10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549 

FORM 10-Q

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

For the quarterly period ended March 31, 2013

☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT OF 1934

For the transition period from:

Commission File Number 000-54730

AIRWARE LABS CORP.

(Exact name of registrant as specified in its charter)

Delaware	98-0665018
(State of incorporation)	(I.R.S. Employer Identification No.)

8399 E. Indian School Rd., Suite 202

Scottsdale, AZ 85251

(Address of principal executive offices)

(480) 463-4246

(Registrant’s telephone number)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

☑Yes     ☐ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ☐Yes     ☑ No (Not required)

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 ☑

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). 

 ☐ Yes  ☑ No

As of May 09, 2013, there were 35,970,477 shares of the registrant’s $0.0001 par value common stock issued and outstanding.

AIRWARE LABS CORP.

TABLE OF CONTENTS

		Page
PART I.                 FINANCIAL INFORMATION
ITEM 1.	FINANCIAL STATEMENTS	3
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	14
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	15
ITEM 4.	CONTROLS AND PROCEDURES	16
PART II.               OTHER INFORMATION
ITEM 1.	LEGAL PROCEEDINGS	17
ITEM 1A.	RISK FACTORS	17
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	17
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	17
ITEM 4.	MINE SAFETY DISCLOSURES	17
ITEM 5.	OTHER INFORMATION	17
ITEM 6.	EXHIBITS	18

Special Note Regarding Forward-Looking Statements

Information included in this Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”). This information may involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Airware Labs Corp. (the “Company”), to be materially different from future results, performance or achievements expressed or implied by any forward-looking statements. Forward-looking statements, which involve assumptions and describe future plans, strategies and expectations of the Company, are generally identifiable by use of the words “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “believe,” “intend,” or “project” or the negative of these words or other variations on these words or comparable terminology. These forward-looking statements are based on assumptions that may be incorrect, and there can be no assurance that these projections included in these forward-looking statements will come to pass. Actual results of the Company could differ materially from those expressed or implied by the forward-looking statements as a result of various factors. Except as required by applicable laws, the Company has no obligation to update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur in the future.

*Please note that throughout this Quarterly Report, and unless otherwise noted, the words "we," "our," "us," the "Company," "AIRW," or “Airware” refers to Airware Labs Corp.

PART I - FINANCIAL INFORMATION

  ITEM 1.   CONDENSED FINANCIAL STATEMENTS

INDEX	F-1
Unaudited Balance Sheet as of March 31, 2013 and Audited Consolidated Balance Sheet as of September 30, 2012	F-2
Unaudited Statements of Operations for the Three and Six Months Ended March 31, 2013 and 2012	F-3
Unaudited Statements of Cash Flows for the Six Months Ended March 31, 2013 and 2012	F-4
Notes to Condensed Financial Statements Unaudited	F-5

F-1

AIRWARE LABS CORP.

BALANCE SHEETS

AS OF MARCH 31, 2013 AND SEPTEMBER 30, 2012

	As of			As of
	March 31,			September 30,
	2013			2012
	(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents	$	87,848		$	1,400
Accounts receivable		136,284			611,370
Inventory		113,112			11,630
Deposits		5,000			—
Prepaid expenses		32,073			131,991
Total current assets		374,317			756,391
Other Assets:
Property and equipment, net		49,955			24,928
Intangible assets, net		308,268			325,463
Deposits		32,400			32,400
Total Assets	$	764,940		$	1,139,182
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
Current Liabilities:
Accounts payable	$	1,540,192		$	1,535,245
Accrued interest		47,064			75,246
Accrued expenses		171,149			166,921
Factored amounts payable		80,509			231,933
Notes payable		62,500			62,500
Notes payable to related parties, net of discount		—			119,500
Convertible notes payable - current portion		105,000			415,000
Convertible notes payable to related parties - current portion, net of discount		1,202,977			665,000
Total current liabilities		3,209,391			3,271,345
Accrued interest to related parties		792			317
Notes payable to former officer		47,520			47,520
Convertible notes payable, less current portion		—			100,000
Convertible notes payable to related parties, less current portion		—			5,000
Total liabilities		3,257,703			3,424,182
Commitments and Contingencies
Stockholders' (Deficit):
Common stock, par value $.0001 per share, 200,000,000 and 200,000,000 shares authorized; 34,585,477 and 30,180,979 shares issued and outstanding at March 31, 2013 and September 30, 2012, respectively		3,459			3,018
Additional paid-in capital		10,001,188			9,357,853
Obligation to issue equity		9,143			28,943
Accumulated (deficit)		(12,506,553	)		(11,674,814	)
Total stockholders' (deficit)		(2,492,763	)		(2,285,000	)
Total Liabilities and Stockholders' (Deficit)	$	764,940		$	1,139,182

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

F-2

AIRWARE LABS CORP.

STATEMENTS OF OPERATIONS

FOR THE THREE AND SIX MONTHS ENDED MARCH 31, 2013 AND 2012

(Unaudited)

	Three Months Ended						Six Months Ended
	March 31,			March 31,			March 31,			March 31,
	2013			2012			2013			2012
Revenues, net	$	119,616		$	13,788		$	198,814		$	25,644
Cost of products sold		45,474			5,386			93,003			12,545
Gross profit		74,142			8,402			105,811			13,099
Operating expenses
General and administrative		330,480			2,166,678			611,711			3,521,511
Sales and marketing		71,922			54,099			115,878			75,765
Total expenses		402,402			2,220,777			727,589			3,597,276
(Loss) from operations		(328,260	)		(2,212,375	)		(621,778	)		(3,584,177	)
Other income (expense)
Interest income		—			748			—			1,244
Induced note conversion expense		—			—			(9,300	)		—
Interest expense		(118,848	)		(58,458	)		(200,661	)		(111,898	)
Total other income (expense)		(118,848	)		(57,710	)		(209,961	)		(110,654	)
(Loss) before income taxes		(447,108	)		(2,270,085	)		(831,739	)		(3,694,831	)
Income tax expense		—			—			—			—
Net (loss)	$	(447,108	)	$	(2,270,085	)	$	(831,739	)	$	(3,694,831	)
Basic and diluted net (loss) per common share	$	(0.01	)	$	(0.14	)	$	(0.03	)	$	(0.26	)
Basic and diluted weighted average common
shares outstanding		33,231,681			16,722,214			31,874,811			14,227,527

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

F-3

AIRWARE LABS CORP.

STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED MARCH 31, 2013 AND 2012

(Unaudited)

	Six Months Ended
	March 31,			March 31,
	2013			2012
Operating Activities:
Net (loss)	$	(831,739	)	$	(3,694,831	)
Adjustments to reconcile net (loss) to net cash (used in) operating activities:
Depreciation and amortization		27,702			36,489
Common stock issued/obligated for services		10,000			3,045,587
Options and warrants issued for services		25,256			24,500
Interest expense from amortization of debt discount		80,041			48,372
Induced conversion expense		9,300			—
Stock issued for interest expense		89,106			—
Interest income on officer note receivable added to note balance		—			(1,151	)
Changes in operating assets and liabilities:
Accounts receivable		475,086			(16,632	)
Inventory		(101,482	)		3,478
Prepaid expenses		99,918			10,000
Deposits		(5,000	)		—
Accounts payable		4,947			23,880
Accrued interest		(27,707	)		30,243
Accrued expenses		4,228			121,012
Net Cash Provided by (Used in) Operating Activities		(140,344	)		(369,053	)
Investing Activities:
Purchases of property and equipment		(35,534	)		(37,000	)
Notes receivable from related parties		—			(108,544	)
Net Cash (Used in) Investing Activities		(35,534	)		(145,544	)
Financing Activities:
Stock issued for cash		228,750			5,000
Proceeds from convertible notes payable		585,000			110,000
Repayment of convertible notes payable		(400,000	)		—
Proceeds from notes payable					37,500
Proceeds from factored accounts receivable		6,448			—
Repayment of factored accounts receivable note		(497,872	)		—
Proceeds from exercise of warrants		—			325,000
Net Cash Provided by (Used in) Financing Activities		262,326			477,500
Net (Decrease) Increase in Cash		86,448			(37,097	)
Cash - Beginning of Period		1,400			192,017
Cash - End of Period	$	87,848		$	154,920
Supplemental disclosure of cash flow information:
Interest paid in cash	$	46,986		$	30,000
Non-cash investing and financing activities:
Stock issued for convertible notes		10,000			5,000
Debt discount on note payable, related party		1,500
Warrants issued to related party for convertible note modification		1,564			25,000

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

F-4

AIRWARE LABS CORP.

NOTES TO FINANCIAL STATEMENTS

(UNAUDITED)

1. Summary of Significant Accounting Policies and Use of Estimates

Basis of Presentation and Organization

Airware Labs Corp. (“Airware Labs” or the “Company”), formerly Crown Dynamics Corp., is a Delaware corporation. The Company was incorporated under the laws of the State of Delaware on June 15, 2010. On October 26, 2012, the Articles of Incorporation were amended to reflect a name change to Airware Labs Corp. On November 13, 2012, the Board approved a change in fiscal year end from December 31 to September 30.

On March 20, 2012, through an equity exchange agreement, the Company acquired all of the issued and outstanding stock of Airware Holdings, Inc., a Nevada corporation (“Airware”), in exchange for shares of the Company’s newly-issued common stock. Airware Holdings, Inc. was formed in February 2010 and is a non-prescription medical products company. The principal business purpose of the Company is to develop, manufacture and distribute nasal breathing devices. The Company targets prospective customers such as compassionate sleeping partners, individuals with allergies and athletic enthusiasts throughout the United States and the United Kingdom.

The share exchange has been accounted for as a recapitalization reverse merger between Airware Holdings, Inc. and Airware Labs Corp. Airware Holdings, Inc. is the accounting acquirer and Airware Labs Corp. is the accounting acquiree. Consequently, the historical pre-merger financial statements of Airware Holdings, Inc. are now those of the Company. The par value of the stock of Airware Holdings, Inc. of $.001 per share has been adjusted to that of the Company of $.0001 per share with the par value difference charged to paid-in capital. The pre-merger deficit is that of Airware Holdings, Inc. Airware Labs Corp’s pre-merger accumulated deficit has been charged to paid-in capital. The pre-merger Airware Holdings, Inc. outstanding shares have been adjusted to reflect the exchange. The pre-merger outstanding shares of Airware Labs Corp. were included in the issued and outstanding shares of the Company at the date of the merger.

