10QSB 1 maxim10q063006.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-QSB QUARTERLY REPORT FOR SMALL BUSINESS ISSUERS SUBJECT TO THE 1934 ACT REPORTING REQUIREMENTS [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 for the quarterly period ended June 30, 2006 Commission File No. Maximum Awards, Inc. -------------------- (Exact name of registrant as specified in its charter) Nevada 86-0787790 ------ ---------- (State of organization) (I.R.S. Employer Identification No.) Level 1, 164 Wharf Street, Brisbane, Queensland 4000, Australia --------------------------------------------------------------- (Address of principal executive offices) 61 738 312316 ------------- Registrant's telephone number, including area code Check whether the issuer (1) filed all reports required to be file by Section 13 or 15(d) of the Exchange Act during the past 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes [X] There are 32,451,900 shares of common stock and 1,000,000 series "A" preferred stock outstanding, as of August 17, 2006. PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS MAXIMUM AWARDS, INC. AND SUBSIDIARIES INTERIM CONSOLIDATED FINANCIAL STATEMENTS SIX MONTHS ENDED JUNE 30, 2006 AND JUNE 30, 2005 UNAUDITED CONTENTS Report of Independent Registered Public Accounting Firm 1 Interim Consolidated Balance Sheets 2 Interim Consolidated Statements of Operations and Comprehensive Loss 3 Interim Consolidated Statements of Cash Flows 4 Notes to Interim Consolidated Financial Statements 5 - 19 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of Maximum Awards, Inc. and Subsidiaries: We have reviewed the accompanying interim consolidated balance sheets of Maximum Awards, Inc. (a Nevada corporation) and its subsidiaries, as of June 30, 2006 and the interim consolidated statements of operations and comprehensive loss for the three months and six months periods ended June 30, 2006 and 2005, and the interim consolidated statements of cash flows for the six month periods ended June 30, 2006 and 2005. These interim consolidated financial statements are the responsibility of the Company's management. We conducted our reviews in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim consolidated financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the interim consolidated financial statements referred to above for them to be in conformity with accounting principles generally accepted in the United States. We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of Maximum Awards, Inc. and Subsidiaries as at December 31, 2005 and 2004, and consolidated statements of operations and comprehensive loss, stockholders' deficit, and cash flows for each of the two years in the year ended December 31, 2005 [not presented herein], and in our report dated March 31, 2006 we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 2005, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived. The accompanying interim consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has experienced operating losses since inception, has raised minimal capital and has no long-term contracts related to its business plans. These factors raise substantial doubt about the Company's ability to continue as a going concern. Management's plans regarding these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Toronto, Canada CHARTERED ACCOUNTANTS August 13, 2006 1 MAXIMUM AWARDS, INC. AND SUBSIDIARIES Interim Consolidated Balance Sheets June 30, 2006 and December 31, 2005 June 30 Dec 31 2006 2005 (Unaudited) (Audited) ----------- ----------- ASSETS Current Cash $ 40,091 $ 42,206 Accounts receivable 43,368 43,766 Inventory 9,740 10,662 Prepaid expenses 16,546 9,509 ----------- ----------- Total Current Assets 109,745 106,143 Furniture and Equipment (note 5) 23,795 21,285 ----------- ----------- Total Assets $ 133,540 $ 127,428 =========== =========== LIABILITIES Current Accounts payable and accrued charges $ 242,309 $ 190,557 Notes payable (note 6) 257,255 -- Liability for unredeemed points 21,178 15,744 Due to related party (note 7) 50,583 39,000 Advances from directors (note 8) 88,819 82,362 ----------- ----------- Total Current Liabilities 660,144 327,663 ----------- ----------- Total Liabilities 660,144 327,663 ----------- ----------- STOCKHOLDERS' DEFICIT Capital Stock (note 9) 33,452 33,052 Additional Paid-In Capital 1,186,451 1,106,850 Accumulated Other Comprehensive Loss (41,755) (27,030) Accumulated Deficit (1,704,752) (1,313,107) ----------- ----------- Total Stockholders' Deficit (526,604) (200,235) ----------- ----------- Total Liabilities and Stockholders' Deficit $ 133,540 $ 127,428 =========== =========== (The accompanying notes are an integral part of these interim consolidated financial statements) 2

