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 June 30, 2014

☐ 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.)

7377 E Doubletree Ranch Rd., Suite 260

Scottsdale, AZ 85258

(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 August 14, 2014, there were 60,991,306 shares of the registrant’s $0.0001 par value common stock issued and outstanding.

AIRWARE LABS CORP. AND SUBSIDIARY

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	12
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	14
ITEM 4.	CONTROLS AND PROCEDURES	14
PART II.	OTHER INFORMATION
ITEM 1.	LEGAL PROCEEDINGS	15
ITEM 1A.	RISK FACTORS	15
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	16
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	16
ITEM 4.	MINE SAFETY DISCLOSURES	16
ITEM 5.	OTHER INFORMATION	16
ITEM 6.	EXHIBITS	16

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 Consolidated Balance Sheet as of June 30, 2014 and Audited Consolidated Balance Sheet as of September 30, 2013	F-2
Unaudited Consolidated Statements of Operations for the Three and Nine Months Ended June 30, 2014 and 2013	F-3
Unaudited Consolidated Statements of Cash Flows for the Nine Months Ended June 30, 2014 and 2013	F-4
Notes to Condensed Financial Statements Unaudited	F-5

F-1

AIRWARE LABS CORP. AND SUBSIDIARY
(FORMERLY CROWN DYNAMICS CORP.)
CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 2014 AND SEPTEMBER 30, 2013
		As of			As of
		June 30,			September 30,
		2014			2013
		(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents	$	77,853		$	19,942
Accounts receivable		29,975			35,019
Inventory		50,051			51,423
Deposits		26,000			—
Prepaid expenses		31,790			10,690
Total current assets		215,669			117,074
Other Assets:
Property and equipment, net		11,603			31,619
Intangible assets, net		265,279			291,072
Deposits		2,387			2,400
Investment in Breathe Active, LLC		290			290
Total Assets	$	495,228		$	442,455
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
Current Liabilities:
Accounts payable	$	1,654,768		$	1,868,205
Accrued interest - related parties		25,580			12,793
Accrued interest		6,151			6,441
Accrued expenses		46,708			18,554
Customer deposit		—			—
Notes payable		—			18,178
Convertible notes payable - current portion		38,896			32,773
Convertible notes payable to related parties - current portion, net of discount		20,000			25,000
Total current liabilities		1,792,103			1,981,944
Accrued interest to related parties		74			1,267
Notes payable to former officer		47,500			47,520
Convertible notes payable, less current portion		—			22,227
Convertible notes payable to related parties, less current portion, net of discount		964,544			228,782
Warrant liability		—			1,098,566
Total liabilities		2,804,221			3,380,306
Commitments and Contingencies
Stockholders' (Deficit):
Common stock, par value $.0001 per share, 200,000,000 and 200,000,000 shares authorized; 59,876,868 and 38,129,100 shares issued and outstanding at June 30, 2014 and September 30, 2013, respectively		5,988			3,813
Additional paid-in capital		29,079,523			12,071,023
Accumulated (deficit)		(31,394,504	)		(15,012,687	)
Total stockholders' (deficit)		(2,308,993	)		(2,937,851	)
Total Liabilities and Stockholders' (Deficit)	$	495,228		$	442,455

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

F-2

AIRWARE LABS CORP. AND SUBSIDIARY
(FORMERLY CROWN DYNAMICS CORP.)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED JUNE 30, 2014 AND 2013
(Unaudited)
	Three Months Ended						Nine Months Ended
	June 30,			June 30,			June 30,			June 30,
	2014			2013			2014			2013
Revenues, net	$	113,365		$	673		$	168,705		$	199,487
Cost of products sold		57,970			3,481			101,577			96,484
Gross profit		55,395			(2,808	)		67,128			103,003
Operating expenses
General and administrative		220,277			470,689			728,470			1,082,400
Sales and marketing		69,610			110,806			153,132			226,684
Total expenses		289,887			581,495			881,602			1,309,084
(Loss) from operations		(234,492	)		(584,303	)		(814,474	)		(1,206,081	)
Other income (expense)
Interest income		—			—			289			—
Forgiveness of debt		—			—			20			—
Induced note conversion expense		—			—			(2,697	)		(9,300	)
Interest expense		(425,204	)		(135,229	)		(943,521	)		(335,890	)
Valuation (loss) - common stock warrants		—			—			(707,400	)		—
Loss on warrants exercised		—			—			(13,914,034	)		—
Total other income (expense)		(425,204	)		(135,229	)		(15,567,343	)		(345,190	)
(Loss) before income taxes		(659,696	)		(719,532	)		(16,381,817	)		(1,551,271	)
Income tax expense		—			—			—			—
Net (loss)	$	(659,696	)	$	(719,532	)	$	(16,381,817	)	$	(1,551,271	)
Basic and diluted net (loss) per common share	$	(0.01	)	$	(0.02	)	$	(0.36	)	$	(0.05	)
Basic and diluted weighted average common shares outstanding		59,124,158			36,157,611			45,896,020			33,301,411

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

F-3

AIRWARE LABS CORP. AND SUBSIDIARY
(FORMERLY CROWN DYNAMICS CORP.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED JUNE 30, 2014 AND 2013
(Unaudited)
	Nine Months Ended
	June 30,			June 30,
	2014			2013
Operating Activities:
Net (loss)	$	(16,381,817	)	$	(1,551,271	)
Adjustments to reconcile net (loss) to net cash (used in) operating activities:
Depreciation and amortization		45,808			41,526
Common stock issued/obligated for services		411,408			218,700
Options and warrants issued for services		43,773			41,957
Interest expense from amortization of debt discount		735,763			166,553
Induced conversion expense		2,697			9,300
Stock issued for interest expense		180,059			113,226
Forgiveness of debt		(20	)		—
Loss on warrants exercised		13,914,034			—
Valuation (gain)/expense - common stock warrants		707,400			—
Changes in operating assets and liabilities:
Accounts receivable		5,044			587,883
Inventory		1,372			(48,428	)
Prepaid expenses		(21,100	)		31,238
Deposits		(25,987	)		(5,000	)
Accounts payable		(213,437	)		16,240
Accrued interest		11,304			(17,966	)
Accrued expenses		28,154			72,458
Net Cash Provided by (Used in) Operating Activities		(555,545	)		(323,584	)
Investing Activities:
Purchases of property and equipment		—			(35,534	)
Net Cash (Used in) Investing Activities		—			(35,534	)
Financing Activities:
Stock issued for cash		—			433,750
Proceeds from convertible notes payable		1,252,000			585,000
Repayment of convertible notes payable		(16,104	)		(400,000	)
Repayment of notes payable		(18,178	)		—
Options re-purchased		(2,500	)		—
Stock re-purchased		(601,762	)		—
Proceeds from factored accounts receivable		—			346,448
Repayment of factored accounts receivable note		—			(578,381	)
Net Cash Provided by (Used in) Financing Activities		613,456			386,817
Net (Decrease) Increase in Cash		57,911			27,699
Cash - Beginning of Period		19,942			1,400
Cash - End of Period	$	77,853		$	29,099
Supplemental disclosure of cash flow information:
Interest paid in cash	$	1,718		$	55,599
Non-cash investing and financing activities:
Stock issued for convertible notes		5,000			10,000
Debt discount on note payable, related party		—			—
Warrants issued to related party for convertible note modification		—			1,564

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

F-4

AIRWARE LABS CORP. AND SUBSIDIARY

(FORMERLY CROWN DYNAMICS CORP.)