Accounting Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could materially differ from those estimates. Significant estimates of the Company include accounting for depreciation and amortization, recoverability of intangible assets, deferred income taxes, accruals and contingencies, the imputed interest rate of the note payable to related party and the fair value of common stock, and the estimated fair value of stock options and warrants.

Unaudited Interim Financial Statements

The interim financial statements of the Company as of March 31, 2013 and 2012, and for the periods then ended, are unaudited. However, in the opinion of management, the interim financial statements include all adjustments, consisting of only normal recurring adjustments, necessary to present fairly the Company’s financial position as of March 31, 2013 and 2012 and the results of its operations and its cash flows for the periods then ended. These results are not necessarily indicative of the results expected for the fiscal year ended September 30, 2013. The accompanying financial statements and notes thereto do not reflect all disclosures required under accounting principles generally accepted in the United States (U.S. “GAAP”).

Earnings per Share

Basic earnings per share does not include dilution and is computed by dividing income available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflect the potential dilution of securities that could share in the earnings of an entity. Dilutive securities are not included in the weighted average number of shares when inclusion would be anti-dilutive. Due to the net losses for the periods ended March 31, 2013 and 2012, basic and diluted loss per common share were the same, as the effect of potentially dilutive securities would have been anti-dilutive.

As of March 31, 2013, there were total shares of 21,345,808 issuable upon conversion of notes payable, exercise of warrants and vested options that were not included in the earnings per share calculation as they were anti-dilutive.

Reclassification

Certain items in the 2012 financial statement presentation have been reclassified to conform to the 2013 presentation. Such reclassifications have no effect on previously reported net (loss).

F-5

2. Going Concern

The Company has incurred losses since inception and requires additional funds for future operating activities. The Company’s selling activity has not yet reached a level of revenue sufficient to fund its operating activities. These factors create an uncertainty as to how the Company will fund its operations and maintain sufficient cash flow to operate as a going concern.

In response to these financial difficulties, management is continuing to pursue financing from various sources, including private placements from investors and institutions. In addition, the Company has introduced an expanded product line and has had positive response to the product from a number of large potential customers. Management believes these efforts will contribute toward funding the Company’s activities until sufficient revenue can be earned from future operations. Management believes these combined efforts, if successful, will be sufficient to meet its working capital needs and its currently anticipated expenditure levels for the next year.

The Company’s ability to meet its cash requirements in the next year is dependent upon obtaining this financing and achieving improved sales level. If this is not achieved, the Company may be unable to obtain sufficient cash flow to fund its operations and obligations, and therefore, may be unable to continue as a going concern. The accompanying financial statements have been prepared on a going concern basis, and accordingly, do not include any adjustments relating to the recoverability and classification of recorded asset amounts; nor do they include adjustments to the amounts and classification of liabilities that might be necessary should the Company be unable to continue operations or be required to sell its assets.

3. Convertible Notes Payable

Convertible notes payable consist of the following:

8.00% notes payable, due August 22, 2012, convertible to common stock at $.50 per share, interest payments are due at maturity, unsecured	$	5,000
6.50% note payable, due November 26, 2011, convertible to common stock at $2 per share, interest payments are due annually, unsecured		50,000
6.50% note payable, due date August 31, 2010, convertible to common stock at $10.00 per share, interest payments are due annually, unsecured		50,000
		105,000
Less current portion		(105,000	)
	$	—

4. Notes Payable to Former Officer

Notes payable to former officer consists of the following:

2.00% note payable, due March 1, 2021, interest due at maturity, unsecured $ 47,520

F-6

5. Convertible Notes Payable to Related Parties

Convertible notes payable to related parties consist of the following:

12% note payable net of unamortized debt discount of $173,023, due September 30, 2013, convertible to common stock at $.10 per share, interest payments are due monthly.  Debt is secured by substantially all of the assets of the Company	$	1,032,977
8.00 % note payable due February 28, 2014, convertible to common stock at $.50 per share, interest payments are due at maturity, unsecured		5,000
8.00 % note payable due August 26, 2012, convertible to common stock at $.50 per share, interest payments are due at maturity, unsecured		20,000
6.50% note payable, due May 2, 2013 convertible to common stock at $2.00 per share, interest payment is due at maturity, unsecured		145,000
		1,202,977
Less current portion		(1,202,977	)
	$	—

On December 20, 2012 the Company entered into a sixth allonge to a convertible secured bridge note with Stockbridge Enterprises, L.P. (Stockbridge) to borrow an additional $606,000 and increase the original note amount from $500,000 to $1,106,000. As a term of this agreement, the Company paid $45,369 of accrued interest on the promissory note dated August 15, 2012 in common stock at $.10 per share. This allonge effectively rolls the August 15, 2012 promissory note for $121,000 into the bridge note, replacing the 10% monthly rate with the 12% per annum interest rate. Additionally, the Company issued a warrant exercisable to purchase 5,000,000 shares of common stock of the Company at $.50 per share for a term of five years. The Company also issued 2,000,000 shares of common stock.

For accounting purposes, the Company has valued the shares issued for the sixth allonge at $.10 per share, resulting in a debt discount of $200,000 to be amortized over the remainder of the loan period. For the quarters ended March 31, 2013 and December 31, 2012, this resulted in debt discount expense of $64,286 and $7,143, respectively.

On January 18, 2013 the Company entered into a seventh allonge to a convertible secured bridge note with Stockbridge to borrow an additional $60,000 and increase the note amount from $1,106,000 to $1,166,000. As a term of this agreement, the Company issued a warrant exercisable to purchase 600,000 shares of common stock of the Company at $.25 per share for a term of five years. Additionally, the exercise price of the 5,000,000 warrants issued on December 20, 2012 changed from $.50 to $.25. The Company also issued 250,000 shares of common stock.

On February 22, 2013 the Company entered into an eighth allonge to a convertible secured bridge note with Stockbridge to borrow an additional $40,000 and increase the note amount from $1,166,000 to $1,206,000. As a term of this agreement, the Company issued a warrant exercisable to purchase 600,000 shares of common stock of the Company at $.25 per share for a term of five years. The Company also issued 250,000 shares of common stock.

For accounting purposes, the Company has valued the shares issued for the seventh and eighth allonges at $.10 per share, resulting in a debt discount of $25,000 to be amortized over the remainder of the loan period. For the quarter ended March 31, 2013, this resulted in debt discount expense of $5,548.

F-7

6. Related Party Transactions

As detailed in Notes Payable to Former Officer Footnote 4, the Company has a note payable to its former President and Executive Chairman, David Dolezal.

As discussed in Convertible Notes Payable to Related Parties Footnote 5, the Company has entered into three additional allonges to a convertible secured bridge note with Stockbridge Enterprises, L.P. to borrow an additional $706,000 and increase the original note amount from $500,000 to $1,206,000.

7. Commitments and Contingencies

The Company has agreed to indemnify its officers and directors for certain events or occurrences that may arise as a result of the officers or director serving in such capacity. The term of the indemnification period is for the officer’s or director’s lifetime. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited.

The Company enters into indemnification provisions under its agreements with other companies in its ordinary course of business, typically with business partners, customers, landlords, lenders and lessors. Under these provisions, the Company generally indemnifies and holds harmless the indemnified party for losses suffered or incurred by the indemnified party as a result of the Company’s activities or, in some cases, as a result of the indemnified party’s activities under the agreement. The maximum potential amount of future payments the Company could be required to make under these indemnification provisions is unlimited.

The Company has not incurred material costs to defend lawsuits or settle claims related to these indemnification agreements. As a result, the Company believes the estimated fair value of these agreements is minimal. Accordingly, the Company has no liabilities recorded for these agreements as of March 31, 2013.

On November 7, 2011, the Company was named as a defendant in a lawsuit alleging a default on a note payable of $50,000 plus accrued interest. The note and accrued interest are reflected in the Company’s Balance Sheet as of March 31, 2013. The Company is working towards settling the litigation.

On December 22, 2011, the Company entered into a distribution agreement that provides for the issuance of common stock warrants, with an expiration date of 3 years, for the purchase of the Company’s common stock in an amount equal to 15% of the total products purchased by the distributor from the Company at the invoice price against the previous year’s purchases of paid invoices. The warrant price will be equal to the closing price of Airware Labs Corp.’s stock price at the anniversary date of the agreement. As noted in Stockholders’ Deficit Footnote 8, per this agreement the Company issued a three-year warrant to purchase 125,464 shares at $.75.

On December 27, 2011, the Company was named as a defendant in a lawsuit alleging a default on a two notes payable totaling $75,000 plus accrued interest. Ultimately, a judgment was entered against the Company as a result of this lawsuit. The Company has entered into a payment plan. The notes and accrued interest are reflected in the Company’s Balance Sheet as of March 31, 2013.

The Company is in default on two notes payable totaling $25,000. The Company has been in communication with the note holders to request extensions or conversion.

On July 26, 2012, the Company was named as a Defendant in a lawsuit alleging patent infringement. The Company believes the lawsuit is without merit and is vigorously defending the action. The case has been transferred from New York to Arizona. A scheduling order has been put in place, discovery has begun, but no substantive issues have been decided.

The Company sells the majority of its products through major distributors. The Company warrants to the distributors that the product will be free from defects in material and workmanship. The Company has determined its product warranty to be immaterial at March 31, 2013. The likelihood that the Company’s estimate of the accrued product warranty claims will materially change in the near term is considered remote.

On December 1, 2012, the Company entered into a consulting agreement with Accounting & Finance Personnel for staffing and management consulting services. The monthly fee for these services is $1,861 for a term of one year.

On February 25, 2013, the Company entered into an engagement agreement with Bridgewater Capital Corporation (Bridgewater) to act as placement agent and financial advisor. One objective of the agreement is a capital raise through equity or debt financing, of up to $5 million. The proceeds from a capital raise will be used primarily for marketing the Company’s products with the intended result of increasing sales through our distributors and retailers.