MAXIMUM AWARDS INC. Interim Consolidated Statements of Operations and Comprehensive Loss Three Months and Six Months Periods Ended June 30, 2006 and June 30, 2005 Three Months Three Months Six Months Six Months June 30, 2006 June 30, 2005 June 30, 2006 June 30, 2005 ------------- ------------- ------------- ------------- (Unaudited) (Unaudited) (Unaudited) (Unaudited) Revenue 179,075 76,371 284,292 139,779 Cost of Sales 54,584 33,318 105,379 55,772 ------------- ------------- ------------- ------------- Gross Profit 124,491 43,053 178,913 84,007 Expenditure General and administrative 276,621 136,066 536,976 319,450 Legal and professional fees 14,840 4,366 24,840 20,000 Amortization 1,577 996 2,896 1,959 ------------- ------------- ------------- ------------- Total Expense 293,038 141,428 564,712 341,409 Operating Loss (168,548) (98,375) (385,799) (257,402) Other (Expense) Interest 4,726 720 5,846 1,140 Provision for income tax -- -- -- -- Net Loss (173,273) (99,095) (391,645) (258,542) ------------- ------------- ------------- ------------- Foreign currency translation adjustment 489 2,546 (2,701) 1,457 Comprehensive Loss (172,784) (96,549) (394,346) (257,085) ------------- ------------- ------------- ------------- Basic and Fully Diluted Loss per share $ 0.01 $ 0.01 $ 0.01 $ 0.01 Basic and Fully Diluted Weighted Average Number of shares outstanding during the period 32,451,900 25,529,400 32,393,107 25,528,150

(The accompanying notes are an integral part of these interim consolidated financial statements) 3 MAXIMUM AWARDS INC. Interim Consolidated Statements of Cash Flows Six Months Ended June 30, 2006 and June 30, 2005 2006 2005 (Unaudited) (Audited) ----------- ----------- Cash Flows from Operating Activities Net loss $ (391,645) $ (258,542) Adjustments to reconcile net loss to net cash used in operating activities Amortization 2,896 1,959 Accounts receivable 398 7,397 Inventory 922 989 Prepaid and sundry assets (7,037) 12,051 Liability for unredeemed points 5,434 (979) Accounts payable and accrued charges 63,336 74,254 ----------- ----------- Net cash used in operating activities (325,696) (162,871) ----------- ----------- Cash Flows from Investing Activities Purchase of equipment (5,406) (7,980) ----------- ----------- Net cash used in investing activities (5,406) (7,980) ----------- ----------- Cash Flows from Financing Activities Advances from directors 6,457 125,737 Proceeds from notes payable 257,255 41,086 Proceeds from issuance of capital stock 80,000 2,500 ----------- ----------- Net cash provided by financing activities 343,712 169,323 ----------- ----------- Net Increase (Decrease) in Cash 12,610 (1,528) Foreign Exchange on Cash Balances (14,725) 1,457 Cash - beginning of period 42,206 15,889 ----------- ----------- Cash - end of period $ 40,091 $ 15,818 =========== =========== Cash $ 40,091 $ 15,068 Cash Held in Escrow -- 750 ----------- ----------- Total Cash $ 40,091 $ 15,818 ----------- ----------- (The accompanying notes are an integral part of these interim consolidated financial statements) 4 MAXIMUM AWARDS, INC. AND SUBSIDIARIES Notes to Interim Consolidated Financial Statements June 30, 2006 Unaudited 1. Operations and Business Maximum Awards, Inc, formerly known as Rising Fortune Incorporated (the "Company"), was incorporated in the State of Nevada on March 7, 1995. The Company was inactive between 1996 and 2000. In 2000, the Company entered into an agreement to distribute product. However, the agreement never materialized and the Company continued to remain inactive until November 18, 2003. On November 19, 2003, the Company amended its Articles of Incorporation to change its name to Maximum Awards, Inc. On December 9, 2003, the Company entered into a definitive Share Exchange Agreement (the "Agreement") with Maximum Awards (Pty) Ltd., an Australian corporation operating a consumer rewards program, whereby the Company acquired all of the issued and outstanding shares of the Subsidiary in exchange for 22,000,000 common shares and 1,000,000 Series "A" preferred shares of the Company in a reverse merger transaction. The Series "A" preferred shares are non-participating, but each share is entitled to 50 votes in a general meeting. In addition, the Company issued 2,200,000 common shares as a finder's fee for assistance in the acquisition of the Subsidiary. As a result of the Agreement, the principal shareholder of Maximum Awards (Pty) Ltd. controls 96% of the Company. While the Company is the legal parent, as a result of the reverse takeover, Maximum Awards (Pty) Ltd. became the parent company for accounting purposes. On June 1, 2004, the Company acquired 100% of the issued and outstanding share capital of both Global Business Group Australia (Pty) Ltd. ("Global Business") and Travel Easy