LINGERIE FIGHTING CHAMPIONSHIPS, INC. - Quarter Report: 2012 May (Form 10-Q)

f10q0512_xodtec.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

x	QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED May 31, 2012

o	TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT FOR THE TRANSITION PERIOD FROM __________ TO __________ COMMISSION FILE NUMBER: 333-148005

XODTEC LED, INC.

(Exact name of registrant as specified in its charter)

Nevada		20-8009362
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

P.O. Box 172

Bahama, NC 27503

(Address of principal executive offices, Zip Code)

(267) 350-6511

(Registrant’s telephone number, including area code)

2F, No.139, Jian 1st Rd., Jhonghe City,

Taipei County 235, Taiwan (R.O.C.)

(Former address)

Copies to:

Asher S. Levitsky P.C.

Ellenoff Grossman & Schole LLP

120 East 42nd Street; 11th floor

New York, New York 10017

Phone: (212) 370-1300

Fax: (646) 895-7182

E-mail: alevitsky@egsllp.com

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). x Yes o 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 definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o	Accelerated filer o
Non-accelerated filer o	Smaller reporting company x

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

The number of shares of registrant’s common stock outstanding, as of July 17, 2012: 81,771,107

XODTEC LED, INC.

Form 10-Q

For the Quarter Ended May 31, 2012

TABLE OF CONTENTS

		Page
PART I. - FINANCIAL INFORMATION
Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets as of May 31, 2012 (unaudited) and February 29, 2012	2
	Condensed Consolidated Statements of Operations and Comprehensive Income for the three months ended May 31, 2012 and 2011 (unaudited)	3
	Condensed Consolidated Statements of Cash Flows for the three months ended May 31, 2012 and 2011 (unaudited)	4
	Notes to Unaudited Condensed Consolidated Financial Statements.	5
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations.	13
Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	17
Item 4.	Controls and Procedures.	17

	PART II - OTHER INFORMATION
Item 6.	Exhibits.	17

FORWARD LOOKING STATEMENTS

This report contains forward-looking statements regarding our business, financial condition, results of operations and prospects. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates” and similar expressions or variations of such words are intended to identify forward-looking statements, but are not deemed to represent an all-inclusive means of identifying forward-looking statements as denoted in this report. Additionally, statements concerning future matters are forward-looking statements.

Although forward-looking statements in this report reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by us. Consequently, forward-looking statements are inherently subject to risks and uncertainties and actual results and outcomes may differ materially from the results and outcomes discussed in or anticipated by the forward-looking statements. Factors that could cause or contribute to such differences in results and outcomes include, without limitation, those specifically addressed under the headings “Risks Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our report on Form 10-K for the year ended February 29, 2012 in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Form 10-Q and in other reports that we file with the SEC. You are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this report.

We file reports with the SEC. The SEC maintains a website (www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, including us. You can also read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. You can obtain additional information about the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.

We undertake no obligation to revise or update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this report, except as required by law. Readers are urged to carefully review and consider the various disclosures made throughout the entirety of this quarterly report, which are designed to advise interested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects.

Part I – Financial Statements

Item 1. Financial Statements

XODTEC LED, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

	May 31, 2012			February 29, 2012
	(Unaudited)
ASSETS
Current assets
Cash	$	1,142		$	4,949
Accounts receivable, , net of allowances for bad debt of $0		21,993			40,075
Inventories, net		8,787			6,280
Prepayments		104			1,218
Other current assets		55,095			53,262
Total current assets		87,121			105,784

Property and equipment, net		84,640			91,788

Other Assets
Deposits		51,883			52,129
Deferred assets		128,708			180,500
Other assets		35,436			41,046

Total assets	$	387,788		$	471,247

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Short-term borrowings from banks	$	333,505		$	254,421
Accounts payable		43,111			72,490
Other payable		473,003			475,249
Accrued liabilities		544,497			509,771
Loans from related parties		919,319			843,022
Other current liabilities		67,942			38,665

Total current liabilities		2,381,377			2,193,618


Total liabilities		2,381,377			2,193,618
Commitments and contingencies
Stockholders' equity
Preferred stock, par value $0.001 per share, 10,000,000 shares		-			-
authorized and 0 shares issued and outstanding, at February 28, 2011
and 2010, respectively
Common stock( 225,000,000 authorized shares, par value $0.001 per share;		81,771			81,771
81,771,107 shares issued and outstanding)
Subscription receivable		-			-
Additional paid in capital		6,227,924			6,227,924
Accumulated deficit		(8,038,048	)		(7,755,802	)
Accumulated other comprehensive gain - translation adjustments		(265,236	)		(276,264	)

Total stockholders' equity		(1,993,589	)		(1,722,371	)
Total liabilities and stockholders' equity	$	387,788		$	471,247

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

XODTEC LED, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS AND
OTHER COMPREHENSIVE INCOME

	Three months ended May 31,
	2012			2011

Revenue	$	38,673		$	227,708

Cost of revenue		18,131			182,071
Reverse of loss on inventory		-			(335,681	)

Gross profit		20,542			381,318

Selling, general and administrative expenses		299,808			806,937

Net operating (loss)		(279,266	)		(425,619	)

Other income (expense)
Interest expense		(3,192	)		(1,500	)
Gain(loss) on currency exchange		211			693
Other income (expense)		-			(1,354	)
Total other income		(2,981	)		(2,161	)

Net (loss) before income taxes		(282,247	)		(427,780	)

Income taxes		-			30

Net (loss)	$	(282,247	)	$	(427,810	)

Translation adjustments		11,028			170,995

Comprehensive income	$	(271,219	)	$	(256,815	)

Net (loss) per share
- Basic	$	(0.00	)	$	(0.01	)
- diluted	$	(0.00	)	$	(0.01	)

Weighted average common shares outstanding
- Basic and		81,771,107			28,864,827
- diluted		81,771,107			28,864,827

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

* Weighted average number of shares used to compute basic and diluted loss per share is the same as the effect of dilutive securities are anti dilutive.

