAS 115  became effective for us at inception.
SFAS 159 establishes a fair value option that permits entities to choose to
measure eligible financial instruments and certain other items at fair value at
specified election dates. A business entity shall report unrealized gains and
losses on items for which the fair value options have been elected in earnings
at each subsequent reporting date. For the period ended February 28, 2009, there
were no applicable items on which the fair value option was elected. SFAS 159
may impact our consolidated financial statements in the future.





In
December 2007, the Financial Accounting Standards Board issued FASB Statement
No. 160,Noncontrolling
Interests in Consolidated Financial Statements—an amendment of ARB
No. 51 (“SFAS 160”). SFAS 160 amends ARB No. 51 to establish
accounting and reporting standards for the noncontrolling interest in a
subsidiary and for the deconsolidation of a subsidiary. This Statement is
effective for fiscal years and interim periods within those fiscal years,
beginning on or after December 15, 2008. The Company is currently
evaluating the impact of adopting SFAS 160 on our financial
statements.


-25-


In May
2008, the FASB issued FSP APB 14-1, Accounting for Convertible Debt
Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash
Settlement)("FSP APB 14-1"). FSP APB 14-1 requires issuers of
convertible debt instruments that may be settled in cash upon conversion to
account separately for the liability and equity components in a manner that will
reflect the entity's nonconvertible debt borrowing rate when interest cost is
recognized in subsequent periods. FSP APB 14-1 is effective for financial
statements issued for fiscal years beginning after December 15, 2008, and
interim periods within those fiscal years. We do not anticipate that the
adoption of FSP APB 14-1 will have a material effect on our results of
operations or financial position.





Management
does not anticipate that the adoption of these standards will have a material
impact on the financial statements.





Income
taxes





Income
taxes are accounted for under Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes," which is an asset and liability approach
that requires the recognition of deferred tax assets and liabilities for the
expected future tax consequences of events that have been recognized in the
Company's financial statements or tax returns.





COMPARISON
OF OPERATING RESULTS FOR THE
YEAR ENDED AUGUST 31, 2009, COMPARED TO THE YEAR ENDED AUGUST 31,
2008





Revenues
increased $525,133 to $608,610 for the year ended August 31, 2009, as compared
to revenues of $83,477 for the year ended August 31, 2008.  The
increase in revenues was due to a $542,098 increase in subscription services to
$608,610 for the year ended August 31, 2009, compared to $66,512 for the year
ended August 31, 2008, offset by a $16,965 decrease in licensing fees, to $0 in
licensing fees for the year ended August 31, 2009.   The increase
in subscription services was principally due to the fact that the Company did
not begin commercial sales until January 8, 2008 and has been steadily growing
its customer base since that time. The decrease in licensing fees was due to a
change in product offerings where the Company stopped charging license fees to
sales representatives in March of 2008.





Cost of
revenues increased $179,210 or 177.4% to $280,225 for the year ended August 31,
2009, as compared to cost of revenues of $101,015 for the year ended August 31,
2008. The increase in cost of revenues was principally attributable to the
increase in subscription services.





Gross
margin increased $345,923 to $328,385 for the year ended August 31, 2009, as
compared to gross loss of $17,538 for the year ended August 31,
2008.





Cost of
revenues as a percentage of revenues were 46% for the year ended August 31,
2009, compared to 121% for the year ended August 31, 2008, a decrease in cost of
revenues as a percentage of revenues of 75% from the prior
period.  The main reason for the decrease in cost of revenues as a
percentage of sales was that we have a number of fixed costs associated with
providing our services and we did not commence sales activity until January 8,
2008.





Selling,
general and administrative expenses (“G&A”) increased $561,562 or 128.7% to
$998,009 for the year ended August 31, 2009, as compared to G&A expense of
$436,447 for the year ended August 31, 2008. The increase in G&A expense was
principally attributable to our expanded staff, marketing efforts, and the
expanded legal and accounting expenses associated with our effort to become a
public company.





We had an
increase of $16,829 in depreciation expense to $51,342 for the year ended August
31, 2009, compared to $34,513 for the year ended August 31, 2008, in connection
with an increase in our depreciable asset base.





We had
$5,128 of interest expense for the year ended August 31, 2009, compared to $0 in
interest expense for the year ended August 31, 2008, which was solely due to
accrued interest on our outstanding Promissory Notes held by Timothy Miller, our
Chief Executive Officer, as described below.


-26-


During
the year ended August 31, 2009, we incurred operating expenses of $1,054,479,
compared to operating expenses of $470,960 incurred during the year ended August
31, 2008, an increase of $583,519 or 123.9% from the prior
period.  The increase in operating expenses is principally due to the
increase in G&A expenses.





We had an
operating loss of $726,094 for the year ended August 31, 2009, compared to an
operating loss of $488,498 for the year ended August 31, 2008, an increase in
operating loss of $237,596 or 48.6% from the prior period.





We had
interest income of $523 for the year ended August 31, 2009, compared to interest
income of $1,853 for the year ended August 31, 2008.





We had a
net loss of $725,571 for the year ended August 31, 2009, as compared to a net
loss of $486,645 for the year ended August 31, 2008, an increase in net loss of
$238,926 or 49.1% from the prior period.  The increase in net loss was
mainly due to the $583,519 increase in operating expenses and the $179,210
increase in cost of revenues, which was not sufficiently offset by the $525,133
increase in revenue for the year ended August 31, 2009, compared to the year
ended August 31, 2008.





LIQUIDITY
AND CAPITAL RESOURCES





As of
August 31, 2009, we had total current assets of $162,379, consisting of cash of
$130,083 and accounts receivable of $32,296.  We had total assets of
$337,931 consisting of $162,379 of current assets and $175,552 of property and
equipment net.





We had
total liabilities consisting solely of current liabilities of $526,361,
consisting of accounts payable and accrued liabilities of $38,571, accrued
expenses of $9,470, deferred revenue of $43,320, and related party notes payable
of $435,000, which included the Stevenson Note and the Miller Notes, described
below.





We had a
working capital deficit of $363,982 as of August 31, 2009, compared to working
capital of $124,599 at August 31, 2008.





We had a
total accumulated deficit of $1,234,930 as of August 31,
2009.





We had
net cash used in operating activities of $646,917 for the year ended August 31,
2009, which was mainly due to $725,571 of net loss and $32,296 of increase in
accounts receivable, offset by $12,913 of increase in accounts payable, $51,342
of depreciation and amortization and $31,320 of increase in deferred
revenue.





We had
net cash used in investing activities of $10,551 for the year ended August 31,
2009, which consisted solely of purchase of property and equipment of
$10,551.





We had
$458,523 of net cash provided by financing activities for the year ended August
31, 2009, which reflected proceeds from the sale of stock of $196,200 and
$275,000 borrowed from Mr. Miller, as described below and $12,677 of payments to
the Company’s President, Timothy Miller, to repay advances he had made on behalf
of the Company.  During the year ended August 31, 2009, the Company
sold an aggregate of 280,286 shares of common stock at $0.70 per share and an
additional 142,857 warrants to purchase shares of common stock for an aggregate
of $196,172 in cash.  These sales included the sale in October 2008 of
142,857 units, with each unit consisting of one share of common stock and one
warrant to purchase one share of common stock at an exercise price of $0.70 per
share for an aggregate of $100,000 in cash, which warrants expire on October 24,
2011, and the sale of an aggregate of 137,429 shares of common stock at $0.70
per share for an aggregate of $96,200 in cash.





In June
2007, the Company borrowed $160,000 from Jim Stevenson through a promissory note
(the “Stevenson Note”).  Mr. Stevenson is a shareholder of the
Company.   The promissory note bears no interest and has no
collateral and is due and payable upon (1) the sale of the Company’s business or
the liquidation of a majority of its assets or (2) the Company reaching “a level
of profitability” and a majority of the Company’s shareholders voting to repay
the note before the sale of the Company or the liquidation of its
assets.  Pursuant to the terms of the note, it must be paid in whole
or in part before any other debt obligations of the Company beyond normal
operating costs, other than the Miller Note, described below.  The
$160,000 loan remained outstanding as of August 31, 2009.


-27-


On April
16, 2009, the Company borrowed $100,000 from its Chief Executive Officer,
Timothy Miller, pursuant to a Promissory Note.  The Promissory Note
bears interest at the rate of 10% per annum, with such interest payable
quarterly in arrears, and with such note due and payable on April 15,
2010.





Effective
July 1, 2009, Mr. Miller, loaned the Company $50,000 which matures July 2, 2010
with interest only payments due quarterly at 10% per annum.  Effective
August 3, 2009, Mr. Miller, loaned the Company $50,000 which matures August 4,
2010 with interest only payments due quarterly at 10% per
annum.  Effective August 27, 2009, Mr. Miller, loaned the Company
$75,000 which matures August 28, 2010 with interest only payments due quarterly
at 10% per annum (collectively the April 16, 2009, July 1, 2009, August 3, 2009,
and August 27, 2009 are referred to herein as the “Miller Notes”)
..  The notes have a right to repayment prior to the right of repayment
of the Stevenson Note.





