10QSB 1 form10qsb.htm REPORT FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2006 Filed by Automated Filing Services Inc. (604) 609-0244 - Infrablue (US) Inc. - Form 10-QSB

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-QSB

[ x ] Quarterly Report Under Section 13 or 15(D) of the Securities Exchange Act of 1934

for the quarterly period ended June 30, 2006

[           ] Transition Report Under Section 13 or 15(D) of the Securities Exchange Act of 1934

for the transition period from _____to _____

Commission File Number: 000-51935

INFRABLUE (US) INC.
(Name of small business issuer as specified in its charter)

NEVADA N/A
(State or other jurisdiction of incorporation or (IRS Employer Identification No.)
organization)  

Suite 5.15, 130 Shaftesbury Avenue, London, England WID 5EU
(Address of principal executive offices)

+44 (0) 20 7031 1189
Issuer's telephone number

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 [ x ]

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

State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date. 28,065,800 shares of common stock as of August 10, 2006.

Transitional Small Business Disclosure Format (check one): Yes [           ] No [ x ]

INFRABLUE (US) INC.

Quarterly Report On Form 10-QSB
For The Quarterly Period Ended
June 30, 2006

INDEX

PART I – FINANCIAL INFORMATION 1
   Item 1. Financial Statements 1
   Item 2. Management’s Discussion and Analysis 2
PART II – OTHER INFORMATION 10
   Item 1. Legal Proceedings 10
   Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 10
   Item 3. Defaults Upon Senior Securities 10
   Item 4. Submission of Matters to a Vote of Securities Holders 10
   Item 5. Other Information 10
   Item 6. Exhibits 10

FORWARD-LOOKING STATEMENTS

This quarterly report on Form 10-QSB contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements involve risks and uncertainties, including statements regarding our capital needs, business plans and expectations. Such forward-looking statements involve risks and uncertainties regarding our ability to achieve commercial levels of sales of our IRMA device, our ability to successfully market our IRMA device, our ability to continue development and upgrades to the IRMA device and our Infrablue technology, availability of funds, government regulations, common share prices, operating costs, capital costs and other factors. Forward-looking statements are made, without limitation, in relation to our operating plans, our liquidity and financial condition, availability of funds, operating costs and the market in which we compete. Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may”, “will”, “should”, “expect”, “plan”, “intend”, “anticipate”, “believe”, “estimate”, “predict”, “potential” or “continue”, the negative of such terms or other comparable terminology. Actual events or results may differ materially. In evaluating these statements, you should consider various factors, including the risks outlined in our registration statement on Form SB-2, filed originally with the Securities and Exchange Commission (the “SEC”) on December 16, 2005, as amended, this quarterly report on Form 10-QSB, and, from time to time, in other reports we file with the SEC. These factors may cause our actual results to differ materially from any forward-looking statement. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.

i

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

The following unaudited condensed consolidated interim financial statements of Infrablue (US) Inc. (the “Company”) are included in this Quarterly Report on Form 10-QSB:

  Page
   
Interim Consolidated Balance Sheets as at June 30, 2006 (unaudited) and September 30, 2005 (audited) F-2
   
Interim Consolidated Statements of Changes in Stockholders’ Deficiency for the period from incorporation (February 18, 2004) to June 30, 2006 F-3
   
Interim Consolidated Statements of Operations for the three months and nine months ended June 30, 2006 and 2005 and for the period from incorporation (February 18, 2004) to June 30, 2006 F-4
   
Interim Consolidated Statements of Cash Flows for the nine months ended June 30, 2006 and 2005 and for the period from incorporation (February 18, 2004) to June 30, 2006 F-5
   
Notes to Interim Consolidated Financial Statements F-6

- 1 -

INFRABLUE (US) INC.

(Formerly Tomi Holdings Inc.)

(A Development Stage Company)

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2006

US FUNDS

(Unaudited)

 

F-1


Infrablue (US) Inc. Statement 1
(Formerly Tomi Holdings Inc.)  
(A Development Stage Company)  
Interim Consolidated Balance Sheet  
US Funds  

    As at     As at  
    June 30,     September 30,  
    2006     2005  
ASSETS   (Unaudited)     (Audited)  
Current            
   Cash $ 28,490   $  122,913  
   Accounts Receivable   14,859     11,259  
   Inventory   14,646     4,629  
    57,995     138,801  
             
Property and Equipment (Note 3)   1,537     2,476  
  $ 59,532   $  141,277  
             
             
LIABILITIES            
Current            
 Accounts payable $ 39,411   $  15,551  
 Accrued liabilities   35,416     58,744  
 Accrued interest (Note 5)   2,378     599  
 Promissory notes payable (Note 5)   100,500     90,000  
 Due to related parties (Note 7)   24,478     14,644  
    202,183     179,538  
Going Concern (Note 1)            
             
             
STOCKHOLDERS’ DEFICIENCY            
Capital Stock            
Common Stock            
       Authorized: 100,000,000 shares with $0.001 par value            
       Issued and fully paid: 28,065,800 (September 30, 2005 –            
                                       17,705,800) - Statement 2 (Note 6)   28,066     17,706  
Additional paid-in capital - Statement 2 (Note 6)   2,776,256     194,983  
Preferred Stock            
       Authorized: 5,000,000 shares with $0.001 par value            
       Issued and fully paid: Nil         -  
Accumulated Comprehensive Loss - Statement 2   (6,063 )   (3,827 )
Deficit – Accumulated during the development stage – Statement 2   (2,940,910 )   (247,123 )
    (142,651 )   (38,261 )
  $ 59,532   $  141,277  

- See Accompanying Notes -

F-2


Infrablue (US) Inc. Statement 2
(Formerly Tomi Holdings Inc.)  
(A Development Stage Company)  
Interim Consolidated Statements of Changes in Stockholders’ Deficiency  
US Funds  
(Unaudited)  

                      Deficit              
                      Accumulated              
                Additional     During the     Accumulated     Total  
    Common Stock     Paid-in     Development     Comprehensive     Stockholders'  
    Shares     Amount     Capital     Stage     Gain (Loss)     Deficiency  
                                     
   Shares issued for cash at $0.003 per                                    
     share – April 30, 2004   4,366,265   $  4,366   $  9,027   $  -   $  -   $  13,393  
   Shares issued for consulting at                                    
     $0.003 per share - August 1, 2004   236,143     236     497     -     -     733  
   Loss for the period   -     -     -     (72,327 )   -     (72,327 )
   Foreign currency translation                                    
     adjustment   -     -     -     -     477     477  
Balance - September 30, 2004 –                                    
     Issued   4,602,408     4,602     9,524     (72,327 )   477     (57,724 )
   Shares allotted for consulting at                                    
     $0.003 per share - issued on                                    
     November 2, 2004   236,143     236     498     -     -     734  
Balance - September 30, 2004 - Issued                                    
     and allotted   4,838,551     4,838     10,022     (72,327 )   477     (56,990 )
   Shares issued for consulting at                                    
     $0.003 per share - February 2, 2005   236,143     236     498     -     -     734  
   Shares issued for consulting at                                    
     $0.003 per share - April 28, 2005   708,439     709     1,660     -     -     2,369  
   Shares issued for debt at $0.026 per                                    
     share – April 28, 2005   6,216,867     6,217     152,848     -     -     159,065  
   Loss for the period   -     -     -     (118,462 )   -     (118,462 )
   Foreign currency translation                                    
     adjustment   -     -     -     -     (5,488 )   (5,488 )
                                     