On March 28, 2013, the Company entered into an advisory agreement with Bridgewater Capital Corporation (Bridgewater). Bridgewater will assist the Company with strategic direction and partnerships as well as identifying potential acquisition opportunities. This agreement calls for payment of one million shares of stock over a six month period. This stock is distributed monthly based on performance and the agreement is cancelable at any time with no additional shares due.

F-8

8. Stockholders’ Deficit

On October 15, 2012, the Company issued 10,000 shares to Stockbridge Enterprises, L.P. as a condition of a promissory note dated August 15, 2012.

On December 7, 2012, a holder of a delinquent $10,000 note elected to convert to stock at a preferred rate of $.50 per share, rather than the post-split amount of $1.00 per share stated in her original note. On March 22, 2013, the company issued an additional 2,788 shares in payment of accrued interest.

On December 7, 2012, the Company issued 39,600 shares of stock for services performed in the fiscal year ended September 30, 2012. These shares were listed as an obligation to issue equity as of September 30, 2012 and the expense for the services was recognized in the fiscal year ended September 30, 2012.

Between December 7, 2012 and March 26, 2013, the Company sold 915,000 shares for $228,750 through a private placement.

As further detailed in Convertible Notes Payable to Related Parties Footnote 5, on December 20, 2012, the Company issued 2,453,690 shares of stock to Stockbridge as part of the terms of an allonge to a convertible secured bridge note.

On February 20, 2013, the Company issued 40,000 shares of stock for the payment of legal services.

As further detailed in Convertible Notes Payable to Related Parties Footnote 5, on February 20, 2013, the Company issued 250,000 shares to Stockbridge Enterprises, L.P. (Stockbridge) as a condition of a seventh allonge to a convertible secured bridge note. On March 22, 2013, the Company issued another 250,000 shares to Stockbridge as a condition of an eighth allonge to a convertible secured bridge note. Additionally, on that same date the Company issued 423,420 shares to Stockbridge in payment of accrued interest on the convertible secured bridge note.

Warrants

The balance of warrants outstanding for purchase of the Company’s common stock as of March 31, 2013 is as follows:

	Common Shares Issuable Upon Exercise of Warrants	Exercise Price of Warrants	Date Issued	Expiration Date
Issued under a Unit Purchase Agreement	535,000	$1.50	5/18/2010	5/17/2013
Issued under a private placement memorandum	250,000	$1.00	4/26/2011	4/25/2014
Issued under a private placement memorandum	50,000	$1.00	4/27/2011	4/26/2014
Issued under a private placement memorandum	25,000	$1.00	4/28/2011	4/27/2014
Issued under a private placement memorandum	200,000	$1.00	5/03/2011	5/02/2014
Issued for financing expense	20,000	$0.25	3/08/2012	3/07/2017
Issued under a consultant settlement agreement	40,000	$0.50	4/30/2012	4/29/2015
Issued as part of convertible agreement (1)	5,000,000	$0.25	12/20/2012	12/19/2017
Issued per distribution agreement (2)	125,464	$0.75	12/22/2012	12/21/2015
Issued as part of convertible agreement (3)	600,000	$0.25	1/18/2013	1/17/2018
Issued as part of convertible agreement (4)	600,000	$0.25	2/22/2013	2/21/2018
Balance of Warrants at March 31, 2013	7,445,464

(1) As noted in Related Party Transactions Footnote 6, on December 20, 2012, the Company issued a warrant for the purchase of 5,000,000 shares with an exercise price of $.50 and a term of five years. Per a later allonge, this exercise price was reduced from $.50 to $.25.

(2) As discussed in Commitments and Contingencies Footnote 7, on December 22, 2012, the Company issued a three-year warrant at $.75 to purchase 125,464 shares of stock per a distribution agreement.

(3) As noted in Related Party Transactions Footnote 6, on January 18, 2013, the Company issued a warrant for the purchase of 600,000 shares with an exercise price of $.25 and a term of five years.

(4) As noted in Related Party Transactions Footnote 6, on February 22, 2013, the Company issued a warrant for the purchase of 600,000 shares with an exercise price of $.25 and a term of five years.

F-9

Stock Options

The Company had the following options outstanding at March 31, 2013:

	Common Shares Issuable Upon Exercise of Options	Exercise Price of Options	Date Issued	Expiration Date
Options granted to former officer & two former senior advisory board members	775,000	$0.50	4/20/2011	4/19/2021
Options granted to former employee and three consultants	700,000	$0.50	7/19/2011	7/18/2016
Options granted under a consultant agreement settlement	52,844	$0.25	4/30/2012	4/29/2022
Options granted to Board member (1)	150,000	$0.30	1/25/2013	1/24/2023
Options granted to employee and two consultants (2)	1,550,000	$0.30	1/25/2013	1/24/2023
Balance of Options at March 31, 2013	3,227,844

(1) On January 25, 2013, the Company granted stock options to a Board member. These options are immediately vested, have an exercise price of $.30 and have a term of 10 years.

(2) On January 25, 2013, the Company granted stock options to an employee and two consultants. These options have an exercise price of $.30 and a term of 10 years. The options vest evenly over the next three years on the anniversary of the grant date, unless there is a change in corporate control, then the options vest immediately.

9. Subsequent Events

During April 2013, the Company sold an additional 585,000 shares for $146,250 through a private placement.

In April 2013, the Company filed an application with the Depository Trust Company (DTC). The Company is currently working through the eligibility process.

On April 8, 2013, the Company entered into an exclusive agency agreement with National United Trading and Investment FZ LLC. This is a performance-based agreement to develop new markets in the United Arab Emirates and other Middle Eastern markets of relevance.

On April 22, 2013, the Company entered into a consulting agreement with Mr. Charles Immel, an individual with extensive experience in the healthcare sector at the executive level. Mr. Immel has been engaged to develop and conduct a market assessment as well as pilot programs with healthcare professionals using the filtered line of products. This agreement is intended to quantify and develop a market in the healthcare sector to aid in the cross-protection of healthcare workers and ailing patients.

End of Notes to Financial Statements

F-10

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

The following Management's Discussion and Analysis should be read in conjunction with Airware Labs Corp. financial statements and the related notes thereto. The Management's Discussion and Analysis contains forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations and intentions. Any statements that are not statements of historical fact are forward-looking statements. When used, the words “believe,” “plan,” “intend,” “anticipate,” “target,” “estimate,” “expect,” and the like, and/or future-tense or conditional constructions (“will,” “may,” “could,” “should,” etc.), or similar expressions, identify certain of these forward-looking statements. These forward-looking statements are subject to risks and uncertainties that could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements in this Report on Form 10-Q. The Company’s actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of several factors. The Company does not undertake any obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this Report on Form 10-Q.

The following discussion should be read in conjunction with our unaudited consolidated financial statements and related notes and other financial data included elsewhere in this report. See also the notes to our consolidated financial statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the year ended September 30, 2012.

Results of Operations

Total revenue for the quarters ended March 31, 2013 and March 31, 2012 was $119,616 and $13,788, respectively. Operating expenses in the quarter ended March 31, 2013 amounted to $402,402 as compared to $2,220,777 for the quarter ended March 31, 2012. The decrease in expenses is a result of a decrease of $1,696,424 in Payroll expenses, which was $39,853 for the quarter ended March 31, 2013 as opposed to $1,736,277 for the quarter ended March 31, 2012. The decrease in payroll expenses was primarily due to stock compensation paid to Officers of the Company.

The net loss for the quarter ended March 31, 2013 was $447,108 as compared to $2,270,085 for the quarter ended March 31, 2012.

Liquidity and Capital Resources

Our balance sheet as at March 31, 2013 reflects $87,848 in cash and cash equivalents. We intend to raise the balance of our cash requirements for the next 12 months (approximately $5,000,000) from private placements or a registered public offering (either self-underwritten or through a broker-dealer). If we are unsuccessful in raising enough money through future capital-raising efforts, we may review other financing possibilities such as bank loans. At this time, our Company does not have a commitment from any broker/dealer to provide financing. There is no assurance that any financing will be available or if available, on terms that will be acceptable.

Cash Flow from Operating Activities

During the six months ended March 31, 2013, the Company’s operating activities used $140,344 in cash compared with a use of cash totaling $369,053 for the six months ended March 31, 2012. The decrease in cash used for operating activities is primarily due to decreases in payroll and related expenses as well as reduced office expenses.

Cash Flow from Investing Activities

During the six month periods ended March 31, 2013 and 2012, the Company used $35,534 and $145,544 in cash for investing activities, respectively. The decrease in cash used for investing activities is primarily due to a decrease in notes receivable from related parties.

Cash Flow from Financing Activities

During the six months ended March 31, 2013, the Company received $262,326 in cash from financing activities. This consisted of $185,000 in net financing from notes payable, $228,750 in proceeds from the issuance of stock for cash and ($151,424) in net repayments from factoring accounts payable and accounts receivable. This compares with $477,500 provided during the six months ended March 31, 2012 which was from net proceeds from convertible notes payable of $110,000, stock issued for cash of $5,000, proceeds from notes payable of $37,500 and proceeds from the exercise of warrants of $325,000.

14

Going Concern

We have not attained profitable operations and are dependent upon obtaining financing to pursue any extensive acquisitions and activities. For these reasons, our auditors stated in their report on our audited financial statements that they have substantial doubt that we will be able to continue as a going concern without further financing.

Future Financings

We will continue to rely on equity sales of our common shares in order to continue to fund our business operations. Issuances of additional shares will result in dilution to existing stockholders. There is no assurance that we will achieve any additional sales of the equity securities or arrange for debt or other financing to fund our operations and other activities.

Off-Balance Sheet Arrangements

We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.

Critical Accounting Policies

Our financial statements and accompanying notes have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.

We regularly evaluate the accounting policies and estimates that we use to prepare our financial statements. A complete summary of these policies is included in the notes to our financial statements. In general, management's estimates are based on historical experience, on information from third party professionals, and on various other assumptions that are believed to be reasonable under the facts and circumstances. Actual results could differ from those estimates made by management.