As of
August 31, 2009, the Company estimates that its current total monthly expenses
are approximately $120,000 of which approximately $35,000 is directly
attributable to advanced commission payments made to sales representatives. With
current base monthly subscription plan fees received of $79,752, combined with
overage (additional usage) charges to existing accounts, and new account set-up
fees with their associative growth in base monthly subscription fees, the
Company estimates that its current negative monthly cash flow is approximately
$40,000. The Company further estimates that this negative cash flow will
continue to decrease monthly, as the number of the Company’s customers expands,
of which there can be no assurance. The Company estimates the need for
approximately $200,000 of additional funding during the next 12 months to
continue its business operations and an additional $500,000 to expand its
operations either through increasing the numbers of sales representatives or
supporting a significant increase in the velocity of sales per representative,
which does not include funds the Company will require to repay the Stevenson
Note and the Miller Note.





If we are
unable to raise adequate working capital for fiscal 2010 and beyond, we will be
restricted in the implementation of our business plan.  We estimate
that we can continue to operate through November 30, 2009 with our cash on hand
if no additional funding is raised.  We have no current commitment
from our officers and Directors or any of our shareholders to supplement our
operations or provide us with financing in the future.  In the future,
we may be required to seek additional capital by selling debt or equity
securities, selling assets, or otherwise be required to bring cash flows in
balance when we approach a condition of cash insufficiency. The sale of
additional equity or debt securities will result in dilution to our then
shareholders. We provide no assurance that financing will be available in
amounts or on terms acceptable to us, or at all.





Off
Balance Sheet Arrangements





We do not
have any off balance sheet arrangements.


-28-


ITEM
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA








INDEX
TO FINANCIAL STATEMENTS








TABLE OF CONTENTSPage No.I
              REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
              F-2II
              BALANCE
      SHEETS
              F-4III
              STATEMENTS
      OF OPERATIONS
              F-5IV
              STATEMENTS
      OF STOCKHOLDERS’ EQUITY (DEFICIT)
              F-6V
              STATEMENTS
      OF CASH FLOWS
              F-7VI
              NOTES
      TO THE FINANCIAL STATEMENTS
              F-8





F-1


REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM








To
the Board of Directors


Sumotext,
Inc.







We have
audited the accompanying balance sheet of Sumotext, Inc. as of August 31, 2009,
and the related statements of operations, changes in stockholders' equity
(deficit), and cash flows for the period then ended. The financial statements
for the period ended August 31, 2008, were audited by other auditors whose
reports expressed unqualified opinions on those statements. The financial
statements for the period ended August 31, 2008, include total revenues and net
loss of $83,477 and $486,645, respectively. Our opinion on the statements of
operations, stockholder’s equity (deficit) and cash flows for the period ended
August 31, 2008, insofar as it relates to amounts for prior periods through
August 31, 2008, is based solely on the reports of other auditors. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.




We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.




In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Sumotext, Inc. as of August 31,
2009, and the results of its operations, changes in stockholders' equity
(deficit) and cash flows for the period described above in conformity with
accounting principles generally accepted in the United States of
America.




The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. As discussed in Note 2 to the financial
statements, the Company has suffered recurring losses from operations, which
raises substantial doubt about its ability to continue as a going concern.
Management's plans regarding those matters also are described in Note 2. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.




/s/
M&K CPAS, PLLC


www.mkacpas.com


Houston,
Texas


November
4, 2009


F-2


REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM











Board of
Directors


SUMOTEXT,
Inc. (formerly Reminderbox, Inc.)


Little
Rock, AR








We have
audited the accompanying balance sheet of SUMOTEXT, Inc. as of August 31, 2008,
and the related statements of operations, changes in stockholders’ equity
(deficit), and cash flows for the year then ended.  These financial
statements are the responsibility of the Company’s management.  Our
responsibility is to express an opinion on these financial statements based on
our audits.





We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  SUMOTEXT,
Inc. is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting.  Our audit included
consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of SUMOTEXT, Inc.
internal control over financial reporting.  Accordingly, we express no
such opinion.  An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.  We
believe that our audits provide a reasonable basis for our opinion.





In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of SUMOTEXT, Inc. as of August 31,
2008, and the results of its operations and its cash flows for the year then
ended in conformity with accounting principles generally accepted in the United
States of America.








Malone
& Bailey, PC


www.malone-bailey.com


Houston,
Texas


November
6, 2008


F-3


SUMOTEXT,
INC.


BALANCE
SHEETS





August
      31, 2009
                                            
                                            
                                            August
      31, 2008AssetsCurrent
      Assets:Cash
                                            
                                            $
                                            130,083
                                            
                                            
                                            $
                                            329,028Accounts
      receivables
                                            
                                            
                                            32,296
                                            
                                            
                                            
                                            -Employee
      receivables
                                            
                                            
                                            -
                                            
                                            
                                            
                                            5,805Deposits
                                            
                                            
                                            -
                                            
                                            
                                            
                                            2,500Total
      Current Assets
                                            
                                            
                                            162,379
                                            
                                            
                                            
                                            337,333Property
      and equipment, net of accumulated depreciation of $86,587 and $35,245,
      respectively
                                            
                                            
                                            175,552
                                            
                                            
                                            
                                            216,342Total
      assets
                                            
                                            $
                                            337,931
                                            
                                            
                                            $
                                            553,675Liabilities
      and Stockholders’ Equity (Deficit)Current
      liabilities:Accounts
      payable and accrued liabilities
                                            
                                            $
                                            38,571
                                            
                                            
                                            $
                                            25,657Advances
      from shareholder
                                            
                                            
                                            -
                                            
                                            
                                            
                                            12,677Accrued
      expenses
                                            
                                            
                                            9,470
                                            
                                            
                                            
                                            2,400Deferred
      revenue
                                            
                                            
                                            43,320
                                            
                                            
                                            
                                            12,000Notes
      payable – related parties
                                            
                                            
                                            435,000
                                            
                                            
                                            
                                            160,000Total
      current liabilities
                                            
                                            
                                            526,361
                                            
                                            
                                            
                                            212,734Total
      liabilities
                                            
                                            
                                            526,361
                                            
                                            
                                            
                                            212,734Stockholders’
      Equity (Deficit)Common
      stock: $0.0001 par value, 100,000,000 shares authorized, 7,779,806 and
      7,499,520 shares issued and outstanding, respectively
                                            
                                            
                                            778
                                            
                                            
                                            
                                            750Additional
      paid-in capital
                                            
                                            
                                            1,045,722
                                            
                                            
                                            
                                            849,550Accumulated
      deficit
                                            
                                            
                                            (1,234,930
                                            )
                                            
                                            
                                            (509,359
                                            )Total
      stockholders' equity(deficit)
                                            
                                            
                                            (188,430
                                            )
                                            
                                            
                                            340,941Total
      liabilities and stockholders' equity (deficit)
                                            
                                            $
                                            337,931
                                            
                                            
                                            $
                                            553,675The
      accompanying notes are an integral part of these financial
      statements


F-4


SUMOTEXT,
INC.


STATEMENTS
OF OPERATIONS





Years
      ended August 31,2009
                                        
                                        
                                        2008RevenuesSubscription
      services
                                        
                                        $
                                        608,610
                                        
                                        
                                        $
                                        66,512Licensing
      fees
                                        
                                        
                                        -
                                        
                                        
                                        
                                        16,965Total
      Revenues
                                        
                                        
                                        608,610
                                        
                                        
                                        
                                        83,477Cost
      of revenues (exclusive of depreciation and amortization shown separately
      below)
                                        
                                        
                                        280,225
                                        
                                        
                                        
                                        101,015Gross
      margin (loss)
                                        
                                        
                                        328,385
                                        
                                        
                                        
                                        (17,538
                                        )Selling,
      general and administrative expenses
                                        
                                        
                                        998,009
                                        
                                        
                                        
                                        436,447Depreciation
      and amortization
                                        
                                        
                                        51,342
                                        
                                        
                                        
                                        34,513Interest
      expense
                                        
                                        
                                        5,128
                                        
                                        
                                        
                                        -Operating
      expenses
                                        
                                        
                                        1,054,479
                                        
                                        
                                        
                                        470,960Operating
      loss
                                        
                                        
                                        (726,094
                                        )
                                        
                                        
                                        (488,498
                                        )Interest
      income
                                        
                                        
                                        523
                                        
                                        
                                        
                                        1,853Net
      loss
                                        
                                        
                                        (725,571
                                        )
                                        
                                        
                                        (486,645
                                        )Basic
      and diluted loss per share
                                        
                                        $
                                        (0.09
                                        )
                                        
                                        $
                                        (0.08
                                        )Basic
      and diluted weighted average of common shares outstanding
                                        
                                        
                                        7,724,737
                                        
                                        
                                        
                                        6,108,403The
      accompanying notes are an integral part of these financial
      statements


F-5


SUMOTEXT,
INC.