Holidays (Pty) Ltd. ("Travel Easy") from the directors of the respective companies for $1.00. Global Business and Travel Easy are controlled by the same shareholder who controls the Company and Maximum Awards (Pty) Ltd. As such, this transfer of equity interests between common controlled entities is accounted for as a recapitalization of the Company with the net assets of Maximum Awards (Pty) Ltd. and the Company brought forward at their historical basis. The Company operates a loyalty and rewards program known as Maximum Awards. Under this program, consumers earn points by purchasing products and services from a range offered by the Company's subsidiaries, Global Business and Travel Easy, or program partners. Accumulated points then can be redeemed to acquire additional desired products or services from the same list of such items offered by the Company's subsidiaries. The Company's subsidiary, Global Business, maintains a catalogue of available goods and services which a member can purchase, or acquire through the redemption of points. Travel Easy is a licensed travel agency which services the public and also allows members to purchase travel services or redeem points for airline tickets or travel packages. 5 MAXIMUM AWARDS, INC. AND SUBSIDIARIES Notes to Interim Consolidated Financial Statements June 30, 2006 Unaudited 2. Going Concern These financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America with the assumption that the Company will be able to realize its assets and discharge its liabilities in the normal course of business. The Company has sustained operating losses since inception, has raised minimal capital and has no long-term contracts related to its business plans. The Company's continuation as a going concern is uncertain and dependant on successfully bringing its services to market, achieving future profitable operations and obtaining additional sources of financing to sustain its operations. In the event the Company cannot obtain the necessary funds, it will be necessary to delay, curtail or cancel the further development of its products and services. Though the business plan indicates profitable operation in the coming year, these profits are contingent on completing and fulfilling contracts with various providers of goods and services throughout the world to provide the Company with a cashflow to sustain operations. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going concern. 3. Summary of Significant Accounting Policies a) Basis of Financial Statement Presentation These financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, under the accrual method of accounting, with the assumption that the Company will be able to realize its assets and discharge its liabilities in the normal course of business. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-QSB. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Interim results are not necessarily indicative of the results that may be expected for a full year. These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company's Annual Report to Stockholders on Form 10-KSB for the fiscal year ended December 31, 2005, as filed with the Securities and Exchange Commission. 6 MAXIMUM AWARDS, INC. AND SUBSIDIARIES Notes to Interim Consolidated Financial Statements June 30, 2006 Unaudited 3. Summary of Significant Accounting Policies (cont'd) b) Basis of Consolidation The reverse merger of the Company and Maximum Awards (Pty) Ltd. has been recorded as the recapitalization of the Company, with the net assets of Maximum Awards (Pty) Ltd. and the Company brought forward at their historical basis. The intention of the management of Maximum Awards (Pty) Ltd. was to acquire the Company as a shell company to be listed on the OTC Bulletin Board. Management does not intend to pursue the business of the Company. As such, accounting for the merger as the recapitalization of the Company is deemed appropriate. As mentioned in Note 1, these interim consolidated financial statements include the financial position and results of operations of Global Business and Travel Easy. The weighted average and total number of shares outstanding have been retroactively restated for each period to reflect the number of shares issued to shareholders of the subsidiary at acquisition. c) Unit of Measurement The United States dollar is being used as the unit of measurement in the accompanying financial statements. d) Use of Estimates In preparing the Company's consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosures of contingent assets and liabilities at the dates of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. e) Inventory Inventory consists of goods purchased for resale. Inventory is stated at the lower of cost (first-in, first-out method) or net realizable value. 