NOTES TO CONSOLIDATED 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, Canada and Europe.

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.

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary. Inter-company balances and transactions have been eliminated upon consolidation.

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 consolidated financial statements of the Company as of June 30, 2014 and 2013, 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 June 30, 2014 and the results of its operations and its cash flows for the periods ended June 30, 2014 and 2013. These results are not necessarily indicative of the results expected for the fiscal year ended September 30, 2014. 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”).

F-5

Net Loss 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 June 30, 2014 and 2013, basic and diluted loss per common share were the same, as the effect of potentially dilutive securities would have been anti-dilutive.

As of June 30, 2014, there were total shares of 29,008,950 issuable upon conversion of notes payable, exercise of warrants and options that were not included in the earnings per share calculation as they were anti-dilutive.

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. Management believes these efforts will contribute toward funding the Company’s activities until sufficient revenue can be earned from future operations. In addition, the Company is seeking additional distribution partners in both domestic and foreign markets. 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 levels. 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. Terms amended in March 2013 to interest at 4.25%, with $4,000 monthly payments of principal and interest		33,896
		38,896
Less current portion		(38,896	)
	$	—

4. Notes Payable to Former Officer

Notes payable to former officer consists of the following:

0.27% note payable, due August 1, 2016, interest due at maturity, unsecured $ 47,500

On December 5, 2013, the Company entered into a revised promissory note with former officer David Dolezal calling for four equal payments to begin on November 1, 2015 and ending August 1, 2016. Interest was reduced from 2.0% to 0.27%.

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 $1,593,456, due September 30, 2015, 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	$	964,544
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
		984,544
Less current portion		(20,000	)
	$	964,544

On August 21, 2013, the Company entered into a ninth allonge to a convertible secured bridge note with Stockbridge Enterprises, L.P. (“Stockbridge”) which provided for up to $3,206,000 principal and a maturity date of September 30, 2015. As of June 30, 2014, the Company has borrowed $2,558,000 against this line of credit.

6. Loss on Warrants Exercised

On March 5, 2014, the Company issued 22,457,143 shares of stock to Stockbridge for the cashless exercise of all of their 26,200,000 outstanding warrants. This transaction resulted in a loss of $13,914,034.

7. 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.

On December 5, 2013, the Company entered into a share re-purchase agreement with former officer Mr. David Dolezal to buy back 7,567,622 shares of common stock held by Mr. Dolezal and entities under his control.  Other outside investors were granted the opportunity to participate in this purchase, with 1,550,000 shares being purchased directly from Mr. Dolezal by others, and 6,017,622 being re-purchased by the Company.  Upon completion of this transaction on December 17, 2013, Mr. Dolezal no longer has any ownership in the Company.

As discussed in Convertible Notes Payable to Related Parties Footnote 5, the Company has a convertible secured bridge note with Stockbridge. During the nine months ended June 30, 2014, the Company borrowed $1,252,000 against this note.

As noted in Stockholders’ Deficit Footnote 9 and Loss on Warrants Exercised Footnote 6, on March 5, 2014, the Company issued 22,457,143 shares of stock to Stockbridge for the cashless exercise of all of their 26,200,000 outstanding warrants.

F-7

8. 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 June 30, 2014.

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.

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 for $92,001 was entered against the Company as a result of this lawsuit. Per a later settlement agreement, the Company has been making monthly payments of $4,000 against this judgment with interest due on the remaining balance of 4.25% per annum. The notes and accrued interest are reflected in the Company’s Balance Sheet as of June 30, 2014.

The Company is in default on a convertible note payable totaling $5,000 and a convertible note payable to a related party totaling $20,000. The Company has attempted 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 believed the claims were without merit.  After the Company vigorously defended the action, the plaintiff moved to dismiss its own claims, and the Court entered judgment in the Company’s favor.  The Court also denied the Company’s request for reimbursement of its attorneys’ fees; the Company retains the right to appeal that decision.

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 July 16, 2013, the Company entered into a Severance Agreement with Jeffrey Rassas, the Company’s Chief Executive Officer pursuant to which Mr. Rassas will be entitled to the following severance benefits: (i) the Company shall pay to Mr. Rassas his base salary for a period of 12 months following termination without cause; (ii) Mr. Rassas shall be paid any earned and unpaid bonus due; and, (iii) and all unvested stock-based compensation held by Mr. Rassas shall vest as of the date of termination.

On November 5, 2013, the Company entered into an agreement with Ramirez Advisors Inter-National, LLC to serve as an advisor to the Company as it pertains to the possible manufacturing of various Company products in Mexico as well as possible business opportunities for Company products in the Mexican market.  Additionally, Ramirez Advisors Inter-National, LLC will use its best efforts to locate distributors in Mexico City for the Company's filtration product line given the high levels of pollution in this region.

On January 6, 2014, the Company entered into a license agreement with Eastar Industries, Co., pursuant to which the Company granted Eastar an exclusive license to sell its products in China for a term of five years in exchange for a royalty equal to 18% of gross profits generated by the sales of products in China. Additionally, the Company and Eastar agreed to establish a joint venture company in Hong Kong of Shanghai which will be assigned Eastar’s rights under the agreement and of which 18% of the joint venture will be owned by the Company.

On January 28, 2014, the Company entered into an agreement (the “Acorn Agreement”) with Acorn Management Partners, LLC (“Acorn”) to perform certain financial advisory, business development and professional relations services (the “Acorn Services”). Under the terms of the Acorn Agreement and in exchange for the performance of the Acorn Services by Acorn, the Company shall pay to Acorn an aggregate of $115,000 USD in cash plus a variable number of shares of the restricted common stock of the Company. The Acorn Agreement shall expire on January 27, 2015, unless terminated earlier in accordance with its terms.

On April 23, 2014, the Company entered into a product development agreement with Dan Pool of Designer Products. This agreement was modified on June 16, 2014. As compensation, the Company will pay $5,000 monthly, as well as issue stock options as the stock price hits certain benchmarks. Additionally, the Company will pay a monthly royalty of 5% of net sales of any products created by Dan Pool as inventor.

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 June 30, 2014. The likelihood that the Company’s estimate of the accrued product warranty claims will materially change in the near term is considered remote.

F-8

9. Stockholders’ Deficit

Common Stock

During the nine months ended June 30, 2014, the Company issued 3,585,175 shares of stock in payment of interest on the Stockbridge convertible note.

As further detailed in Related Party Transactions Footnote 7, on December 5, 2013, the Company entered into a share re-purchase agreement with former officer Mr. David Dolezal and re-purchased 6,017,622 shares of common stock held by Mr. Dolezal and entities under his control.

On January 21, 2014, the Company issued 102,916 shares of stock for the payment of consulting services. The shares were valued using the average closing price ($0.18) for the previous quarter.

As referenced in Commitments and Contingencies Footnote 8, on January 27, 2014, the Company issued 225,000 shares of stock for payment to Acorn Management Partners, LLC. The shares were valued using the closing price ($0.22) on the date the shares were issued with a 25% discount for the restricted trading.

On February 20, 2014, the Company issued 52,941 shares of stock for the payment of consulting services. The shares were valued using the closing price ($0.34) on the date the shares were issued.

On February 28, 2014, the Company issued 1,207,388 shares of stock to two vendors in satisfaction of accounts payable of $301,847.

On March 3, 2014, the Company issued 23,200 shares of stock for the conversion of a note payable to related party and interest.

On March 5, 2014, the Company issued shares of stock to Stockbridge as part of a warrant exercise. Stockbridge exercised 26,200,000 warrants to purchase stock.  They elected to use the cashless exercise formula, which resulted in the issuance of 22,457,143 shares of common stock of the Company.