STATEMENT
OF STOCKHOLDERS’ EQUITY (DEFICIT)


For
The Years Ended August 31, 2009 and 2008








Common
      StockShares
                                                                                                                          
                                                                                                                          Amount
                                                                                                                          
                                                                                                                          Additional
      Paid-in Capital
                                                                                                                          
                                                                                                                          Accumulated
      Deficit
                                                                                                                          
                                                                                                                          
                                                                                                                          TotalBalance
      at 08/31/07
                                                                                                                          
                                                                                                                          
                                                                                                                          5,022,000
                                                                                                                          
                                                                                                                          $
                                                                                                                          502
                                                                                                                          
                                                                                                                          $
                                                                                                                          (202
                                                                                                                          )
                                                                                                                          $
                                                                                                                          (22,714
                                                                                                                          )
                                                                                                                          $
                                                                                                                          22,414Shares
      issued for cash
                                                                                                                          
                                                                                                                          
                                                                                                                          2,477,520
                                                                                                                          
                                                                                                                          
                                                                                                                          248
                                                                                                                          
                                                                                                                          
                                                                                                                          849,752Net
      Loss
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          (486,645
                                                                                                                          )
                                                                                                                          
                                                                                                                          (486,645
                                                                                                                          )Balances
      at 08/31/08
                                                                                                                          
                                                                                                                          
                                                                                                                          7,499,520
                                                                                                                          
                                                                                                                          $
                                                                                                                          750
                                                                                                                          
                                                                                                                          $
                                                                                                                          849,550
                                                                                                                          
                                                                                                                          $
                                                                                                                          (509,359
                                                                                                                          )
                                                                                                                          $
                                                                                                                          340,941Shares
      issued for cash
                                                                                                                          
                                                                                                                          
                                                                                                                          280,286
                                                                                                                          
                                                                                                                          
                                                                                                                          28
                                                                                                                          
                                                                                                                          
                                                                                                                          196,172
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          196,200Net
      Loss
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          (725,571
                                                                                                                          )
                                                                                                                          
                                                                                                                          (725,571
                                                                                                                          )Balances
      at 08/31/09
                                                                                                                          
                                                                                                                          
                                                                                                                          7,779,806
                                                                                                                          
                                                                                                                          $
                                                                                                                          778
                                                                                                                          
                                                                                                                          $
                                                                                                                          1,045,722
                                                                                                                          
                                                                                                                          $
                                                                                                                          (1,234,930
                                                                                                                          )
                                                                                                                          $
                                                                                                                          (188,430
                                                                                                                          )The
      accompanying notes are an integral part of these financial
      statements


F-6


SUMOTEXT,
INC.


STATEMENTS
OF CASH FLOWS





Years
      ended August 31,2009
                                                            
                                                            
                                                            2008Cash
      flows from operating activities:Net
      loss
                                                            
                                                            $
                                                            (725,571
                                                            )
                                                            
                                                            $
                                                            (486,645
                                                            )Adjustments
      to reconcile net loss to net cash provided by (used in) operating
      activities:Depreciation
      and amortization
                                                            
                                                            
                                                            51,342
                                                            
                                                            
                                                            
                                                            34,513Changes
      in operating assets and liabilities:Account
      receivables
                                                            
                                                            
                                                            (32,296
                                                            )
                                                            
                                                            
                                                            -Employee
      receivables
                                                            
                                                            
                                                            5,805
                                                            
                                                            
                                                            
                                                            (5,805
                                                            )Deposits
                                                            
                                                            
                                                            2,500
                                                            
                                                            
                                                            
                                                            (2,500
                                                            )Accounts
      payable
                                                            
                                                            
                                                            12,913
                                                            
                                                            
                                                            
                                                            13,336Accrued
      expenses
                                                            
                                                            
                                                            7,070
                                                            
                                                            
                                                            
                                                            2,400Deferred
      revenue
                                                            
                                                            
                                                            31,320
                                                            
                                                            
                                                            
                                                            12,000Net
      cash provided by (used in) operating activities
                                                            
                                                            
                                                            (646,917
                                                            )
                                                            
                                                            
                                                            (432,701
                                                            )Cash
      flows from investing activities:Purchase
      of property and equipment
                                                            
                                                            
                                                            (10,551
                                                            )
                                                            
                                                            
                                                            (81,726
                                                            )Net
      cash (used in) investing activities
                                                            
                                                            
                                                            (10,551
                                                            )
                                                            
                                                            
                                                            (81,726
                                                            )Cash
      flows from financing activities:Payment
      of notes payable
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            (60,000
                                                            )Proceeds
      from issuance of notes payable – (related party)
                                                            
                                                            
                                                            275,000
                                                            
                                                            
                                                            
                                                            60,000Payments
      on shareholder advances
                                                            
                                                            
                                                            (12,677
                                                            )
                                                            
                                                            
                                                            (46,023
                                                            )Proceeds
      from issuance of stock
                                                            
                                                            
                                                            196,200
                                                            
                                                            
                                                            
                                                            850,000Net
      cash provided by financing activities
                                                            
                                                            
                                                            458,523
                                                            
                                                            
                                                            
                                                            803,977Net
      increase (decrease) in cash and cash equivalents
                                                            
                                                            
                                                            (198,945
                                                            )
                                                            
                                                            
                                                            289,550Cash
      and cash equivalents, beginning of period
                                                            
                                                            
                                                            329,028
                                                            
                                                            
                                                            
                                                            39,478Cash
      and cash equivalents, end of period
                                                            
                                                            $
                                                            130,083
                                                            
                                                            
                                                            $
                                                            329,028Supplemental
      cash flow information:Interest
      paid
                                                            
                                                            $
                                                            2,521
                                                            
                                                            
                                                            $
                                                            -Taxes
      paid
                                                            
                                                            $
                                                            -
                                                            
                                                            
                                                            $
                                                            -The
      accompanying notes are an integral part of these financial
      statements.


F-7


Note
1 - Organization and Summary of Significant Accounting Policies





SUMOTEXT,
Inc. (“SUMOTEXT” or “the Company”), was incorporated in Arkansas on June 8, 2007
and does business as SUMOTEXT, Inc. at http://www.sumotext.com. 
On September 10, 2008 the Company converted into a Nevada corporation and
contemporaneously changed its name to SUMOTEXT Incorporated.  The
Company is a short code application provider that enables businesses to
instantly launch product offers, promotions, and time-sensitive alerts into the
mobile channel via shared or dedicated mobile short codes.





As
consumers ‘opt-in’ to one of our client’s mobile programs, the consumer’s mobile
contact information is added to that client’s database. This ‘opt-in’ process
gives that client expressed permission to send that customer targeted marketing
campaigns via SMS (Short Message Service), also known as text
messaging.





The Company attracts new clients by
offering short code technology solutions that are designed for specific
industries and applications. These packaged solutions are 'ready-to-go' and
leverage the Company’s carrier relationships and proprietary SMS Gateway and
campaign management tools. This enables the Company's clients to instantly
launch and manage mobile loyalty, rewards, and alert
programs.




Like all
short code application providers, the Company leases short codes through the
Common Short Code Administration (CSCA) and maintains connections to wireless
networks through wireless carrier's appointed SMS aggregators. Performance
failure by one or more of these partners may have an adverse impact on the
Company’s business or operating results.




Cash
and Cash Equivalents


The
Company considers all highly liquid investments with an original maturity of
three months or less at the date of purchase to be cash equivalents. There were
no cash equivalents at August 31, 2009 and 2008, respectively.





Concentration
of Credit Risk


The
Company maintains its cash accounts with financial institutions where, at times,
deposits exceed federal insurance limits.  As of August 31, 2009 the
cash accounts did not exceed the federal insurance limit of
$250,000.





Revenue
Recognition


The
Company generates revenue through monthly service, support, and transaction
fees. The Company’s revenue transactions include set-up fees, recurring monthly
subscription plan fees, short code lease fees, and overage fees when a client
exceeds the base number of message transactions included in their plan. The
Company recognizes revenue when persuasive evidence of an arrangement exists,
performance has occurred, the fee is fixed or determinable, and collectability
is probable.





The
Company recognizes revenue in accordance with Emerging Issues Task Force (EITF)
Issue No. 00-3, Application of
AICPA Statement of Position No. 97-2, Software Revenue Recognition, to
Arrangements That Include the Right to Use Software Stored on Another Entity’s
Hardware, and Staff Accounting Bulletin No. 104, Revenue Recognition in the Financial
Statements. EITF Issue No. 00-3 states that a software element covered by
SOP 97-2 is only present in a hosting arrangement if the customer has the
contractual right to take possession of the software at any time during the
hosting period without significant penalty and it is feasible for the customer
to either run the software on its own hardware or contract with another party
unrelated to the vendor to host the software. The Company’s hosting arrangements
do not allow the customer the contractual right to take possession of the
software during the hosting period; accordingly, the hosting arrangements are
considered service contracts. Revenues are recognized as the subscription
services are provided.  Amounts collected prior to subscription use
being provided are recorded as deferred revenue.


F-8


Property
and Equipment




Property
and equipment is stated at cost and depreciated using the straight-line method
over the estimated life of the assets, ranging from one to ten years. The cost
of normal maintenance and repairs is charged to expense as incurred and
expenditures for major improvements are capitalized at cost. Gains or losses on
the disposition of assets are reflected in the income statement at the time of
disposal.





Impairment
of Long-Lived Assets




The
Company applies the provisions of Statement of Financial Accounting Standard No.
144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” SFAS
No. 144 requires that long-lived assets be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable through the estimated undiscounted cash flows expected to
result from the use and eventual disposition of the assets. Whenever any such
impairment exists, an impairment loss will be recognized for the amount by which
the carrying value exceeds the fair value. During 2009 and 2008, there was no
impairment of long-lived assets.





Internally
Developed Software




Statement
of Position (SOP) No. 98-1, Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use, requires all costs
related to the development of internal-use software other than those incurred
during the application development stage to be expensed as incurred. Costs
incurred during the application development stage are capitalized and amortized
over the estimated useful life of the software. Internally developed software
costs are amortized on a straight-line basis over the estimated useful life of
the software.  During the year ended August 31, 2009 and the period
ended August 31, 2008 the Company capitalized developed software costs of $0 and
$79,415, respectively.