Balance - August 31, 2005                                    
     - Issued before acquisition   12,000,000     12,000     165,028     (190,789 )   (5,011 )   (18,772 )
   Acquisition of Infrablue Ltd.                                    
     - Recapitalization (Note 1)   5,705,800     5,706     29,955     -     -     35,661  
                                     
Balance - August 31, 2005                                    
     - Issued post acquisition   17,705,800     17,706     194,983     (190,789 )   (5,011 )   16,889  
   Loss for the period   -     -     -     (56,334 )   -     (56,334 )
   Foreign currency translation                                    
     adjustment   -     -     -     -     1,184     1,184  
                                     
Balance - September 30, 2005   17,705,800     17,706     194,983     (247,123 )   (3,827 )   (38,261 )
   Shares issued for debt at $0.25 per                                    
     share – November 30, 2005                                    
     (Note 5c)   360,000     360     91,273     -     -     91,633  
   Shares issued for intellectual                                    
     property at $0.25 per share –                                    
     November 30, 2005 (Note 4)   10,000,000     10,000     2,490,000     -     -     2,500,000  
   Loss for the period   -     -     -     (2,693,787 )   -     (2,693,787 )
   Foreign currency translation                                    
     adjustment   -     -     -     -     (2,236 )   (2,236 )
Balance – June 30, 2006   28,065,800   $  28,066   $  2,776,256   $  (2,940,910 ) $  (6,063 ) $  (142,651 )

- See Accompanying Notes -

F-3


Infrablue (US) Inc. Statement 3
(Formerly Tomi Holdings Inc.)  
(A Development Stage Company)  
Interim Consolidated Statements of Operations  
US Funds  
(Unaudited)  

    For the     For the     For the     For the     From  
    Nine Months     Three Months     Nine Months     Three Months     Incorporation  
    Ended     Ended     Ended     Ended     (February 18,  
    June 30,     June 30,     June 30,     June 30,     2004 )
    2006     2006     2005     2005     to 2006  
Sales $  31,630   $  10,731   $  16,297   $  11,087   $  63,588  
Cost of Sales   23,450     7,533     12,727     9,345     47,140  
Gross Profit   8,180     3,198     3,570     1,742     16,448  
General and Administrative                              
       Expenses                              
   Intellectual property                              
        (Note 4)   2,500,000     -     -     -     2,500,000  
   Accounting and auditing   96,047     19,936     9,443     3,994     157,531  
   Legal   41,428     17,695     1,351     183     58,418  
   Salaries and wages   29,877     (2,224 )   59,485     21,617     130,909  
   Rent   7,992     2,739     6,551     914     23,606  
   Filing Fees   6,235     1,220     -     -     6,235  
   Development   6,082     6,082     -     -     9,481  
   Marketing and promotion   2,974     42     24,594     3,526     40,201  
   Consulting   2,125     -     -     -     2,125  
   Test equipment   1,419     186     -     -     1,419  
   Office and information                              
        technology   1,291     392     6,799     1,053     10,829  
   Interest and bank charges   1,126     (1,403 )   115     115     1,126  
   Depreciation   939     318     954     327     2,355  
   Travel   214     38     2,068     721     2,452  
   Sub-contractors   -     -     5,615     (22 )   5,551  
    2,697,749     45,021     116,975     32,428     2,952,238  
Other Expenses                              
   Interest income (expense)   (3,433 )   (41,823 )   602     (30,686 )   (3,773 )
   Foreign exchange loss   (785 )   (187 )   (357 )   (204 )   (1,347 )
Loss for the Period $  (2,693,787 )   (45,403 ) $  (113,160 )   (30,571 ) $  (2,940  
                               
Loss per Share – Basic and                              
       Diluted $  (0.10 )   (0.00 ) $  (0.02 ) $  (0.00 )      
                               
Weighted Average Shares                              
   Outstanding   25,750,928     28,065,800     6,537,037     9,869,136        
                               
Comprehensive Loss                              
   Loss for the period $  (2,693,787 )   (41,823 ) $  (113,160 )   (30,571 ) $  (2,940,910 )
   Foreign currency                              
           translation adjustment   (2,236 )   816     (4,773 )   (2,086 )   (6,063 )
Total Comprehensive Loss                              
       for the Period $  (2,696,023 )   (44,587 ) $  (117,933 )   (32,657 ) $  (2,946,973 )
                               
Comprehensive Loss per                              
       Share $  (0.10 )   (0.00 ) $  (0.02 ) $  (0.00 )      

- See Accompanying Notes -

F-4


Infrablue (US) Inc. Statement 4
(Formerly Tomi Holdings Inc.)  
(A Development Stage Company)  
Interim Consolidated Statements of Cash Flows  
US Funds  
(Unaudited)  

                From  
    For the Nine     For the Nine     Incorporation  
    Months Ended     Months Ended     (February 18, 2004 )
    June 30,     June 30,     to June 30,  
    2006     2005     2006  
Operating                  
   Loss for the period $  (2,693,787 ) $  (113,160 ) $  (2,940,910 )
   Items not involving an outlay of cash:                  
         Depreciation   939     954     2,355  
         Shares for consulting services   -     3,103     4,570  
         Accrued interest   3,412     -     4,011  
         Shares for intellectual property   2,500,000     -     2,500,000  
     Changes in non-cash working capital                  
         items:                  
         Accounts receivable   (3,600 )   (5,126 )   (14,859 )
         Inventory   (10,017 )   (5,896 )   (14,646 )
         Accounts payable   23,860     9,547     39,411  
         Accrued liabilities   (23,328 )   1,777     25,389  
    (202,521 )   (108,801 )   (394,679 )
                   
Investing                  
   Acquisition of property and equipment   -     (2,090 )   (3,892 )
     Cash acquired on purchase of Tomi                  
         Holdings Inc.   -     -     135,688  
    -     (2,090 )   131,796  
                   
Financing                  
   Promissory notes   100,500     -     100,500  
   Loan from related party   -     159,065     159,065  
   Amounts due to related party   9,834     (21,083 )   24,478  
   Share issuances for cash   -     -     13,393  
    110,334     137,982     297,436  
                   
Effect of exchange rate changes on cash   (2,236 )   (4,773 )   (6,063 )
                   
Net Increase (Decrease) in Cash   (94,423 )   22,318     28,490  
   Cash – Beginning of period   122,913     -     -  
Cash – End of Period $  28,490   $  22,318   $  28,490  
                   
Income Taxes Paid $  -   $  -   $  -  
Interest Paid $  (40 ) $  -   $  (5 )

Please refer to Note 11 for the supplemental schedule of non-cash investing and financing transactions.