XODTEC LED, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

	Three months ended May 31,
	2012			2011

Cash Flows from operating activities:
Net (loss)	$	(282,247	)	$	(427,810	)
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization		12,238			12,474
Reversal of inventory writedown		-			(335,681	)
Issuance of common shares and amorization of professional services		51,792			290,667
Impairment loss on Long live assets		-
Loss (Gain) on disposal of property and equipment		-
(Gain) on change in fair value of accrued derivative liabilities
(Increase) Decrease in assets:
Accounts receivable		18,051			13,468
Other receivables		-			3,793
Inventories		(2,559	)		4,735
Prepayments		1,118			1,619
Other current assets		(2,104	)		(13,484	)
Decrease (Increase) in liabilities:
Accounts payable		(29,295	)		(79,572	)
Other payable		-			652
Accrued liabilities		37,468			159,625
Other current liabilities		29,722			(19,738	)

Net cash used in operating activities		(165,816	)		(389,252	)

Cash Flows from Investing activities:
Prepayment of property and equipment					(25,952	)
Purchase of property and equipment		-			(2,765	)
Net cash used in investing activities		-			(28,717	)

Cash flows from financing activities:
Proceeds from borrowings		81,001			2,381
Proceeds from related parties		80,996			413,200

Net cash provided by financing activities		161,998			415,581

Effect of exchange rate changes on cash and cash equivalents		12			128

Net increase in cash and cash equivalents		(3,807	)		(2,260	)
Cash, beginning of the period		4,949			35,652

Cash, end of the period	$	1,142		$	33,392

Supplemental disclosures of cash flow information:
Interest paid	$	3,193		$	1,500
Income taxes paid	$	2,549		$	-

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

XODTEC LED, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

May 31, 2012

NOTE 1 – NATURE OF OPERATIONS AND BASIS OF PRESENTATION

Xodtec LED, Inc. (“Company”) is a Nevada corporation incorporated on November 29, 2006, under the name Sparking Events, Inc. On June 28, 2009, the Company’s corporate name was changed to “Xodtec Group USA, Inc.” and on May17, 2010 the Company’s corporate name was changed to “Xodtec LED, Inc.”

The Company, through its subsidiaries, is engaged in the design, marketing and selling of advanced lighting solutions which are designed to use less energy and have a longer life than traditional incandescent, halogen, fluorescent light sources. The Company’s wholly-owned subsidiaries, Xodtec Technology Co., Ltd. (“Xodtec”); Targetek Technology Co., Ltd. (“Targetek”); UP Technology Co., Ltd. (“UP”), are organized under the laws of the Republic of China (Taiwan). The Company also owns a 35% interest in Radiant Sun Development S.A., a company organized under the laws of the Independent State of Samoa (“Radiant Sun”). See Note 17 in connection with a change in the Company’s business.

On April 1, 2009, in anticipation of the exchange agreement described in the following paragraph, APlus International, Ltd., a Nevada limited liability company (“APlus”), acquired all of the capital stock of Xodtec, Targetek and UP, pursuant to agreements with the shareholders of each of these companies (The application of domestic investment by foreign nationals governed by the Investment Commission of the Republic of China is still in the process ) and acquired a 35% interest in Radiant Sun pursuant to an agreement with the holders of 35% of the capital stock of Radiant Sun. As a result of these agreements, the former shareholders of Xodtec, Targetek and UP and the former holders of 35% of the stock of Radiant Sun were the sole members of APlus.

On April 20, 2009, the Company entered into an exchange agreement with APlus and its members pursuant to which the Company, then known as Sparking Events, Inc. acquired all of the stock of Xodtec, Targetek and UP and APlus’ 35% interest in Radiant Sun in exchange for 16,000,002 shares of common stock. The transaction pursuant to which the Company issued 16,000,002 shares of common stock to the former members of APlus in exchange for all of the stock of Xodtec, Targetek and UP and APlus’ 35% interest in Radiant Sun is referred to as the reverse acquisition.

Simultaneously with the reverse acquisition, the Company’s then principal stockholder transferred to the Company for cancellation, without consideration, 27,000,000 shares of common stock owned by him.

At the time of the reverse acquisition, the Company was a blank check shell company and was not engaged in any business. Upon completion of the reverse acquisition, the Company’s business became the business of Xodtec, Targetek and UP. Radiant Sun did not have any significant operations prior to the reverse acquisition.