Income
Taxes




For the
period ended August 31, 2008, the Company was an S corporation under the
provisions of the Internal Revenue Code of 1986, as amended.  For
federal and state income tax purposes, the Company was not subject to tax on its
income.  The Company’s income and/or loss flows through to the
shareholders of the Company and is taxed to them individually.  On
August 31, 2008, the Company revoked the election to be treated as an S
corporation.  For the period ended August 31, 2009, income taxes are
provided for the tax effects of transactions reported in the financial
statements and consist of taxes currently due plus deferred taxes of operating
losses that are available to offset future taxable income.





Fair
Value of Financial Instruments




Accounting
principles generally accepted in the United States of America require disclosing
the fair value of financial instruments to the extent practicable for financial
instruments, which are recognized or unrecognized in the balance sheet. The fair
value of the financial instruments disclosed herein is not necessarily
representative of the amount that could be realized or settled, nor does the
fair value amount consider the tax consequences of realization or settlement. In
assessing the fair value of these financial instruments, the Company uses a
variety of methods and assumptions, which were based on estimates of market
conditions and risks existing at that time. For certain instruments, including
cash, accounts payable, accrued liabilities and convertible notes payable, it
was estimated that the carrying amount approximated fair value for the majority
of these instruments because of their short maturity. The fair value of the
Company's property and equipment is estimated to approximate their net book
values. The Company has implemented SFAS statements number 157 and 159 in these
financial statements, the impact of these pronouncements has not been
material.


F-9


Use
of Estimates




The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
financial statements and the reported amounts of revenue and expenses during the
reporting period. Among the more significant estimates included in these
financial statements are the estimated allowance for doubtful accounts
receivable, valuation allowance for deferred tax assets, impairment of
long-lived assets and intangible and the valuation of warrants and restricted
stock grants. Actual results could materially differ from those
estimates.





Advertising




The
Company expenses advertising costs as they are incurred. The total advertising
costs expensed for the year ended August 31, 2009 and for the period ended
August 31, 2008 were $3,345 and $20,716, respectively.





Earnings
(Loss) Per Share




Statement
of Financial Accounting Standards FASB No. 128, “Earnings per Share”, which
replaces the calculation of primary and fully diluted earnings (loss) per share
with basic and diluted earnings (loss) per share, is used to calculate earnings
per share. Basic earnings (loss) per share includes no dilution and is computed
by dividing income (loss) available to common stockholders by the weighted
average number of shares outstanding during the period. Diluted earnings (loss)
per share reflect the potential dilution of securities that could share in the
earnings of an entity, similar to fully diluted earnings (loss) per share. For
the years ended August 31, 2009 and August 31, 2008, there was no variance
between basic diluted and no potentially dilutive securities.





Stock
Split




On June
30, 2008 the Company implemented a 16,740 to 1 forward stock
split.  The par value of the common stock changed from $1.00 to $.0001
per share.  All shares and per share amounts have been restated in the
financial statements and in the notes to the financial statements for all
periods presented to reflect the forward stock split.





Stock
Based Compensation:




Stock-based
awards to non-employees are accounted for using the fair value method in
accordance with SFAS No. 123R, Accounting for Stock-Based
Compensation, and EITF Issue No. 96-18, Accounting for Equity Instruments
that are Issued to Other Than Employees for Acquiring, or in Conjunction with
Selling Goods or Services.





We
adopted the provisions of Statement of Financial Accounting Standards (“SFAS”)
123R, “Share-Based Payment” (“SFAS 123(R)”), which requires that companies
measure and recognize compensation expense at an amount equal to the fair value
of share-based payments granted under compensation arrangements. Prior to
January 1, 2006, we accounted for our stock-based compensation plans under the
recognition and measurement principles of Accounting Principles Board (“APB”)
Opinion 25, “Accounting for Stock Issued to Employees,” and related
interpretations, and would typically recognize no compensation expense for stock
option grants if options granted had an exercise price equal to the market value
of the underlying common stock on the date of grant.





We
adopted SFAS 123(R) using the “modified prospective” method, which results in no
restatement of prior period amounts. Under this method, the provisions of SFAS
123(R) apply to all awards granted or modified after the date of adoption. In
addition, compensation expense must be recognized for any unvested stock option
awards outstanding as of the date of adoption on a straight-line basis over the
remaining vesting period. We calculate the fair value of options using a
Black-Scholes option pricing model. We do not currently have any outstanding
options subject to future vesting therefore no charge is required for the period
ended February 28, 2009. SFAS 123(R) also requires the benefits of tax
deductions in excess of recognized compensation expense to be reported in the
Statement of Cash Flows as a financing cash inflow rather than an operating cash
inflow. In addition, SFAS 123(R) required a modification to the Company’s
calculation of the dilutive effect of stock option awards on earnings per share.
For companies that adopt SFAS 123(R) using the “modified prospective” method,
disclosure of pro forma information for periods prior to adoption must continue
to be made.


F-10


Recent
Accounting Pronouncements




The
Company does not expect the adoption of any recently issued accounting
pronouncements to have a significant effect on its material position or results
of operations.





In May
2009, the FASB issued SFAS 165 (“SFAS 165”), “Subsequent Events.” This
pronouncement establishes standards for accounting for and disclosing subsequent
events (events which occur after the balance sheet date but before financial
statements are issued or are available to be issued). SFAS 165 requires an
entity to disclose the date subsequent events were evaluated and whether that
evaluation took place on the date financial statements were issued or were
available to be issued. It is effective for interim and annual periods ending
after June 15, 2009. The Company adopted SFAS 165 effective June 30, 2009 and
the adoption did not have a material impact on its consolidated financial
statements. The date through which subsequent events have been evaluated is
November 4, 2009, the date on which the financial statements were
issued.




In June
2009, the FASB issued SFAS 168 (“SFAS 168”), “The FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting Principles.”
SFAS 168 will become the source of authoritative U.S. generally accepted
accounting principles (GAAP) recognized by the FASB to be applied by
nongovernmental entities. Rules and interpretive releases of the Securities and
Exchange Commission (SEC) under authority of federal securities laws are also
sources of authoritative GAAP for SEC registrants. On the effective date of this
Statement, the Codification will supersede all then-existing non-SEC accounting
and reporting standards. All other non grandfathered non-SEC accounting
literature not included in the Codification will become non authoritative. This
statement is effective for financial statements issued for interim and annual
periods ending after September 15, 2009. The Company does not expect the
adoption of FAS 168 to have an impact on the Company’s results of operations,
financial condition or cash flows.





In
September 2006, the SEC staff issued Staff Accounting
Bulletin No. 108, Considering the Effects of Prior
Year Misstatements when Quantifying Misstatements in Current Year Financial
Statements(“SAB 108”). SAB 108 establishes an approach that
requires quantification of financial statement misstatements based on the
effects of the misstatements on each of the Company’s consolidated financial
statements and the related financial statement disclosures. SAB 108 is
effective for the year ending August 31, 2009.





In
December 2007, the Financial Accounting Standards Board issued FASB Statement
No. 141 (Revised 2007), Business Combinations (“SFAS 141R”). SFAS 141R
provides additional guidance on improving the relevance, representational
faithfulness, and comparability of the financial information that a reporting
entity provides in its financial reports about a business combination and its
effects. This Statement applies prospectively to business combinations for
which the acquisition date is on or after the beginning of the first annual
reporting period beginning on or after December 15, 2008.





We
adopted the Financial Accounting Standards Board’s (FASB) Statement of Financial
Accounting Standard (SFAS) No. 157,Fair Value
Measurement  at inception. SFAS 157 defines fair value,
establishes a framework for measuring fair value and expands disclosure of fair
value measurements. SFAS 157 applies under other accounting pronouncements that
require or permit fair value measurements and accordingly, does not require any
new fair value measurements. SFAS No. 157 clarifies that fair value is an exit
price, representing the amount that would be received to sell an asset or paid
to transfer a liability in an orderly transaction between market participants.
As such, fair value is a market-based measurement that should be determined
based on assumptions that market participants would use in pricing an asset or
liability. As a basis for considering such assumptions, SFAS No. 157 established
a three-tier fair value hierarchy, which prioritizes the inputs used in
measuring fair value as follows:


F-11





            Level
      1. Observable inputs such as quoted prices in active
    markets;






            Level
      2. Inputs, other than the quoted prices in active markets, that are
      observable either directly or indirectly;
and






            Level
      3. Unobservable inputs in which there is little or no market data, which
      require the reporting entity to develop its own
    assumptions.





The
following table presents assets that are measured and recognized at fair value
on a non-recurring basis:





TotalGainsDescription
                        
                        Level
      1
                        
                        Level
      2
                        
                        Level
      3
                        
                        (Losses)Note
      Payable – Related Party (net)
                        
                        $
                        
                        
                        $
                        
                        
                        $
                        435,000
                        
                        $
                        -Software
      Development (net)
                        
                        
                        
                        
                        
                        
                        
                        
                        154,277
                        
                        
                        -Totals
                        
                        
                        
                        
                        
                        
                        
                        
                        589,277







The
FASB’s SFAS No. 159,The Fair
Value Option for Financial Assets and Financial Liabilities, including an
Amendment of SFAS 115  became effective for us at inception.
SFAS 159 establishes a fair value option that permits entities to choose to
measure eligible financial instruments and certain other items at fair value at
specified election dates. A business entity shall report unrealized gains and
losses on items for which the fair value options have been elected in earnings
at each subsequent reporting date. For the period ended August 31, 2009, there
were no applicable items on which the fair value option was elected. SFAS 159
may impact our consolidated financial statements in the future.