- See Accompanying Notes -

F-5


Infrablue (US) Inc.
(Formerly Tomi Holdings Inc.)
(A Development Stage Company)
Notes to Interim Consolidated Financial Statements
June 30, 2006
US Funds
(Unaudited)
 
 

1.

Organization and Going Concern
   

Organization
   

Tomi Holdings Inc. (the "Company" or “Tomi”) was incorporated on April 5, 2005 under the laws of the State of Nevada. On October 20, 2005, the Company changed its name to Infrablue (US) Inc.
   

By letter of intent dated April 18, 2005 and a Share Exchange Agreement ("Agreement") dated May 23, 2005 and as amended on June 30, 2005 and July 31, 2005 with Infrablue Ltd. ("Infrablue"), a United Kingdom corporation, wherein Tomi agreed to issue to the shareholders of Infrablue 12,000,000 Tomi shares in exchange for the 2,075,000 shares that constituted all the issued and outstanding shares of Infrablue. On August 31, 2005, Infrablue completed the reverse acquisition (“RTO”) under the Agreement with Tomi. Immediately before the date of the RTO, Tomi had 100,000,000 common shares authorized and 5,705,800 shares of common stock issued and outstanding. Pursuant to the RTO, all of the 2,075,000 issued and outstanding shares of common stock of Infrablue were exchanged for 12,000,000 Tomi shares, on an approximate 5.783 to 1 basis.
   

Immediately after the RTO, the management of Infrablue took control of the board and officer positions of Tomi, constituting a change of control. Because the former owners of Infrablue gained control of Tomi, the transaction would normally have been considered a purchase by Infrablue. However, since Tomi was not carrying on a business, the transaction was not considered to be a business combination. Instead, the transaction was accounted for as a recapitalization of Infrablue and the issuance of stock by Infrablue (represented by the outstanding shares of Tomi) for the assets and liabilities of Tomi. The value of the net assets of Tomi acquired by Infrablue is the same as their historical book value, being $35,661. At the date of the acquisition, the balance sheet of Tomi was as follows:

  Cash $  126,394  
  Due from Infrablue   9,294  
  Total Assets $  135,688  
         
  Accrued liabilities $  10,027  
  Promissory notes payable   90,000  
  Total Liabilities $  100,027  
         
  Net Assets $  35,661  

Infrablue was incorporated February 18, 2004 and is a technology and marketing company, headquartered in London, England. The major asset of Infrablue is the license to market the Infrablue Technology.

The Company as at June 30, 2006, has the rights for the sale of a Bluetooth software and device, known as IRMA Bluetooth. This product is used by mobile professionals for connecting Smart Phones or personal digital assistants (“PDA’s”) to a projector or other type of presentation equipment.

F-6


Infrablue (US) Inc.
(Formerly Tomi Holdings Inc.)
(A Development Stage Company)
Notes to Interim Consolidated Financial Statements
June 30, 2006
US Funds
(Unaudited)
 
 

1.

Organization and Going Concern - Continued
   

The Company intends to market its product via a three-channel strategy: trade distributors, complementary manufacture bundles and Original Equipment Manufacturer (“OEM”) sales. The trade distributor strategy targets partners with large reseller chains that have the ability to reach high volumes of end customers. Complementary manufacture bundles involve packaging the Infrablue products with other software and hardware, such as PDA’s, Smart Phones and projectors thereby presenting a united solution for the end customer. OEM licensing of the product hardware and software solutions is intended to allow the Company to distribute its products through large businesses, although OEMs will be allowed to use their own branding.
   

Going Concern and Liquidity Considerations
   

The accompanying unaudited interim consolidated financial statements have been prepared by management in accordance with accounting principles generally accepted in the United States for interim financial information and in accordance with Item 310(b) of Regulation S-B. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for annual financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the nine-month period ended June 30, 2006 are not necessarily indicative of the results that may be expected for the year ended September 30, 2006.
   

The accompanying interim financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates, among other things, the realization of assets and satisfaction of liabilities in the normal course of business. As at June 30, 2006, the Company has a working capital deficiency of $144,188, an accumulated deficit of $2,940,910 and has incurred an accumulated operating cash flow deficit of $394,679. The Company intends to fund operations through sales and equity financing arrangements, which may be insufficient to fund its capital expenditures, working capital and other cash requirements for the next fiscal year.
   

Thereafter, the Company will be required to seek additional funds, either through sales and/or equity financing, to finance its long-term operations. The successful outcome of future activities cannot be determined at this time, and there is no assurance that, if achieved, the Company will have sufficient funds to execute its intended business plan or generate positive operating results. In response to these conditions, management intends to raise additional funds through future private placement offerings.
   

These factors, among others, raise substantial doubt about the Company's ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.
   

F-7


Infrablue (US) Inc.
(Formerly Tomi Holdings Inc.)
(A Development Stage Company)
Notes to Interim Consolidated Financial Statements
June 30, 2006
US Funds
(Unaudited)
 
 

2.

Significant Accounting Policies
   

These interim consolidated financial statements follow the same accounting policies and methods of their application as the most recent annual financial statements, except as noted below. These interim financial statements should be read in conjunction with the audited financial statements of the Company as at September 30, 2005.
   

Basis of Consolidation
   

These interim consolidated financial statements include the accounts of Infrablue Ltd. since its incorporation on February 18, 2004 and Infrablue (US) Inc. since the reverse acquisition on August 31, 2005 (Note 1). All intercompany balances and transactions have been eliminated.
   

Stock-Based Compensation
   

Effective January 1, 2006, the Company adopted the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 123(R), “Share-Based Payment”, which establishes accounting for equity instruments exchanged for employee services. Under the provisions of SFAS 123(R), stock-based compensation cost is measured at the grant date, based on the calculated fair value of the award, and is recognized as an expense over the employees’ requisite service period (generally the vesting period of the equity grant). Before January 1, 2006, the Company accounted for stock-based compensation to employees in accordance with Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” and complied with the disclosure requirements of SFAS No. 123, “Accounting for Stock-Based Compensation”. The Company adopted FAS 123(R) using the modified prospective method, which requires the Company to record compensation expense over the vesting period for all awards granted after the date of adoption, and for the unvested portion of previously granted awards that remain outstanding at the date of adoption. Accordingly, financial statements for the periods prior to January 1, 2006 have not been restated to reflect the fair value method of expensing share-based compensation. Adoption of SFAS No. 123(R) does not change the way the Company accounts for share-based payments to non-employees, with guidance provided by SFAS 123 (as originally issued) and Emerging Issues Task Force Issue No. 96-18, “Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services”.
   

Recently Issued Accounting Pronouncements
   

In March 2006, the FASB issued Statement of Financial Accounting Standards No. 156, Accounting for Servicing of Financial Assets (“SFAS No. 156”), which amends FASB Statement No. 140 (“SFAS No. 140”). SFAS 156 may be adopted as early as January 1, 2006, for calendar year-end entities, provided that no interim financial statements have been issued. Those not choosing to early adopt are required to apply the provisions as of the beginning of the first fiscal year that begins after September 15, 2006 (e.g., January 1, 2007, for calendar year-end entities). The intention of the new statement is to simplify accounting for separately recognized servicing assets and liabilities, such as those common with mortgage securitization activities, as well as to simplify efforts to obtain hedge- like accounting. Specifically, the FASB said FAS No. 156 permits a servicer using derivative financial instruments to report both the derivative financial instrument and related servicing asset or liability by using a consistent measurement attribute, or fair value. The adoption of SFAS 156 is not expected to have a material impact on the Company’s financial position, results of operations or cash flows.

