Edgar Filing: AMERICAN COMMERCE SOLUTIONS Inc

acs_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

FORM 10-Q

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

For the quarterly period ended November 30, 2011

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the transition period from _______, 20 , to ______, 20 .

Commission File Number 33-98682

American Commerce Solutions, Inc.

(Exact Name of Registrant as Specified in Charter)

Delaware		05-0460102
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification Number)

1400 Chamber Drive, Bartow, Florida 33830

(Address of Principal Executive Offices)

(863) 533-0326

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(g) of the Act:

$0.001 par value preferred stock		Over the Counter Bulletin Board
$0.002 par value common stock		Over the Counter Bulletin Board

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No x

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 x 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 (Section 232.405) during the preceding 12 months. Yes ¨ No ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

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

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

As of January 11, 2012, the Registrant had 331,691,576 outstanding shares of its common stock, $0.002 par value.

Documents incorporated by reference: none

AMERICAN COMMERCE SOLUTIONS, INC.

FORM 10-Q—INDEX

		Page
Part I – Financial Information

Item 1.	Financial Statements		3

	Consolidated Balance Sheets		3

	Consolidated Statements of Operations		4

	Consolidated Statement of Changes in Stockholders’ Equity		5

	Consolidated Statements of Cash Flows		6

	Notes to Consolidated Financial Statements		7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operation		12

Item 3.	Quantitative and Qualitative Disclosures About Market Risk		17

Item 4T.	Controls and Procedures		17

Part II – Other Information

Item 1.	Legal Proceedings		19

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		19

Item 3.	Defaults Upon Senior Securities		19

Item 4.	Reserved		19

Item 5.	Other Information		19

Item 6.	Exhibits		20

Signatures			21

PART I – FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

American Commerce Solutions, Inc. and Subsidiary

Consolidated Balance Sheets

	November 30, 2011				February 28, 2011
Assets		(unaudited)				(audited)
Current assets:
Cash		$	56,056			$	29,655
Accounts receivable, net of allowance of $0 and $0, respectively			-				70,839
Accounts receivable, factored			57,752				13,163
Inventories			275,669				213,557
Note receivable, related party, net of unamortized discount of $0 and $0, respectively			1,009,792				1,009,792
Due from related party			561,644				561,644
Other receivables			109,819				73,662

Total current assets			2,070,732				1,972,312

Property and equipment, net of accumulated depreciation of $2,396,982 and $2,250,218, respectively			2,962,824				3,071,599

Prepaid loan costs paid with common stock							22,047
Other assets			17,239				11,128

		$	5,050,795			$	5,077,086


Liabilities and Stockholders’ Equity
Current liabilities:
Current portion of notes payable		$	1,317,243			$	1,308,647
Current portion of notes payable, related party			805,498				642,925
Accounts payable; including related party balances of $48,114 and $77,812, respectively			248,427				307,371
Accrued expenses			148,028				161,195
Accrued interest			270,870				411,267

Total current liabilities			2,790,066				2,831,405


Notes payable, net of current portion			10,406				10,406
Due to stockholders			1,946,610				1,772,310

Total Liabilities			4,747,082				4,614,121

Stockholders’ equity:
Preferred stock, total authorized 5,000,000 shares:
Series A; cumulative and convertible; $.001 par value; 600 shares authorized; 102 shares issued and outstanding; liquidating preference $376,125			—				—
Series B; cumulative and convertible; $.001 par value; 3,950 shares authorized; 3,944 shares issued and outstanding; liquidating preference $3,944,617			3				3
Common stock; $.002 par value; 350,000,000 shares authorized; 331,691,576 and 329,691,576 shares issued and outstanding, respectively			663,384				659,384
Additional paid-in capital			19,154,574				19,155,574
Stock subscription receivable			(10,000	)			(10,000	)
Treasury stock, at cost			(265,526	)			(265,526	)
Accumulated deficit			(19,238,722	)			(19,076,470	)