On April 10, 2014, the Company issued 43,926 shares of stock for the payment of consulting services. The shares were valued using the average closing price ($0.34) for the previous quarter.

On April 10, 2014, the Company issued 38,465 shares of stock for the payment of consulting services. The shares were valued using the average closing price ($0.32) for the period of service.

On May 28, 2014, the Company issued 29,236 shares of stock for the payment of consulting services. The shares were valued using the average closing price ($0.29) for the period of service.

Warrants

The balance of warrants outstanding for purchase of the Company’s common stock as of June 30, 2014 is as follows:

	Common Shares Issuable Upon Exercise of Warrants		Exercise Price of Warrants		Date Issued		Expiration Date
Issued for financing expense		20,000	$	0.25		03/08/2012		03/07/2017
Issued under a consultant settlement agreement		40,000	$	0.50		04/30/2012		04/29/2015
Issued per distribution agreement		125,464	$	0.75		12/22/2012		12/21/2015
Issued under a private placement memorandum		140,000	$	0.40		06/25/2013		06/25/2015
Issued under a private placement memorandum		120,000	$	0.40		06/26/2013		06/26/2015
Issued per distribution agreement		172,028	$	0.14		12/22/2013		12/22/2016
Balance of Warrants at June 30, 2014		617,492

F-9

Stock Options

The Company had the following options outstanding at June 30, 2014:

	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		04/20/2011		04/19/2021
Options granted to former employee and three consultants		700,000		$	0.50		07/19/2011		07/18/2016
Options granted under a consultant settlement agreement		52,844		$	0.25		04/30/2012		04/29/2022
Options granted to Board member		150,000		$	0.30		01/25/2013		01/24/2023
Options granted to employee and two consultants		1,550,000		$	0.30		01/25/2013		01/24/2023
Options granted to medical advisory board member		250,000		$	0.26		05/20/2013		05/19/2016
Options granted to consultant		250,000		$	0.28		09/05/2013		09/04/2016
Options issued for investment in Breathe Active, LLC		500,000		$	0.25		09/28/2013		12/31/2014
Options issued for investment in Breathe Active, LLC		500,000		$	0.50		09/28/2013		12/31/2014
Options re-purchased by Company (1)		(200,000	)
Options granted to Board member (2)		150,000		$	0.11		10/04/2013		10/03/2023
Options granted to Officers (3)		433,333		$	0.11		10/04/2013		10/03/2023
Balance of Options at June 30, 2014		5,111,177

(1) On December 5, 2013, per an Agreement and Mutual Release of Claims with a former consultant, the Company paid $2,500 in return for the relinquishment of the consultant’s stock options.

(2) On October 4, 2013, the Company granted stock options to a Board member. These options are immediately vested, have an exercise price of $.11 and have a term of 10 years.

(3) On October 4, 2013, the Company granted stock options to two officers. These options have an exercise price of $.11 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.

10. Customer Rebates

As part of an agreement with its domestic distributor, the Company agreed to provide free product to assist in promotional efforts by the distributor. This free product would be recognized as credits on future orders as they are placed. During the nine months ended June 30, 2014, this resulted in $74,648 being recognized as customer credits against revenue and $14,238 in samples expense. No further credit remains to be granted per this agreement. Additionally, the Company agreed to an additional $27,341 in credits to help offset the distributor’s expenses related to product markdowns.

11. Subsequent Events

Subsequent to June 30, 2014, the Company borrowed an additional $150,000 against the convertible secured note with Stockbridge to fund marketing efforts. The total currently drawn on the note is $2,708,000.

On July 7, 2014, the Company sold 125,000 shares and 100,000 warrants for $25,000 through a private placement.

On July 23, 2014, the Company entered into an Asset Acquisition Agreement with Equity Earnings Corp. pursuant to which the Company will purchase a patent and related tooling and exclusive C serum formula in exchange for 300,000 shares of stock as well as a royalty interest of 5% of proceeds received from gross sales of related products.

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, 2013.

Results of Operations

Total revenue for the three months ended June 30, 2014 was $113,365, as compared to $673 for the three months ended June 30, 2013. Operating expenses in the quarter ended June 30, 2014 amounted to $289,887 as compared to $581,495 for the quarter ended June 30, 2013. The decrease in expenses is the result of a reduction in legal fees and consulting expenses.

Total revenue for the nine months ended June 30, 2014 was $168,705, as compared to $199,487 for the nine months ended June 30, 2013. Operating expenses for the nine months ended June 30, 2014 amounted to $881,602 as compared to $1,309,084 for the nine months ended June 30, 2013.

The net loss for the quarter ended June 30, 2014 was $659,696 as compared to $719,532 for the quarter ended June 30, 2013. This is due to reduced operating expenses offset by a significant increase in interest expense. The net loss for the nine months ended June 30, 2014 was $16,381,817 as compared to $1,551,271 for the nine months ended June 30, 2013.

Liquidity and Capital Resources

Our balance sheet as at June 30, 2014 reflects $77,853 in cash and cash equivalents as compared to $19,942 as at September 30, 2013. We intend to raise the balance of our cash requirements for the next 12 months from private placements or a registered public offering (either self-underwritten or through a broker-dealer). Additionally, we have the Stockbridge secured bridge note to draw from, which as of August 4, 2014 has an available balance of $498,000. 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 additional financing. There is no assurance that any additional financing will be available or if available, on terms that will be acceptable.

Cash Flow from Operating Activities

During the nine months ended June 30, 2014, the Company’s operating activities used $555,545 in cash as compared to $323,584 used by operating activities for the nine months ended June 30, 2013. The increase in cash used for operating activities is primarily due to payments towards accounts payable.

Cash Flow from Investing Activities

During the nine month periods ended June 30, 2014 and 2013, the Company used $0 and $35,534 respectively, in cash for investing activities. The decrease in cash used for investing activities is primarily due to there not being any purchases of fixed assets in the nine months ended June 30, 2014.

12

Cash Flow from Financing Activities

During the nine months ended June 30, 2014, the Company received $613,456 in cash from financing activities. This consisted of $1,217,718 in net financing from notes payable less $604,262 in payments for the re-purchase of common stock and options. This compares with $386,817 provided during the nine months ended June 30, 2013 which consisted of $185,000 in net financing from notes payable, $433,750 in proceeds from the issuance of stock for cash and ($231,933) in net repayments from factoring accounts payable and accounts receivable.

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.

13

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.

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 June 30, 2014, due to the material weaknesses resulting from controls not being 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.

14

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.

Other than those certain events as reported in our Annual Report on Form 10-K filed with the Commission on January 13, 2014, 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.

15

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

1. Quarterly Issuances:

On April 10, 2014, the Company issued 461,600 shares of restricted common stock as payment for interest on loans to the Company for March 2014, at a cost basis of $0.05 per share.

On April 10, 2014, the Company issued 43,926 restricted shares of common stock as payment for consulting services rendered to the Company, at a cost basis of $0.34 per share.

On April 10, 2014, the Company issued 38,465 restricted shares of common stock as payment for consulting services rendered to the Company, at a cost basis of $0.32 per share.

On May 15, 2014, the Company issued 470,267 shares of restricted common stock as payment for interest on loans to the Company for April 2014, at a cost basis of $0.05 per share.

On May 28, 2014, the Company issued a total of 29,236 restricted shares of common stock as payment for services rendered to the Company, at a cost basis of $0.29 per share.