Under generally accepted accounting principles, the acquisition by the Company of Xodtec, Targetek and UP is equivalent to the acquisition by APlus of the Company, then known as Sparking Events, Inc., with the issuance of stock by APlus for the net monetary assets of the Company. This transaction is reflected as a recapitalization, and is accounted for as a change in capital structure. Accordingly, the accounting for the acquisition is identical to that resulting from a reverse acquisition. Under reverse acquisition accounting, the comparative historical financial statements of the Company, as the legal acquirer, are those of the accounting acquirer, APlus. Since APlus was organized to acquire Xodtek, Targetek and UP on April 1, 2009, and had no operations, the Company’s historical financial statements reflect the operations of Xodtek, Targetek and UP prior to April 1, 2009, the combined operations of APlus, Xodtek, Targetek and UP from April 1, 2009 to April 20, 2009, and the combined operations of these companies and the Company from April 20, 2009. The accompanying financial statements reflect the recapitalization of the shareholders’ equity as if the transactions occurred as of the beginning of the first period presented. Thus, only the 16,000,002 shares of common stock issued to the former APlus members are deemed to be outstanding for all periods reported prior to the date of the reverse acquisition. The 1,380,000 shares of common stock that were outstanding on April 20, 2009, after giving effect to the cancellation of the 27,000,000 shares that were acquired by the Company and cancelled, are treated as if they were issued on April 20, 2009, as part of a recapitalization.

The Company has the following operating subsidiaries:

-	Xodtec Technology Co., Ltd., was set up on February 5, 2005 is mainly engaged in LED lighting ODM/OEM and distribution in Taiwan business.
-	Targetek Technology Co., Ltd., was set up on March 26, 1997 and is mainly engaged in professional translation business.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited interim condensed consolidated financial statements (“Interim Financial Statements”) of the Company and its subsidiaries have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and are presented in accordance with the requirements of Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, these Interim Financial Statements do not include all of the information and notes required by GAAP for complete financial statements. These Interim Financial Statements should be read in conjunction with the consolidation financial statements and notes thereto for the fiscal year ended February 29, 2012 included in the Company’s Form 10-K. In the opinion of management, the Interim Financial Statements included herein contain all adjustments, including normal recurring adjustments considered necessary to present fairly the Company’s financial position, the results of operations and cash flows for the periods presented. The operating results and cash flows for the interim periods presented herein are not necessarily indicative of the results to be expected for any other interim period or the full year.

Certain prior year amounts have been reclassified to conform with the current period's presentation, none of which had an impact on total assets, stockholders' deficit, net loss, or net loss per share.

The accompanying consolidated financial statements have been prepared on a going concern basis which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As shown in the consolidated financial statements, during the three months ended May 31, 2012, the Company incurred an operating loss and a net loss of approximately $280,000. The Company had a negative cash flow in operating activities amounting approximately $166,000 in the three months ended May 31, 2012, and the Company’s accumulated deficit was approximately $8 million as of May 31, 2012. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the amount of revenues and expenses during the reporting periods. Management makes these estimates using the best information available at the time the estimates are made. However, actual results could differ materially from those results.

Segment Information

ASC 280 requires companies to report information about operating segment in interim and annual financial statements. It also requires segment disclosures about products and services geographic and major customers. The Company has determined that it does not have any separately reportable operating segments.

Revenue Recognition

The Company’s revenue recognition policies are in compliance with ASC 605 (Originally issued as Staff Accounting Bulletin (SAB) 104). Revenue is recognized at the date of shipment to customers when a formal arrangement exists, the price is fixed or determinable, the delivery is completed, no other significant obligations of the Company exist and collectability is reasonably assured. Payments received before all of the relevant criteria for revenue recognition are satisfied are recorded as unearned revenue. Discounts provided to customers by the Company at the time of sale are recognized as a reduction in sales as the products are sold. Sales taxes are not recorded as a component of sales.

Cost of Sales

The cost of sales represents, primarily, the cost of manufacturing by third party manufacturers based on a contract price, as well as warehousing costs, shipping and handling costs, and any cost related inventory adjustment, including write downs for excess and obsolete inventory.

Shipping and Handling Costs

The Company records all charges for outbound shipping and handling as revenue. All compounding shipping and handling costs are classified as cost of goods sold.

Accounts Receivable

Accounts receivable are carried at original invoice amount less the allowance for doubtful accounts based on a review of all outstanding amounts at year end. Management determines the allowance for doubtful accounts by using historical experience applied to an aging of accounts. Trade receivables are written off when deemed uncollectible.

Inventories

The Company’s inventories are stated at the lower-of-cost-or-market price. Cost is determined on the weighted average method. The Company provides for a lower-of-cost-or-market adjustment against gross inventory values. For the three months ended May 31, 2012, the company sold approximated $10,000 of inventories which were fully reserved as of February 29, 2012. The Company recorded approximately $500,000 of inventory valuation reserve for LCM inventory adjustments at May 31, 2012.

Equity Investment

The Company accounts for its interest in its equity investments pursuant to ASC 323 “Investment – Equity Method and Joint Ventures,” which sets forth guidance as to the treatment of equity investments. Because the Company only unconsolidated subsidiary is inactive, does not meet the test of a significant subsidiary under Rule 1-02(w)of Regulation S-X and any summarized information is de minimis, the Company is not required to include summarized financial information with respect to this entity and the absence of summarized financial information does not impact its consolidated financial statements.

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation and accumulated impairment losses, if any. Major improvements and addition which can prolong the service life of fixed assets are counted as capital expenditures and recorded as fixed assets. Expenditures on regular repairs and maintenance are recorded as expenses.

Property and equipment are depreciated according to the service life and using the average method, with one-year residual value. Additions are depreciated according to their respective estimated service life. Major improvements are depreciated based on the remaining service lives of fixed assets. While assets are continually in use after the expiration of its service life, the residual values and service lives are estimated and depreciated accordingly and continually. The gain (loss) on disposal of assets is recognized as non-operating revenue (expenditure) in the period of sale or disposal.