Total stockholders’ equity			303,713				462,965

		$	5,050,795			$	5,077,086

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

American Commerce Solutions, Inc. and Subsidiary

Consolidated Statements of Operations

Unaudited

	Three Months Ended November 30,							Nine Months Ended November 30,
	2011				2010			2011			2010
Net sales	$	594,450			$	480,511		$	1,822,186		$	1,673,960
				1
Cost of goods sold		280,259				212,425			868,729			793,659

Gross profit		314,191				268,086			953,457			880,301

Selling, general and administrative expenses		322,302				346,123			1,042,931			1,079,145

Loss from operations		(8,111	)			(78,037	)		(89,474	)		(198,844	)

Other income (expense):
Other		3,000				—			37,532			—
Interest income		2,676				873			6,454			28,307
Interest expense		(32,590	)			(43,266	)		(116,764	)		(138,941	)
Total other (expense)		(26,914	)			(42,393	)		(72,778	)		(110,634	)
Loss from continuing operations before income tax	$	(35,025	)		$	(120,430	)	$	(162,252	)	$	(309,478	)
Income taxes		—				—			—			—

Loss from continuing operations	$	(35,025	)		$	(120,430	)	$	(162,252	)	$	(309,478	)

Net income (loss) available to common stockholders		(35,025	)			(120,430	)		(162,252	)		(309,478	)

Net loss per common share from continuing operations	$	(.00	)		$	(.00	)	$	(.00	)	$	(.00	)

Weighted average number of common shares outstanding		331,169,576				329,159,576			330,100,485			308,530,110

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

American Commerce Solutions, Inc. and Subsidiary

Consolidated Statements of Changes in Stockholders’ Equity

Nine Months Ended November 30, 2011

Unaudited

	Common Stock					Preferred Stock
	Shares		Amount			Shares		Amount
Balance, February 28, 2011		329,691,576		$	659,384		3,944		$	3
Common stock issued for services		2,000,000			4,000
Net loss (unaudited)

Balance, November 30, 2011		331,691,576		$	663,384		3,944		$	3

Additional Paid-In Capital			Accumulated Deficit				Treasury Stock				Total
$	19,155,574			$	(19,076,470	)		$	(265,526	)		$	462,965
	(1,000	)											3,000
					(162,252	)							(162,252	)

$	19,154,574			$	(19,238,722	)		$	(265,526	)		$	303,713

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

American Commerce Solutions, Inc. and Subsidiary

Consolidated Statements of Cash Flows

For the Nine Months Ended November 30, 2011 and 2010

Unaudited

	Nine Months Ended November 30,
	2011			2010
Operating activities:
Net loss	$	(162,252	)	$	(309,478	)
Adjustments to reconcile net loss to net cash used by operating activities:
Depreciation and amortization		146,764			140,006
Amortization of loan costs		22,047			49,294
Issuance of common stock for services		3,000			—
Amortization of discount on notes receivable		—			(20,708	)
Decrease (increase) in allowance for doubtful accounts		—			6,682
(Increase) decrease in:
Accounts receivables		70,839			(33,013	)
Inventories		(62,112	)		8,379
Other assets		(6,111	)		(1,745	)
Increase (decrease) in:
Accounts payable and accrued expenses		3,596			(11,165	)
Deferred income		—			(14,097	)

Net cash provided (used) by operating activities		15,771			(185,845	)

Investing activities:
(Increase) decrease in other receivables		(36,157	)		(29,140	)
Acquisition of property and equipment		(37,989	)		—

Net cash used by investing activities		(74,146	)		(29,140	)

Financing activities:
(Increase) decrease in due from factor		(44,589	)		52,352
Proceeds from notes payable and long-term debt		45,200			121,302
Principal payments on notes payable		(90,135	)		(111,831	)
Increase in due to stockholders		174,300			174,300

Net cash provided by financing activities		84,776			236,123

Net increase in cash		26,401			21,138

Cash, beginning of period		29,655			10,289

Cash, end of period	$	56,056		$	31,427

Supplemental disclosures of cash flow information and noncash investing and financing activities:
Cash paid during the period for interest	$	11,073		$	18,229

During the nine months ended November 30, 2011, the Company reclassified $197,873 of accrued interest to notes payable.