On June 23, 2014, the Company issued 509,653 shares of restricted common stock as payment for interest on loans to the Company for May 2014, at a cost basis of $0.05 per share.

2. Subsequent Issuances:

On July 8, 2014, the Company issued 125,000 restricted shares of common stock to one investor at a cost basis of $0.20 per share pursuant to a Subscription Agreement dated July 2, 2014.

On July 17, 2014, the Company issued 75,000 restricted shares of common stock pursuant to a Settlement Agreement dated July 3, 2014, at a cost basis of NIL.

On July 17, 2014, the Company issued 511,600 shares of restricted common stock as payment for interest on loans to the Company for June 2014, at a cost basis of $0.05 per share.

On July 23, 2014, the Company issued a total of 90,017 restricted shares of common stock as payment for consulting services rendered to the Company, at a cost basis of $0.26 per share.

On July 23, 2014, the Company issued a total of 12,821 restricted shares of common stock as payment for consulting services rendered to the Company pursuant to a Consulting Agreement dated March 27, 2014, at a cost basis of $0.39 per share.

On August 4, 2014, the Company issued 300,000 shares of restricted common stock at a cost basis of $.20 per an Asset Acquisition Agreement dated July 23, 2014.

  ITEM 3.   DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

N/A.

ITEM 5. OTHER INFORMATION

As reported on our current report on Form 8-K filed on May 23, 2014, Dr. Lorrie Henderson resigned as Chief Operating Officer of Airware Labs Corp. (the “Company”) on May 21, 2014. The resignation was not the result of any disagreement with the Company on any matter relating to the Company’s operations, policies, or practices.

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.
10.04	Professional Relations and Consulting Agreement between Acorn Management Partners, LLC and Airware Labs Corp. dated January 28, 2014	Filed herewith.
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.

16

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: August 14, 2014	By:	/s/  Jeffrey Rassas
	Name:	Jeffrey Rassas
	Title:	Chief Executive Officer and Director
Date: August 14, 2014	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: August 14, 2014	By:	/s/  Jeffrey Rassas
	Name:	Jeffrey Rassas
	Title:	Chief Executive Officer and Director
Date: August 14, 2014	By:	/s/  Jessica Smith
	Name:	Jessica Smith
	Title:	Chief Accounting and Financial Officer

Date: August 14, 2014	By:	/s/  Ron Miller
	Name:	Ron Miller
	Title:	Director

17

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 June 30, 2014;

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: August 14, 2014
	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 June 30, 2014;

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.

Date: August 14, 2014	Airware Labs Corp.
	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 June 30, 2014, 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: August 14, 2014
	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 June 30, 2014, 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.

Date: August 14, 2014	Airware Labs Corp.
	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

Stockholders' Deficit (Details Narrative) (USD $)	0 Months Ended
	Mar. 04, 2014	Feb. 28, 2014	Jan. 27, 2014	Dec. 05, 2013
Equity [Abstract]
Stock repurchased in share re-purchase agreement with a former officer				6,017,622
Stock issued for payment to Acorn Management Partners, LLC			225,000
Stock issued for payment to Acorn Management Partners, LLC, closing price on the date shares were issued with 25% discount for restricted trading used in valuation			$ 0.22
Stock issued to two vendors in satisfaction of accounts payable		1,207,388
Stock issued to two vendors in satisfaction of accounts payable, amount satisfied		$ 301,847
Stock issued for conversion of a note payable to related party and interest	23,200
Cash paid to repurchase stock				$ 2,500

XML

Notes Payable to Former Officer (Details Narrative) (Interest rate information)	9 Months Ended
	Jun. 30, 2014
Interest rate information
Notes payable to former officer, original interest rate	2.00%
Notes payable to former officer, reduced interest rate	0.27%

XML

Subsequent Events (Details Narrative) (USD $)	1 Months Ended
	Aug. 11, 2014	Aug. 11, 2014	Aug. 11, 2014	Aug. 14, 2014	Jul. 07, 2014	Jun. 30, 2014
Subsequent Events [Abstract]
Additional borrowings against Stockbridge convertible secured note line of credit			$ 150,000
Current total line of credit draw on note				2,708,000		2,558,000
Shares sold through private placement		125,000
Warrants sold through private placements					100,000
Proceeds from private placement		$ 25,000
Asset Aquisition Agreement, shares exchanged	300,000
Asset Acquisition Agreement, royalty interest percentage of proceeds received from gross sales of related products	5.00%

XML

Notes Payable to Former Officer

9 Months Ended

Jun. 30, 2014

Debt Disclosure [Abstract]

Notes Payable to Former Officer

4. Notes Payable to Former Officer

Notes payable to former officer consists of the following:

0.27% note payable, due August 1, 2016, interest due at maturity, unsecured $ 47,500

On December 5, 2013, the Company entered into a revised promissory note with former officer David Dolezal calling for four equal payments to begin on November 1, 2015 and ending August 1, 2016. Interest was reduced from 2.0% to 0.27%.

XML

Related Party Transactions (Details Narrative) (USD $)	9 Months Ended
	Jun. 30, 2014	Dec. 05, 2013
Related Party Transactions [Abstract]
Common stock to be repurchased from David Dolezal		7,567,622
Common stock purchased from David Dolezal by others		1,550,000
Common stock purchased from David Dolezal by the Company		6,017,622
Borrowed cash against secured bridge note	$ 1,252,000

XML

Loss on Warrants Exercised (Details Narrative) (Loss on warrants exercised, USD $)	Mar. 05, 2014
Loss on warrants exercised
Issuance of stock to Stockbridge for cashless exercise of warrants	22,457,143
Warrants outstanding	26,200,000
Loss on warrants exercised	$ (13,914,034)

XML

Commitments and Contingencies (Details Narrative) (USD $)	0 Months Ended	2 Months Ended	5 Months Ended	6 Months Ended	9 Months Ended
	Dec. 23, 2011	Jun. 30, 2014	Jun. 30, 2014	Jun. 30, 2014	Jun. 30, 2014	Aug. 26, 2012	Aug. 22, 2012	Dec. 27, 2011
Distribution Agreement
Expiration of common stock warrants made available for issuance by agreement	3 years
Amount of common stock available for purchase, percentage of total products purchased by distributor at invoice price against previous year's purchase of paid invoices	15.00%
Lawsuit
Alleged default on two notes payable by Company named in lawsuit								$ 75,000
Judgment entered against Company as result of lawsuit					92,001
Monthly payments per settlement agreement					4,000
Interest per annum of remaining balance					4.25%
Defaults on Convertible Notes Payable
Default on convertible note payable							5,000
Default on convertible note payable to a related party						20,000
License Agreement with Eastar Industries, Co.
Sales license term				5 years
Royalty to Company, percentage of gross profits generated by sales of products in China				18.00%
Percentage of joint venture company established with Eastar owned by Company				18.00%
Professional Services Agreement with Acorn Management Partners, LLC
Service fee			115,000
Acorn Agreement expiration date			Jan. 27, 2015
Product Development Agreement with Dan Pool or Designer Products
Monthly development fee		$ 5,000
Monthly royalty paid, percentage of net sales		5.00%