In
December 2007, the Financial Accounting Standards Board issued FASB Statement
No. 160,Noncontrolling
Interests in Consolidated Financial Statements—an amendment of ARB
No. 51 (“SFAS 160”). SFAS 160 amends ARB No. 51 to establish
accounting and reporting standards for the noncontrolling interest in a
subsidiary and for the deconsolidation of a subsidiary. This Statement is
effective for fiscal years and interim periods within those fiscal years,
beginning on or after December 15, 2008. The Company is currently
evaluating the impact of adopting SFAS 160 on our financial
statements.





In
December 2007, the Financial Accounting Standards Board issued FASB Statement
No. 141 (Revised 2007), Business Combinations (“SFAS 141R”). SFAS 141R
provides additional guidance on improving the relevance, representational
faithfulness, and comparability of the financial information that a reporting
entity provides in its financial reports about a business combination and its
effects. This Statement applies prospectively to business combinations for
which the acquisition date is on or after the beginning of the first annual
reporting period beginning on or after December 15, 2008.





In May
2008, the FASB issued FSP APB 14-1, Accounting for Convertible Debt
Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash
Settlement)("FSP APB 14-1"). FSP APB 14-1 requires issuers of
convertible debt instruments that may be settled in cash upon conversion to
account separately for the liability and equity components in a manner that will
reflect the entity's nonconvertible debt borrowing rate when interest cost is
recognized in subsequent periods. FSP APB 14-1 is effective for financial
statements issued for fiscal years beginning after December 15, 2008, and
interim periods within those fiscal years. We do not anticipate that the
adoption of FSP APB 14-1 will have a material effect on our results of
operations or financial position.


F-12


Management
does not anticipate that the adoption of these standards will have a material
impact on the financial statements.





Note
2. Going Concern





The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern.   The Company has suffered
significant operating losses, used substantial funds in its operations, and
needs to raise additional funds to accomplish its objectives. The Company
expects to obtain additional debt and equity financing from various sources in
order to finance its operations. These conditions raise substantial doubt about
the Company’s ability to continue as a going concern.  These financial
statements do not include any adjustments that might be necessary if the Company
is unable to continue as a going concern.





Note
3. Related Party Transactions





During
the year ended August 31, 2009 and for the period ended August 31, 2008, the
Company entered into contracts with two companies, Atreides, Inc., owned 100% by
the President and shareholder of the Company, and Datamethodolgy, Inc, owned
100% by another shareholder of the Company.  The companies were
contracted to design, develop and test the hosted application software that the
Company uses to generate revenue.  For the period ended August 31,
2008, the Company incurred expenses related to designing, developing and testing
software due to Atreides, Inc of $43,400, of which all was paid as of August 31,
2008. These amounts were capitalized as software and recorded at the same basis
incurred by Atreides, Inc. During the year ending August 31, 2009, and during
the year ending August 31, 2008, the Company paid Atreides, Inc. $115,041 and
$76,000 respectively, for managing and training the Company’s sales
representatives which was recorded as selling, general and administrative
expenses.  For the period ended August 31, 2008, the Company incurred
expenses related to designing, developing, and testing software due to
Datamethodology, Inc. of $36,015, of which all was paid.   This
amount was capitalized as software and recorded at the same basis incurred by
Datamethodology.  For the year ended August 31, 2009, and for the year
ended August 31, 2008, the Company paid Datamethodology, Inc. $124,200 and
$82,015, respectively, for maintenance and upgrading software related issues
which was recorded as a cost of revenue.





In June
2007, the Company was advanced $160,000 from a shareholder of the
Company.  The advance is due on demand as a payable and bears no
interest, and has no collateral. As of August 31, 2009 and 2008 the entire
balance of the advance was outstanding.





During
April 2008, the Company borrowed $20,000 from another shareholder of the Company
with no interest and due on demand.  In May 2008, the loan was
repaid.





During
May 2008, the Company borrowed $40,000 from a shareholder of the Company with no
interest and due on demand.  In May 2008, the loan was
repaid.





In April
2009, the Company borrowed $100,000 from the Company’s Chief Executive Officer
and Director who is also a shareholder of the Company.  The note
payable is due April 2010, bears 10% interest only due quarterly, and has no
collateral. As of August 31, 2009 the entire balance of the note was
outstanding.





In July
2009, the Company borrowed $50,000 from the Company’s Chief Executive Officer
and Director who is also a shareholder of the Company.  The note
payable is due July 2010, bears 10% interest only due quarterly, and has no
collateral. As of August 31, 2009, the entire balance of the note was
outstanding.


F-13


In August
2009, the Company borrowed $50,000 from the Company’s Chief Executive Officer
and Director who is also a shareholder of the Company.  The note
payable is due August 2010, bears 10% interest only due quarterly, and has no
collateral. As of August 31, 2009, the entire balance of the note was
outstanding.





In August
2009, the Company borrowed $75,000 from the Company’s Chief Executive Officer
and Director who is also a shareholder of the Company.  The note
payable is due August 2010, bears 10% interest only due quarterly, and has no
collateral. As of August 31, 2009 the entire balance of the note was
outstanding.





Note
4. Operating Lease





The
Company conducts its operations from one facility that is leased under an
operating lease.  The lease is a seventeen month lease with monthly
lease payments of $1,670 which expires June 30, 2010.





The
following is a schedule of future minimum rental payments under the above
operating lease as of August 31, 2009:




Year
      Ending August 31,
                  
                  Amount2010
                  
                  $
                  16,700$
                  16,700








Rental
expense for the year ended August 31, 2009 and for the period ended August 31
2008, amounted to $29,088 and $15,250, respectively.




Note
5. Property and Equipment





Property
and equipment consisted of the following:





August
      31, 2009
                
                
                August
      31, 2008Equipment
      (3-5 year life)
                
                $
                22,393
                
                
                $
                17,873Furniture
      and fixtures (5-10 year life)
                
                
                8,331
                
                
                
                2,299Internal
      Use Developed Software (5 year life)
                
                
                231,415
                
                
                
                231,415Total
                
                
                262,139
                
                
                
                251,587Accumulated
      depreciation and amortization
                
                
                (86,587
                )
                
                
                (35,245
                )$
                175,552
                
                
                $
                216,342





Depreciation
expense for year ended August 31, 2009 and for the period ended August 31, 2008
was $51,342 and $34,513, respectively.


F-14


Note
6. Stockholders’ Equity





Common
Stock




In
October 2007, the Company issued 552,420 common shares for cash totaling
$150,000.





In
January 2008, the Company issued 468,720 common shares for cash totaling
$150,000.





In April
2008, the Company issued 401,760 common shares for cash totaling
$150,000.





In June
2008, the Company issued 1,054,620 common shares for cash totaling
$400,000.





In June
2008, the Company effected a 16,740 to 1 forward stock split resulting in
increasing the outstanding common stock from 448 to 7,499,520
shares.  The par value per share was reduced to $.0001 from $1 per
share and the amount of authorized shares was increased to 100,000,000 from
100,000.





In
October 2008 the Company sold units of securities consisting of common stock and
warrants to purchase additional shares of common stock in a private placement.
Aggregate gross proceeds of $100,000 were received for 142,857 shares of common
stock and warrants to purchase an additional 142,857 shares of common stock. The
relative fair value of the common stock was $54,931 and the relative fair value
of the warrants was $45,068. The warrants have an exercise price of $0.70 per
share and expire on October 24, 2011.


In
November 2008, the Company issued 98,429 common shares for cash totaling
$68,900.





In
December 2008, the Company issued 39,000 common shares for cash totaling
$27,300.





The fair
value of the stock was estimated using current market rates and the fair value
of the warrants granted with this private placement was computed using the
Black-Scholes option-pricing model. Variables used in the option-pricing model
include (1) risk-free interest rate at the date of grant (1.8%), (2) expected
warrant life of 3 years, (3) expected volatility of 265%, and (4) zero expected
dividends.





Note
7. Income Taxes





We must
make certain estimates and judgments in determining income tax expense for
financial statement purposes. These estimates and judgments occur in the
calculation of certain tax assets and liabilities, which arise from differences
in the timing of recognition of revenue and expense for tax and financial
statement purposes.





Deferred
income taxes are recorded in accordance with SFAS No. 109, “Accounting for Income Taxes,”
or SFAS 109. Under SFAS No. 109, deferred tax assets and liabilities are
determined based on the differences between financial reporting and the tax
basis of assets and liabilities using the tax rates and laws in effect when the
differences are expected to reverse.





SFAS 109
provides for the recognition of deferred tax assets if realization of such
assets is more likely than not to occur. Realization of our net deferred tax
assets is dependent upon our generating sufficient taxable income in future
years in appropriate tax jurisdictions to realize benefit from the reversal of
temporary differences and from net operating loss, or NOL, carryforwards. We
have determined it more likely than not that these timing differences will not
materialize and have provided a valuation allowance against substantially all of
our net deferred tax asset. Management will continue to evaluate the
realizability of the deferred tax asset and its related valuation allowance. If
our assessment of the deferred tax assets or the corresponding valuation
allowance were to change, we would record the related adjustment to income
during the period in which we make the determination. Our tax rate may also vary
based on our results and the mix of income or loss in domestic and foreign tax
jurisdictions in which we operate.