Recently Issued Accounting Pronouncements

The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

15

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures are controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by our company in the reports that it files or submits under the Exchange Act is accumulated and communicated to our management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Our management carried out an evaluation under the supervision and with the participation of our Principal Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 ("Exchange Act"). Based upon that evaluation, our Principal Executive Officer and Principal Financial Officer have concluded that our disclosure controls and procedures were not effective as March 31, 2013, due to the material weaknesses resulting from no director qualifying as an audit committee financial expert as defined in Item 407(d)(5)(ii) of Regulation S-K, and controls were not designed and in place to ensure that all disclosures required were originally addressed in our financial statements.

Changes in Internal Control over Financial Reporting

Our management has also evaluated our internal control over financial reporting, and there have been no significant changes in our internal controls or in other factors that could significantly affect those controls subsequent to the date of our last evaluation.

The Company is not required by current SEC rules to include, and does not include, an auditor's attestation report. The Company's registered public accounting firm has not attested to Management's reports on the Company's internal control over financial reporting.

16

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time, the Company may become subject to various legal proceedings that are incidental to the ordinary conduct of its business. Although the Company cannot accurately predict the amount of any liability that may ultimately arise with respect to any of these matters, it makes provision for potential liabilities when it deems them probable and reasonably estimable. These provisions are based on current information and legal advice and may be adjusted from time to time according to developments.

On November 7, 2011, the Company was named as a defendant in a lawsuit alleging a default on a note payable of $50,000 plus accrued interest. The note and accrued interest are reflected in the Company’s Balance Sheet as of March 31, 2013.  The Company is working towards settling the litigation.

On December 27, 2011, the Company was named as a defendant in a lawsuit alleging a default on two notes payable totaling $75,000 plus accrued interest. Ultimately, a judgment was entered against the Company as a result of this lawsuit. The notes and accrued interest are reflected in the Company’s Balance Sheet as of March 31, 2013

On July 26, 2012, the Company was named as a Defendant alleging patent infringement. The Company believes the lawsuit is without merit and is vigorously defending the action. The case has been transferred from New York to Arizona. A scheduling order has been put in place, discovery has begun, but no substantive issues have been decided.

Other than the foregoing, we know of no material, existing or pending legal proceedings against our Company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any director, officer or any affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.

ITEM 1A. RISK FACTORS

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

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

1. Quarterly Issuances:

During the quarter, we did not issue any unregistered securities other than as previously disclosed.

2. Subsequent Issuances:

Subsequent to the quarter, we did not issue any unregistered securities other than as previously disclosed.

  ITEM 3.   DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

N/A.

ITEM 5. OTHER INFORMATION

None.

17

ITEM 6. EXHIBITS

Exhibit
Number	Description of Exhibit
3.01(a)	Articles of Incorporation	Filed with the SEC on May 12, 2011 as part of our Registration Statement on Form S-1/A.
3.01(b)	Certificate of Amendment to Articles of Incorporation dated October 26, 2012	Filed with the SEC on November 13, 2012 as part of our Current Report on Form 8-K
3.02	Bylaws	Filed with the SEC on May 12, 2011 as part of our Registration Statement on Form S-1/A.
10.01	Patent Sale Agreement	Filed with the SEC on May 12, 2011 as part of our Registration Statement on Form S-1/A.
10.02	License Agreement between Crown Dynamics Corp. and Zorah LLC	Filed with the SEC on January 20, 2012 on Form 8-K.
10.03	Share Exchange Agreement between Crown Dynamics Corp. and Airware Dated March 20, 2012	Filed with the SEC on March 26, 2012 on Form 8-K.
31.01	Certification of Principal Executive Officer Pursuant to Rule 13a-14	Filed herewith.
31.02	Certification of Principal Financial Officer Pursuant to Rule 13a-14	Filed herewith.
32.01	CEO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act	Filed herewith.
32.02	CFO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act	Filed herewith.
99.1	Crown Dynamics Corp. Subscription Agreement	Filed with the SEC on May 12, 2011 as part of our Registration Statement on Form S-1/A.
101.INS*	XBRL Instance Document	Filed herewith.
101.SCH*	XBRL Taxonomy Extension Schema Document	Filed herewith.
101.CAL*	XBRL Taxonomy Extension Calculation Linkbase Document	Filed herewith.
101.LAB*	XBRL Taxonomy Extension Labels Linkbase Document	Filed herewith.
101.PRE*	XBRL Taxonomy Extension Presentation Linkbase Document	Filed herewith.
101.DEF*	XBRL Taxonomy Extension Definition Linkbase Document	Filed herewith.

*Pursuant to Regulation S-T, this interactive data file is deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections.

18

SIGNATURES

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

	AIRWARE LABS CORP.
Date: May 14, 2013	By:	/s/  Jeffrey Rassas
	Name:	Jeffrey Rassas
	Title:	Chief Executive Officer and Director
Date: May 14, 2013	By ;	/s/  Jessica Smith
	Name :	Jessica Smith
	Title :	Chief Accounting and Financial Officer

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Date:  May 14, 2013	By:	/s/  Jeffrey Rassas
	Name:	Jeffrey Rassas
	Title:	Chief Executive Officer and Director
Date:   May 14, 2013	By:	/s/  Jessica Smith
	Name:	Jessica Smith
	Title:	Chief Accounting and Financial Officer
Date:   May 14, 2013	By:	/s/ Ron Miller
	Name:	Ron Miller
	Title:	Director

19

EX-31.01

EXHIBIT 31.01

CERTIFICATION OF

PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO SECTION 302(a) OF THE SARBANES-OXLEY ACT OF 2002

I, Jeffrey Rassas, certify that:

1.      I have reviewed this Quarterly Report on Form 10-Q of the Registrant for the period ended March 31, 2013;

2.      Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.      Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

4.      As the Registrant’s certifying officer, I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

a.      Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.      Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.      Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.      Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

5.      As the Registrant’s certifying officer, I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant auditors and the audit committee of the Registrant’s Board of Directors (or persons performing the equivalent functions):

a.      All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

b.      Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

	Airware Labs Corp.
Date: May 14, 2013
	By:	/s/ Jeffrey Rassas
	Name:	Jeffrey Rassas
	Title:	Chief Executive Officer

EX-31.02

EXHIBIT 31.02

CERTIFICATION OF

PRINCIPAL ACCOUNTING OFFICER

PURSUANT TO SECTION 302(a) OF THE SARBANES-OXLEY ACT OF 2002

I, Jessica Smith, certify that:

1.      I have reviewed this Quarterly Report on Form 10-Q of the Registrant for the period ended March 31, 2013;

2.      Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.      Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

4.      As the Registrant’s certifying officer, I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

a.      Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.      Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.      Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.      Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

5.      As the Registrant’s certifying officer, I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant auditors and the audit committee of the Registrant’s Board of Directors (or persons performing the equivalent functions):

a.      All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

  b.      Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

	Airware Labs Corp.
Date: May 14, 2013
	By:	/s/ Jessica Smith
	Name:	Jessica Smith
	Title:	Chief Accounting and Financial Officer

EX-32.01

EXHIBIT 32.01

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Jeffrey Rassas, the Chief Executive Officer of Airware Labs Corp., certify, under the standards set forth and solely for the purposes of 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge, the Quarterly Report on Form 10-Q of the Registrant for the period ended March 31, 2013, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and information contained in that Form 10-Q fairly presents, in all material respects, the financial condition and  results of operations of the Registrant.

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

	Airware Labs Corp.
Date: May 14, 2013
	By:	/s/ Jeffrey Rassas
	Name:	Jeffrey Rassas
	Title:	Chief Executive Officer

A signed original of this written statement required by Section 906 has been provided to the Registrant and will be retained by the Registrant and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.02

EXHIBIT 32.02

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Jessica Smith, the Chief Accounting and Financial Officer of Airware Labs Corp., certify, under the standards set forth and solely for the purposes of 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge, the Quarterly Report on Form 10-Q of the Registrant for the period ended March 31, 2013, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and information contained in that Form 10-Q fairly presents, in all material respects, the financial condition and  results of operations of the Registrant.

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

	Airware Labs Corp.
Date: May 14, 2013
	By:	/s/ Jessica Smith
	Name:	Jessica Smith
	Title:	Chief Accounting and Financial Officer

A signed original of this written statement required by Section 906 has been provided to the Registrant and will be retained by the Registrant and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Related Party Transactions (Details Narrative) (USD $)	Mar. 31, 2013	Feb. 22, 2013	Jan. 18, 2013	Dec. 20, 2012
Related Party Transactions [Abstract]
Additional cash borrowed from Stockbridge Enterprises, L.P.	$ 706,000	$ 40,000	$ 60,000	$ 606,000
Original note amount	500,000	1,166,000	1,106,000	500,000
Increased note amount	$ 1,206,000	$ 1,206,000	$ 1,166,000	$ 1,106,000

XML

Notes Payable to Former Officer

3 Months Ended

Mar. 31, 2013

Receivables [Abstract]

Notes Payable to Former Officer

4. Notes Payable to Former Officer

Notes payable to former officer consists of the following:

2.00% note payable, due March 1, 2021, interest due at maturity, unsecured $ 47,520

XML

Stockholders' Deficit (Details Narrative) (USD $)	1 Months Ended	3 Months Ended
	Apr. 30, 2013	Mar. 26, 2013	Mar. 22, 2013	Feb. 22, 2013	Feb. 20, 2013	Jan. 25, 2013	Jan. 18, 2013	Dec. 22, 2012	Dec. 20, 2012	Dec. 07, 2012	Oct. 15, 2012
Equity [Abstract]
Issued shares to Stockbridge Enterprises, L.P.			250,000	250,000	250,000				2,453,690		10,000
Value of delinquent note										$ 10,000
Preferred rate of stock conversion, per share										$ 0.50
Post-split amount, per share										$ 1.00
Additional shares issued in payment of accrued interest			2,788
Issued stock for services performed										39,600
Shares of stock sold through private placement	585,000	915,000
Value of stock sold through private placement	$ 146,250	$ 228,750
Issued stock for the payment of legal services					40,000
Issued additional shares to Stockbridge Enterprises, L.P.			423,420
Shares to be purchased with issued warrant				600,000			600,000	125,464	5,000,000
Shares to be purchased with issued warrant, exercise price				$ 0.25			$ 0.25		$ 0.50
Shares to be purchased with issued warrant, term				5 years			5 years		5 years
Shares to be purchased with issued warrant, reduced exercise price									$ 0.25
Vested stock options granted, exercise price						$ 0.30
Vested stock options granted, term						10 years