7 MAXIMUM AWARDS, INC. AND SUBSIDIARIES Notes to Interim Consolidated Financial Statements June 30, 2006 Unaudited 3. Summary of Significant Accounting Policies (cont'd) f) Revenue Recognition Consumer Reward Points Program The Company recognizes commission income from a participating vendor when the participating vendor commits to purchasing points from the Company and collectibility is reasonably assured. Travel Agency The Company earns commission revenues from ticket sales and reports this revenue in accordance with Emerging Issues Task Force ("EITF") Issue No.99-19, "Reporting Revenue Gross as a Principal versus Net as an Agent". The Company is an agent and not the primary obligor, and accordingly the amounts earned are determined using a fixed percentage, a fixed-payment schedule, or a combination of the two. Online Shopping The Company recognizes revenue from product sales or services rendered when the following four revenue recognition criteria are met: persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the selling price is fixed or determinable, and collectibility is reasonably assured. Additionally, revenue arrangements with multiple deliverables are divided into separate units of accounting if the deliverables in the arrangement meets the following criteria: (1) the delivered item has value to the customer on a standalone basis; (2) there is objective and reliable evidence of the fair value of undelivered items; and (3) delivery of any undelivered item is probable. Product sales, net of promotional discounts, rebates, and return allowances, are recorded when the products are shipped and title passes to customers. Retail items sold to customers are made pursuant to a sales contract that provides for transfer of both title and risk of loss upon the Company's delivery to the carrier. The return policy allows customers to exchange product within 7 days. 8 MAXIMUM AWARDS, INC. AND SUBSIDIARIES Notes to Interim Consolidated Financial Statements June 30, 2006 Unaudited 3. Summary of Significant Accounting Policies (cont'd) f) Revenue Recognition (cont'd) Online Shopping (cont'd) The Company periodically provides incentive offers to it's customers to encourage purchases. Such offers include current discount offers, such as percentage discounts off current purchases, inducement offers, such as offers for future discounts subject to a minimum current purchase, and other similar offers. Current discount offers, when accepted by the customers, are treated as a reduction to the purchase price of the related transaction, while inducement offers, when accepted by the customers, are treated as a reduction to purchase price based on estimated future redemption rates. Redemption rates are estimated using the Company's historical experience for similar inducement offers. Current discount offers and inducement offers are presented as a net amount in "Net sales." Outbound shipping charges to customers are included in net sales. g) Foreign Currency Translation The Company accounts for foreign currency translation pursuant to Statement of Financial Accounting Standards ("SFAS") No. 52, "Foreign Currency Translation". The Company's functional currency is the Australian dollar. All assets and liabilities are translated into U.S. dollars using the current exchange rate. Revenues and expenses are translated using the average exchange rates prevailing throughout the period. Translation adjustments are included in other comprehensive income (loss) for the period. h) Fair Value of Financial Instruments The estimated fair value of financial instruments has been determined by the Company using available market information and valuation methodologies. Considerable judgment is required in estimating fair value. Accordingly, the estimates may not be indicative of the amounts the Company could realize in a current market exchange. At June 30, 2006, the carrying amounts of cash, accounts receivable, accounts payable, accrued charges, notes payable and advances from directors approximate their fair values due to the short-term maturities of these instruments. i) Furniture and Equipment Furniture and equipment is stated at cost. Depreciation, based on the estimated useful lives of the assets, is provided using the undernoted annual rates and methods: Furniture and equipment 20% Declining balance Computer software 20% Declining balance 9 MAXIMUM AWARDS, INC. AND SUBSIDIARIES Notes to Interim Consolidated Financial Statements June 30, 2006 Unaudited 3. Summary of Significant Accounting Policies (cont'd) j) Impairment of Long-Lived Assets In accordance with SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets", long-lived assets to be held and used are analyzed for impairment whenever events or changes in circumstances indicate that the related carrying amounts may not be recoverable. The Company evaluates at each balance sheet date whether events and circumstances have occurred that indicate possible impairment. If there are indications of impairment, the Company uses future undiscounted cash flows of the related asset or asset grouping over the remaining life in measuring whether the assets are recoverable. In the event such cash flows are not expected to be sufficient to recover the recorded asset values, the assets are written down to their estimated fair value. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value of asset less cost to sell. As described in Note 2, the long-lived assets have been valued on a going concern basis. However, substantial doubt exists as to the ability of the Company to continue as a going concern. If the Company ceases operations, the asset values may be materially impaired. k) Income Taxes The Company accounts for income taxes pursuant to SFAS No. 109, "Accounting for Income Taxes". Deferred tax assets and liabilities are recorded for differences between the financial statement and tax basis of the assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense is recorded for the amount of income tax payable or refundable for the period increased or decreased by the change in deferred tax assets and liabilities during the period. l) Stock Based Compensation In accordance with SFAS No. 123 "Accounting for Stock-Based Compensation", the Company enters into transactions in which goods or services are the consideration received for the issuance of equity instruments. The value of these transactions are measured and accounted for, based on the fair value of the equity instrument issued or the value of the services, whichever is more reliably measurable. The services are expensed in the periods during which the services are rendered. 10 MAXIMUM AWARDS, INC. AND SUBSIDIARIES Notes to Interim Consolidated Financial Statements June 30, 2006 Unaudited 3. Summary of Significant Accounting Policies (cont'd) m) Loss per Common Share The Company calculates net loss per share based on SFAS No. 128, "Earnings Per Share". Basic loss per share is computed by dividing the net loss attributable to the common stockholders by the weighted average number of common shares outstanding. Fully diluted loss per share is computed similar to basic loss per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. n) Comprehensive Income The Company adopted SFAS No. 130, "Reporting Comprehensive Income." SFAS No. 130 establishes standards for reporting and presentation of comprehensive income and its components in a full set of financial statements. Comprehensive income is presented in the statements of changes in stockholders' (deficit) equity, and consists of net loss and unrealized gains (losses) on available for sale marketable securities; foreign currency translation adjustments and changes in market value of future contracts that qualify as a hedge; and negative equity adjustments recognized in accordance with SFAS 87. SFAS No. 130 requires only additional disclosures in the financial statements and does not affect the Company's financial position or results of operations. o) Concentration of Credit Risk SFAS No. 105, "Disclosure of Information About Financial Instruments with Off-Balance Sheet Risk and Financial Instruments with Concentration of Credit Risk", requires disclosure of any significant off-balance sheet risk and credit risk concentration. The Company does not have significant off-balance sheet risk or credit concentration. The Company maintains cash with major Australian financial institutions. The Company provides credit to its clients in the normal course of its operations. It carries out, on a continuing basis, credit checks on its clients and maintains provisions for contingent credit losses which, once they materialize, are consistent with management's forecasts. For other debts, the Company determines, on a continuing basis, the probable losses and sets up a provision for losses based on the estimated realizable value. Concentration of credit risk arises when a group of clients having a similar characteristic such that their ability to meet their obligations is expected to be affected similarly by changes in economic conditions. The Company does not have any significant risk with respect to a single client. 