F-15


In
addition, the calculation of our tax liabilities involves dealing with
uncertainties in the application of complex tax regulations. We recognize
liabilities for anticipated tax audit issues in the U.S. and other tax
jurisdictions based on our estimate of whether, and to the extent to which,
additional taxes will be due. If we ultimately determine that payment of these
amounts is unnecessary, we will reverse the liability and recognize a tax
benefit during the period in which we determine that the liability is no longer
necessary. We will record an additional charge in our provision for taxes in the
period in which we determine that the recorded tax liability is less than we
expect the ultimate assessment to be.





The
Company accounts for income taxes in accordance with Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes," ("SFAS 109") which
requires recognition of estimated income taxes payable or refundable on income
tax returns for the current year and for the estimated future tax effect
attributable to temporary differences and carry-forwards. Measurement of
deferred income tax is based on enacted tax laws including tax rates, with the
measurement of deferred income tax assets being reduced by available tax
benefits not expected to be realized.





We
currently believe given our operational status it is remote that we will pay
federal income taxes in the future. We also do not have any material uncertain
income tax positions. We have a NOL carryfoward of approximately $ 724,635 which
will begin to expire in fiscal year ended August 31, 2024.





Deferred
      Tax Asset
                                    August
      31, 2009NOL
      carryforward
                                    $
                                    724,635Valuation
      Allowances
                                    
                                    (724,635
                                    )Total
                                    $
                                    0














F-16


ITEM
9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE





Effective
September 8, 2009, the client auditor relationship between the Company and
Malone & Bailey, PC ("M&B") was terminated as Malone was dismissed as
the Company’s independent registered accounting firm and replaced by M&K
CPAS, PLLC ("M&K").  Effective September 8, 2009, the Company
engaged M&K as its principal independent public accountant for the fiscal
years ended August 31, 2009 and 2010. The decision to change accountants was
recommended, approved and ratified by the Company's Board of Directors effective
September 8, 2009.





M&B's
report on the financial statements of the Company for the fiscal years ended
August 31, 2008 and 2007, did not contain any adverse opinion or disclaimer of
opinion and was not qualified or modified as to uncertainty, audit scope or
accounting principles other than the inclusion of an explanatory paragraph
discussing the Company’s ability to continue as a going concern.





During
the fiscal years ended August 31, 2008 and 2007, and any subsequent interim
periods through the date the relationship with M&B ceased, there were no
disagreements between M&B and the Company on a matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure, which disagreement, if not resolved to the satisfaction of M&B
would have caused M&B to make reference to the subject matter of the
disagreement in connection with its report on the Company's financial
statements.





There
have been no reportable events as defined in Item 304(a)(1)(v) of Regulation S-K
during the Company's fiscal years ended August 31, 2008 and 2007, and any
subsequent interim periods through the date the relationship with M&B
ceased.





The
Company has authorized M&B to respond fully to any inquiries of any new
auditors hired by the Company relating to their engagement as the Company's
independent accountant. The Company has requested that M&B review the
disclosure and M&B has been given an opportunity to furnish the Company with
a letter addressed to the Commission containing any new information,
clarification of the Company's expression of its views, or the respect in which
it does not agree with the statements made by the Company herein. Such letter is
incorporated by reference as an exhibit to this filing.





The
Company has not previously consulted with M&K regarding either (i) the
application of accounting principles to a specific completed or contemplated
transaction; (ii) the type of audit opinion that might be rendered on the
Company's financial statements; or (iii) a reportable event (as provided in Item
304(a)(1)(v) of Regulation S-K) during the Company's fiscal years ended August
31, 2008 and August 31, 2007, and any later interim period, including the
interim period up to and including the date the relationship with Malone ceased
(however, certain of the current partners of M&K were employed by
Malone during the Company's engagement of Malone). M&K has reviewed the
disclosure required by Item 304 (a) before it was filed with the Commission and
has been provided an opportunity to furnish the Company with a letter addressed
to the Commission containing any new information, clarification of the Company's
expression of its views, or the respects in which it does not agree with the
statements made by the Company in response to Item 304 (a). M&K did not
furnish a letter to the Commission.





ITEM
9A. CONTROLS AND PROCEDURES.





(a)           Evaluation
of disclosure controls and procedures. Our Chief Executive Officer, who is also
our acting Chief Financial Officer, after evaluating the effectiveness of our
"disclosure controls and procedures" (as defined in the Securities Exchange Act
of 1934, as amended (the “Exchange Act”) Rules 13a-15(e) and 15d-15(e)) as of
the end of the period covered by this Annual Report on Form 10-K (the
"Evaluation Date"), has concluded that as of the Evaluation Date, our disclosure
controls and procedures were ineffective to provide reasonable assurance that
information we are required to disclose in reports that we file or submit under
the Exchange Act is recorded, processed, summarized and reported within the time
periods specified in the Securities and Exchange Commission rules and forms, and
that such information is accumulated and communicated to our management,
including our Chief Executive Officer and Chief Financial Officer, as
appropriate, to allow timely decisions regarding required
disclosure.


-29-


(b)           This
annual report does not include a report of management's assessment regarding
internal control over financial reporting or an attestation report of the
Company's registered public accounting firm due to a transition period
established by rules of the Securities and Exchange Commission for newly public
companies.





(c)           There have been no changes in our internal control over
financial reporting identified in connection with the evaluation required by
paragraph (d) of Rules13a-15 or 15d-15 under the Exchange Act that occurred
during the last fiscal quarter that has materially affected, or is reasonably
likely to materially affect, our internal control over financial
reporting.





Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting as defined in Rule 13a-15(f) under the Exchange
Act. Our management assessed the effectiveness of our internal control over
financial reporting as of August 31, 2009. In making this assessment, our
management used  the  criteria set
forth  by  the  Committee  of
Sponsoring  Organizations of the Treadway Commission ("COSO") in
Internal Control-Integrated Framework. A material weakness is a deficiency, or a
combination of deficiencies, in internal control over financial reporting, such
that there is a reasonable possibility that a material misstatement of the
company's annual or interim financial statements will not be prevented or
detected on a timely basis. Our management has identified the following material
weaknesses.





1.  As
of August 31, 2009, we did not maintain effective controls over financial
statement disclosure. Specifically, controls were not designed and in place to
ensure that all disclosures required were originally addressed in our financial
statements. Accordingly, management has determined that this control deficiency
constitutes a material weakness.





2.  As
of August 31, 2009, we did not maintain effective controls over revenue
transactions.  Specifically, controls were not designed and in place
to ensure that revenue transactions were properly reflected. Accordingly,
management has determined that this control deficiency constitutes a material
weakness.





Because
of these material weaknesses, management has concluded that the Company did not
maintain effective internal control over financial reporting as of August 31,
2009, based on the criteria
established  in  "Internal  Control-Integrated
Framework" issued by the COSO.





ITEM
9B. OTHER INFORMATION.





None.


-30-


PART
III





ITEM
10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE





The
following table sets forth the name, age and position of our Director and
executive officers. There are no other persons who can be classified as a
promoter or controlling person of us. Our officers and Director are as
follows:








Name
                Age
                PositionTimothy
      Miller
                38
                President,
      Chief Executive Officer, Principal Accounting Officer, Treasurer and
      DirectorMatthew
      Lozeau
                25
                Secretary





Timothy
Miller





Mr.
Miller has been the President, Chief Executive Officer, Principal Accounting
Officer, Treasurer and Director of the Company since its inception in June 2007.
Prior to founding the Company, Mr. Miller was the owner and President of Golden
Care, Inc., a private medical supply company servicing seniors with diabetes and
Medicare, from March 2005 to December 2006. While growing Golden Care, Inc., Mr.
Miller developed an internal software application to better manage the unique
needs of the diabetic supply industry. In 2006 Mr. Miller sold his company and
software assets to Fortune 500 company Owens & Minor, Inc. (Ticker: OMI).
Prior to starting Golden Care, Inc., Mr. Miller worked as the National Sales
Manager for Golden Diabetic Care, Inc. from April 2002 to March
2005.





Prior to
Golden Diabetic Care, Mr. Miller spent 8 years in professional services which
began in the Electronic Commerce division of Electronic Data Systems (“EDS”) in
Plano, Texas, where he completed the a Systems Engineer Development (SED)
program. With EDS, Mr. Miller later led the implementation of the industry’s
first electronic bill presentment and payment (EBPP) applications. In 1999, Mr.
Miller left EDS to lead the launch of IBM's EBPP National Practice in New York.
Tim was on point as his IBM teams successfully sold and implemented over
approximately 60 complex EBPP projects around the globe to the world’s largest
financial services, telecommunications, and public utility
companies.





Mr.
Miller has a BBA from the University of Arkansas at Little Rock and lives in
Little Rock, Arkansas with his wife and three children.





The
Company entered into a Software Development and Consulting Agreement with Mr.
Miller on January 1, 2007, which was amended in February 2009 and again in March
2009, as described in greater detail above.





Matthew
Lozeau





Mr.
Lozeau has served as our Secretary since February 2009.  Since August
2008, Mr. Lozeau has been employed by the Company in sales
support.  From August 2006 to September 2008, Mr. Lozeau was employed
as a waitperson at Red Lobster.  From May 2005 to September 2005, Mr.
Lozeau served as a lab technician with Ouachita Baptist University in
Arkadelphia, Arkansas.





Our
Director and any additional Directors we may appoint in the future are elected
annually and will hold office until our next annual meeting of the shareholders
and until their successors are elected and qualified. Officers will hold their
positions at the pleasure of the Board of Directors, absent any employment
agreement. Our officers and Directors may receive compensation as determined by
us from time to time by vote of the Board of Directors. Such compensation might
be in the form of stock options. Directors may be reimbursed by the Company for
expenses incurred in attending meetings of the Board of Directors. Vacancies in
the Board are filled by majority vote of the remaining
Directors.