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Stockholders' Deficit - Balance of warrants outstanding (Details) (USD $)	9 Months Ended
	Jun. 30, 2014
Issued for financing expense
Common shares issuable upon exercise of warrants	20,000
Exercise price of warrants	$ 0.25
Date issued	Mar. 08, 2012
Expiration date	Mar. 07, 2017
Issued under a consultant settlement agreement
Common shares issuable upon exercise of warrants	40,000
Exercise price of warrants	$ 0.50
Date issued	Apr. 30, 2012
Expiration date	Apr. 29, 2015
Issued per distribution agreement (1)
Common shares issuable upon exercise of warrants	125,464
Exercise price of warrants	$ 0.75
Date issued	Dec. 22, 2012
Expiration date	Dec. 21, 2015
Issued under a private placement memorandum (1)
Common shares issuable upon exercise of warrants	140,000
Exercise price of warrants	$ 0.40
Date issued	Jun. 25, 2013
Expiration date	Jun. 25, 2015
Issued under a private placement memorandum (2)
Common shares issuable upon exercise of warrants	120,000
Exercise price of warrants	$ 0.40
Date issued	Jun. 26, 2013
Expiration date	Jun. 26, 2015
Issued per distribution agreement (2)
Common shares issuable upon exercise of warrants	172,028
Exercise price of warrants	$ 0.14
Date issued	Dec. 22, 2013
Expiration date	Dec. 22, 2016
Balance of Warrants
Common shares issuable upon exercise of warrants	617,492

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Convertible Notes Payable

9 Months Ended

Jun. 30, 2014

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. Terms amended in March 2013 to interest at 4.25%, with $4,000 monthly payments of principal and interest		33,896
		38,896
Less current portion		(38,896	)
	$	—

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Stockholders' Deficit - Options outstanding (Details) (USD $)	9 Months Ended
	Jun. 30, 2014
Options granted to former officer & two former senior advisory board members
Common shares issuable upon exercise of options	775,000
Exercise price of options	$ 0.50
Date issued	Apr. 20, 2011
Expiration date	Apr. 19, 2021
Options granted to former employee and three consultants
Common shares issuable upon exercise of options	700,000
Exercise price of options	$ 0.50
Date issued	Jul. 19, 2011
Expiration date	Jul. 18, 2016
Options granted under consultant settlement agreement
Common shares issuable upon exercise of options	52,844
Exercise price of options	$ 0.25
Date issued	Apr. 30, 2012
Expiration date	Apr. 29, 2022
Options granted to Board member (1)
Common shares issuable upon exercise of options	150,000
Exercise price of options	$ 0.30
Date issued	Jan. 25, 2013
Expiration date	Jan. 24, 2023
Options granted to employee and two consultants
Common shares issuable upon exercise of options	1,550,000
Exercise price of options	$ 0.30
Date issued	Jan. 25, 2013
Expiration date	Jan. 24, 2023
Options granted to medical advisory board member
Common shares issuable upon exercise of options	250,000
Exercise price of options	$ 0.26
Date issued	May 20, 2013
Expiration date	May 19, 2016
Options granted to consultant
Common shares issuable upon exercise of options	250,000
Exercise price of options	$ 0.28
Date issued	Sep. 05, 2013
Expiration date	Sep. 04, 2016
Options issued for investment in Breathe Active, LLC (1)
Common shares issuable upon exercise of options	500,000
Exercise price of options	$ 0.25
Date issued	Sep. 28, 2013
Expiration date	Dec. 31, 2014
Options issued for investment in Breathe Active, LLC (2)
Common shares issuable upon exercise of options	500,000
Exercise price of options	$ 0.50
Date issued	Sep. 28, 2013
Expiration date	Dec. 31, 2014
Options re-purchased by Company
Common shares issuable upon exercise of options	(200,000)	[1]
Options granted to Board member (2)
Common shares issuable upon exercise of options	150,000	[2]
Exercise price of options	$ 0.11
Date issued	Oct. 04, 2013
Expiration date	Oct. 03, 2023
Options granted to Officers
Common shares issuable upon exercise of options	433,333	[3]
Exercise price of options	$ 0.11
Date issued	Oct. 04, 2013
Expiration date	Oct. 03, 2023
Balance of Options
Common shares issuable upon exercise of options	5,111,177

[1] On December 5, 2013, per an Agreement and Mutual Release of Claims with a former consultant, the Company paid $2,500 in return for the relinquishment of the consultant's stock options.

[2] On October 4, 2013, the Company granted stock options to a Board member. These options are immediately vested, have an exercise price of $.11 and have a term of 10 years.

[3] On October 4, 2013, the Company granted stock options to two officers. These options have an exercise price of $.11 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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CONSOLIDATED BALANCE SHEETS (Unaudited) (USD $)	Jun. 30, 2014	Sep. 30, 2013
Current Assets:
Cash and cash equivalents	$ 77,853	$ 19,942
Accounts receivable	29,975	35,019
Inventory	50,051	51,423
Deposits	26,000
Prepaid expenses	31,790	10,690
Total current assets	215,669	117,074
Other Assets:
Property and equipmnet, net	11,603	31,619
Intangible assets, net	265,279	291,072
Deposits	2,387	2,400
Investment in Breathe Active, LLC	290	290
Total Assets	495,228	442,455
Current Liabilities:
Accounts payable	1,654,768	1,868,205
Accrued interest - related parties	25,580	12,793
Accrued interest	6,151	6,441
Accrued expenses	46,708	18,554
Customer deposit
Notes payable		18,178
Convertible notes payable - current portion	38,896	32,773
Convertible notes payable to related parties - current portion, net of discount	20,000	25,000
Total current liabilities	1,792,103	1,981,944
Accrued interest to related parties	74	1,267
Notes payable to former officer	47,500	47,520
Convertible notes payable, less current portion		22,227
Convertible notes payable to related parties, less current portion, net of discount	964,544	228,782
Warrant liablility		1,098,566
Total liabilities	2,804,221	3,380,306
Stockholders' (Deficit):
Common stock, par value $.0001 per share, 200,000,000 and 200,000,000 shares authorized; 59,876,868 and 38,129,100 shares issued and outstanding at June 30, 2014 and September 30, 2013, respectively	5,988	3,813
Additional paid-in capital	29,079,523	12,071,023
Accumulated (deficit)	(31,394,504)	(15,012,687)
Total stockholders' (deficit)	(2,308,993)	(2,937,851)
Total Liabilities and Stockholders' (Deficit)	$ 495,228	$ 442,455

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Summary of Significant Accounting Policies and Use of Estimates

9 Months Ended

Jun. 30, 2014

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, Canada and Europe.

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.

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary. Inter-company balances and transactions have been eliminated upon consolidation.

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 consolidated financial statements of the Company as of June 30, 2014 and 2013, 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 June 30, 2014 and the results of its operations and its cash flows for the periods ended June 30, 2014 and 2013. These results are not necessarily indicative of the results expected for the fiscal year ended September 30, 2014. 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”).

Net Loss 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 June 30, 2014 and 2013, basic and diluted loss per common share were the same, as the effect of potentially dilutive securities would have been anti-dilutive.

As of June 30, 2014, there were total shares of 29,008,950 issuable upon conversion of notes payable, exercise of warrants and options that were not included in the earnings per share calculation as they were anti-dilutive.