During the nine months ended November 30, 2011 and 2010, the Company increased a note payable by $18,231 and $18,231, respectively for an accrual of interest.

During the nine months ended November 30, 2010, the Company issued 45,773,010 shares of common stock to a related party and related company valued at $66,143 in exchange for guarantees of a note payable. As of November 30, 2011 and 2010, $22,047 and $49,294 of these guaranty fees has been amortized.

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

American Commerce Solutions, Inc. and Subsidiary

Notes to Consolidated Financial Statements

As of November 30, 2011 and for the

Three and Nine Months Ended November 30, 2011 and 2010

1. BACKGROUND INFORMATION

American Commerce Solutions, Inc., located and operating in West Central Florida, was incorporated in Rhode Island in 1991 under the name Jaque Dubois, Inc., and was re-incorporated in Delaware in 1994. In July 1995, Jaque Dubois, Inc. changed its name to JD American Workwear, Inc. In December 2000, the stockholders voted at the annual stockholders meeting to change the name of JD American Workwear, Inc. to American Commerce Solutions, Inc. (the “Company”).

The Company is primarily a holding company with one wholly owned subsidiary; International Machine and Welding, Inc. is engaged in the machining and fabrication of parts used in heavy industry, and parts sales and service for heavy construction equipment.

2. GOING CONCERN

The Company recorded losses from continuing operations of $35,025 and $162,252 for the three and nine months ended November 30, 2011. Current liabilities exceed current assets by $719,334 at November 30, 2011. Additionally, the Company is in default on several notes payable. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent upon its ability to reverse negative operating trends, raise additional capital, and obtain debt financing.

Management has revised its business strategy to include expansion into other lines of business through the acquisition of other companies in exchange for the Company’s stock to facilitate manufacturing contracts under negotiation. In conjunction with the anticipated new contracts, management is currently negotiating new debt and equity financing, the proceeds from which would be used to settle outstanding debts at more favorable terms, to finance operations, and to complete additional business acquisitions. However, there can be no assurance that the Company will be able to raise capital, obtain debt financing, or improve operating results sufficiently to continue as a going concern.

The accompanying consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be necessary if the Company is unable to continue as a going concern.

3. RECENT ACCOUNTING PRONOUNCEMENTS

Recent accounting pronouncements issued by FASB (including EITF), the AICPA and the SEC did not or are not believed by management to have a material impact on the Company’s present or future financial statements.

4. STOCK BASED COMPENSATION

At November 30, 2011, the Company has two stock-based employee compensation plans, both which have been approved by the shareholders.

The Company recognizes all share-based payments to employees, including grants of employee stock options, as compensation expense in the financial statements based on their fair values. That expense will be recognized over the period during which an employee is required to provide services in exchange for the award, known as the requisite service period (usually the vesting period).

The value of each grant is estimated at the grant date using the Black-Scholes model. There were no options granted or exercised during the three and nine months ended November 30, 2011 and 2010.

5. BASIS OF PRESENTATION

In the opinion of management, all adjustments consisting only of normal recurring adjustments necessary for a fair statement of (a) the results of operations for the three and nine month periods ended November 30, 2011 and 2010, (b) the financial position at November 30, 2011, and (c) cash flows for the nine month periods ended November 30, 2011 and 2010, have been made.

The unaudited consolidated financial statements and notes are presented as permitted by Form 10-Q. Accordingly, certain information and note disclosures normally included in condensed financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted. The accompanying consolidated financial statements and notes should be read in conjunction with the audited consolidated financial statements and notes of the Company for the fiscal year ended February 28, 2011. The results of operations for the three and nine month periods ended November 30, 2011 are not necessarily indicative of those to be expected for the entire year.