-31-


Involvement In Certain Legal
Proceedings





There
have been no events under any bankruptcy act, no criminal proceedings and no
judgments, injunctions, orders or decrees material to the evaluation of the
ability and integrity of any Director or executive officer, of the Registrant
during the past five years, other than as provided above.





Independence of
Directors




We are
not required to have independent members of our Board of Directors, and do not
anticipate having independent Directors until such time as we are required to do
so.





Audit Committee and
Financial Expert




The
Company is not required to have an audit committee and as such, does not have
one.





Code of
Ethics




We have
not adopted a formal Code of Ethics. The Board of Directors, consisting solely
of Mr. Miller, evaluated the business of the Company and the number of employees
and determined that since the business is operated by one person who is the
Chief Executive Officer, President and sole Director, general rules of fiduciary
duty and federal and state criminal, business conduct and securities laws are
adequate ethical guidelines.   In the event our operations,
employees and/or Directors expand in the future, we may take actions to adopt a
formal Code of Ethics.





ITEM
11. EXECUTIVE COMPENSATION.




Summary
Compensation Table:





Name
      and principal position
              (a)
            Year
              (b)
            
            Salary
      ($)
              (c)
            
            
            Bonus
      ($)
              (d)
            
            
            Stock
      Awards ($)
              (e)
            
            
            Option
      Awards ($)
              (f)
            
            
            Non-Equity
      Incentive Plan Compensation ($)
              (g)
            
            
            Nonqualified
      Deferred Compensation Earnings ($)
              (h)
            
            
            All
      Other Compensation ($)
              (i)
            
            
            Total
      ($)
              (j)Timothy
      Miller
              CEO,
      President, and Director
            2009
            
            
            115,041(1)
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            $
            115,0412008
            
            
            116,900(1)
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            $
            116,9002007
            
            
            72,000(1)
            
            
            
            -
            
            
            
            --
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            $
            72,000





The table
above does not include perquisites and other personal benefits in amounts less
than 10% of the total annual salary and other compensation.  Other
than the individual listed above, we had no executive employees or Directors
during the years listed above.





(1)
Represents amounts paid pursuant to Mr. Miller’s consulting agreement, as
described in greater detail above.


-32-


COMPENSATION
DISCUSSION AND ANALYSIS





Director
Compensation





Our Board
of Directors, currently consisting solely of Timothy Miller, does not currently
receive any consideration for its services as a member of the Board of
Directors.  The Board of Directors reserves the right in the future to
award the members of the Board of Directors cash or stock based consideration
for their services to the Company, which awards, if granted shall be in the sole
determination of the Board of Directors.





Executive
Compensation Philosophy





Our Board
of Directors, consisting solely of Mr. Miller, determines the compensation given
to our executive officers in its sole determination. Our Chief Executive Officer
and President, Mr. Miller, receives no compensation from us other than through
the Software Development and Consulting Agreement described under the “Material
Agreements” section above.  As such, we do not currently have any
executive compensation program in place; however, Mr. Miller in his capacity as
our sole Director has the power to set his own compensation, without the
required approval of any other individual or shareholder. Additionally, our
Board of Directors, currently consisting solely of Mr. Miller, reserves the
right to pay our executives a salary, and/or issue them shares of Common Stock
issued in consideration for services rendered and/or to award incentive bonuses
which are linked to our performance, as well as to the individual executive
officer’s performance in the future. This package may also include long-term
stock based compensation to certain executives which is intended to align the
performance of our executives with our long-term business strategies.
Additionally, while our Board of Directors has not granted any performance based
stock options to date, the Board of Directors reserves the right to grant such
options in the future, if the Board in its sole determination believes such
grants would be in the best interests of the Company.





Incentive
Bonus





The Board
of Directors may grant incentive bonuses to our executive officers in its sole
discretion, if the Board of Directors believes such bonuses are in the Company’s
best interest, after analyzing our current business objectives and growth, if
any, and the amount of revenue we are able to generate each month, which revenue
is a direct result of the actions and ability of such executives.





Long-term,
Stock Based Compensation





In order
to attract, retain and motivate executive talent necessary to support the
Company’s long-term business strategy we may award certain executives with
long-term, stock-based compensation in the future, in the sole discretion of our
Board of Directors, which we do not currently have any immediate plans to
award.





CORPORATE
GOVERNANCE





The
Company promotes accountability for adherence to honest and ethical conduct;
endeavors to provide full, fair, accurate, timely and understandable disclosure
in reports and documents that the Company files with the Securities and Exchange
Commission (the “SEC”) and in other public communications made by the Company;
and strives to be compliant with applicable governmental laws, rules and
regulations. The Company has not formally adopted a written code of business
conduct and ethics that governs the Company’s employees, officers and Directors
as the Company is not required to do so.





In lieu
of an Audit Committee, the Company’s Board of Directors is responsible for
reviewing and making recommendations concerning the selection of outside
auditors, reviewing the scope, results and effectiveness of the annual audit of
the Company's financial statements and other services provided by the Company’s
independent public accountants. The Board of Directors reviews the Company's
internal accounting controls, practices and policies.


-33-


ITEM
12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS.





The
following table presents certain information regarding the beneficial ownership
of all shares of Common Stock as of October 27, 2009 by (i) each
person who owns beneficially more than five percent (5%) of the outstanding
shares of Common Stock based on 7,779,806 shares outstanding as of October 27,
2009, (ii) each of our Directors, (iii) each named executive officer and (iv)
all Directors and officers as a group.





Name
      and Address of Beneficial Owner
            Shares
      Beneficially Owned
            Percentage
      Beneficially OwnedTimothy
      Miller
              President,
      Chief Executive Officer, Principal Accounting Officer, Treasurer and
      Director
              2100
      Riverdale, Suite 200
              Little
      Rock, Arkansas 72202
            1,757,700
            22.6%Matthew
      Lozeau
              Secretary
            3,000
            *Jim
      Stevenson
              3028
      Steeplegate Drive
              Germantown,
      Tennessee 38138
            1,640,520
            21.1%Doug
      Cooper
              P.O.
      Box 37, CR 1030
              Henderson,
      Arkansas 72544
            1,340,334(1)
            16.9%(2)Joe
      Miller (3)
              VP
      of Sales
              (Non-Executive
      Position)
              1040
      Biscayne Boulevard
              Suite
      1007
              Miami,
      Florida 33132
            1,255,500
            16.1%Eric
      Woods
              7454
      East Whistling Wind Way
              Scottsdale,
      Arizona 85255
            602,640
            7.7%Sharon
      Miller (4)
              38
      Pamela Drive
              Little
      Rock, Arkansas 72227
            552,420
            7.1%All
      Officers and Directors as a Group (2 persons)
            1,760,700
            22.6%





*  Represents
less than 1%.





(1)
Includes warrants to purchase 142,857 shares of the Company’s Common Stock at an
exercise price of $0.70 per share. The warrants expire in October
2011.





(2)
Assumes the exercise of all outstanding warrants held by Mr.
Cooper.





(3)
Brother of our Chief Executive Officer and Director, Timothy
Miller.





(4)
Mother of Timothy Miller, our sole Director and Joe Miller (see footnote 3
above).


-34-


ITEM
13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS





On our
about January 1, 2007, the Company entered into a Software Development and
Consulting Agreement with Timothy Miller, in his capacity as President of
Atreides, LLC, described in greater detail above.   Timothy
Miller is the Chief Executive Officer, President and Director of the
Company.  Mr. Miller is also the sole officer and employee of
Atreides, LLC.  Atreides, LLC does not have any clients which compete
with the Company. Mr. Miller is also the sole officer and employee of
Atreides.  Atreides does not have any clients which compete with the
Company.  Currently, Atreides has no other clients besides the
Company; however, Atreides has had other clients in the past and may have
additional clients in the future. Mr. Miller performs services for the Company
through Atreides instead of personally, because operating as a limited liability
company affords Mr. Miller certain tax benefits, as well as increased liability
protection, which he would not have if he performed services for the Company in
his own personal name.





On or
about January 1, 2007, the Company entered into a Software Development and
Consulting Agreement with Eric Woods in his capacity as President of
DataMethodology, LLC, described in greater detail above.  Eric Woods
currently holds 7.7% of the Company’s Common Stock.  Mr. Woods is the
sole officer and employee of DataMethodology, LLC.  DataMethodology,
LLC does not have any clients which compete with the Company. Mr. Woods is the
sole officer and employee of DataMethodology.  DataMethodology does
not have any clients which compete with the Company. Currently, DataMethodology
has two (2) other clients besides the Company and those clients pay
DataMethodology software licensing fees for applications previously developed by
DataMethodology that are presently in use by those clients.  Mr. Woods
performs services for the Company through DataMethodology instead of personally,
because operating as a limited liability company affords Mr. Woods certain tax
benefits, as well as increased liability protection, which he would not have if
he performed services for the Company in his own personal name.





In June
2007, the Company issued 5,022,000 restricted shares of its Common Stock in
consideration for an aggregate of $300 including 1,757,700 shares to Timothy
Miller, the Company’s Chief Executive Officer, President and Director, 1,406,160
shares to Jim Stevenson, 1,255,500 shares to Joe Miller, the our Vice President
of Sales (a non-executive position) and the brother of Timothy Miller, our Chief
Executive Officer, and 602,640 shares to Eric Woods.