Depreciation is computed using the straight-line method over the estimated useful lives as follows:

	Useful Lives (Years)
Transportation	5 years
Office equipment	3-6 years
Machinery	3-6 years
Other equipment	3-6 years

Impairment of Long-Lived Assets

The Company accounts for the impairment and disposition of long-lived assets in accordance with ASC 360, Property, Plant and Equipment. The Company periodically evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. If the estimated future cash flows (undiscounted and without interest charges) from the use of an asset were less than the carrying value, a write-down would be recorded to reduce the related asset to its estimated fair value.

The assumptions used by management in determining the future cash flows are critical. In the event these expected cash flows are not realized, future impairment losses may be recorded.

Income Taxes

The Company accounts for income taxes in accordance with ASC 740, Income Taxes, which requires that the Company recognize deferred tax liabilities and assets based on the differences between the financial statement carrying amounts and the tax basis of assets and liabilities, using enacted tax rates in effect in the years the differences are expected to reverse. Deferred income tax benefit (expense) results from the change in net deferred tax assets or deferred tax liabilities. A valuation allowance is recorded when, in the opinion of management, it is more likely than not that some or all of any deferred tax assets will not be realized.

The Company adopted ASC 740-10-25, Income Taxes- Overall-Recognition, on January 1, 2007, which provides criteria for the recognition, measurement, presentation and disclosure of uncertain tax position. The Company must recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate resolution. The Company did not recognize any additional liabilities for uncertain tax positions as a result of the implementation of ASC 740-10-25.

Net Loss per Share

The Company calculates its basic and diluted earnings per share in accordance with ASC 260. Basic earnings per share are calculated by dividing net income by the weighted average number of common shares outstanding for the period. Diluted earnings per share are calculated by adjusting the weighted average outstanding shares to assume conversion of all potentially dilutive warrants and options and convertible securities. There were no convertible securities outstanding during the three months ended May 31, 2012. The Company uses the treasury stock method to reflect the potential dilutive effect of the unvested stock options and unexercised warrants. Because the Company incurred losses for the three months ended May 31, 2012, the number of basic and diluted shares of common stock is the same since any effect from outstanding warrants would be anti-dilutive.

Gain (Loss) on Exchange

Foreign-currency transactions are recorded in New Taiwan dollars (“NTD”) at the rates of exchange in effect when the transactions occur. Gains or losses resulting from the application of different foreign exchange rates when cash in foreign currency is converted into NTD, or when foreign-currency receivables or payables are settled, are credited or charged to income in the year of conversion or settlement. On the balance sheet dates, the balances of foreign-currency assets and liabilities are restated at the prevailing exchange rates and the resulting differences are charged to current income.

Translation Adjustment

The Company’s financial statements are presented in the U.S. dollar ($), which is the Company’s reporting and functional currency. The functional currency of the Company’s subsidiaries is NTD. Transactions in foreign currencies are initially recorded at the functional currency rate prevailing at the date of transaction. Any differences between the initially recorded amount and the settlement amount are recorded as a gain or loss on foreign currency transaction in the consolidated statements of operations. Monetary assets and liabilities denominated in foreign currency are translated at the functional currency rate of exchange prevailing at the balance sheet date. Any differences are taken to profit or loss as a gain or loss on foreign currency translation in the statements of operations.

In accordance with ASC 830, Foreign Currency Matters, the Company translates the assets and liabilities into U.S. dollars using the rate of exchange prevailing at the balance sheet date and the statements of operations and cash flows are translated at an average rate during the reporting period. Adjustments resulting from the translation from NTD into U.S. dollar are recorded in stockholders’ equity as part of accumulated other comprehensive income. The exchange rates used for interim financial statements in accordance with ASC 830, Foreign Currency Matters, are as follows:

	Average Rate for the three months
May 31,	2012		2011
Taiwan dollar (NTD)	NTD 29.42042		NTD 29.97079
United States dollar ($)	$	1.00000	$	1.00000

	Exchange Rate at
May 31,		2012		2011
Taiwan dollar (NTD)	NTD 29.68240		NTD 29.68975
United States dollar ($)	$	1.0000	$	1.0000

Comprehensive Income (Loss)

Comprehensive income (loss) includes accumulated foreign currency translation gains and losses.

NOTE 3 - FAIR VALUE MEASUREMENTS

The carrying values of cash and cash equivalents, accounts receivable, other receivable inventories, prepayments, other current assets, short-term borrowings from banks, accounts payable, other payable, accrued liabilities, loans from related parties and other current liabilities approximate the related fair values due to the short-term maturities of instruments.

NOTE 4 - RECENT ACCOUNTING PRONOUNCEMENTS

The Company has considered all new accounting pronouncements and has concluded that there are no new pronouncements that may have a material impact on results of operations, financial condition, or cash flows, based on current information.

NOTE 5 – INVENTORIES

As of May 31, 2012 and February 29, 2012, the Company’s inventory consisted of raw material, work in progress and finished goods as follows:

	May 31, 2012		February 29, 2012
Raw material	$	323,645	$	337,463
Work-in-process		47,394		47,139
Finished goods		136,015		141,176
Gross inventory	$	507,054	$	525,778
Less inventory reserve		(498,267)		(519,498)
Net inventory	$	8,787	$	6,280

NOTE 6 – PROPERTY AND EQUIPMENT

Property and equipment consisted of the following:

	May 31, 2012			February 29, 2012
Transportation	$	1,692		$	1,700
Office equipment		95,712			96,167
Machinery		66,828			67,145
Total property and equipment		164,232			165,012
Accumulated depreciation		(79,592	)		(73,224	)
Total property and equipment, net	$	84,640		$	91,788

Depreciation and amortization expenses during the three months ended May 31, 2012 and 2011 were $12,238 and $12,474, respectively.