6. ACCOUNTS RECEIVABLE, FACTORED

During the three and nine months ended November 30, 2011, the Company factored receivables of approximately $213,300 and $684,000, respectively. In connection with the factoring agreement, the Company incurred fees of approximately $6,000 and $21,200 during the three and nine months ended November 30, 2011, respectively. Any and all of the Company’s indebtedness and obligations to the Factoring Company is guaranteed by two stockholders and collateralized by the Company’s inventory and fixed assets.

7. INVENTORIES

Inventories consist of the following:

	November 30, 2011			February 28, 2011
Work-in process		$	13,715		$	10,310
Finished goods			261,954			203,247
Raw materials			—			—
Total inventories		$	275,669		$	213,557

8. RELATED PARTY TRANSACTIONS

During the three and nine months ended November 30, 2011 and 2010, two executives who are stockholders of the Company deferred $58,100 and $174,300, respectively, of compensation earned during the period. The balance due to stockholders at November 30, 2011 and February 28, 2011 totaled $1,946,610 and $1,772,310, respectively. The amounts are unsecured, non-interest bearing, and have no specific repayment terms; however, the Company does not expect to repay these amounts within the next year.

During the nine months ended November 30, 2010, the Company issued 45,773,010 shares of common stock to a related party and related company valued at $66,142 in exchange for guarantees of a note payable. As of November 30, 2010 $49,294 of these guaranty fees has been amortized.

Certain notes to related parties have conversion features, whereby, at the holder’s option, the notes may be converted, in whole or in part upon written notice, into the Company’s common shares at a discount to the fair market value. The Company considered the value of the beneficial conversion features of the notes, and when deemed material, recorded the beneficial conversion value as deferred financing costs and amortized the amount over the period of the loan, charging interest expense. The convertible notes are to related parties, who have the majority of the voting rights. The related parties have waived their conversion rights since the inception of these notes until such time that the Company’s market price of shares rise sufficiently or the Company amends the capital structure (through a reverse split or increase in the authorized shares) or combination of all factors, whereby a conversion of any single note, or portion thereof, will not exceed the authorized shares of the Company.

During the nine months ended November 30, 2011, the Company consolidated $499,753 of notes payable and $197,873 of accrued interest into $697,626 of new notes payable.

The above amounts are not necessarily indicative of the amounts that would have been incurred had comparable transactions been entered into with independent parties.

9. SEGMENT INFORMATION

The Company had two reportable segments during 2011 and 2010; manufacturing and other. For the three and nine months ended November 30, 2011 and 2010 the Company has included segment reporting.

For the three months ended November 30, 2011, information regarding operations by segment is as follows:

	Manufacturing		Other (a)			Total Continuing Operations

Revenue	$	594,450				$	594,450
Interest expense	$	20,110		12,480			32,590
Depreciation	$	49,038					49,038
Net income (loss)	$	74,792		(109,817	)		(35,025	)
Property and equipment, net of accumulated depreciation	$	2,962,824					2,962,824
Segment assets	$	3,634,201		1,416,594			5,050,795

For the nine months ended November 30, 2011, information regarding operations by segment is as follows:

	Manufacturing		Other (a)			Total

Revenue	$	1,822,186				$	1,822,186
Interest expense	$	78,900	$	37,864		$	116,764
Depreciation	$	146,764	$			$	146,764
Net income	$	192,050	$	(354,302	)	$	(162,252	)

For the three months ended November 30, 2010, information regarding operations by segment is as follows:

	Manufacturing		Other (a)			Total

Revenue	$	480,511				$	480,511
Interest expense, net	$	30,909	$	11,484		$	42,393
Depreciation	$	43,432	$			$	43,432
Net income (loss)	$	32,243	$	(152,673	)	$	(120,430	)
Property and equipment, net of accumulated depreciation	$	3,119,948	$			$	3,119,948

For the nine months ended November 30, 2010, information regarding operations by segment is as follows:

	Manufacturing		Other (a)			Total

Revenue	$	1,673,960	$			$	1,673,960
Interest expense, net	$	96,216	$	14,418		$	110,634
Depreciation and amortization	$	140,006	$			$	140,006
Net income (loss)	$	134,606	$	(444,084	)	$	(309,478	)

(a)	The “other” segment is mainly related to the holding company expenses and general overhead, as well as the stock based compensation awards.