11 MAXIMUM AWARDS, INC. AND SUBSIDIARIES Notes to Interim Consolidated Financial Statements June 30, 2006 Unaudited 3. Summary of Significant Accounting Policies (cont'd) p) Segment Reporting SFAS No. 131 "Disclosures about Segments of an Enterprise and Related Information" establishes standards for the manner in which public enterprises report segment information about operating segments. The Company has determined that its operations primarily involve three reportable segments based on the companies being consolidated: Maximum Awards, Inc. - a consumer rewards program; Travel Easy Holidays (Pty) Ltd. - a travel agency; and Global Business Group (Pty) Ltd. - an online shopping business. q) Recent Accounting Pronouncements In July 2006 FASB issued Financial Accounting Standards Interpretation No. 48 ("FIN 48"), "Accounting for Uncertainty in Income Taxes". FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprises' financial statements in accordance with FASB Statement No. 109, "Accounting for Income Taxes". FIN 48 prescribes a recognition threshold and measurement attributable for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosures and transitions. FIN 48 is effective for fiscal years beginning after December 15, 2006. The Company is currently reviewing the effect, if any, the proposed guidance will have on its financial position. In March 2006, the Financial Accounting Standards Board ("FASB") issued Statement 156, Accounting for Servicing of Financial Assets, which amends FAS 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities. In a significant change to current guidance, the Statement of Financial Accountant Standards ("SFAS") No. 156 permits an entity to choose either of the following subsequent measurement methods for each class of separately recognized servicing assets and servicing liabilities: (1) Amortization Method or (2) Fair Value Measurement Method. SFAS No. 156 is effective as of the beginning of an entity's first fiscal year that begins after September 15, 2006. The Company is currently reviewing the effect, if any, the proposed guidance will have on its financial statements. In February 2006, the FASB issued SFAS No. 155, Accounting for Certain Hybrid Financial Instruments--an amendment of FASB Statements No. 133 and 140. This Statement permits fair value of remeasurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation; clarifies which interest-only strips and principal-only strips are not subject to the requirements of SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities; establishes a requirement to evaluate interests in securitized financial assets to identify interests that are freestanding derivatives or that are hybrid financial instruments that contain an embedded derivative requiring bifurcation; clarifies that concentrations of credit risk in the form of subordination are not embedded derivatives; and amended SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, to eliminate the prohibition on a qualifying special-purpose entity from holding a derivative financial instrument that pertains to a beneficial interest other than another derivative financial instrument. SFAS No. 155 is effective for all financial instruments acquired, issued, or subject to a remeasurement (new basis) event occurring after the beginning of an entity's first fiscal year that begins after September 15, 2006. The Company is currently reviewing the effect, if any, the proposed guidance will have on its financial statements. 12 MAXIMUM AWARDS, INC. AND SUBSIDIARIES Notes to Interim Consolidated Financial Statements June 30, 2006 Unaudited 3. Summary of Significant Accounting Policies (cont'd) p) Segment Reporting (cont'd) In December 2005, the Financial Accounting Standards Board ("FASB") issued SFAS No. 154, Accounting Changes and Error Corrections--a replacement of APB Opinion No. 20 and FASB Statement No. 3. This Statement replaces APB Opinion No. 20, Accounting Changes, and FASB Statement No. 3, Reporting Accounting Changes in Interim Financial Statements, and changes the requirements for the accounting for and reporting of a change in accounting principle. This Statement applies to all voluntary changes in accounting principle. It also applies to changes required by an accounting pronouncement in the unusual instance that the pronouncement does not include specific transition provisions. When a pronouncement includes specific transition provisions, those provisions should be followed. Opinion 20 previously required that most voluntary changes in accounting principle be recognized by including in net income of the period of the change the cumulative effect of changing to the new accounting principle. This Statement requires retrospective application to prior periods' financial statements of changes in accounting principle, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change In July 2005, the FASB issued an exposure draft of a proposed interpretation, Accounting for Uncertain Tax Positions-an Interpretation of FASB Statement No. 109 ("SFAS No. 109"). This interpretation would apply to all open tax positions