NOTE 7 – DEFERRED ASSETS

Deferred assets consisted of the following:

		May 31, 2012				February 29, 2012
Deferred professional fee		$	128,708			$	180,500

The Company’s professional fee for the future is as followings:

May 31, 2013		$	128,708
May 31, 2014		$	-

NOTE 8 – OTHER ASSETS

Other assets consisted of the following:

	May 31, 2012		February 29, 2012
Prepayment of property and equipment	$	18,964	$	19,054
Long-term prepaid		16,472		21,992
Total other assets	$	35,436	$	41,046

NOTE 9 – SHORT-TERM BORROWINGS

Short-term borrowings consisted of the following as of May 31, 2012 and February 29, 2012:

	May 31, 2012			February 29, 2012
From First Bank, interest at 5.09%, maturity date July 1, 2012	$	4,017	$	10,024
From Taiwan Business Bank, interest at 3.75%, maturity date August 15, 2012		329,488		244,397
Total	$	333,505	$	254,421
Current portion	$	333,505	$	254,421
Long-term portion	$	-	$	-

Interest expenses during the three months ended May 31, 2012 and 2011 were approximately $3,200 and $1,500, respectively.

NOTE 10 – ACCRUED LIABILITIES

Accrued liabilities consisted of the following:

	May 31, 2012		February 29, 2012
Accrued salaries	$	384,803	$	332,737
Accrued professional fee		94,317		86,342
Accrued travel fee		31,097		23,987
Accrued others		34,280		66,705
Total	$	544,497	$	509,771

NOTE 11 – RELATED PARTY TRANSACTIONS

	May 31, 2012		February 29, 2012
Non-interest bearing and payable on demand to Chief Executive Officer of the Company	$	325,517	$	304,392
Non-interest bearing and payable on demand to its director of the Company		593,802		538,630
Total	$	919,319	$	843,022

NOTE 12 - COMMITIMENTS AND CONTINGENCIES

The Company rent offices under several operating leases. The Company’s minimum rent for the future is as followings:

Twelve months ending	Amounts
May 31, 2013	$	143,000
May 31, 2014	$	135,000
May 31, 2015	$	23,000

NOTE 13 – CAPITAL STOCK AND SHARE-BASED PAYMENTS

On July 1, 2011, the Company entered debt cancellation agreement with the Company's director which the Company issued 2,000,000 shares of common stock to cancel the Company's indebtedness in the principal amount of US$200,000.

On July 11, 2011, the Company entered into a contract with one consultant pursuant to which consultant is to provide services in connection with the Company’s expansion into China for a one year period. Pursuant to the contracts, the Company issued 300,000 shares of common stock to the consultants, which value is $30,000.

On August 5, 2011, the Company entered debt cancellation agreements with the Company's CEO and director which the Company issued 16,447,160 and 34,159,120 shares of common stock to cancel the Company's indebtedness in the principal amount of US$822,358 and US $1,707,965.

Warrant activity for the period ended May31, 2012 and February 29, 2012, is summarized as follows:

	Shares subject to Warrants		Weighted Average Exercise Price
Balance at February 28, 2011	1,550,000		$	1.26
Granted	-			-
Exercised	-			-
Cancelled	-			-
Expired	(1,550,000)			1.26
Balance at February 29, 2012	-			-
Granted		-		-
Exercised		-		-
Cancelled		-		-
Expired		-	$	-
Balance at May31, 2012		-	$	-

NOTE 14 - CONCENTRATION

-	Major customers

The following table provides information as to sales to each customer who accounted for at least 10% of the Company’s revenue for the three months ended May 31, 2012 and 2011, respectively, and the accounts receivable from such customers:

	Revenue Three Months Ended May 31,		Percentage of Total Revenue			Accounts Receivable At May 31,
2012
-Customer A	$	8,980		23	%	$	6,007
-Customer B		6,483		17	%		8,762
-Customer C		5,713		15	%		-

2011
-Customer D	$	45,463		20	%	$	48,188
-Customer E		28,959		13	%		7,041

Substantially all of the Company's revenue is derived from sales of LED lighting products. Any significant decline in market acceptance of the Company's products or in the financial condition of the Company's existing customers could impair the Company's ability to operate effectively.

-	Major suppliers

The following table provides information as to purchase to each major supplier who accounted for 10% or more of the Company’s purchases for the three months ended May 31, 2012 and 2011, respectively, and the accounts payable to such suppliers:

	Purchase Three Months Ended May 31,		Accounts /Notes Payable At May 31,
2012
-Vendor A	$	5,713	$	-
-Vendor B		3,739		-
-Vendor C		2,243		-
2011
-Vendor D		69,935		67,938
-Vendor E		20,820		22,068

NOTE 15 – INCOME TAXES

The Company did not provide any current or deferred U.S. federal income tax provision or benefit for any of the periods presented because the Company has experienced operating losses for U.S. federal income tax purposes since inception. When it is more likely than not that a tax asset cannot be realized through future income the Company must allow for this future tax benefit. The Company pays income taxes under the laws of the Republic of China (Taiwan). For the three months ended May 31, 2012 and 2011, the Company has income tax amount of $0 and $30, respectively.