F-8


Infrablue (US) Inc.
(Formerly Tomi Holdings Inc.)
(A Development Stage Company)
Notes to Interim Consolidated Financial Statements
June 30, 2006
US Funds
(Unaudited)
 
 

2.

Significant Accounting Policies - Continued
   

In February 2006, the FASB issued Statement of Financial Accounting Standards No. 155, Accounting for Certain Hybrid Financial Instruments (“SFAS No. 155”), which amends Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities (“SFAS No. 133”) and Statement of Financial Accounting Standards No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities (“SFAS No. 140”). SFAS No. 155 permits fair value measurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation, establishes a requirement to evaluate interests in securitized financial assets to identify interests that are freestanding derivatives or hybrid financial instruments containing embedded derivatives. The adoption of SFAS 155 is not expected to have a material impact on the Company’s financial position, results of operations or cash flows.
   
   
3.

Property and Equipment
   

Details are as follows:

                  Net Book Value  
            Accumulated     June 30,  
      Cost     Depreciation     2006  
  Office and computer equipment $  3,894   $  2,357   $  1,537  
                     
                  Net Book Value  
            Accumulated     September 30,  
      Cost     Depreciation     2005  
  Office and computer equipment $  3,892   $  1,416   $  2,476  

   
4.

Agency Exploitation Agreement
   

By agency exploitation agreement dated March 30, 2004, between the Company and third party licensors, the Company is allowed to use, deal with and exploit the intellectual property rights for the IRMA Bluetooth technology in the regions of Australia, Asia, Europe, United States and Canada. On November 30, 2005, the intellectual property was purchased by the Company and the agency exploitation agreement was cancelled.
   

The purchase of the intellectual property was pursuant to an agreement dated November 1, 2005, whereby the Company acquired from its majority stockholder, the Infrablue Technology by issuing 10,000,000 common shares. The Infrablue Technology is comprised of a suite of software programs and a computer peripheral device that enables users to make presentations wirelessly, directly from a personal digital assistant (“PDA”) or mobile smartphone to a projector. The value assigned was $2,500,000, being equal to the most recent share transaction of the Company at $0.25 per share. This amount was expensed, as it does not meet the criteria for capitalization as set out in SFAS No. 86.
   

F-9


Infrablue (US) Inc.
(Formerly Tomi Holdings Inc.)
(A Development Stage Company)
Notes to Interim Consolidated Financial Statements
June 30, 2006
US Funds
(Unaudited)
 
 

5.

Promissory Notes Payable
     
a)

During the current period, the Company issued a convertible promissory note ("Note") for $50,000 to an unrelated third party. The Note bears interest at the US bank prime rate compounded annually and the principal and accrued interest on the Note are due and payable on February 16, 2008. The holder of the Note will have the right to convert the principal and accrued interest into units of the Company at a conversion rate of $0.25 per unit. Each unit is comprised of one share ("Share") of common stock of the Company and one share purchase warrant ("Warrant"). Each Warrant entitles the holder to purchase one additional Share ("Warrant Share") at a price of $0.50 per Warrant Share, for a period of one year following the conversion date. As of June 30, 2006, the Company has accrued $1,281 in related interest (September 30, 2005 – $Nil).
     
b)

During the current period, the Company issued a convertible promissory note ("Note") for $50,500 to an unrelated third party. The Note bears interest at the US bank prime rate compounded annually and the principal and accrued interest on the Note are due and payable on February 16, 2008. The holder of the Note will have the right to convert the principal and accrued interest into units of the Company at a conversion rate of $0.25 per unit. Each unit is comprised of one share ("Share") of common stock of the Company and one share purchase warrant ("Warrant"). Each Warrant entitles the holder to purchase one additional Share ("Warrant Share") at a price of $0.25 per Warrant Share, for a period of one year following the conversion date. As of June 30, 2006, the Company has accrued $1,097 in related interest (September 30, 2005 – $Nil).
     
c)

During the prior year, the Company received $90,000 in cash by issuing promissory notes. These notes bear interest at the US bank prime rate and are payable on demand. The Company cancelled the loans when it entered into debt conversion agreements dated November 30, 2005, whereby the Company issued 360,000 common shares valued at $0.25 per share in full settlement of the $90,000 plus related interest of $1,633 (September 30, 2005 – accrued $599).
     

6.

Capital Stock
     
a)

The number of shares outstanding presented in these financial statements relating to share transactions taking place prior to August 31, 2005 has been restated to reflect the approximate 5.783:1 ratio based upon the 12,000,000 shares issued on August 31, 2005 to acquire the 2,075,000 shares of Infrablue Ltd. (Note 1).
     
b)

During the year ended September 30, 2004, the Company split its stock on a 100 new for 1 old basis. Common shares issued prior to the effective date of the stock split have been restated to reflect the stock split ratio.
     
c)

During the current period, the Company issued Nil (September 30, 2005 – 944,582, September 30, 2004 – 236,143) and allotted Nil (September 30, 2005 – Nil, September 30, 2004 - 236,143) of common stock to the Managing Director for consulting and employment services (Note 7b). The shares were recorded at $Nil (September 30, 2005 – $3,103, September 30, 2004 - $1,467) being the fair value at the time of issuance.
     
d)

By agreement dated April 28, 2005, the Company issued 6,216,867 common shares in full settlement of $159,065 of debt owed to the majority shareholder (Note 8).

F-10


Infrablue (US) Inc.
(Formerly Tomi Holdings Inc.)
(A Development Stage Company)
Notes to Interim Consolidated Financial Statements
June 30, 2006
US Funds
(Unaudited)
 
 

6.

Capital Stock - Continued
     
e)

On November 30, 2005, the Company issued 360,000 common shares at $0.25 per share in full settlement of the $90,000 promissory notes payable and related interest of $1,633 (Note 5c).
     
f)

On November 30, 2005, the Company issued 10,000,000 common shares to acquire the Infrablue Technology from a related party. The value assigned was $2,500,000, being equal to the most recent share transaction of the Company at $0.25 per share (Note 4).

There were no warrants or stock options granted during the current period and none were outstanding as at June 30, 2006 and September 30, 2005.

   
7.