accounted for in accordance with SFAS No. 109, including those acquired in business combinations. It is a proposed asset recognition approach to apply a dual threshold for uncertain tax positions. The interpretation would allow the recognition of a tax benefit when it is probable that it could be sustained upon audit. The interpretation defines "probable" as it is defined in SFAS No. 5, "Accounting for Contingencies." FASB has not established an effective date for the interpretation. The Company is currently reviewing the effect, if any, the proposed guidance will have on its financial statements. In March 2005, the FASB issued FASB Staff Position ("FSP") No. 46(R)-5, "Implicit Variable Interests under FASB Interpretation No. ("FIN") 46 (revised December 2003), Consolidation of Variable Interest Entities" ("FSP FIN 46R-5"). FSP FIN 46R-5 provides guidance for a reporting enterprise on whether it holds an implicit variable interest in Variable Interest Entities ("VIEs") or potential VIEs when specific conditions exist. This FSP is effective in the first period beginning after March 3, 2005 in accordance with the transition provisions of FIN 46 (Revised 2003), "Consolidation of Variable Interest Entities -- an Interpretation of Accounting Research Bulletin No. 51" ("FIN 46R"). The adoption of this standard is not expected to have a material impact on the Company's results of operations or financial position. 13 MAXIMUM AWARDS, INC. AND SUBSIDIARIES Notes to Interim Consolidated Financial Statements June 30, 2006 Unaudited 3. Summary of Significant Accounting Policies (cont'd) p) Segment Reporting (cont'd) In March 2005, the FASB issued Interpretation No. 47, "Accounting for Conditional Asset Retirement Obligations" ("FIN 47"), which will result in (a) more consistent recognition of liabilities relating to asset retirement obligations, (b) more information about expected future cash outflows associated with those obligations, and (c) more information about investments in long-lived assets because additional asset retirement costs will be recognized as part of the carrying amounts of the assets. FIN 47 clarifies that the term "conditional asset retirement obligation" as used in SFAS 143, "Accounting for Asset Retirement Obligations," refers to a legal obligation to perform an asset retirement activity in which the timing and/or method of settlement are conditional on a future event that may or may not be within the control of the entity. The obligation to perform the asset retirement activity is unconditional even though uncertainty exists about the timing and/or method of settlement. Uncertainty about the timing and/or method of settlement of a conditional asset retirement obligation should be factored into the measurement of the liability when sufficient information exists. FIN 47 also clarifies when an entity would have sufficient information to reasonably estimate the fair value of an asset retirement obligation. FIN 47 is effective no later than the end of fiscal years ending after December 15, 2005. Retrospective application of interim financial information is permitted but is not required. Early adoption of this interpretation is encouraged. As FIN 47 was recently issued, the Company has not determined whether the interpretation will have a significant effect on its financial position or results of operations. 4. Consumer Reward Points Program The Company operated a consumer reward program, as described in Note 1, whereby, consumers earn points by purchasing goods and services with various vendors, whom are registered with the program. When a consumer purchases a good or service, the vendor remits a cash amount for the amount of points earned by the consumer to the Company. The Company no longer maintains an escrow account for funds collected. 14

MAXIMUM AWARDS, INC. AND SUBSIDIARIES Notes to Interim Consolidated Financial Statements June 30, 2006 Unaudited 5. Furniture and Equipment June 30, December 31, 2006 2005 Accumulated Accumulated Cost Amortization Cost Amortization ------------ ------------ ------------ ------------ Office furniture and equipment $ 28,857 $ 9,512 $ 23,147 $ 6,521 Computer software 4,873 423 5,177 518 ------------ ------------ ------------ ------------ $ 33,730 $ 9,935 $ 28,324 $ 7,039 ------------ ------------ ------------ ------------ Net carrying amount $ 23,795 $ 21,285 ------------ ------------