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Stockholders' Deficit - Issuances of stock to Stockbrdige (Details Narrative) (Issuances to Stockbridge)	9 Months Ended
	Jun. 30, 2014	Mar. 05, 2014
Issuances to Stockbridge
Stock issued in payment of interest on Stockbridge convertible note	3,585,175
Stock issued to Stockbridge as part of a warrant exercise, warrants exercised		26,200,000
Stock issued to Stockbridge as part of a warrant exercise, shares issued		22,457,143

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Summary of Significant Accounting Policies and Use of Estimates (Details Narrative) (USD $)	9 Months Ended	26 Months Ended
	Jun. 30, 2014	Mar. 19, 2012	Sep. 30, 2013
Accounting Policies [Abstract]
Airware Holdings, Inc. historical par value of stock		$ 0.001
Current adjusted par value of Company stock	$ 0.0001		$ 0.0001
Anti-dilutive shares issuable not included in earnings per share calculation	29,008,950

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Customer Rebates (Details Narrative) (USD $)	9 Months Ended
	Jun. 30, 2014
Notes to Financial Statements
Customer credits against revenue	$ 74,648
Samples expense	14,238
Additional credit to offset distributor's expense	$ 27,341

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Notes Payable to Former Officer - Notes payable to former officer (Details) (USD $)			9 Months Ended
	Jun. 30, 2014	Sep. 30, 2013	Jun. 30, 2014 Notes payable to former officer
Notes payable to former officer, amount	$ 47,500	$ 47,520	$ 47,500
Notes payable to former officer, interest rate			0.27%
Notes payable to former officer, due date			Aug. 01, 2016

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Going Concern

9 Months Ended

Jun. 30, 2014

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. Management believes these efforts will contribute toward funding the Company’s activities until sufficient revenue can be earned from future operations. In addition, the Company is seeking additional distribution partners in both domestic and foreign markets. 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 levels. 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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CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)	Jun. 30, 2014	Sep. 30, 2013
Statement of Financial Position [Abstract]
Common stock, par value	$ 0.0001	$ 0.0001
Common stock, authorized	200,000,000	200,000,000
Common stock, issued	59,876,868	38,129,100
Common stock, outstanding	59,876,868	38,129,100

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

9 Months Ended

Jun. 30, 2014

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, Canada and Europe.

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.

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary. Inter-company balances and transactions have been eliminated upon consolidation.

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 consolidated financial statements of the Company as of June 30, 2014 and 2013, 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 June 30, 2014 and the results of its operations and its cash flows for the periods ended June 30, 2014 and 2013. These results are not necessarily indicative of the results expected for the fiscal year ended September 30, 2014. 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”).

Net Loss per Share

Net Loss 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 June 30, 2014 and 2013, basic and diluted loss per common share were the same, as the effect of potentially dilutive securities would have been anti-dilutive.

As of June 30, 2014, there were total shares of 29,008,950 issuable upon conversion of notes payable, exercise of warrants and options that were not included in the earnings per share calculation as they were anti-dilutive.

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Document and Entity Information	9 Months Ended
	Jun. 30, 2014	Aug. 14, 2014
Document And Entity Information
Entity Registrant Name	AIRWARE LABS CORP.
Entity Central Index Key	0001500123
Document Type	10-Q
Document Period End Date	Jun. 30, 2014
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		60,991,306
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2014

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Convertible Notes Payable (Tables)

9 Months Ended

Jun. 30, 2014

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. Terms amended in March 2013 to interest at 4.25%, with $4,000 monthly payments of principal and interest		33,896
		38,896
Less current portion		(38,896	)
	$	—

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CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (USD $)	3 Months Ended		9 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Income Statement [Abstract]
Revenues, net	$ 113,365	$ 673	$ 168,705	$ 199,487
Cost of products sold	57,970	3,481	101,577	96,484
Gross profit	55,395	(2,808)	67,128	103,003
Operating expenses
General and administrative	220,277	470,689	728,470	1,082,400
Sales and marketing	69,610	110,806	153,132	226,684
Total expenses	289,887	581,495	881,602	1,309,084
(Loss) from operations	(234,492)	(584,303)	(814,474)	(1,206,081)
Other income (expense)
Interest income			289
Forgiveness of debt			20
Induced note conversion expense			(2,697)	(9,300)
Interest expense	(425,204)	(135,229)	(943,521)	(335,890)
Valuation (loss) - common stock warrants			(707,400)
Loss on warrants exercised			(13,914,034)
Total other income (expense)	(425,204)	(135,229)	(15,567,343)	(345,190)
(Loss) before income taxes	(659,696)	(719,532)	(16,381,817)	(1,551,271)
Income tax expense
Net (loss)	$ (659,696)	$ (719,532)	$ (16,381,817)	$ (1,551,271)
Basic and diluted net (loss) per common share	$ (0.01)	$ (0.02)	$ (0.36)	$ (0.05)
Basic and diluted weighted average common shares outstanding	59,124,158	36,157,611	45,896,020	33,301,411

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Related Party Transactions

9 Months Ended

Jun. 30, 2014

Related Party Transactions [Abstract]

Related Party Transactions

7. 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.

On December 5, 2013, the Company entered into a share re-purchase agreement with former officer Mr. David Dolezal to buy back 7,567,622 shares of common stock held by Mr. Dolezal and entities under his control.  Other outside investors were granted the opportunity to participate in this purchase, with 1,550,000 shares being purchased directly from Mr. Dolezal by others, and 6,017,622 being re-purchased by the Company.  Upon completion of this transaction on December 17, 2013, Mr. Dolezal no longer has any ownership in the Company.

As discussed in Convertible Notes Payable to Related Parties Footnote 5, the Company has a convertible secured bridge note with Stockbridge. During the nine months ended June 30, 2014, the Company borrowed $1,252,000 against this note.

As noted in Stockholders’ Deficit Footnote 9 and Loss on Warrants Exercised Footnote 6, on March 5, 2014, the Company issued 22,457,143 shares of stock to Stockbridge for the cashless exercise of all of their 26,200,000 outstanding warrants.

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Loss on Warrants Exercised

9 Months Ended

Jun. 30, 2014

Notes to Financial Statements

Loss on Warrants Exercised

6. Loss on Warrants Exercised

On March 5, 2014, the Company issued 22,457,143 shares of stock to Stockbridge for the cashless exercise of all of their 26,200,000 outstanding warrants. This transaction resulted in a loss of $13,914,034.

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Convertible Notes Payable - Convertible notes payable (Details) (USD $)	9 Months Ended
	Jun. 30, 2014
Convertible Notes Payable A
Notes payable, amount	$ 5,000
Notes payable, interest rate	8.00%
Notes payable, due date	Aug. 22, 2012
Notes payable, conversion to common stock price per share	$ 0.50
Convertible Notes Payable B
Notes payable, amount	33,896
Notes payable, interest rate	6.50%
Notes payable, due date	Nov. 26, 2011
Notes payable, conversion to common stock price per share	$ 2.00
Notes payable, amended interest rate	4.25%
Notes payable, amended monthly payment terms	4,000
Convertible Notes Payable Total
Notes payable, amount	38,896
Notes payable, less current portion	(38,896)
Notes payable, total less current portion

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Notes Payable to Former Officer (Tables)

9 Months Ended

Jun. 30, 2014

Debt Disclosure [Abstract]

Notes payable to former officer

0.27% note payable, due August 1, 2016, interest due at maturity, unsecured $ 47,500

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Customer Rebates

9 Months Ended

Jun. 30, 2014

Notes to Financial Statements

Customer Rebates

10. Customer Rebates

As part of an agreement with its domestic distributor, the Company agreed to provide free product to assist in promotional efforts by the distributor. This free product would be recognized as credits on future orders as they are placed. During the nine months ended June 30, 2014, this resulted in $74,648 being recognized as customer credits against revenue and $14,238 in samples expense. No further credit remains to be granted per this agreement. Additionally, the Company agreed to an additional $27,341 in credits to help offset the distributor’s expenses related to product markdowns.

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Commitments and Contingencies

9 Months Ended

Jun. 30, 2014

Commitments and Contingencies

Commitments and Contingencies

8. 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 June 30, 2014.