Related Party Balances and Transactions
       

Related party transactions not disclosed elsewhere in these financial statements are as follows:
       
a)

The amounts due to related parties of $24,478 (September 30, 2005 - $14,644) are non-interest bearing and due on demand. Included in due to related parties are $6,549 (September 30, 2005 - $3,413) with a shareholder of the Company and $7,031 (September 30, 2005 - $6,824), and $10,898 (September 30, 2005 - $4,407), owing to two separate companies with a director in common with a corporate shareholder of the Company.
       
b)

By employment agreement dated April 1, 2004 and amended July 20, 2004, the Company agreed to pay the Managing Director $51,618 (GBP28,000) per annum plus 236,143 common shares every three months to a maximum of 1,416,868 shares. During the period, $28,867 (June 30, 2005 - $51,672) was paid to the Managing Director, of which $28,867 (June 30, 2005 - $54,726) was in cash and $Nil (June 30, 2005 - $3,055) was from the issuance of Nil (June 30, 2005 – 944,582) shares.
       
c)

During the current period, the Company paid or accrued the following fees:
       
i)

$Nil (June 30, 2005 - $5,241) for accounting; $Nil (June 30, 2005 - $1,310) for legal; $Nil (June 30, 2005 - $2,808) for marketing and promotion; $Nil (June 30, 2005 - $6,551) for rent; $Nil (June 30, 2005 - $4,586) for office to a company that is a corporate shareholder of the Company; and
       
ii)

$7,992 (June 30, 2005 - $Nil) for rent to a company with a director in common with a corporate shareholder of the Company.

 

The above transactions, occurring in the normal course of operations, are measured at the exchange amount, which is the amount of consideration established and agreed to by the related parties.

   

F-11


Infrablue (US) Inc.
(Formerly Tomi Holdings Inc.)
(A Development Stage Company)
Notes to Interim Consolidated Financial Statements
June 30, 2006
US Funds
(Unaudited)
 
 

8.

Loan Payable to Related Party
   

By agreement dated October 4, 2004, the Company entered into a loan agreement with the majority shareholder whereby the shareholder would make available up to $269,655 (GBP150,000). The facility was available in tranches of $53,931 (GBP30,000) every three months. The facility was to be paid, including all accrued interest, by April 1, 2007 and bore interest at 6% per annum above the Svenska Handelsbanken Plc base rate or 10% per annum whichever is greater. During the first eighteen months from the date of the agreement, the loan was interest free. As security the shareholder had a first charge debenture agreement for all Company assets. By agreement dated April 28, 2005, the Company settled the full amount of the loan, being $159,065 with the issuance of 6,216,867 common shares. The loan facility was cancelled at that time.
   
   
9.

Segmented Information
   

Details on a geographic basis as at June 30, 2006 are as follows:

      Western              
      Europe     U.S.A.     Total  
  Assets $  59,531   $  1   $  59,532  
  Revenue $  31,630   $  -   $  31,630  
  Loss for the period $  (66,363 ) $  (2,627,424 ) $  (2,693,787 )

Details on a geographic basis as at September 30, 2005 are as follows:

      Western              
      Europe     U.S.A.     Total  
  Assets $  37,455   $  103,822   $  141,277  
  Revenue $  31,958   $  -   $  31,958  
  Loss for the year $  (156,724 ) $  (18,072 ) $  (174,796 )
                     

F-12


Infrablue (US) Inc.
(Formerly Tomi Holdings Inc.)
(A Development Stage Company)
Notes to Interim Consolidated Financial Statements
June 30, 2006
US Funds
(Unaudited)
 
 

10.

Income Taxes
   

The Company has incurred non-capital losses for UK tax purposes of approximately $295,000, which may be carried forward indefinitely and used to reduce taxable income of future years. The Company also had accumulated net operating losses for U.S. federal income tax purposes of approximately $191,000, which may be carried forward until 2026 and used to reduce taxable income of future years.
   

Details of future income tax assets:

      June 30,     September 30,  
  Future income tax assets:   2006     2005  
         Net operating losses $  486,000   $  292,000  
         Effective US and UK corporate tax rates   31%     31%  
         Non-capital tax loss   153,000     90,000  
         Valuation allowance   (153,000 )   (90,000 )
    $  -   $  -  

The potential future tax benefits of these losses have not been recognized in these financial statements due to uncertainty of their realization. When the future utilization of some portion of the carryforwards is determined not to be “more likely than not,” a valuation allowance is provided to reduce the recorded tax benefits from such assets.
   
   
11.

Non-Cash Transactions
   

The following is a schedule of non-cash investing and financing transactions:

                  From  
      For the Nine     For the Nine     Incorporation  
      Months Ended     Months Ended     (February 18, 2004 )
      June 30,     June 30,     to June 30,  
      2006     2005     2006  
  Transactions:                  
         Shares issued for acquisition of                  
                Infrablue Ltd. $  -   $  -   $  35,661  
         Shares issued to related party for debt $  -   $  159,065   $  159,065  
         Shares issued for consulting services $  -   $  3,103   $  4,570  
         Shares issued for intellectual property $  2,500,000   $  -   $  2,500,000  
         Shares issued for debt $  91,633   $  -   $  91,633  
  Acquisition of Assets and Liabilities of                  
     Tomi Holdings Inc.:                  
         Due from Infrablue $  -   $  -   $  9,294  
         Accrued liabilities $  -   $  -   $  10,027  
         Promissory notes payable $  -   $  -   $  90,000  

F-13

Item 2. Management’s Discussion and Analysis

The following discussion of our financial condition, changes in financial condition and results of operations for the nine months ended June 30, 2006 should be read in conjunction with our unaudited consolidated interim financial statements and related notes for the nine months ended June 30, 2006.

Overview of Our Business

We are engaged in the business of commercializing proprietary technology that we refer to as the InfraBlue Technology. The InfraBlue Technology is comprised of a suite of software programs and a computer peripheral device known as the IRMA device. IRMA stands for “intelligent remote mobile accessory”. The development of this technology has been completed and we are presently marketing the IRMA device with the objective of achieving commercial levels of sales. We operate a website which can be accessed through the Internet at www.InfraBlue.co.uk. While we have commenced initial sales of the IRMA device, we have not achieved significant sales of our product to date.

Our IRMA devices are small hand-held digital presentation devices that enable users to make PowerPoint presentations wirelessly, directly from the user’s personal digital assistant (“PDA”) or mobile “smartphone”, without the use of a laptop or desk-top computer. Each IRMA device is sold with our proprietary InfraBlue software that enables the conversion and compression of Microsoft PowerPoint slides to Windows graphical formats and transfers them to the user’s handheld PDA or smartphone. The PDA or smartphone then connects wirelessly with the IRMA device, which is linked to a data projector by a regular VGA (video graphics array) cable. The wireless communication is completed using either the Bluetooth protocol or infrared technology. The primary target market for our IRMA device is the mobile professional who could benefit from highly portable presentation materials, without the need to carry a laptop computer.

Our InfraBlue Technology solution is comprised of the following components:

1.

The IRMA Suite is personal computer (“PC”) software that is deployed on the user’s desktop or laptop computer for the purpose or converting a Microsoft PowerPoint presentation into image folders and for transferring these images to the user’s PDA or smartphone.

   
2.

The IRMA Client is software that is used for opening image folders on the user’s PDA or smartphone, for previewing these images, for controlling the IRMA device and for enabling the user to deliver the presentation through a projector or computer display.

   
3.