NOTE 16 - OTHER COMPREHENSIVE INCOME (LOSS)

Balances of related after-tax components comprising accumulated other comprehensive loss, included in stockholders’ deficit and at May 31, 2012 and February 29, 2012 are as follows:

	Foreign Currency Translation Adjustment
Balance at February 29, 2012	$	(276,264)
Change in foreign currency translation		11,028
Balance at May 31, 2012	$	(265,236)

NOTE 17 - SUBSEQUENT EVENTS

On June 5, 2012, the board of directors approved the sale to one of the Company’s directors of all of the stock of two of the Company’s subsidiaries, Targetek Technology Co., Ltd. and UP Technology Co., Ltd., which generated no revenue during the three months ended May 31, 2012.

On July 13, 2012, the Company entered into an agreement with Hui-Yun Lo, a director, pursuant to which transferred to Ms. Lo all of the Company’s equity interest in Xodtec Technology Co., Ltd. and the Company’s 35% interest in Radiant Sun Development S.A. in exchange for the cancellation by Ms. Lo of debt from the Company to her in the amount of $100,000. Since all of the Company’s consolidated assets and liabilities are assets and liabilities of the former subsidiaries, the assets and liabilities reflected on the May 31, 2012 balance sheet ceased to be assets or liabilities of the Company. The results of operations reflected on the Company’s historical consolidated financial statements will be treated in the future as results of discontinued operations.

On July 14, 2012 Morgan Stanley Smith Barney Custodian fbo Terry Butler Roth IRA (“Butler Roth IRA”) acquired, for nominal consideration, 24,988,621 shares of common stock from Hui-Yun Lo and 19,401,160 shares of common stock from Yao-Ting Su, as well as all notes from the Company to Ms. Lo and Mr. Su through the date of the transfer (other than $100,000 principal amount of notes held by Ms. Lo which were cancelled in connection with her acquisition of the stock of Xodtec Technology Co., Ltd. and the 35% interest in Radiant Sun Development S.A.). As a result of the transfer of shares to the Butler Roth IRA, the Butler Roth IRA acquired 44,389,781 shares of common stock, constituting 54.3% of the outstanding common stock.

On July 14, 2012, Yao-Ting Su, chief executive and financial officer and a director, and Hui-Yun Lo, a director, resigned as officers and directors.

On July 14, 2012, Mr. Butler was elected as chief executive officer, chief financial officer and secretary.

On July 18, 2012, Butler Roth IRA and the Company entered into a loan agreement pursuant to which the Butler Roth IRA agreed to lend the Company up to $150,000, for which the Company would issue the 6% demand promissory note in the principal amount of $150,000.

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

The following discussion of the results of our operations and financial condition should be read in conjunction with our financial statements and the related notes, which appear elsewhere in this report. The following discussion includes forward-looking statements. For a discussion of important factors that could cause actual results to differ from results discussed in the forward-looking statements, see “Forward Looking Statements.”

Overview

Subsequent to May 31, 2012, we disposed of our subsidiaries, through which our business was conducted. As a result, we are no longer engaged in the design, marketing and selling of advanced lighting products which are designed to use less energy and have a longer life than traditional incandescent, halogen, fluorescent light sources.

We disposed of our subsidiaries through the transfer of the stock in the subsidiaries to one of our directors in consideration of the cancellation of a portion of the debt that we owed to the director, and our two directors sold their shares and their notes to a third party. Since all of our consolidated assets and liabilities are assets and liabilities of the former subsidiaries, the assets and liabilities reflected on the May 31, 2012 balance sheet ceased to be our assets or liabilities. The results of operations reflected on the Company’s historical consolidated financial statements will be treated in the future as results of discontinued operations.

We plan to focus on providing an internet based security system to companies that would like to replace security guards with video cameras that are monitored 24/7. We would seek to integrate hardware and software to provide a seamless solution. The 24/7 monitoring would be designed to help prevent crimes and property damage by the constant monitoring.

The marketplace is currently dominated by two types of security solutions. The first is security guards. Regardless of whether the security guards are employees or hired through an outside firm there are distinct limitations. Using security guards on a 24/7 basis can be fairly expensive. Security guards only “see” a small portion of the area that they are to be protecting at any one time. The quality of the security guards can be uncertain since many of these guards are minimum wage employees. The second type of security solution is static video cameras. Since most of these systems record events which are reviewed after an incident, they do not help to prevent a crime.

We intend to take the best of these solutions. We plan to monitor the video cameras in a cost effective manner, using a tech hub designed so that a few highly trained security officials can monitor many video cameras. Our goal is to get the police involved before and during a crime instead of providing information after an event has taken place. However, we are in the start-up phase, and we have not yet generated any revenue from this business, and we cannot assure you that we will be successful in this business.

The following discussion relates to the LED business of the Company, which was the Company’s business during the period covered by this report.

During the fiscal year ended May 31, 2012, our gross margin was 53.12%, as compared 167.46%, for the quarter ended May 31, 2011. The gross margin for the May 2011 quarter reflected the reverse of loss on inventory in the quarter ended May 31, 2011 of $335,681.

Our consolidated financial statements have been prepared on a going concern basis which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. During the three months ended May 31, 2012, we incurred a net loss and an operating loss of approximately $0.28 million. For the three months ended May 31, 2012, we had nominal revenue and a loss of $0.28 million.

We had a negative cash flow in operating activities amounting approximately $0.16 million in the three months ended May 31, 2012, and our accumulated deficit was approximately $8.0 million as of May 31, 2012. These factors raise substantial doubt about our ability to continue as a going concern.

Our internal financial statements are maintained in New Taiwan Dollars “NTD.” The financial statements included in this Form 10-Q are expressed in United States dollars. The translation adjustments in expressing the financial statements in United States dollars is shown on the statements of operation as a translation adjustment, and the cumulative translation adjustment is shown as an element of stockholders’ equity.