Segment 1, manufacturing, consists of International Machine and Welding, Inc. and derives its revenues from machining operations, sale of parts and service.

The manufacturing segment, International Machine and Welding, Inc. has a broad and diverse base of customers. The segment does not rely on any single customer, the loss of which would have a material adverse effect on the segment. However, this segment does generate a significant amount of revenues from sales and services provided to three different industries.

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS

This FILING contains forward-looking statements. The words “anticipated,” “believe,” “expect,” “plan,” “intend,” “seek,” “estimate,” “project,” “will,” “could,” “may,” and similar expressions are intended to identify forward-looking statements. These statements include, among others, information regarding future operations, future capital expenditures, and future net cash flow. Such statements reflect the Company’s current views with respect to future events and financial performance and involve risks and uncertainties, including, without limitation, general economic and business conditions, changes in foreign, political, social, and economic conditions, regulatory initiatives and compliance with governmental regulations, the ability to achieve further market penetration and additional customers, and various other matters, many of which are beyond the Company’s control. Should one or more of these risks or uncertainties occur, or should underlying assumptions prove to be incorrect, actual results may vary materially and adversely from those anticipated, believed, estimated, or otherwise indicated. Consequently, all of the forward-looking statements made in this FILING are qualified by these cautionary statements and there can be no assurance of the actual results or developments.

The Company cautions readers that in addition to important factors described elsewhere, the following important facts, among others, sometimes have affected, and in the future could affect, the Company’s actual results, and could cause the Company’s actual results during 2012 and beyond, to differ materially from those expressed in any forward-looking statements made by, or on behalf of, the Company.

This Management’s Discussion and Analysis or Plan of Operation presents a review of the consolidated operating results and financial condition of the Company for the three and nine month periods ended November 30, 2011 and 2010. This discussion and analysis is intended to assist in understanding the financial condition and results of operation of the Company and its subsidiary. This section should be read in conjunction with the consolidated financial statements and the related notes.

RESULTS OF OPERATIONS

MANUFACTURING SEGMENT

The manufacturing subsidiary, International Machine and Welding, Inc., generates its revenues from three divisions. Division 1 provides specialized machining and repair services to heavy industry and original equipment manufacturers. Division 2 provides repair and rebuild services on heavy equipment used in construction and mining as well as sales of used equipment. Division 3 provides parts sales for heavy equipment directly to the customer. The primary market of this segment is the majority of central and south Florida with parts sales expanding its market internationally. The current operations can be significantly expanded using the 38,000 square foot structure owned by International Machine and Welding, Inc.

COMPARISON OF THE RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED NOVEMBER 30, 2011 AND 2010

General

The Company’s consolidated net sales increased to $594,450 for the three months ended November 30, 2011, an increase of $113,939 or 24%, from $480,511 for the three months ended November 30, 2010. Management believes the increase is due to customers requiring necessary repairs previously deferred over the last two years.

Gross profit for the consolidated operations increased to $314,191 for the three months ended November 30, 2011 from $268,086 for the three months ended November 30, 2010. Gross profit as a percentage of sales decreased to 53% during the three months ended November 30, 2011 from 56% for the same period ended November 30, 2010.

Consolidated interest expense for the three months ended November 30, 2011 was $32,590 compared to $43,266 for the three months ended November 30, 2010. The decrease in interest expense is due to the Company reducing the overall debt and consolidating debts at a lower interest rate during the three months ended November 30, 2011.

Consolidated interest income for the three months ended November 30, 2011 was $2,676 compared to $873 for the three months ended November 30, 2010. The increase in interest income is due to an increase in the note receivable to a related party during the three months ended 2011.