The IRMA device is a small peripheral hardware device that connects to a projector or computer display using a computer graphics cable known as a VGA cable. The IRMA device is able to connect wirelessly to the user’s PDA or smartphone using Bluetooth or infrared technology.

Our plan of operation is to exploit the InfraBlue Technology in its current form and to develop a market for the IRMA devices and the related InfraBlue software. We anticipate carrying out ongoing product development in order to maintain the compatibility of our IRMA devices with upgraded software as we seek to establish a competitive position in the mobile computer peripheral device and data projector markets.

We have achieved only minimal revenues from sales of our IRMA products to date. Accordingly, we are presently a development stage company. We have limited funds with which to pursue our plan of operations to commercialize our IRMA products and technology. We anticipate that we will require additional funding in order to achieve significant sales of IRMA products and technology. We have no arrangements for any additional financing and there is no assurance that any additional financing will be obtained.

- 2 -

We were incorporated on April 5, 2005 under the laws of the State of Nevada. We carry out our business operations through our wholly owned subsidiary, InfraBlue Ltd. (“InfraBlue UK”), located in the United Kingdom. Our principal executive office is located at Suite 5.15, 130 Shaftesbury Avenue, London, England W1D 5EU. Our telephone number is +44(0)20 7031 1189 and our fax number is +44(0)20 7031 1199.

Our Plan of Operations

We plan to exploit the InfraBlue Technology in its present form and to develop a market for the InfraBlue products, currently consisting of the IRMA device and the IRMA Client and IRMA Suite PC software. As such, the primary objective of our current plan of operations is to market the IRMA device and the IRMA Client and IRMA Suite PC software with the objective of increasing sales and establishing greater awareness and acceptance of our products in our marketplace. We anticipate ongoing development work on these products with a view to establishing a competitive position in the mobile devices and data projector markets. We will also pursue creating partnerships and strategic relationships with original equipment manufacturers (“OEMs”) with the objective of earning license fees from the license of our technology, although this presently not a primary focus of our plan of operations. If we are successful in creating partnerships and strategic relationships with OEMs, we expect that our product development efforts would be specifically tailored to such OEMs’ needs, but we have no immediate plans in this regard.

Our plan of operations for the next twelve months is to complete the following objectives within the time periods and within the budgets specified:

1.

We plan to carry out marketing of our IRMA devices with the objective of securing distributor relationships and increasing sales of our products. We anticipate that marketing activities will be carried throughout the course of the next twelve months. We anticipate that we will spend approximately $7,500 per month on marketing activities during the next twelve months, for a total anticipated expenditure of $90,000 over the next twelve months. This amount is primarily comprised of the salary we will pay to Mitchell Johnson, our sole executive officer and director, who will carry out our marketing activities. Mr. Johnson is paid a salary of approximately $5,000 per month.

   
2.

We plan to continue development work on our IRMA devices in order to update the operating software to ensure compatibility with Windows Mobile 5.0 and to add three operating system patches. We anticipate spending approximately $20,000 over the next twelve months to complete this development work.

   
3.

We anticipate spending approximately $4,000 in ongoing general and administrative expenses per month for the next twelve months, for a total anticipated expenditure of $48,000 over the next twelve months. The general and administrative expenses for the year will consist primarily of rent and office services, technical support and hosting services and general office expenses.

   
4.

We anticipate spending approximately $40,000 in complying with our obligations a reporting company under the Securities Exchange Act of 1934. These expenses will consist primarily of professional fees relating to the preparation of our financial statements and completing our annual report, quarterly report, current report and proxy statement filings with the SEC.

- 3 -

We also anticipate that we will purchase additional IRMA devices from Flander Oy, which has an inventory of manufactured IRMA devices, as required to fulfill orders for sales of our IRMA devices. We anticipate that revenues from sales will exceed the costs of purchasing IRMA devices. However, if sales of IRMA devices increase to the point where Flander Oy’s inventory is depleted, or if we otherwise determine to commence manufacturing to fulfill orders, then we anticipate that we would incur an upfront expense of approximately $68,000 in order to manufacture the minimum initial run of 300 IRMA devices. This expense would be incurred prior to any revenues being achieved.

As at September 30, 2005, we had cash reserves of $122,913 and a working capital deficiency of $40,737. On November 30, 2005, we converted $90,000 of loans outstanding as of September 30, 2005 into common stock, thereby reducing our current liabilities by $90,000. As at June 30, 2006, we had cash reserves of $28,490 and a working capital deficiency of $144,188. We anticipate that our planned expenditures over the next twelve months in the amount of $198,000 will exceed our cash reserves and working capital plus the amount that we anticipate deriving from sales of our IRMA devices. We presently have sufficient cash to fund our operations for less than two months. We anticipate that we will require financing the amount of approximately $250,000 in order to carry out our plan of operations for the next twelve months.

During the twelve month period following the date of this quarterly report, we anticipate that we will not generate revenues that exceed our operating costs. We anticipate based on our current cash and working capital and our planned expenses that we will be able to continue our plan of operations over the next two months without additional financing. We believe that we will require additional financing in order to commercialize our InfraBlue Technology and the IRMA device in order to earn revenues that exceed our operating expenses. We believe that debt financing will not be an alternative for funding of our planned activities as we do not have tangible assets to secure any debt financing. We anticipate that additional funding will be in the form of equity financing from the sale of our common stock or debt financings that are convertible into shares of our common stock. We do not have any other financing arranged and we cannot provide investors with any assurance that we will be able to raise sufficient funding from the sale of our common stock to fund our plan of operations. In the absence of such financing, we may not be able to continue our plan of operations beyond the next two months and our business plan will fail. If we do not continue to obtain additional financing, we will be forced to abandon our plan of operations and our business activities.

Presentation of Financial Information

Effective August 31, 2005, we acquired 100% of the issued and outstanding shares of InfraBlue UK by issuing 12,000,000 shares of our common stock. Notwithstanding its legal form, our acquisition of InfraBlue UK has been accounted for as a reverse acquisition, since the acquisition resulted in the former shareholders of InfraBlue UK owning the majority of our issued and outstanding shares. Because Tomi Holdings Inc. (now InfraBlue (US) Inc.) was a newly incorporated company with nominal net non-monetary assets, the acquisition has been accounted for as an issuance of stock by InfraBlue UK accompanied by a recapitalization. Under the rules governing reverse acquisition accounting, the results of operations of InfraBlue (US) Inc. are included in our consolidated financial statements effective August 31, 2005. Our date of inception is the date of inception of InfraBlue UK, being February 18, 2004, and our financial statements are presented with reference to the date of inception of InfraBlue UK. Financial information relating to periods prior to August 31, 2005 is that of InfraBlue UK.

Critical Accounting Policies

Development Stage Company

- 4 -

We are a development stage company as defined by Financial Accounting Standards No. 7. We are presently devoting all of our present efforts to establish a new business. All losses accumulated since inception have been considered as part of our development stage activities.

Revenue Recognition

We recognize revenue from sales of our IRMA devices when all of the following criteria have been met: persuasive evidence for an arrangement exists; delivery has occurred; the fee is fixed or determinable and collection is reasonably assured.