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.

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 for $92,001 was entered against the Company as a result of this lawsuit. Per a later settlement agreement, the Company has been making monthly payments of $4,000 against this judgment with interest due on the remaining balance of 4.25% per annum. The notes and accrued interest are reflected in the Company’s Balance Sheet as of June 30, 2014.

The Company is in default on a convertible note payable totaling $5,000 and a convertible note payable to a related party totaling $20,000. The Company has attempted 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 believed the claims were without merit.  After the Company vigorously defended the action, the plaintiff moved to dismiss its own claims, and the Court entered judgment in the Company’s favor.  The Court also denied the Company’s request for reimbursement of its attorneys’ fees; the Company retains the right to appeal that decision.

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 July 16, 2013, the Company entered into a Severance Agreement with Jeffrey Rassas, the Company’s Chief Executive Officer pursuant to which Mr. Rassas will be entitled to the following severance benefits: (i) the Company shall pay to Mr. Rassas his base salary for a period of 12 months following termination without cause; (ii) Mr. Rassas shall be paid any earned and unpaid bonus due; and, (iii) and all unvested stock-based compensation held by Mr. Rassas shall vest as of the date of termination.

On November 5, 2013, the Company entered into an agreement with Ramirez Advisors Inter-National, LLC to serve as an advisor to the Company as it pertains to the possible manufacturing of various Company products in Mexico as well as possible business opportunities for Company products in the Mexican market.  Additionally, Ramirez Advisors Inter-National, LLC will use its best efforts to locate distributors in Mexico City for the Company's filtration product line given the high levels of pollution in this region.

On January 6, 2014, the Company entered into a license agreement with Eastar Industries, Co., pursuant to which the Company granted Eastar an exclusive license to sell its products in China for a term of five years in exchange for a royalty equal to 18% of gross profits generated by the sales of products in China. Additionally, the Company and Eastar agreed to establish a joint venture company in Hong Kong of Shanghai which will be assigned Eastar’s rights under the agreement and of which 18% of the joint venture will be owned by the Company.

On January 28, 2014, the Company entered into an agreement (the “Acorn Agreement”) with Acorn Management Partners, LLC (“Acorn”) to perform certain financial advisory, business development and professional relations services (the “Acorn Services”). Under the terms of the Acorn Agreement and in exchange for the performance of the Acorn Services by Acorn, the Company shall pay to Acorn an aggregate of $115,000 USD in cash plus a variable number of shares of the restricted common stock of the Company. The Acorn Agreement shall expire on January 27, 2015, unless terminated earlier in accordance with its terms.

On April 23, 2014, the Company entered into a product development agreement with Dan Pool of Designer Products. This agreement was modified on June 16, 2014. As compensation, the Company will pay $5,000 monthly, as well as issue stock options as the stock price hits certain benchmarks. Additionally, the Company will pay a monthly royalty of 5% of net sales of any products created by Dan Pool as inventor.

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 June 30, 2014. The likelihood that the Company’s estimate of the accrued product warranty claims will materially change in the near term is considered remote.

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Stockholders' Deficit

9 Months Ended

Jun. 30, 2014

Equity [Abstract]

Stockholders' Deficit

9. Stockholders’ Deficit

Common Stock

During the nine months ended June 30, 2014, the Company issued 3,585,175 shares of stock in payment of interest on the Stockbridge convertible note.

As further detailed in Related Party Transactions Footnote 7, on December 5, 2013, the Company entered into a share re-purchase agreement with former officer Mr. David Dolezal and re-purchased 6,017,622 shares of common stock held by Mr. Dolezal and entities under his control.

On January 21, 2014, the Company issued 102,916 shares of stock for the payment of consulting services. The shares were valued using the average closing price ($0.18) for the previous quarter.

As referenced in Commitments and Contingencies Footnote 8, on January 27, 2014, the Company issued 225,000 shares of stock for payment to Acorn Management Partners, LLC. The shares were valued using the closing price ($0.22) on the date the shares were issued with a 25% discount for the restricted trading.

On February 20, 2014, the Company issued 52,941 shares of stock for the payment of consulting services. The shares were valued using the closing price ($0.34) on the date the shares were issued.

On February 28, 2014, the Company issued 1,207,388 shares of stock to two vendors in satisfaction of accounts payable of $301,847.

On March 3, 2014, the Company issued 23,200 shares of stock for the conversion of a note payable to related party and interest.

On March 5, 2014, the Company issued shares of stock to Stockbridge as part of a warrant exercise. Stockbridge exercised 26,200,000 warrants to purchase stock.  They elected to use the cashless exercise formula, which resulted in the issuance of 22,457,143 shares of common stock of the Company.

On April 10, 2014, the Company issued 43,926 shares of stock for the payment of consulting services. The shares were valued using the average closing price ($0.34) for the previous quarter.

On April 10, 2014, the Company issued 38,465 shares of stock for the payment of consulting services. The shares were valued using the average closing price ($0.32) for the period of service.

On May 28, 2014, the Company issued 29,236 shares of stock for the payment of consulting services. The shares were valued using the average closing price ($0.29) for the period of service.

Warrants

The balance of warrants outstanding for purchase of the Company’s common stock as of June 30, 2014 is as follows:

	Common Shares Issuable Upon Exercise of Warrants		Exercise Price of Warrants		Date Issued		Expiration Date
Issued for financing expense		20,000	$	0.25		03/08/2012		03/07/2017
Issued under a consultant settlement agreement		40,000	$	0.50		04/30/2012		04/29/2015
Issued per distribution agreement		125,464	$	0.75		12/22/2012		12/21/2015
Issued under a private placement memorandum		140,000	$	0.40		06/25/2013		06/25/2015
Issued under a private placement memorandum		120,000	$	0.40		06/26/2013		06/26/2015
Issued per distribution agreement		172,028	$	0.14		12/22/2013		12/22/2016
Balance of Warrants at June 30, 2014		617,492

Stock Options

The Company had the following options outstanding at June 30, 2014:

	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		04/20/2011		04/19/2021
Options granted to former employee and three consultants		700,000		$	0.50		07/19/2011		07/18/2016
Options granted under a consultant settlement agreement		52,844		$	0.25		04/30/2012		04/29/2022
Options granted to Board member		150,000		$	0.30		01/25/2013		01/24/2023
Options granted to employee and two consultants		1,550,000		$	0.30		01/25/2013		01/24/2023
Options granted to medical advisory board member		250,000		$	0.26		05/20/2013		05/19/2016
Options granted to consultant		250,000		$	0.28		09/05/2013		09/04/2016
Options issued for investment in Breathe Active, LLC		500,000		$	0.25		09/28/2013		12/31/2014
Options issued for investment in Breathe Active, LLC		500,000		$	0.50		09/28/2013		12/31/2014
Options re-purchased by Company (1)		(200,000	)
Options granted to Board member (2)		150,000		$	0.11		10/04/2013		10/03/2023
Options granted to Officers (3)		433,333		$	0.11		10/04/2013		10/03/2023
Balance of Options at June 30, 2014		5,111,177

(1) On December 5, 2013, per an Agreement and Mutual Release of Claims with a former consultant, the Company paid $2,500 in return for the relinquishment of the consultant’s stock options.

(2) On October 4, 2013, the Company granted stock options to a Board member. These options are immediately vested, have an exercise price of $.11 and have a term of 10 years.