Significant Accounting Estimates and Policies

The discussion and analysis of our financial condition and results of operations is based upon our financial statements that have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities. On an on-going basis, we evaluate our estimates including the allowance for doubtful accounts, the salability and recoverability of our products, income taxes and contingencies. We base our estimates on historical experience and on other assumptions that we believe to be reasonable under the circumstances, the results of which form our basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Revenue Recognition

Our revenue recognition policies are in compliance with ASC 605. Revenue is recognized at the date of shipment to customers when a formal arrangement exists, the price is fixed or determinable, the delivery is completed, no other significant obligations exist and collectability is reasonably assured. Payments received before all of the relevant criteria for revenue recognition are satisfied are recorded as unearned revenue. Discounts provided to customers by us at the time of sale are recognized as a reduction in sales as the products are sold. Sales taxes are not recorded as a component of sales.

Comprehensive Income

Comprehensive income includes accumulated foreign currency translation gains and losses. We have reported the components of comprehensive income on its statements of stockholders’ equity.

Income Taxes

We account for income taxes in accordance with ASC 740, Income Taxes, which requires that we recognize deferred tax liabilities and assets based on the differences between the financial statement carrying amounts and the tax basis of assets and liabilities, using enacted tax rates in effect in the years the differences are expected to reverse. Deferred income tax benefit (expense) results from the change in net deferred tax assets or deferred tax liabilities. A valuation allowance is recorded when, in the opinion of management, it is more likely than not that some or all of any deferred tax assets will not be realized.

We adopted ASC 740-10-25, Income Taxes- Overall-Recognition, on January 1, 2007, which provides criteria for the recognition, measurement, presentation and disclosure of uncertain tax position. We must recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate resolution. We did not recognize any additional liabilities for uncertain tax positions as a result of the implementation of ASC 740-10-25.

Inventories

Property, Plant and Equipment

Depreciation is computed using the straight-line method over the estimated useful lives as follows:

	Useful Lives (Years)
Transportation	5 years
Office equipment	3-6 years
Machinery	3-6 years
Other equipment	3-6 years

Research and development

Research and development costs are expensed as incurred, and are included in general and administrative expenses. These costs primarily consist of cost of material used and salaries paid for the development of our products and fees paid to third parties. Our total research and development expense for the quarter ended May 31, 2012 and May 31, 2011 was not significant.

Equity Investment

We account for our interest in our equity investments pursuant to ASC 323 “Investments – Equity Method and Joint Ventures,” which sets forth guidance as to the treatment of equity investments. Because our only unconsolidated subsidiary is inactive, does not meet the test of a significant subsidiary under Rule 1-02(w)of Regulation S-X and any summarized information is de minimis, we are not required to include summarized financial information with respect to this entity and the absence of summarized financial information does not impact our consolidated financial statements.

Recent accounting pronouncements

We considered all new accounting pronouncements and has concluded that there are no new pronouncements that may have a material impact on results of operations, financial condition, or cash flows, based on current information.

RESULTS OF OPERATIONS

Three Months Ended May 31, 2012 and 2011

The following table sets forth the results of our operations for the periods indicated as a percentage of net sales:

	Three Months Ended May 31,
	2012						2011
	Dollars			Percentage			Dollars			Percentage
Sales	$	38,673			100.0	%	$	227,708			100.0	%
Cost of sales		18,131			46.9	%		182,071			80	%
Reversal of inventory writedown								(335,681	)		(147.4	)%
Gross profit		20,542			53.1	%		381,318			167.5	%
Operating expenses		299,808			775.2	%		806,937			354.4	%
Loss from operations		(279,266	)		(722.1	)%		(425,619	)		(186.9	)%
Interest expense		(3,192	)		(8.3	)%		(1,500	)		(0.7	)%
Gain(loss) on exchange		211			0.6	%		693			0.3	%
Other income (expense)		-			-	%		(1,354	)		(0.6	)%
Loss before income tax expense		(282,247	)		(729.8	)%		(427,780	)		(187.9	)%
Income taxes		-			-	%		30			0.0	%
Net loss		(282,247	)		(729.8	)%		(427,810	)		(187.9	)%
Foreign currency translation adjustment		11,028			28.5	%		170,995			75.1	%
Total comprehensive loss	$	(271,219	)		(701.3	)%	$	(256,815	)		(112.8	)%

Sales. During the quarter ended May 31, 2012, we had sales of $38,673, as compared to sales of $0.2 million for the quarter ended May 31, 2011, a decrease of approximately 83%. The decrease in sales is attributed to a lack of capital to purchase inventory and raw materials as well as a reduction in overhead dedicated to lighting solutions sales. All of our revenue represented in the quarter ended May 31, 2012 represented sales of lights. We no longer offer lighting solutions.

Cost of sales; gross margin. During the quarter ended May 31, 2012, our cost of sales was $18,131, as compared to cost of sales of $0.18 million during the quarter ended May 31, 2011, a decrease of $0.16 million, or 71.9%. Our gross profit decreased to $20,542, from $0.38 million in the same period last year. Our gross margin decreased from 167.5% in the quarter ended May 31, 2011 to 53.1% in the quarter ended May 31, 2012. The decrease in gross profit margin resulted from the reversal of an inventory write-down of $335,681 in the May 2011 quarter.