Foreign Currency Translations

Our functional currency is pounds sterling (“£”). Our reporting currency is the U.S. dollar. All transactions initiated in other currencies are translated into U.S. dollars as follows:

  (i)

assets and liabilities at the rate of exchange in effect at the balance sheet date;

     
  (ii)

equity at historical rates; and

     
  (iii)

revenue and expense items at the average rate of exchange prevailing during the period.

Unrealized exchange gains and losses arising from such translations are deferred until realization and are included as a separate component of shareholder’s equity as a component of comprehensive income or loss. Upon realization, the amount deferred is recognized as income in the period when it is realized.

Results Of Operations – Nine months Ended June 30, 2006 and 2005

References to the discussion below to fiscal 2006 are to our current fiscal year which will end on September 30, 2006. References to fiscal 2005 and fiscal 2004 are to our fiscal years ended September 30, 2005 and 2004, respectively.

  Nine months Three months Nine months Three months Cumulative from
  ended ended ended June 30, ended inception
  June 30, 2006 June 30, 2005 June 30, (February 18, 2004)
    2006   2005 to June 30, 2006
  (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
Revenue $31,630 $10,731 $16,297 $11,087 $63,588
Cost of Sales $23,450 $7,533 $12,727 $9,345 $47,140
Gross Profit $8,180 $3,198 $3,570 $1,742 $16,448
General and Administrative          
Expenses          
         Intellectual Property $2,500,000 NIL NIL NIL $2,500,000
         Salaries and Wages $29,877 ($2,224) $59,485 $21,617 $130,909
         Accounting and Auditing $96,047 $19,936 $9,443 $3,994 $157,531
         Marketing and Promotion $2,974 $42 $24,594 $3,526 $40,201
         Legal $41,428 $17,695 $1,351 $183 $58,418
         Rent $7,992 $2,739 $6,551 $914 $23,606
         Office and Information $1,291 $392 $6,799 $1,053 $10,829
         Technology          
         Sub-contractors NIL NIL $5,615 ($22) $5,551
         Filing Fees $6,235 $1,220 NIL NIL $6,235

- 5 -


  Nine months Three months Nine months Three months Cumulative from
  ended ended ended June 30, ended inception
  June 30, 2006 June 30, 2005 June 30, (February 18, 2004)
    2006   2005 to June 30, 2006
         Development $6,082 $6,082 NIL NIL $9,481
         Travel $214 $38 $2,068 $721 $2,452
         Consulting $2,125 NIL NIL NIL $2,125
         Depreciation $939 $318 $954 $327 $2,355
         Test Equipment $1,419 $186 NIL NIL $1,419
         Interest and Bank $1,126 ($1,403) $115 $115 $1,126
         Charges          
Other Income (Expense)          
         Interest Expense ($3,433) ($41,823) $602 ($30,686) ($3,773)
         Foreign Exchange Loss ($785) ($187) ($357) ($204) ($1,347)
Loss for the Period ($2,693,787) ($45,403) ($113,160) ($30,571) ($2,940,910)

Revenue

Our sales are comprised of sales of our IRMA devices.

We experienced our initial sales of our IRMA devices during fiscal 2005. We sold 74 devices during this period.

We continued to earn revenues from sales of our IRMA devices during the first nine months of 2006. Our revenues increased to $31,603 for the first nine months ended June 30, 2006 while it decreased to $10,731 for the three months ended June 30, 2006. We sold 109 IRMA devices during the first nine months of fiscal year 2006.

Cost of Sales

Cost of sales is comprised of amounts that we have paid to Flander Oy for purchase of IRMA devices for resale.

Cost of sales increased to $23,450 during the first nine months of 2006 from $12,727 during the first nine months of fiscal 2005 and reflected our initial sales during these periods. However, our costs of sales during the three months ended June 30, 2006 decreased to $7,533 from $9,345 during the three months ended June 30, 2005.

Gross Profit

Our gross profit during the first nine months of fiscal 2006 was $8,180 or 26% of sales, compared to $3,570 or 22% of sales during the first nine months of fiscal 2005. Our gross profit during the three months ended June 30, 2006 was $3,198 or 30% of sales, compared to $1,742 or 16% of sales during the three months ended June 30, 2005.

Salaries and Wages

Salaries and wages are primarily comprised of salary paid to Mitchell Johnson, our sole executive officer and employee.

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Salaries and wages decreased to $29,877 during the first nine months of fiscal 2006 from $59,485 during the first nine months of fiscal 2005. Salaries and wages decreased to $2,224 during the three months ended June 30, 2006 from $21,617 during the three months ended June 30, 2005. The reduction in salaries and wages resulted primarily from the fact that no shares were issued during the first nine months of fiscal 2006 to Mr. Johnson under his compensation agreement, whereas compensation shares had been issued during the first nine months of fiscal 2005. The decrease was also attributable to a decrease in the foreign exchange rate of the U.S. dollar in terms of the Great Britain pound.

Accounting and Auditing

Accounting and auditing expenses are attributable to the preparation and audit of our financial statements.

Accounting and auditing expenses increased during the three and nine month periods ended June 30, 2006 compared to the comparable periods of fiscal 2005 as a result of our completing our audited annual and unaudited interim financial statements prepared in connection with the filing of a registration statement with the SEC.

Legal

Legal expenses are attributable to legal fees paid to our legal counsel in connection with the completion of our corporate reorganization and our filing a registration statement with the SEC and becoming a reporting company under the Securities Exchange Act of 1934.

Legal expenses increased during the three and nine month periods ended June 30, 2006 compared to the comparable periods of fiscal 2005 as a result of our completing our corporate reorganization and preparing and filing of a registration statement with the SEC .

Office and Information Technology

Office and information technology expenses are attributable to purchase of products including demonstration equipment, test equipment, competitor analysis and business machines.

Office and information technology expenses declined significantly during the three and nine month periods ended June 30, 2006 compared to the comparable periods of fiscal 2005 as we had completed development of our IRMA devices and are now selling IRMA devices.

Rent

Rent expense was attributable to amounts paid to Outlander Management on account of our rent of share office premises in London, England. This contract was replaced with our agreement with Azuracle in May 2005.

Intellectual Property

We expensed the intellectual property acquired in the first quarter of fiscal 2006 due to our determination that the cost of the intellectual property purchased during the current fiscal year does not meet the criteria for capitalization as set out in SFAS No. 86.

Loss from Operations

Our loss from operations increased during the first nine months of fiscal 2006 compared to the first nine months of fiscal 2005 as a result of our increased business activity, consisting primarily of business development and marketing efforts that resulted in the initial sales of our IRMA devices. We also incurred significant legal, accounting and auditing expenses during the year in connection with the

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reorganization of our business. Our loss from operations for the first nine months of fiscal 2006 also increased significantly from the first nine months of fiscal 2005 due to our intellectual property expense realized during this period.