(3) On October 4, 2013, the Company granted stock options to two officers. These options have an exercise price of $.11 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

9 Months Ended

Jun. 30, 2014

Subsequent Events [Abstract]

Subsequent Events

11. Subsequent Events

Subsequent to June 30, 2014, the Company borrowed an additional $150,000 against the convertible secured note with Stockbridge to fund marketing efforts. The total currently drawn on the note is $2,708,000.

On July 7, 2014, the Company sold 125,000 shares and 100,000 warrants for $25,000 through a private placement.

On July 23, 2014, the Company entered into an Asset Acquisition Agreement with Equity Earnings Corp. pursuant to which the Company will purchase a patent and related tooling and exclusive C serum formula in exchange for 300,000 shares of stock as well as a royalty interest of 5% of proceeds received from gross sales of related products.

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Stockholders' Deficit - Issuances of stock for consulting services (Details Narrative) (USD $)	May 28, 2014	Apr. 10, 2014	Feb. 20, 2014	Jan. 21, 2014
Issuances for consulting services
Stock issued for payment of consulting services	29,236	43,926	52,941	102,916
Stock issued for payment of consulting services, closing price used in valuation	$ 0.29	$ 0.34	$ 0.34	$ 0.18
Issuances for consulting services (2)
Stock issued for payment of consulting services		38,465
Stock issued for payment of consulting services, closing price used in valuation		$ 0.32

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Stockholders' Deficit (Tables)

9 Months Ended

Jun. 30, 2014

Equity [Abstract]

Balance of warrants outstanding

	Common Shares Issuable Upon Exercise of Warrants		Exercise Price of Warrants		Date Issued		Expiration Date
Issued for financing expense		20,000	$	0.25		03/08/2012		03/07/2017
Issued under a consultant settlement agreement		40,000	$	0.50		04/30/2012		04/29/2015
Issued per distribution agreement		125,464	$	0.75		12/22/2012		12/21/2015
Issued under a private placement memorandum		140,000	$	0.40		06/25/2013		06/25/2015
Issued under a private placement memorandum		120,000	$	0.40		06/26/2013		06/26/2015
Issued per distribution agreement		172,028	$	0.14		12/22/2013		12/22/2016
Balance of Warrants at June 30, 2014		617,492

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		04/20/2011		04/19/2021
Options granted to former employee and three consultants		700,000		$	0.50		07/19/2011		07/18/2016
Options granted under a consultant settlement agreement		52,844		$	0.25		04/30/2012		04/29/2022
Options granted to Board member		150,000		$	0.30		01/25/2013		01/24/2023
Options granted to employee and two consultants		1,550,000		$	0.30		01/25/2013		01/24/2023
Options granted to medical advisory board member		250,000		$	0.26		05/20/2013		05/19/2016
Options granted to consultant		250,000		$	0.28		09/05/2013		09/04/2016
Options issued for investment in Breathe Active, LLC		500,000		$	0.25		09/28/2013		12/31/2014
Options issued for investment in Breathe Active, LLC		500,000		$	0.50		09/28/2013		12/31/2014
Options re-purchased by Company (1)		(200,000	)
Options granted to Board member (2)		150,000		$	0.11		10/04/2013		10/03/2023
Options granted to Officers (3)		433,333		$	0.11		10/04/2013		10/03/2023
Balance of Options at June 30, 2014		5,111,177

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Convertible Notes Payable to Related Parties - Convertible notes payable to related parties (Details) (USD $)	9 Months Ended
	Jun. 30, 2014
Convertible notes payable to related parties A
Convertible notes payable to related parties, amount	$ 964,544
Convertible notes payable to related parties, interest rate	12.00%
Unamortized debt discount	1,593,456
Convertible notes payable to related parties, due date	Sep. 30, 2015
Convertible notes payable to related parties, conversion to common stock price per share	$ 0.10
Convertible notes payable to related parties B
Convertible notes payable to related parties, amount	20,000
Convertible notes payable to related parties, interest rate	8.00%
Convertible notes payable to related parties, due date	Aug. 26, 2012
Convertible notes payable to related parties, conversion to common stock price per share	$ 0.50
Convertible notes payable to related parties Total
Convertible notes payable to related parties, amount	984,544
Convertible notes payable to related parties, less current portion	(20,000)
Convertible notes payable to related parties, total less current portion	$ 964,544

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CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (USD $)	9 Months Ended
	Jun. 30, 2014	Jun. 30, 2013
Operating Activities:
Net (loss)	$ (16,381,817)	$ (1,551,271)
Adjustments to reconcile net (loss) to net cash (used in) operating activities:
Depreciation and amortization	45,808	41,526
Common stock issued obligated for services	411,408	218,700
Options and warrants issued for services	43,773	41,957
Interest expense from amortization of debt discount	735,763	166,553
Induced conversion expense	2,697	9,300
Stock issued for interest expense	180,059	113,226
Forgiveness of debt	(20)
Loss on warrants exercised	13,914,034
Valuation (gain) expense - common stock warrants	707,400
Changes in operating assets and liabilities:
Accounts receivable	5,044	587,883
Inventory	1,372	(48,428)
Prepaid expenses	(21,100)	31,238
Deposits	(25,987)	(5,000)
Accounts payable	(213,437)	16,240
Accrued interest	11,304	(17,966)
Accrued expenses	28,154	72,458
Net Cash (Used in) Operating Activities	(555,545)	(323,584)
Investing Activities:
Purchases of property and equipment		(35,534)
Net Cash (Used In) Investing Activities		(35,534)
Financing Activities:
Stock issued for cash		433,750
Proceeds from convertible notes payable	1,252,000	585,000
Repayment of convertible notes payable	(16,104)	(400,000)
Repayment of notes payable	(18,178)
Options re-purchased	(2,500)
Stock re-purchased	(601,762)
Proceeds from factored accounts receivable		346,448
Repayment of factored accounts receivable note		(578,381)
Net Cash Provided by Financing Activities	613,456	386,817
Net (Decrease) Increase in Cash	57,911	27,699
Cash - Beginning of Year	19,942	1,400
Cash - End of Year	77,853	29,099
Supplemental disclosure of cash flow information:
Interest paid in cash	1,718	55,599
Non-cash investing and financing activities:
Stock issued for convertible notes	5,000	10,000
Debt discount on note payable, related party
Warrants issued to related party for convertible note modification		$ 1,564

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Convertible Notes Payable to Related Parties

9 Months Ended

Jun. 30, 2014

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 $1,593,456, due September 30, 2015, 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	$	964,544
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
		984,544
Less current portion		(20,000	)
	$	964,544

On August 21, 2013, the Company entered into a ninth allonge to a convertible secured bridge note with Stockbridge Enterprises, L.P. (“Stockbridge”) which provided for up to $3,206,000 principal and a maturity date of September 30, 2015. As of June 30, 2014, the Company has borrowed $2,558,000 against this line of credit.

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Convertible Notes Payable to Related Parties (Details Narrative) (USD $)	9 Months Ended
	Jun. 30, 2014	Aug. 14, 2014	Aug. 21, 2013
Debt Disclosure [Abstract]
Line of credit granted by convertible secured bridge note with Stockbridge			$ 3,206,000
Maturity date of note	Sep. 30, 2015
Current amount borrowed against line of credit	$ 2,558,000	$ 2,708,000

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Convertible Notes Payable to Related Parties (Tables)

9 Months Ended

Jun. 30, 2014

Convertible Notes Payable To Related Parties Tables

Convertible notes payable to related parties

12% note payable net of unamortized debt discount of $1,593,456, due September 30, 2015, 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	$	964,544
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
		984,544
Less current portion		(20,000	)
	$	964,544