Selling, general and administrative expenses. Selling, general and administrative expenses totaled $0.3 million for the quarter ended May 31, 2012, as compared to $0.81 million for the quarter ended May 31, 2011, a decrease of $0.51 million or approximately 63%. The decrease was largely the result of a decrease costs associated with our expansion into the PRC as well as the reduction in overhead dedicated to lighting project sales. We are no longer seeking to sell in the PRC due to our lack of resources.

Loss from operations. For the quarter ending May 31, 2012, loss from operations amounted to $0.28 million as compared to $0.43 million for the same quarter ended 2011, a decrease of approximately $0.15million or 33%.

Total other income (expenses). Other income, consisting of interest expense, gain (loss) on exchange and other income (expense) was not material for the three-month periods ended May 31, 2012 or 2011.

Net loss. As a result of the foregoing, our net loss for the three months ended May 31, 2011 was $282,247, or $0.00 per share (basic and diluted), as compared with net loss of $427,810 or $0.01 per share (basic and diluted) for the three month period ended May 31, 2011.

Liquidity and Capital Resources

Liquidity is the ability of a company to generate funds to support its current and future operations, satisfy its obligations and otherwise operate on an ongoing basis. At May 31, 2012, we had a cash balance of $1,142, all of which were located in banks in Taiwan, ROC, and a working capital deficiency of approximately $2.3 million.

The following table sets forth information as to the principal changes in the components of our working capital from February 29, 2012 to May 31, 2012:

							February 29, 2012 to May 31, 2012
Category	May 31, 2012			February 29, 2012			Change			Percent Change
Current assets:
Cash	$	1,142			4,949		$	(3,807	)		(76.9	)%
Accounts receivable, net	21,993				40,075			(18,082	)		(45.1	)%
Inventories, net		8,787			6,280			2,507			39.9	%
Prepayments		104			1,218			(1,114	)		91.5	%
Other current assets		55,095			53,262			1,833			3.4	%
Current liabilities:
Short-term borrowings from banks		333,505		254,421				79,084			31.1	%
Accounts payable	43,111			72,490				(29,379	)		(40.5	)%
Other payables		473,003		475,249				(2,246	)		(0.5	)%
Accrued liabilities		544,497		509,771				34,726			6.8	%
Due to related parties		919,319		843,022				76,297			9.1	%
Other current liabilities		67,942		38,665				29,277			75.7	%
Working capital:
Total current assets		87,121		105,784				(18,663	)		(-17.6	)%
Total current liabilities		2,381,377		2,193,618				187,759			8.6	%
Working capital	(2,294,256		)	(2,087,834		)		(206,422	)		9.9	%

Our working capital position deficiency increased $0.2 million to $2.29 million at May 31, 2012 from a working capital deficiency of $2.09 million at February 29, 2012.

During the three months ended May 31, 2012, we financed our operations principally through the loans from company officers and directors as well as bank loans.

During the three months ended May 31, 2012, we used $165,817 in our operations, principally reflecting our loss of $282,247, the issuance of common shares and amortization of professional services of $51,792, and a decrease in accounts payable of $29,295. Cash flow used in investing activities was not significant. Cash flow from financing activities was $161,998, consisting primarily of proceeds of loans from related parties and proceeds from borrowings.

During the three months ended May 31, 2011, we used $389,252 in our operations, principally reflecting our loss of $427,810, the issuance of equity for compensation of $290,667, the reversal of an inventory write-down of $335,681, a decrease in accrued liabilities of $159,625 and an increase in accounts payable of $79,572. Cash flow used in investing activities was not significant, consisting of prepayments and purchase of property and equipment. Cash flow from financing activities was $415,581, consisting primarily of proceeds of loans from related parties.

As of May 31, 2012, we had outstanding loans from our chief executive officer of $325,517, which we used for working capital needs. The borrowings do not bear interest and are payable on demand. As of May 31, 2012, we had outstanding loans from one of our directors totaling $593,802, which we used for general working capital needs. The borrowings do not bear interest and are payable on demand.

With our proposed change in business, we will need additional funds to develop and sustain our proposed internet based security. As of the date of this report, we have no commitments from any person to provide the necessary funding. We cannot assure you that we will be able to raise the necessary funding or that we will be successful in our new business.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not required for smaller reporting companies.

ITEM 4. CONTROLS AND PROCEDURES.

Our management evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of May 31, 2012.

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures refer to controls and other procedures designed to ensure that information required to be disclosed in the reports we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and that such information is accumulated and communicated to our management, including our chief executive and financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating and implementing possible controls and procedures.

Management conducted its evaluation of disclosure controls and procedures under the supervision of our chief executive and financial officer. Based on that evaluation, our chief executive and financial officers concluded that because of the material weaknesses in internal control over financial reporting described below, our disclosure controls and procedures were not effective as of May 31, 2012.

Changes in Internal Controls over Financial Reporting

There were no changes (including corrective actions with regard to significant deficiencies or material weaknesses) in our internal controls over financial reporting that occurred during the quarter ended May 31, 2012 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. We anticipate that, with our proposed entry into a new business, we will seek to implement effective controls over financial reporting, although we recognize that, in view of the small number of employees, segregation of duties may be difficult. As of the date of this report, we have one employee.

PART II - OTHER INFORMATION

ITEM 6. EXHIBITS

Exhibit Description of the Exhibit

31.1 Rule 13a-14(a)/15d-14(a) certification by the chief executive and chief financial officer.

32.1 Section 1350 certification by the chief executive officer and chief financial officer.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

		XODTEC LED, INC.

Date: July 23, 2012		/s/ Terry Butler
		Terry Butler
		Chief Executive Officer