Selling, general and administrative expenses decreased to $322,302 for the three months ended November 30, 2011 from $346,123 for the three months ended November 30, 2010, a decrease of $23,821 or 7%. The decrease in selling, general and administrative expenses is mainly due to operating efficiencies.

The Company incurred a net consolidated loss of $35,025 for the three months ended November 30, 2011 compared to $120,430 net loss for the three months ended November 30, 2010.

Manufacturing Segment

The manufacturing operation, International Machine and Welding, Inc. provided net sales of $594,450 for the three months ended November 30, 2011 compared to $480,511 for the three months ended November 30, 2010. The machining operations provided $152,150 or 26% of net sales with parts and service providing $442,300 or 74% of net sales for the three months ended November 30, 2011 as compared to machining operations contributing $160,414 or 33% of net sales with parts and service providing $320,097 or 67% of net sales for the three months ended November 30, 2010.

Gross profit from International Machine and Welding, Inc. was $314,191 for the three months ended November 30, 2011 compared to $268,086 during the three months ended November 30, 2010 providing gross profit margins of 53% and 56%, respectively.

Selling, general and administrative expenses for International Machine and Welding, Inc. were $219,725 for the three months ended November 30, 2011 compared to $204,935 for the three months ended November 30, 2010. The increase in selling, general and administrative expenses is due to the overall decrease in the allocation of overhead expenses passed on to the parent company.

Interest expense was $20,110 for the three months ended November 30, 2011 compared to $30,909 for the three months ended November 30, 2010. The decrease in interest expense is due to the Company reducing the overall debt and consolidating debts at a lower interest rate during the three months ended November 31, 2011.

The Company does not have discrete financial information on each of the three manufacturing divisions, nor does the Company make decisions on the divisions separately; therefore they are not reported as segments.

COMPARISON OF THE RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED NOVEMBER 30, 2011 AND 2010

General

The Company’s consolidated net sales increased to $1,822,186 for the nine months ended November 30, 2011, an increase of $148,226 or 9%, from $1,673,960 for the nine months ended November 30, 2010. Management believes the increase is due to customers requiring necessary repairs previously deferred over the last two years.

Gross profit for the consolidated operations increased to $953,457 for the nine months ended November 30, 2011 from $880,301 for the nine months ended November 30, 2010. Gross profit as a percentage of sales decreased during the nine months ended November 30, 2011 to 52% from 53% during the nine months ended November 30, 2010.

Consolidated interest expense for the nine months ended November 30, 2011 was $116,764 compared to $138,941 for the nine months ended November 30, 2010. The decrease in interest expense is due to the Company paying bills on a timely basis thereby not incurring the penalties and interest that were being charged during the nine months ended November 30, 2010.

Consolidated interest income for the nine months ended November 30, 2011 was $6,454 compared to $28,307 for the nine months ended November 30, 2010. The decrease in interest income is due to the discount on the note receivable becoming fully amortized during the nine months ended November 30, 2011.

Selling, general and administrative expenses decreased to $1,042,931 for the nine months ended November 30, 2011 from $1,079,145 for the nine months ended November 30, 2010, a decrease of $6,214 or .6%.

The Company incurred a net consolidated loss of $162,252 for the nine months ended November 30, 2011 compared to $309,478 net loss for the nine months ended November 30, 2010.

Manufacturing Segment

The manufacturing operation, International Machine and Welding, Inc. provided net sales of $1,822,186 for the nine months ended November 30, 2011 compared to $1,673,960 for the nine months ended November 30, 2010. The machining operations provided $523,077 or 29% of net sales with parts and service providing $1,299,109 or 71% of net sales for the nine months ended November 30, 2011 as compared to machining operations contributing $502,014 or 30% of net sales with parts and service providing $822,111 or 70% of net sales for the nine months ended November 30, 2010.

Gross profit from International Machine and Welding, Inc., our operating subsidiary, was $953,457 for the nine months ended November 30, 2011 compared to $880,301 during the nine months ended November 30, 2010 providing gross profit margins of 52% and 53%, respectively.