XML

Stockholders' Deficit - Options outstanding (Details) (USD $)	Mar. 31, 2013
Common Shares Issuable Upon Exercise of Options
Options granted to former officer & two former senior advisory board members (Issued: 4/20/2011, Expires: 4/19/2021)	775,000
Options granted to former employee and three consultants (Issued: 7/19/2011, Expires: 7/18/2016)	700,000
Options granted under a consultant agreement settlement (Issued: 4/30/2012, Expires: 4/29/2022)	52,844
Options granted to Board member (Issued: 1/25/2013, Expires: 1/24/2023)	150,000
Options granted to employee and two consultants (Issued: 1/25/2013, Expires: 1/24/2023)	1,550,000
Balance of Options	3,227,844
Exercise Price of Options
Options granted to former officer & two former senior advisory board members (Issued: 4/20/2011, Expires: 4/19/2021), Per Share	0.50
Options granted to former employee and three consultants (Issued: 7/19/2011, Expires: 7/18/2016), Per Share	0.50
Options granted under a consultant agreement settlement (Issued: 4/30/2012, Expires: 4/29/2022), Per Share	0.25
Options granted to Board member (Issued: 1/25/2013, Expires: 1/24/2023), Per Share	0.30
Options granted to employee and two consultants (Issued: 1/25/2013, Expires: 1/24/2023), Per Share	0.30

XML

Subsequent Events (Details Narrative) (USD $)	1 Months Ended	3 Months Ended
	Apr. 30, 2013	Mar. 26, 2013
Subsequent Events [Abstract]
Shares of stock sold through private placement	585,000	915,000
Value of stock sold through private placement	$ 146,250	$ 228,750

XML

Convertible Notes Payable

3 Months Ended

Mar. 31, 2013

Debt Disclosure [Abstract]

Convertible Notes Payable

3. Convertible Notes Payable

Convertible notes payable consist of the following:

8.00% notes payable, due August 22, 2012, convertible to common stock at $.50 per share, interest payments are due at maturity, unsecured	$	5,000
6.50% note payable, due November 26, 2011, convertible to common stock at $2 per share, interest payments are due annually, unsecured		50,000
6.50% note payable, due date August 31, 2010, convertible to common stock at $10.00 per share, interest payments are due annually, unsecured		50,000
		105,000
Less current portion		(105,000	)
	$	—

XML

BALANCE SHEETS (Unaudited) (USD $)	Mar. 31, 2013	Sep. 30, 2012
ASSETS
Cash and cash equivalents	$ 87,848	$ 1,400
Accounts receivable	136,284	611,370
Inventory	113,112	11,630
Deposits	5,000
Prepaid expenses	32,073	131,991
Total current assets	374,317	756,391
Other Assets:
Property and equipmnet, net	49,955	24,928
Intangible assets, net	308,268	325,463
Deposits	32,400	32,400
Total Assets	764,940	1,139,182
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
Accounts payable	1,540,192	1,535,245
Accrued interest	47,064	75,246
Accrued expenses	171,149	166,921
Factored amounts payable	80,509	231,933
Notes payable	62,500	62,500
Notes payable to related parties, net of discount		119,500
Convertible notes payable - current portion	105,000	415,000
Convertible notes payable to related parties - current portion, net of discount	1,202,977	665,000
Total current liabilities	3,209,391	3,271,345
Accrued interest to related parties	792	317
Notes payable to officer	47,520	47,520
Convertible notes payable, less current portion		100,000
Convertible notes payable to related parties, less current portion		5,000
Total liabilities	3,257,703	3,424,182
Stockholders' (Deficit):
Common stock, par value $.0001 per share, 200,000,000 and 200,000,000 shares authorized; 34,585,477 and 30,180,979 shares issued and outstanding at March 31, 2013 and September 30, 2012, respectively	3,459	3,018
Additional paid-in capital	10,001,188	9,357,953
Obligation to issue equity	9,143	28,943
Accumulated (deficit)	(12,506,553)	(11,674,814)
Total stockholders' (deficit)	(2,492,763)	(2,285,000)
Total Liabilities and Stockholders' (Deficit)	$ 764,940	$ 1,139,182

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Summary of Significant Accounting Policies and Use of Estimates

3 Months Ended

Mar. 31, 2013

Accounting Policies [Abstract]

Summary of Significant Accounting Policies and Use of Estimates

1. Summary of Significant Accounting Policies and Use of Estimates

Basis of Presentation and Organization

Airware Labs Corp. (“Airware Labs” or the “Company”), formerly Crown Dynamics Corp., is a Delaware corporation. The Company was incorporated under the laws of the State of Delaware on June 15, 2010. On October 26, 2012, the Articles of Incorporation were amended to reflect a name change to Airware Labs Corp. On November 13, 2012, the Board approved a change in fiscal year end from December 31 to September 30.

On March 20, 2012, through an equity exchange agreement, the Company acquired all of the issued and outstanding stock of Airware Holdings, Inc., a Nevada corporation (“Airware”), in exchange for shares of the Company’s newly-issued common stock. Airware Holdings, Inc. was formed in February 2010 and is a non-prescription medical products company. The principal business purpose of the Company is to develop, manufacture and distribute nasal breathing devices. The Company targets prospective customers such as compassionate sleeping partners, individuals with allergies and athletic enthusiasts throughout the United States and the United Kingdom.

The share exchange has been accounted for as a recapitalization reverse merger between Airware Holdings, Inc. and Airware Labs Corp. Airware Holdings, Inc. is the accounting acquirer and Airware Labs Corp. is the accounting acquiree. Consequently, the historical pre-merger financial statements of Airware Holdings, Inc. are now those of the Company. The par value of the stock of Airware Holdings, Inc. of $.001 per share has been adjusted to that of the Company of $.0001 per share with the par value difference charged to paid-in capital. The pre-merger deficit is that of Airware Holdings, Inc. Airware Labs Corp’s pre-merger accumulated deficit has been charged to paid-in capital. The pre-merger Airware Holdings, Inc. outstanding shares have been adjusted to reflect the exchange. The pre-merger outstanding shares of Airware Labs Corp. were included in the issued and outstanding shares of the Company at the date of the merger.

Accounting Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could materially differ from those estimates. Significant estimates of the Company include accounting for depreciation and amortization, recoverability of intangible assets, deferred income taxes, accruals and contingencies, the imputed interest rate of the note payable to related party and the fair value of common stock, and the estimated fair value of stock options and warrants.

Unaudited Interim Financial Statements

The interim financial statements of the Company as of March 31, 2013 and 2012, and for the periods then ended, are unaudited. However, in the opinion of management, the interim financial statements include all adjustments, consisting of only normal recurring adjustments, necessary to present fairly the Company’s financial position as of March 31, 2013 and 2012 and the results of its operations and its cash flows for the periods then ended. These results are not necessarily indicative of the results expected for the fiscal year ended September 30, 2013. The accompanying financial statements and notes thereto do not reflect all disclosures required under accounting principles generally accepted in the United States (U.S. “GAAP”).

Earnings per Share

Basic earnings per share does not include dilution and is computed by dividing income available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflect the potential dilution of securities that could share in the earnings of an entity. Dilutive securities are not included in the weighted average number of shares when inclusion would be anti-dilutive. Due to the net losses for the periods ended March 31, 2013 and 2012, basic and diluted loss per common share were the same, as the effect of potentially dilutive securities would have been anti-dilutive.

As of March 31, 2013, there were total shares of 21,345,808 issuable upon conversion of notes payable, exercise of warrants and vested options that were not included in the earnings per share calculation as they were anti-dilutive.

Reclassification

Certain items in the 2012 financial statement presentation have been reclassified to conform to the 2013 presentation. Such reclassifications have no effect on previously reported net (loss).

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Notes Payable to Former Officer - Notes payable to former officer (Details) (2.00% Note Payable, USD $)	Mar. 01, 2021
2.00% Note Payable
Note Payable, interest due at maturity, unsecured	$ 47,520

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Convertible Notes Payable to Related Parties (Details Narrative) (USD $)	3 Months Ended
	Mar. 31, 2013	Dec. 31, 2012	Feb. 22, 2013	Jan. 18, 2013	Dec. 20, 2012	Sep. 30, 2012	Aug. 15, 2012	Dec. 22, 2011
Debt Disclosure [Abstract]
Additional cash borrowed from Stockbridge Enterprises, L.P.	$ 706,000		$ 40,000	$ 60,000	$ 606,000
Original note amount	500,000		1,166,000	1,106,000	500,000
Increased note amount	1,206,000		1,206,000	1,166,000	1,106,000
Accrued interest on promissory note					45,369
Common stock, per share							$ 0.10
Promissory note						119,500	121,000
Interest rate							12.00%
Common stock purchased by issued warrant			600,000	600,000	5,000,000			125,464
Common stock purchased by issued warrant, per share			$ 0.25	$ 0.25	$ 0.50			$ 0.75
Issued additional common stock			250,000	250,000	2,000,000
Value of shares issued for the sixth allonge, per share					$ 0.10
Debt discount			25,000		200,000
Debt discount expense	64,286	7,143
Debt discount expense (b)	$ 5,548
Issued warrants					5,000,000
Issued warrants, original exercise price					$ 0.50
Issued warrants, adjusted exercise price					$ 0.25
Value of shares issued for the seventh and eighth allonges, per share			$ 0.10

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Going Concern

3 Months Ended

Mar. 31, 2013

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Going Concern

2. Going Concern

The Company has incurred losses since inception and requires additional funds for future operating activities. The Company’s selling activity has not yet reached a level of revenue sufficient to fund its operating activities. These factors create an uncertainty as to how the Company will fund its operations and maintain sufficient cash flow to operate as a going concern.