Liquidity and Financial Resources

We had cash of $122,913 and working capital deficit of $40,737 as at September 30, 2005, compared to cash of $Nil and a working capital deficit of $58,644 at September 30, 2004. Subsequent to the fiscal year end, we converted $90,000 of loans outstanding as of September 30, 2005 into common stock, thereby reducing our current liabilities by $90,000. As at June 30, 2006, we had cash reserves of $28,490 and a working capital deficiency of $144,188.

Plan of Operations

We estimate that our total expenditures over the next twelve months will be approximately $198,000, as outlined above under the heading “Plan of Operations”. While this amount will be offset by any gross profits that we earn from sales of our IRMA devices, we anticipate that our cash and working capital will not be sufficient to enable us to undertake our plan of operations over the next twelve months without our obtaining additional financing. We presently have sufficient cash to fund our operations for the next two months. However, we anticipate that we will require additional financing in order to enable us to sustain our operations for the next twelve months, as outlined above.

Cash used in Operating Activities

We used cash of $202,521 in operating activities during the first nine months of fiscal 2006 compared to cash used of $108,801 in operating activities during the first nine months of 2005.

We have applied cash generated from our financing activities to fund cash used in operating activities.

Cash from Investing Activities

We did not use any cash in investing activities during the first nine months of fiscal 2006 compared to cash used of $2,090 in investing activities during the first nine months of 2005.

Cash used in investing activities during the first nine months of fiscal 2006 was attributable to purchases of equipment.

Cash from Financing Activities

We generated cash of $110,334 from financing activities during the first nine months of fiscal 2006 compared to cash of $137,982 generated from activities during the first nine months of 2005.

Cash generated from financing activities during the first nine months of fiscal 2006 was attributable to the sale of convertible promissory notes to two investors in the aggregate principal amount of $100,500 in March 2006. Each convertible note will be for a two year term from the date of advance and will bear interest at an interest rate equal to the prime rate of interest for U.S. banks as published in Money Rates Column of the Money and Investing Section of The Wall Street Journal from time to time. Each investor will have the right at any time commencing on the date of the quotation of our common stock on the NASD Over-the-Counter Bulletin Board and ending on the maturity date to convert the outstanding principal and accrued interest on each convertible loan into units at a conversion rate of $0.25 US per unit. Each unit to be issued upon conversion will be comprised of one share of our common stock and one warrant to purchase one additional share of our common stock.

Going Concern

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We have not attained profitable operations and are dependent upon obtaining financing to pursue any extensive business activities. For these reasons our auditors stated in their report that they have substantial doubt we will be able to continue as a going concern.

Future Financings

We anticipate continuing 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 our existing stockholders. There is no assurance that we will achieve any additional sales of our equity securities or arrange for debt or other financing to fund our planned 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 is material to stockholders.

Item 3. Controls and Procedures

As required by Rule 13a-15 under the Securities Exchange Act of 1934 (the “Exchange Act”), we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2006, being the date of our most recently completed quarter. This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, Mr. Mitchell Johnson. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the rules and forms of the Securities and Exchange Commission (the “SEC”) .

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted 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 in our reports filed under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and our Chief Financial Officer, to allow timely decisions regarding required disclosure.

During the fiscal quarter ended June 30, 2006, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to affect, our internal control over financial reporting during the quarter ended June 30, 2006.

The term “internal control over financial reporting” is defined as a process designed by, or under the supervision of, the registrant’s principal executive and principal financial officers, or persons performing similar functions, and effected by the registrant’s board of directors, management and other personnel, 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 and includes those policies and procedures that:

(a)

Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the registrant;

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(b)

Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the registrant are being made only in accordance with authorizations of management and directors of the registrant; and

   
(c)

Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the registrant’s assets that could have a material effect on the financial statements.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

We currently are not a party to any material legal proceedings and to our knowledge, no such proceedings are threatened or contemplated.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

We did not complete any sales of securities without registration under the Securities Act of 1933 during the quarter ended June 30, 2006.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Submission of Matters to a Vote of Securities Holders

No matters were submitted to our security holders for a vote during the nine months ended June 30, 2006.

Item 5. Other Information

None.

Item 6. Exhibits

The following exhibits are included with this Quarterly Report on Form 10-QSB:

Exhibit  
Number                                                                                Description of Exhibit
3.1(1)

Articles of Incorporation

3.2(1)

Certificate of Amendment to Articles of Incorporation

3.3(1)

By-Laws

10.1(1)

Agency Agreement dated March 30, 2004 among HBI Sales Private Limited, Zacan Holdings Proprietary Limited, ICT/Europetec Limited, MIR Technologies LLC and InfraBlue Ltd.

10.2(1)

Employment Agreement between InfraBlue Ltd. and Mitchell Johnson dated April 1, 2004

10.3(1)

Letter Agreement dated April 1, 2004 confirming Mitchell Johnson’s appointment as a director of InfraBlue Ltd.

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Exhibit  
Number Description of Exhibit
10.4(1)

Letter Agreement dated July 20, 2004 amending the Letter Agreement between InfraBlue Ltd. and Mitchell Johnson dated April 1, 2004

10.5(1)

Loan Agreement dated October 4, 2004 between InfraBlue Ltd. and PublicLock Inc.

10.6(1)

Debenture between InfraBlue Ltd., as issuer, and PublicLock Inc., as holder, dated October 4, 2004

10.7(1)

Debt Settlement Agreement dated April 28, 2005 between InfraBlue Ltd. and PublicLock Inc.

10.8(1)

Share Exchange Agreement dated May 23, 2005, as amended, among Tomi Holdings Inc., InfraBlue Ltd. and the stockholders of InfraBlue Ltd.

10.9(1)

Intellectual Property Purchase Agreement dated November 1, 2005 between InfraBlue (US) Inc. and PublicLock Inc.

10.10(1)

Debt Conversion Agreement dated November 30, 2005 between Tomi Holdings Inc. and Overseas Investments and Finance Limited

10.11(1)

Debt Conversion Agreement dated November 30, 2005 between Tomi Holdings Inc. and Starfield Holdings Group Ltd.

10.12(1)

Termination and Release Agreement dated November 30, 2005 among HBI Sales Private Limited, Zacan Holdings Proprietary Limited, ICT/Europetec Limited, MIR Technologies LLC and InfraBlue Ltd.

10.13(2)

Administration Services Agreement dated May 1, 2005 between Infrablue Ltd. and Azuracle Limited

10.14(3)

Form of Regulation S Subscription Agreement for Convertible Notes

31.1(4)

Certification of Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(a) of the Exchange Act

32.1(4)

Certification of Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(b) of the Exchange Act and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002


(1)

Filed as an exhibit to our registration statement on Form SB-2 filed with the SEC on December 16, 2005

(2)

Filed as an exhibit to the Amendment No. 1 to Form SB-2 filed with the SEC on February 10, 2006.

(3)

Filed as an exhibit to the Amendment No. 2 to Form SB-2 filed with the SEC on March 21, 2006.

(4)

Filed as an exhibit to this Quarterly Report on Form 10-QSB.

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SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

  INFRABLUE (US) INC.
     
Date: August 11, 2006 By: /s/ Mitchell Johnson
   
    Mitchell Johnson
    Chief Executive Officer and Chief Financial Officer

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