Selling, general and administrative expenses for International Machine and Welding, Inc., our operating subsidiary, were $717,504 for the nine months ended November 30, 2011 compared to $649,479 for the nine months ended November 30, 2010. The increase in selling, general and administrative expenses is due to the overall decrease in the allocation of overhead expenses passed on to the parent company.

Interest expense was $78,900 for the nine months ended November 30, 2011 compared to $101,628 for the nine months ended November 30, 2010. The decrease in interest expense is due to the Company paying their bills more timely and avoiding the penalties and interest that the Company had incurred in the past. The Company also consolidated several notes payable and was able to reduce the overall interest rate during the nine months ended November 30, 2011.

LIQUIDITY AND CAPITAL RESOURCES

During the nine months ended November 30, 2011 and 2010, the Company provided (used) net cash for operating activities of $15,771 and ($185,845), respectively.

During the nine months ended November 30, 2011 and 2010, the Company used funds for investing activities of $74,146 and $29,140, respectively.

During the nine months ended November 30, 2011 and 2010, the Company provided cash from financing activities of $84,776 and $236,123, respectively. The decrease in net cash provided by financing activities is due to the reduced reduction in proceeds from lending arrangements, as operations decreased comparative cash requirements.

Cash flows from financing activities provided for working capital needs and principal payments on long-term debt through fiscal 2011. As of November 30, 2011, the Company had a working capital deficit of $719,334. To the extent that the cash flows from financing activities are insufficient to finance the Company’s anticipated growth, or its other liquidity and capital requirements during the next twelve months, the Company will seek additional financing from alternative sources including bank loans or other bank financing arrangements, other debt financing, the sale of equity securities (including those issuable pursuant to the exercise of outstanding warrants and options), or other financing arrangements. However, there can be no assurance that any such financing will be available and, if available, that it will be available on terms favorable or acceptable to the Company.

Although management has reduced debt, new financing to finance operations and to facilitate additional production is still being sought. However, there can be no assurance that the Company will be able to raise capital, obtain debt financing, or improve operating results sufficiently to continue as a going concern.

SEASONALITY

The diversity of operations in the manufacturing segment protects it from seasonal trends except in the sales of agricultural processing where the majority of the revenue is generated while the processors await the next harvest.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The accompanying consolidated financial statements include the activity of the Company and its wholly owned subsidiary. All intercompany transactions have been eliminated in consolidation. The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The Company reviews its estimates, including but not limited to, recoverability of long-lived assets, recoverability of prepaid expenses and allowance for doubtful accounts, on a regular basis and makes adjustments based on historical experiences and existing and expected future conditions. These evaluations are performed and adjustments are made as information is available. Management believes that these estimates are reasonable; however, actual results could differ from these estimates.

We believe that the following critical policies affect our more significant judgments and estimates used in preparation of our consolidated financial statements.

We maintain allowances for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. We base our estimate on an analysis of the Company’s prior collection experience, customer credit worthiness, and current economic trends. If the financial condition of our customers were to deteriorate, additional allowances may be required.

We value our inventories at the lower of cost or market. Cost is determined on a standard cost basis that approximates the first-in, first-out method; market is determined based on net realizable value. We write down inventory balances for estimated obsolescence or unmarketable inventory equal to the difference between the cost of the inventory and the estimated market value based upon assumptions about future demand and market conditions. If actual market conditions are less favorable than those projected by management, additional inventory write-downs may be required.

We value our property and equipment at cost. Amortization and depreciation are calculated using the straight-line and accelerated methods of accounting over the estimated useful lives of the assets. Maintenance and repairs are charged to operations when incurred. Betterments and renewals are capitalized. When property and equipment are sold or otherwise disposed of, the asset account and related accumulated depreciation account are relieved, and any gain or loss is included in operations.