In response to these financial difficulties, management is continuing to pursue financing from various sources, including private placements from investors and institutions. In addition, the Company has introduced an expanded product line and has had positive response to the product from a number of large potential customers. Management believes these efforts will contribute toward funding the Company’s activities until sufficient revenue can be earned from future operations. Management believes these combined efforts, if successful, will be sufficient to meet its working capital needs and its currently anticipated expenditure levels for the next year.

The Company’s ability to meet its cash requirements in the next year is dependent upon obtaining this financing and achieving improved sales level. If this is not achieved, the Company may be unable to obtain sufficient cash flow to fund its operations and obligations, and therefore, may be unable to continue as a going concern. The accompanying financial statements have been prepared on a going concern basis, and accordingly, do not include any adjustments relating to the recoverability and classification of recorded asset amounts; nor do they include adjustments to the amounts and classification of liabilities that might be necessary should the Company be unable to continue operations or be required to sell its assets.

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BALANCE SHEETS (Parenthetical) (USD $)	Mar. 31, 2013	Sep. 30, 2012
Statement of Financial Position [Abstract]
Common stock, par value	$ 0.0001	$ 0.0001
Common stock, shares authorized	200,000,000	200,000,000
Common stock, shares issued	34,585,477	30,180,979
Common stock, shares outstanding	34,585,477	30,180,979

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Notes Payable to Former Officer (Tables)

3 Months Ended

Mar. 31, 2013

Receivables [Abstract]

Notes payable to former officer

2.00% note payable, due March 1, 2021, interest due at maturity, unsecured $ 47,520

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Document and Entity Information	3 Months Ended
	Mar. 31, 2013	May 09, 2013
Document And Entity Information
Entity Registrant Name	AIRWARE LABS CORP.
Entity Central Index Key	0001500123
Document Type	10-Q
Document Period End Date	Mar. 31, 2013
Amendment Flag	false
Current Fiscal Year End Date	--09-30
Is Entity a Well-known Seasoned Issuer?	No
Is Entity a Voluntary Filer?	No
Is Entity's Reporting Status Current?	Yes
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		35,970,477
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2013

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Convertible Notes Payable to Related Parties (Tables)

3 Months Ended

Mar. 31, 2013

Debt Disclosure [Abstract]

Convertible notes payable to related parties

12% note payable net of unamortized debt discount of $173,023, due September 30, 2013, convertible to common stock at $.10 per share, interest payments are due monthly.  Debt is secured by substantially all of the assets of the Company	$	1,032,977
8.00 % note payable due February 28, 2014, convertible to common stock at $.50 per share, interest payments are due at maturity, unsecured		5,000
8.00 % note payable due August 26, 2012, convertible to common stock at $.50 per share, interest payments are due at maturity, unsecured		20,000
6.50% note payable, due May 2, 2013 convertible to common stock at $2.00 per share, interest payment is due at maturity, unsecured		145,000
		1,202,977
Less current portion		(1,202,977	)
	$	—

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STATEMENTS OF OPERATIONS (Unaudited) (USD $)	3 Months Ended		6 Months Ended
	Mar. 31, 2013	Mar. 31, 2012	Mar. 31, 2013	Mar. 31, 2012
Income Statement [Abstract]
Revenues, net	$ 119,616	$ 13,788	$ 198,814	$ 25,644
Cost of products sold	45,474	5,386	93,003	12,545
Gross profit	74,142	8,402	105,811	13,099
Operating expenses
General and administrative	330,480	2,166,678	611,711	3,521,511
Sales and marketing	71,922	54,099	115,878	75,765
Total expenses	402,402	2,220,777	727,589	3,597,276
(Loss) from operations	(328,260)	(2,212,375)	(621,778)	(3,584,177)
Other income (expense)
Interest income		748		1,244
Induced note conversion expense			(9,300)
Interest expense	(118,848)	(58,458)	(200,661)	(111,898)
Total other income (expense)	(118,848)	(57,710)	(209,961)	(110,654)
(Loss) before income taxes	(447,108)	(2,270,085)	(831,739)	(3,694,831)
Income tax expense
Net (loss)	$ (447,108)	$ (2,270,085)	$ (831,739)	$ (3,694,831)
Basic and diluted net (loss) per common share	$ (0.01)	$ (0.14)	$ (0.03)	$ (0.26)
Basic and diluted weighted average common shares outstanding	33,231,681	16,722,214	31,874,811	14,227,527

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Commitments and Contingencies

3 Months Ended

Mar. 31, 2013

Commitments and Contingencies

Commitments and Contingencies

7. Commitments and Contingencies

The Company has agreed to indemnify its officers and directors for certain events or occurrences that may arise as a result of the officers or director serving in such capacity. The term of the indemnification period is for the officer’s or director’s lifetime. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited.

The Company enters into indemnification provisions under its agreements with other companies in its ordinary course of business, typically with business partners, customers, landlords, lenders and lessors. Under these provisions, the Company generally indemnifies and holds harmless the indemnified party for losses suffered or incurred by the indemnified party as a result of the Company’s activities or, in some cases, as a result of the indemnified party’s activities under the agreement. The maximum potential amount of future payments the Company could be required to make under these indemnification provisions is unlimited.

The Company has not incurred material costs to defend lawsuits or settle claims related to these indemnification agreements. As a result, the Company believes the estimated fair value of these agreements is minimal. Accordingly, the Company has no liabilities recorded for these agreements as of March 31, 2013.

On November 7, 2011, the Company was named as a defendant in a lawsuit alleging a default on a note payable of $50,000 plus accrued interest. The note and accrued interest are reflected in the Company’s Balance Sheet as of March 31, 2013. The Company is working towards settling the litigation.

On December 22, 2011, the Company entered into a distribution agreement that provides for the issuance of common stock warrants, with an expiration date of 3 years, for the purchase of the Company’s common stock in an amount equal to 15% of the total products purchased by the distributor from the Company at the invoice price against the previous year’s purchases of paid invoices. The warrant price will be equal to the closing price of Airware Labs Corp.’s stock price at the anniversary date of the agreement. As noted in Stockholders’ Deficit Footnote 8, per this agreement the Company issued a three-year warrant to purchase 125,464 shares at $.75.

On December 27, 2011, the Company was named as a defendant in a lawsuit alleging a default on a two notes payable totaling $75,000 plus accrued interest. Ultimately, a judgment was entered against the Company as a result of this lawsuit. The Company has entered into a payment plan. The notes and accrued interest are reflected in the Company’s Balance Sheet as of March 31, 2013.

The Company is in default on two notes payable totaling $25,000. The Company has been in communication with the note holders to request extensions or conversion.

On July 26, 2012, the Company was named as a Defendant in a lawsuit alleging patent infringement. The Company believes the lawsuit is without merit and is vigorously defending the action. The case has been transferred from New York to Arizona. A scheduling order has been put in place, discovery has begun, but no substantive issues have been decided.

The Company sells the majority of its products through major distributors. The Company warrants to the distributors that the product will be free from defects in material and workmanship. The Company has determined its product warranty to be immaterial at March 31, 2013. The likelihood that the Company’s estimate of the accrued product warranty claims will materially change in the near term is considered remote.

On December 1, 2012, the Company entered into a consulting agreement with Accounting & Finance Personnel for staffing and management consulting services. The monthly fee for these services is $1,861 for a term of one year.

On February 25, 2013, the Company entered into an engagement agreement with Bridgewater Capital Corporation (Bridgewater) to act as placement agent and financial advisor. One objective of the agreement is a capital raise through equity or debt financing, of up to $5 million. The proceeds from a capital raise will be used primarily for marketing the Company’s products with the intended result of increasing sales through our distributors and retailers.

On March 28, 2013, the Company entered into an advisory agreement with Bridgewater Capital Corporation (Bridgewater). Bridgewater will assist the Company with strategic direction and partnerships as well as identifying potential acquisition opportunities. This agreement calls for payment of one million shares of stock over a six month period. This stock is distributed monthly based on performance and the agreement is cancelable at any time with no additional shares due.

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Related Party Transactions

3 Months Ended

Mar. 31, 2013

Related Party Transactions [Abstract]

Related Party Transactions

6. Related Party Transactions

As detailed in Notes Payable to Former Officer Footnote 4, the Company has a note payable to its former President and Executive Chairman, David Dolezal.

As discussed in Convertible Notes Payable to Related Parties Footnote 5, the Company has entered into three additional allonges to a convertible secured bridge note with Stockbridge Enterprises, L.P. to borrow an additional $706,000 and increase the original note amount from $500,000 to $1,206,000.

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Convertible Notes Payable to Related Parties - Convertible notes payable to related parties (Details) (USD $)	Sep. 30, 2013 12% Note Payable	Feb. 28, 2014 8.00% Note Payable	Aug. 26, 2012 8.00% Note Payable	May 02, 2013 6.50% Note Payable
Note payable to related parties	$ 1,032,977	$ 5,000	$ 20,000	$ 145,000
Note payable to related parties, per share	$ 0.10	$ 0.50	$ 0.50	$ 2.00
Total note payable to related parties	145,000	145,000	145,000	145,000
Less current portion	$ 1,202,977	$ 1,202,977	$ 1,202,977	$ 1,202,977
Net note payable to related parties

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Stockholders' Deficit (Tables)

3 Months Ended

Mar. 31, 2013

Equity [Abstract]

Balance of warrants outstanding for purchase of the Company's common stock

	Common Shares Issuable Upon Exercise of Warrants	Exercise Price of Warrants	Date Issued	Expiration Date
Issued under a Unit Purchase Agreement	535,000	$1.50	5/18/2010	5/17/2013
Issued under a private placement memorandum	250,000	$1.00	4/26/2011	4/25/2014
Issued under a private placement memorandum	50,000	$1.00	4/27/2011	4/26/2014
Issued under a private placement memorandum	25,000	$1.00	4/28/2011	4/27/2014
Issued under a private placement memorandum	200,000	$1.00	5/03/2011	5/02/2014
Issued for financing expense	20,000	$0.25	3/08/2012	3/07/2017
Issued under a consultant settlement agreement	40,000	$0.50	4/30/2012	4/29/2015
Issued as part of convertible agreement (1)	5,000,000	$0.25	12/20/2012	12/19/2017
Issued per distribution agreement (2)	125,464	$0.75	12/22/2012	12/21/2015
Issued as part of convertible agreement (3)	600,000	$0.25	1/18/2013	1/17/2018
Issued as part of convertible agreement (4)	600,000	$0.25	2/22/2013	2/21/2018
Balance of Warrants at March 31, 2013	7,445,464

Options outstanding

	Common Shares Issuable Upon Exercise of Options	Exercise Price of Options	Date Issued	Expiration Date
Options granted to former officer & two former senior advisory board members	775,000	$0.50	4/20/2011	4/19/2021
Options granted to former employee and three consultants	700,000	$0.50	7/19/2011	7/18/2016
Options granted under a consultant agreement settlement	52,844	$0.25	4/30/2012	4/29/2022
Options granted to Board member (1)	150,000	$0.30	1/25/2013	1/24/2023
Options granted to employee and two consultants (2)	1,550,000	$0.30	1/25/2013	1/24/2023
Balance of Options at March 31, 2013	3,227,844

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Summary of Significant Accounting Policies and Use of Estimates (Policies)

3 Months Ended

Mar. 31, 2013

Accounting Policies [Abstract]

Basis of Presentation and Organization

Basis of Presentation and Organization

Airware Labs Corp. (“Airware Labs” or the “Company”), formerly Crown Dynamics Corp., is a Delaware corporation. The Company was incorporated under the laws of the State of Delaware on June 15, 2010. On October 26, 2012, the Articles of Incorporation were amended to reflect a name change to Airware Labs Corp. On November 13, 2012, the Board approved a change in fiscal year end from December 31 to September 30.