In
October 2007, we issued an aggregate of 552,420 restricted shares of our Common
Stock to Ray Miller, the father of Timothy Miller, our Chief Executive Officer,
in consideration for aggregate consideration of $150,000.





In
January 2008, we issued an aggregate of 234,360 restricted shares of our Common
Stock to Jim Stevenson and 234,360 restricted shares of our Common Stock to
another investor for aggregate consideration of $150,000 ($75,000
each).





In April
2008, we issued an aggregate of 401,760 restricted shares of our Common Stock to
three investors for aggregate consideration of $150,000.





In June
2008, we issued an aggregate of 1,054,620 restricted shares of our Common Stock
to Doug Cooper, an individual, for aggregate consideration of
$400,000.





During
the year ending August 31, 2009, and during the year ending August 31, 2008, the
Company paid Atreides $115,041 and $76,000 respectively, for managing and
training the Company’s sales representatives which was recorded as selling,
general and administrative expenses   Our Chief Executive Officer,
President and Director, Timothy Miller, is the President of Atreides,
LLC.





For the
year ended August 31, 2009, and for the year ended August 31, 2008, the Company
paid Datamethodology $124,200 and $82,015 respectively, for maintenance and
upgrading software related issues which was recorded as a cost of
revenue.   Eric Woods, who currently is a 7.7% shareholder of the
Company, is the President of DataMethodology, Inc.


-35-


During
the years ending August 31, 2008 and 2007, the Company charged various operating
expenses on Timothy Miller’s American Express charge cards.  The
Company paid American Express directly for the Company’s portion of the
expenses.  As of August 31, 2008 and 2007, the outstanding balance
owed to American Express was approximately $12,677 and $24,200, respectively,
which was included in the accounts payable and accrued liabilities listed on the
Company’s balance sheet for the year ended August 31, 2008. As of August 31,
2009, all amounts have been repaid.





In June
2007, the Company borrowed $160,000 from Jim Stevenson through a promissory
note.  The promissory note bears no interest and has no collateral and
is due and payable upon (1) the sale of the Company’s business or the
liquidation of a majority of its assets or (2) the Company reaching “a level of
profitability” and a majority of the Company’s shareholders voting to repay the
note before the sale of the Company or the liquidation of its
assets.  Pursuant to the terms of the note, it must be paid in whole
or in part before any other debt obligations of the Company beyond normal
operating costs.  Mr. Stevenson is currently a 21.1% shareholder of
the Company and is therefore considered an affiliate.





In April
2008, the Company borrowed $20,000 from Ray Miller with no interest and due on
demand.  In May 2008, the loan was repaid.  Ray Miller was a
7.37% shareholder of the Company at the time of the loan and was therefore
considered an affiliate.  Ray Miller died in July 2008.  He
is survived by his wife, Sharon Miller, who is the beneficial owner of his
shares in the Company, which currently represent 7.1% of the Company’s
outstanding Common Stock.





In May
2008, the Company borrowed $40,000 from Jim Stevenson with no interest and due
on demand.  In May, 2008, the loan was repaid.





In
October 2008, we issued an aggregate of 142,857 units to Doug Cooper, each unit
consisting of one share of our Common Stock and one warrant to purchase one
share of our Common Stock at an exercise price of $0.70 per share, for aggregate
consideration of $100,000.  The warrants expire in October
2011.





For the
quarter ended November 30, 2008, the Company prepaid credit cards in the name of
Timothy Miller, the Company’s Chief Executive Officer, President and Director,
for future expenses. As of November 30, 2008, the outstanding balance related to
the advances was $7,598. As of August 31, 2009, the amounts have been
repaid.





In
February 2009, we entered into amendments to the agreements with Atreides and
DataMethodology, to clarify those agreements.  The agreements were
each amended to remove the right of Atreides and DataMethodology to hold a
security interest over the intellectual property they develop for us and to
remove language regarding Atreides’ and DataMethodology’s ownership of certain
intellectual property they create while performing services on our
behalf.  Additionally, the Atreides Agreement was amended to clarify
that Atreides, and not Mr. Miller, has no right to take actions in the name of
and/or bind the Company. In March 2009, we entered into another amendment to the
agreement with Atreides, to further clarify that agreement by removing the
references to Atreides not having the right to take action in the name of
and/or bind the Company. The effects of the amendments are reflected in the
discussion of the agreements, above.





Effective
February 24, 2009, Matthew Lozeau was appointed as the Secretary of the
Company.





Recent
Events:





Effective
July 1, 2009, Mr. Miller, loaned the Company $50,000 which matures July 2, 2010
with interest only payments due quarterly at 10% per annum.  Effective
August 3, 2009, Mr. Miller, loaned the Company $50,000 which matures August 4,
2010 with interest only payments due quarterly at 10% per
annum.  Effective August 27, 2009, Mr. Miller, loaned the Company
$75,000 which matures August 28, 2010 with interest only payments due quarterly
at 10% per annum.


-36-


Review,
Approval and Ratification of Related Party Transactions





Given our
small size and limited financial resources, we had not adopted formal policies
and procedures for the review, approval or ratification of transactions, such as
those described above, with our executive officers, Directors and significant
stockholders.  However, all of the transactions described above were
approved and ratified by our sole Director, Tim Miller.  In connection
with the approval of the transactions described above, Mr. Miller took into
account several factors, including his fiduciary duties to the Company; the
relationships of the related parties described above to the Company; the
material facts underlying each transaction; the anticipated benefits to the
Company and related costs associated with such benefits; whether comparable
products or services were available; and the terms the Company could receive
from an unrelated third party.





We intend
to establish formal policies and procedures in the future, once we have
sufficient resources and have appointed additional Directors, so that such
transactions will be subject to the review, approval or ratification of our
Board of Directors, or an appropriate committee thereof.   On a
moving forward basis, Mr. Miller, as our sole Director will continue to approve
any related party transaction based on the criteria set forth
above.





ITEM
14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.





AUDIT
FEES





The fees
billed for the fiscal years ended August 31, 2009, for professional services
rendered by our independent principal accountants, M&K CPAS, PLLC
("M&K"), for the audit of our annual financial statements as included in our
Annual Report on Form 10-K was $11,000.





The fees
billed for the fiscal years ended August 31, 2009 and 2008, for professional
services rendered by our former independent auditors, Malone & Bailey, PC
(who were dismissed effective September 8, 2009) for the audit of our annual
financial statements as included in our Annual Report on Form 10-K and
Registration Statements on Form S-1, and the review of the financial statements
included in our Registration Statement and Quarterly Reports on Form 10-Q, as
well as services provided in connection with statutory and regulatory filings or
engagements for those fiscal years were $18,065 and $27,160,
respectively.





AUDIT
RELATED FEES





None.





TAX
FEES





None.





ALL
OTHER FEES




None.


-37-


PART
IV





ITEM
15. EXHIBITS





Exhibit Number
                Description of Exhibit3.1(1)
                Articles
      of Incorporation3.2(1)
                Bylaws10.1(1)
                Software
      Development and Consulting Agreement with Atreides, LLC10.2(1)
                Software
      Development and Consulting Agreement with DataMethodology,
    LLC10.3(2)
                First
      Amendment to Software Development and Consulting Agreement with Atreides,
      LLC10.4(2)
                First
      Amendment to Software Development and Consulting Agreement with
      DataMethodology, LLC10.5(3)
                Second
      Amendment to Software Development and Consulting Agreement with Atreides,
      LLC10.6(4)
                Promissory
      Note with Timothy Miller - $100,000 -- April 16, 200910.7*
                Promissory
      Note with Timothy Miller - $50,000 -- July 2, 200910.8*
                Promissory
      Note with Timothy Miller - $50,000 – August 3, 200910.9*
                Promissory
      Note with Timothy Miller - $75,000 – August 28, 200916.1(5)
                Letter
      from Malone & Bailey,
PC





31*
              
              32*
            Certificate
      of the Chief Executive Officer and Principal Accounting Officer pursuant
      to Section 302 of the Sarbanes-Oxley Act of 2002
              
              Certificate
      of the Chief Executive Officer and Principal Accounting Officer pursuant
      to Section 906 of the Sarbanes-Oxley Act of
2002





* Filed
herewith.





(1) Filed
as an Exhibit to the Company’s Registration Statement on Form S-1, filed with
the Commission on January 23, 2009, and incorporated by reference
herein.




(2) Filed
as an Exhibit to the Company’s Amended Registration Statement on Form
S-1/A, filed with the Commission on February 27, 2009, and incorporated by
reference herein.





(3) Filed
as an Exhibit to the Company’s Amended Registration Statement on Form
S-1/A, filed with the Commission on March 19, 2009, and incorporated by
reference herein.





(4) Filed
as an Exhibit to the Company’s Report on Form 10-Q for the quarterly period
ended May 31, 2009, filed with the Commission on July 1, 2009, and incorporated
herein by reference.





(5) Filed
as an Exhibit to the Company’s Report on Form 8-K, filed with the Commission on
September 9, 2009, and incorporated herein by reference.


-38-


SIGNATURES





In
accordance with the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.





SUMOTEXT
      INCORPORATEDDate:
      November 5,  2009
              By:
              /s/ Timothy MillerTimothy
      MillerChief
      Executive Officer
                (Principal
      Executive Officer)
                and
      Principal Accounting Officer
                (Principal
      Financial Officer)


-39-