Fair value estimates used in preparation of the consolidated financial statements are based upon certain market assumptions and pertinent information available to management. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. These financial instruments include cash, accounts receivable, accounts payable, and accrued expenses. Fair values were assumed to approximate carrying values for these financial instruments since they are short-term in nature and their carrying amounts approximate fair values or they are receivable or payable on demand. The fair value of the Company’s notes payable is estimated based upon the quoted market prices for the same or similar issues or on the current rates offered to the Company for debt of the same remaining maturities.

NEW ACCOUNTING PRONOUNCEMENTS

For a description of recent accounting standards, including the expected dates of adoption and estimated effects, if any, on our financial statements, see “Note 3: Recent Accounting Pronouncements” in Part I, Item 1 of this Form 10-Q.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 4(T). CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Management conducted its evaluation based on the framework in Internal Control – Integrated Framework issued by the Committee on Sponsoring Organizations of the Treadway Commission (COSO). Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that, at November 30, 2011, such disclosure controls and procedures were not effective.

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 or submitted under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.

Management’s Annual Report on Internal Control over Financial Reporting

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rue 13a-15(f) under the Exchange Act). Internal control over financial reporting is a process, including policies and procedures, designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with U.S. generally accepted accounting principles. Our management assessed our internal control over financial reporting based on the Internal Control – Integrated Framework issued by the COSO. Based on the results of this assessment, our management concluded that our internal control over financial reporting was not effective as of November 30, 2011 based on such criteria.

A control system, no matter how well conceived or operated, can provide only reasonable, not absolute assurance that the objectives of the control system are met under all potential conditions, regardless of how remote, and may not prevent or detect all errors and all fraud. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been prevented or detected. Our internal control over financial reporting is designed 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.

Limitations on the Effectiveness of Controls

Our disclosure controls and procedures are designed to provide reasonable, not absolute, assurance that the objectives of our disclosure control system are met. Because of inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within a company have been detected. Based on their evaluation as of the end of the period covered by this report, management concluded that our disclosure controls and procedures were sufficiently effective to provide reasonable assurance that the objectives of our disclosure control system were met.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the fiscal quarter ended November 30, 2011 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Auditor’s Report on Internal Control over Financial Reporting

This Annual Report does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this Annual Report.

PART II

ITEM 1. LEGAL PROCEEDINGS

None.

ITEM 1A. RISK FACTORS

Not applicable.

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

During the three months ended November 30, 2011, there was no modification of any instruments defining the rights of holders of the Company’s common stock and no limitation or qualification of the rights evidenced by the Company’s common stock as a result of the issuance of any other class of securities or the modification thereof.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

The Company has defaulted on a total of $915,723 of notes payable. The amount of principal payments in arrears was $529,470, with an additional amount of $386,253 of interest due at November 30, 2011. These defaults are the result of a failure to pay in accordance with the terms agreed.

ITEM 4. RESERVED

ITEM 5. OTHER MATTERS

None

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

EXHIBIT INDEX

Incorporated Documents	SEC Exhibit Reference	Sequentially Numbered

31.1	Certification of the Chief Financial Officer	31.1

31.2	Certification of the Chief Executive Officer	31.2

32.1	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of the Chief Financial Officer	32.1

32.2	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of the Chief Executive Officer	32.2

	XBRL Instance Document	101.INS **

	XBRL Taxonomy Extension Schema Document	101.SCH **

	XBRL Taxonomy Extension Calculation Linkbase Document	101.CAL **

	XBRL Taxonomy Extension Definition Linkbase Document	101.DEF **

	XBRL Taxonomy Extension Label Linkbase Document	101.LAB **

	XBRL Taxonomy Extension Presentation Linkbase Document	101.PRE **

** XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

(b) Reports on Form 8-K

None

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.

	AMERICAN COMMERCE SOLUTIONS, INC.

Date: January 11, 2012	By:	/S/ DANIEL L. HEFNER
		Daniel L. Hefner, President

Date: January 11, 2012	By:	/S/ FRANK D. PUISSEGUR
		Frank D. Puissegur, CFO and Chief Accounting Officer