On March 20, 2012, through an equity exchange agreement, the Company acquired all of the issued and outstanding stock of Airware Holdings, Inc., a Nevada corporation (“Airware”), in exchange for shares of the Company’s newly-issued common stock. Airware Holdings, Inc. was formed in February 2010 and is a non-prescription medical products company. The principal business purpose of the Company is to develop, manufacture and distribute nasal breathing devices. The Company targets prospective customers such as compassionate sleeping partners, individuals with allergies and athletic enthusiasts throughout the United States and the United Kingdom.

The share exchange has been accounted for as a recapitalization reverse merger between Airware Holdings, Inc. and Airware Labs Corp. Airware Holdings, Inc. is the accounting acquirer and Airware Labs Corp. is the accounting acquiree. Consequently, the historical pre-merger financial statements of Airware Holdings, Inc. are now those of the Company. The par value of the stock of Airware Holdings, Inc. of $.001 per share has been adjusted to that of the Company of $.0001 per share with the par value difference charged to paid-in capital. The pre-merger deficit is that of Airware Holdings, Inc. Airware Labs Corp’s pre-merger accumulated deficit has been charged to paid-in capital. The pre-merger Airware Holdings, Inc. outstanding shares have been adjusted to reflect the exchange. The pre-merger outstanding shares of Airware Labs Corp. were included in the issued and outstanding shares of the Company at the date of the merger.

Accounting Estimates

Accounting Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could materially differ from those estimates. Significant estimates of the Company include accounting for depreciation and amortization, recoverability of intangible assets, deferred income taxes, accruals and contingencies, the imputed interest rate of the note payable to related party and the fair value of common stock, and the estimated fair value of stock options and warrants.

Unaudited Interim Financial Statements

Unaudited Interim Financial Statements

The interim financial statements of the Company as of March 31, 2013 and 2012, and for the periods then ended, are unaudited. However, in the opinion of management, the interim financial statements include all adjustments, consisting of only normal recurring adjustments, necessary to present fairly the Company’s financial position as of March 31, 2013 and 2012 and the results of its operations and its cash flows for the periods then ended. These results are not necessarily indicative of the results expected for the fiscal year ended September 30, 2013. The accompanying financial statements and notes thereto do not reflect all disclosures required under accounting principles generally accepted in the United States (U.S. “GAAP”).

Earnings per Share

Earnings per Share

Basic earnings per share does not include dilution and is computed by dividing income available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflect the potential dilution of securities that could share in the earnings of an entity. Dilutive securities are not included in the weighted average number of shares when inclusion would be anti-dilutive. Due to the net losses for the periods ended March 31, 2013 and 2012, basic and diluted loss per common share were the same, as the effect of potentially dilutive securities would have been anti-dilutive.

As of March 31, 2013, there were total shares of 21,345,808 issuable upon conversion of notes payable, exercise of warrants and vested options that were not included in the earnings per share calculation as they were anti-dilutive.

Reclassification

Reclassification

Certain items in the 2012 financial statement presentation have been reclassified to conform to the 2013 presentation. Such reclassifications have no effect on previously reported net (loss).

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Stockholders' Deficit

3 Months Ended

Mar. 31, 2013

Equity [Abstract]

Stockholders' Deficit

8. Stockholders’ Deficit

On October 15, 2012, the Company issued 10,000 shares to Stockbridge Enterprises, L.P. as a condition of a promissory note dated August 15, 2012.

On December 7, 2012, a holder of a delinquent $10,000 note elected to convert to stock at a preferred rate of $.50 per share, rather than the post-split amount of $1.00 per share stated in her original note. On March 22, 2013, the company issued an additional 2,788 shares in payment of accrued interest.

On December 7, 2012, the Company issued 39,600 shares of stock for services performed in the fiscal year ended September 30, 2012. These shares were listed as an obligation to issue equity as of September 30, 2012 and the expense for the services was recognized in the fiscal year ended September 30, 2012.

Between December 7, 2012 and March 26, 2013, the Company sold 915,000 shares for $228,750 through a private placement.

As further detailed in Convertible Notes Payable to Related Parties Footnote 5, on December 20, 2012, the Company issued 2,453,690 shares of stock to Stockbridge as part of the terms of an allonge to a convertible secured bridge note.

On February 20, 2013, the Company issued 40,000 shares of stock for the payment of legal services.

As further detailed in Convertible Notes Payable to Related Parties Footnote 5, on February 20, 2013, the Company issued 250,000 shares to Stockbridge Enterprises, L.P. (Stockbridge) as a condition of a seventh allonge to a convertible secured bridge note. On March 22, 2013, the Company issued another 250,000 shares to Stockbridge as a condition of an eighth allonge to a convertible secured bridge note. Additionally, on that same date the Company issued 423,420 shares to Stockbridge in payment of accrued interest on the convertible secured bridge note.

Warrants

The balance of warrants outstanding for purchase of the Company’s common stock as of March 31, 2013 is as follows:

	Common Shares Issuable Upon Exercise of Warrants	Exercise Price of Warrants	Date Issued	Expiration Date
Issued under a Unit Purchase Agreement	535,000	$1.50	5/18/2010	5/17/2013
Issued under a private placement memorandum	250,000	$1.00	4/26/2011	4/25/2014
Issued under a private placement memorandum	50,000	$1.00	4/27/2011	4/26/2014
Issued under a private placement memorandum	25,000	$1.00	4/28/2011	4/27/2014
Issued under a private placement memorandum	200,000	$1.00	5/03/2011	5/02/2014
Issued for financing expense	20,000	$0.25	3/08/2012	3/07/2017
Issued under a consultant settlement agreement	40,000	$0.50	4/30/2012	4/29/2015
Issued as part of convertible agreement (1)	5,000,000	$0.25	12/20/2012	12/19/2017
Issued per distribution agreement (2)	125,464	$0.75	12/22/2012	12/21/2015
Issued as part of convertible agreement (3)	600,000	$0.25	1/18/2013	1/17/2018
Issued as part of convertible agreement (4)	600,000	$0.25	2/22/2013	2/21/2018
Balance of Warrants at March 31, 2013	7,445,464

(1) As noted in Related Party Transactions Footnote 6, on December 20, 2012, the Company issued a warrant for the purchase of 5,000,000 shares with an exercise price of $.50 and a term of five years. Per a later allonge, this exercise price was reduced from $.50 to $.25.

(2) As discussed in Commitments and Contingencies Footnote 7, on December 22, 2012, the Company issued a three-year warrant at $.75 to purchase 125,464 shares of stock per a distribution agreement.

(3) As noted in Related Party Transactions Footnote 6, on January 18, 2013, the Company issued a warrant for the purchase of 600,000 shares with an exercise price of $.25 and a term of five years.

(4) As noted in Related Party Transactions Footnote 6, on February 22, 2013, the Company issued a warrant for the purchase of 600,000 shares with an exercise price of $.25 and a term of five years.

Stock Options

The Company had the following options outstanding at March 31, 2013:

	Common Shares Issuable Upon Exercise of Options	Exercise Price of Options	Date Issued	Expiration Date
Options granted to former officer & two former senior advisory board members	775,000	$0.50	4/20/2011	4/19/2021
Options granted to former employee and three consultants	700,000	$0.50	7/19/2011	7/18/2016
Options granted under a consultant agreement settlement	52,844	$0.25	4/30/2012	4/29/2022
Options granted to Board member (1)	150,000	$0.30	1/25/2013	1/24/2023
Options granted to employee and two consultants (2)	1,550,000	$0.30	1/25/2013	1/24/2023
Balance of Options at March 31, 2013	3,227,844

(1) On January 25, 2013, the Company granted stock options to a Board member. These options are immediately vested, have an exercise price of $.30 and have a term of 10 years.

(2) On January 25, 2013, the Company granted stock options to an employee and two consultants. These options have an exercise price of $.30 and a term of 10 years. The options vest evenly over the next three years on the anniversary of the grant date, unless there is a change in corporate control, then the options vest immediately.

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Subsequent Events

3 Months Ended

Mar. 31, 2013

Subsequent Events [Abstract]

Subsequent Events

9. Subsequent Events

During April 2013, the Company sold an additional 585,000 shares for $146,250 through a private placement.

In April 2013, the Company filed an application with the Depository Trust Company (DTC). The Company is currently working through the eligibility process.

On April 8, 2013, the Company entered into an exclusive agency agreement with National United Trading and Investment FZ LLC. This is a performance-based agreement to develop new markets in the United Arab Emirates and other Middle Eastern markets of relevance.

