NOTE 2 - SUMMARY OF SIGNIFICANT AND CRITICAL ACCOUNTING POLICIES

(a) Earnings Per Share :

The Company utilizes the guidance per FASB Codification “ASC 260 "Earnings Per Share". Basic earnings per share is calculated on the weighted effect of all common shares issued and outstanding, and is calculated by dividing net income available to common stockholders by the weighted average shares outstanding during the period. Diluted earnings per share, which is calculated by dividing net income available to common stockholders by the weighted average number of common shares used in the basic earnings per share calculation, plus the number of common shares that would be issued assuming conversion of all potentially dilutive securities outstanding, is not presented separately as it is anti-dilutive. Such securities, shown below, presented on a common share equivalent basis and outstanding as of March 31, 2012 and 2011 have been excluded from the per share computations:

	For the Three Months Ended
	March 31,
	2012		2011
2004 Stock Plan Options		—		230,000
Non ISO Stock Options		22,504,900		31,604,900
Convertible Preferred Stock		51,444,780		52,803,150
Convertible Notes Payable		17,696,060		4,552,439
Warrants		35,298,981		113,050,713

(b) Software Development Costs:

Research and development costs are expensed as incurred. No research and development costs were incurred during the three months ended March 31, 2012 and 2011.

In accordance with the provisions of Accounting for the costs of computer software to be sold or otherwise marketed, software development costs are subject to capitalization beginning when a product's technological feasibility has been established and ending when a product is available for release to customers. For the three months ended March 31, 2012 and 2011, respectively, the Company capitalized approximately $0 and $115,000, respectively of software and website development costs. The software costs are amortized on a straight line basis over the estimated useful life of three years. Amortization expense for the three months ended March 31, 2012 and 2011 was approximately $30,000 and $22,000 respectively.

The Company recognizes revenues in accordance with authoritative guidance when services have been rendered, the sales price is determinable and collectability is reasonably assured. Revenue from online Internet sales is recognized upon the settlement of credit card charges, typically within three days of the sale.

(d) Use of Estimates:

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.

(e) Recent Accounting Pronouncements:

The Company evaluates the new accounting provisions for guidance applicable to ProText Mobility, Inc. During the period, the Company does not believe there are any new pronouncements that will materially impact the Company.

(f) Long-Lived Assets

In accordance with FASB Codification Topic ASC 360-10-15, Impairment or Disposal of Long-Lived Assets, we review long-lived assets for impairment whenever circumstances and situations change such that there is an indication that the carrying amounts may not be recovered. In such circumstances, we will estimate the future cash flows expected to result from the use of the asset and its eventual disposition. Future cash flows are the future cash inflows expected to be generated by an asset less the future outflows expected to be necessary to obtain those inflows. If the sum of the expected future cash flows (undiscounted and without interest charges) is less than the carrying amount of the asset, we will recognize an impairment loss to adjust to the fair value of the asset. For the three months ended March 31, 2012 and 2011, the Company determined there was impairment to the software capitalization and website development expense and recorded write offs of approximately $0 and $39,000 which is included in the accompanying consolidated statement of operations.