On April 22, 2013, the Company entered into a consulting agreement with Mr. Charles Immel, an individual with extensive experience in the healthcare sector at the executive level. Mr. Immel has been engaged to develop and conduct a market assessment as well as pilot programs with healthcare professionals using the filtered line of products. This agreement is intended to quantify and develop a market in the healthcare sector to aid in the cross-protection of healthcare workers and ailing patients.

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Convertible Notes Payable (Tables)

3 Months Ended

Mar. 31, 2013

Debt Disclosure [Abstract]

Convertible notes payable

8.00% notes payable, due August 22, 2012, convertible to common stock at $.50 per share, interest payments are due at maturity, unsecured	$	5,000
6.50% note payable, due November 26, 2011, convertible to common stock at $2 per share, interest payments are due annually, unsecured		50,000
6.50% note payable, due date August 31, 2010, convertible to common stock at $10.00 per share, interest payments are due annually, unsecured		50,000
		105,000
Less current portion		(105,000	)
	$	—

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Convertible Notes Payable - Convertible notes payable (Details) (USD $)	Aug. 22, 2012 8.00% Notes Payable	Nov. 26, 2011 6.50% Notes Payable	Aug. 31, 2010 6.50% Notes Payable
Notes Payable	$ 5,000	$ 50,000	$ 50,000
Notes Payable, Per Share	$ 0.50	$ 2.00	$ 10.00
Total Notes Payable	105,000	105,000	105,000
Less Current Portion	(105,000)	(105,000)	(105,000)
Net Notes Payable

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Commitments and Contingencies (Details Narrative) (USD $)	Mar. 28, 2013	Feb. 25, 2013	Feb. 22, 2013	Jan. 18, 2013	Dec. 20, 2012	Dec. 01, 2012	Dec. 27, 2011	Dec. 22, 2011	Nov. 07, 2011
Commitments and Contingencies
Alleged default on note payable plus accrued interest							$ 75,000		$ 50,000
Common stock purchased by issued warrant			600,000	600,000	5,000,000			125,464
Common stock purchased by issued warrant, per share			$ 0.25	$ 0.25	$ 0.50			$ 0.75
Default on two notes payable							25,000
Staffing and management consulting services, monthly fee						1,861
Capital raise through equity or debt financial, maximum amount		$ 5,000,000
Shares of stock to be paid off	1,000,000

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CASH FLOWS (Unaudited) (USD $)	6 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Operating Activities:
Net (loss)	$ (831,739)	$ (3,694,831)
Adjustments to reconcile net (loss) to net cash (used in) operating activities:
Depreciation and amortization	27,702	36,489
Common stock issued obligated for services	10,000	3,045,587
Options and warrants issued for services	25,256	24,500
Interest expense from amortization of debt discount	80,041	48,372
Induced conversion expense	9,300
Stock issued for interest expense	89,106
Interest income on officer note receivable added to note balance		(1,151)
Changes in operating assets and liabilities:
Accounts receivable	475,086	(16,632)
Inventory	(101,482)	3,478
Prepaid expenses	99,918	10,000
Deposits	(5,000)
Accounts payable	4,947	23,880
Accrued interest	(27,707)	30,243
Accrued expenses	4,228	121,012
Net Cash (Used in) Operating Activities	(140,344)	(369,053)
Investing Activities:
Purchases of property and equipment	(35,534)	(37,000)
Notes receivable from related parties		(108,544)
Net Cash (Used In) Investing Activities	(35,534)	(145,544)
Financing Activities:
Stock issued for cash	228,750	5,000
Proceeds from convertible notes payable	585,000	110,000
Repayment of convertible notes payable	(400,000)
Proceeds from notes payable		37,500
Proceeds from factored accounts receivable	6,448
Repayment of factored accounts receivable note	(497,872)
Proceeds from exercise of warrants		325,000
Net Cash Provided by Financing Activities	262,326	477,500
Net (Decrease) Increase in Cash	86,448	(37,097)
Cash - Beginning of Year	1,400	192,017
Cash - End of Year	87,848	154,920
Interest paid in cash	46,986	30,000
Non-cash investing and financing activities:
Stock issued for convertible notes	10,000	5,000
Debt discount on note payable, related party	15,000
Warrants issued to related party for convertible note modification	$ 1,564	$ 25,000

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Convertible Notes Payable to Related Parties

3 Months Ended

Mar. 31, 2013

Debt Disclosure [Abstract]

Convertible Notes Payable to Related Parties

5. Convertible Notes Payable to Related Parties

Convertible notes payable to related parties consist of the following:

12% note payable net of unamortized debt discount of $173,023, due September 30, 2013, convertible to common stock at $.10 per share, interest payments are due monthly.  Debt is secured by substantially all of the assets of the Company	$	1,032,977
8.00 % note payable due February 28, 2014, convertible to common stock at $.50 per share, interest payments are due at maturity, unsecured		5,000
8.00 % note payable due August 26, 2012, convertible to common stock at $.50 per share, interest payments are due at maturity, unsecured		20,000
6.50% note payable, due May 2, 2013 convertible to common stock at $2.00 per share, interest payment is due at maturity, unsecured		145,000
		1,202,977
Less current portion		(1,202,977	)
	$	—

On December 20, 2012 the Company entered into a sixth allonge to a convertible secured bridge note with Stockbridge Enterprises, L.P. (Stockbridge) to borrow an additional $606,000 and increase the original note amount from $500,000 to $1,106,000. As a term of this agreement, the Company paid $45,369 of accrued interest on the promissory note dated August 15, 2012 in common stock at $.10 per share. This allonge effectively rolls the August 15, 2012 promissory note for $121,000 into the bridge note, replacing the 10% monthly rate with the 12% per annum interest rate. Additionally, the Company issued a warrant exercisable to purchase 5,000,000 shares of common stock of the Company at $.50 per share for a term of five years. The Company also issued 2,000,000 shares of common stock.

For accounting purposes, the Company has valued the shares issued for the sixth allonge at $.10 per share, resulting in a debt discount of $200,000 to be amortized over the remainder of the loan period. For the quarters ended March 31, 2013 and December 31, 2012, this resulted in debt discount expense of $64,286 and $7,143, respectively.

On January 18, 2013 the Company entered into a seventh allonge to a convertible secured bridge note with Stockbridge to borrow an additional $60,000 and increase the note amount from $1,106,000 to $1,166,000. As a term of this agreement, the Company issued a warrant exercisable to purchase 600,000 shares of common stock of the Company at $.25 per share for a term of five years. Additionally, the exercise price of the 5,000,000 warrants issued on December 20, 2012 changed from $.50 to $.25. The Company also issued 250,000 shares of common stock.

On February 22, 2013 the Company entered into an eighth allonge to a convertible secured bridge note with Stockbridge to borrow an additional $40,000 and increase the note amount from $1,166,000 to $1,206,000. As a term of this agreement, the Company issued a warrant exercisable to purchase 600,000 shares of common stock of the Company at $.25 per share for a term of five years. The Company also issued 250,000 shares of common stock.

For accounting purposes, the Company has valued the shares issued for the seventh and eighth allonges at $.10 per share, resulting in a debt discount of $25,000 to be amortized over the remainder of the loan period. For the quarter ended March 31, 2013, this resulted in debt discount expense of $5,548.

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Stockholders' Deficit - Balance of warrants outstanding for purchase of the Company's common stock (Details) (USD $)	Mar. 31, 2013
Common Shares Issuable Upon Exercise of Warrants
Issued under a Unit Purchase Agreement (Issued: 5/18/2010, Expires: 5/17/2013)	535,000
Issued under a private placement memorandum (Issued: 4/26/2011, Expires: 4/25/2014)	250,000
Issued under a private placement memorandum (Issued: 4/27/2011, Expires: 4/26/2014)	50,000
Issued under a private placement memorandum (Issued: 4/28/2011, Expires: 4/27/2014)	25,000
Issued under a private placement memorandum (Issued: 5/03/2011, Expires: 5/02/2014)	200,000
Issued for financing expense (Issued: 3/08/2012, Expires: 3/07/2017)	20,000
Issued under a consultant settlement agreement (Issued: 4/30/2012, Expires: 4/29/2015)	40,000
Issued as part of convertible agreement (Issued: 12/20/2012, Expires: 12/19/2017)	5,000,000
Issued per distribution agreement (Issued: 12/22/2012, Expires: 12/21/2017)	125,464
Issued as part of convertible agreement (Issued: 1/18/2013, Expires: 1/17/2018)	600,000
Issued as part of convertible agreement (Issued: 2/22/2013, Expires: 2/21/2018)	600,000
Balance of Warrants	7,445,464
Exercise Price of Warrants
Issued under a Unit Purchase Agreement (Issued: 5/18/2010, Expires: 5/17/2013), Per Share	1.50
Issued under a private placement memorandum (Issued: 4/26/2011, Expires: 4/25/2014), Per Share	1.00
Issued under a private placement memorandum (Issued: 4/27/2011, Expires: 4/26/2014), Per Share	1.00
Issued under a private placement memorandum (Issued: 4/28/2011, Expires: 4/27/2014), Per Share	1.00
Issued under a private placement memorandum (Issued: 5/03/2011, Expires: 5/02/2014), Per Share	1.00
Issued for financing expense (Issued: 3/08/2012, Expires: 3/07/2017), Per Share	0.25
Issued under a consultant settlement agreement (Issued: 4/30/2012, Expires: 4/29/2015), Per Share	0.50
Issued as part of convertible agreement (Issued: 12/20/2012, Expires: 12/19/2017), Per Share	0.25
Issued per distribution agreement (Issued: 12/22/2012, Expires: 12/21/2017), Per Share	0.75
Issued as part of convertible agreement (Issued: 1/18/2013, Expires: 1/17/2018), Per Share	0.25
Issued as part of convertible agreement (Issued: 2/22/2013, Expires: 2/21/2018), Per Share	0.25

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Summary of Significant Accounting Policies and Use of Estimates (Details Narrative) (USD $)	Mar. 31, 2013	Sep. 30, 2012	Mar. 31, 2012
Accounting Policies [Abstract]
Airware Holdings, Inc. stock, par value			$ 0.001
Adjustment of par value for Airware Holdings, Inc. stock	$ 0.0001	$ 0.0001	$ 0.0001
Total shares issuable upon conversion of notes payable	21,345,808