6. Notes Payable The notes are interest bearing at 10% per annum. One of the notes amounting to $246,255 is secured by a floating charge over the Company's assets. The note is repayable on demand after January 31, 2007 and can be converted into common shares at $0.10 per share. The note amounting to $11,000 is interest free with no fixed date for repayment. 7. Related Party Balances and Transactions Related party balances and transactions were transacted with directors of the Company and a related party. During the year, the Company paid salaries to two directors and a related party for management services incurred. Transactions were in the normal course of business and recorded at an exchange value established and agreed upon by the above mentioned parties. The related party balance of $50,583 is owed to a shareholder of the Company for accounting services provided. The amount is non interest bearing and due on demand. 15

MAXIMUM AWARDS, INC. AND SUBSIDIARIES Notes to Interim Consolidated Financial Statements June 30, 2006 Unaudited 8. Advances from Directors June 30, December 31, 2006 2005 ------------ ------------ Notes payable to directors of the Company: Maxwell Thomas $ 77,390 $ 42,336 Michael Sullivan 11,429 40,026 ------------ ------------ $ 88,819 $ 82,362 ============ ============ The notes are non-interest bearing, unsecured and have no specific terms of repayment. 9. Capital Stock Authorized 10,000,000 preferred shares, Series "A", par value of $0.001 per share, non- participating, voting rights of 50 votes per share 100,000,000 common shares, par value of $0.001 per share June 30, December 31, 2006 2005 ------------ ------------ Issued 1,000,000 preferred shares, Series "A" (December 31, 2005 - 1,000,000) $ 1,000 $ 1,000 32,451,900 common shares (December 31, 2005 -32,051,900) 32,452 32,052 ------------ ------------ $ 33,452 $ 33,052 ============ ============

The following transactions occurred during 2005 and 2006: a) On June 21, 2005 the Company issued 5,000 common shares for a cash consideration of $2,500 b) On October 10, 2005 the Company issued 1,500,000 common shares for a cash consideration of $150,000. c) On November 1, 2005 the Company issued 3,000,000 common shares for a cash consideration of $300,000 and 500,000 common shares for services rendered, valued at $50,000. d) On November 21, 2005 the Company issued 575,000 common shares for a cash consideration of $57,500. 16

MAXIMUM AWARDS, INC. AND SUBSIDIARIES Notes to Interim Consolidated Financial Statements June 30, 2006 Unaudited 9. Capital Stock (cont'd) e) On November 30, 2005 the Company issued 345,000 common shares for a cash consideration of $34,500. f) On December 12, 2005 the Company issued 550,000 common shares for a cash consideration of $55,000. g) On December 21, 2005 the Company issued 50,000 common shares for a cash consideration of $5,000. h) On January 19, 2006 the Company issued 300,000 common shares for a cash consideration of $30,000 i) On February 16, 2006 the Company issued 100,000 common shares for a cash consideration of $50,000 10. Segmented Information Qtr Qtr 6 Mths 6 Mths June June June June 2006 2005 2006 2005 -------- -------- -------- -------- Revenues by Segment: Maximum Awards - rewards program 858 6,728 4,453 9,818 Travel Easy - travel agency 122,312 32,315 173,855 67,928 Global Business - online shopping 55,905 37,328 105,984 62,034 -------- -------- -------- -------- Consolidated revenues 179,075 76,371 284,292 139,779 ======== ======== ======== ======== Operating Earnings (Loss) by Segment: Maximum Awards - rewards program (213,937) (77,639) (384,939) (223,905) Travel Easy - travel agency 51,583 (32,490) 3,224 (34,773) Global Business - online shopping (10,919) 11,034 (9,930) 136 -------- -------- -------- -------- Consolidated operating loss (173,273) (99,095) (391,645) (258,542) ======== ======== ======== ======== Total Assets by Segment: Maximum Awards - rewards program 33,471 30,739 33,471 30,739 Travel Easy -Travel agency 63,275 81,262 63,275 81,262 Global Business - online shopping 36,794 14,299 36,794 14,299 -------- -------- -------- -------- Total gross assets 133,540 126,300 133,540 126,300 ======== ======== ======== ======== Total Liabilities by Segment Maximum Awards - rewards program 637,543 374,313 637,543 374,313 Travel Easy -Travel agency 4,347 117,008 4,347 117,008 Global Business - online shopping 6,230 18,896 6,230 18,896 -------- -------- -------- -------- Total liabilities 648,120 510,217 648,120 510,217 ======== ======== ======== ========

Geographical information is not presented as the Company's consolidated operations are conducted in Australia. The Company does not earn any significant revenues from a single customer. 17 MAXIMUM AWARDS, INC.AND SUBSIDIARIES Notes to Interim Consolidated Financial Statements June 30, 2006 Unaudited 11. Income Taxes The Company accounts for income taxes pursuant to SFAS No. 109, "Accounting for Income Taxes". This Standard prescribes the use of the liability method whereby deferred tax asset and liability account balances are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates. Under SFAS No. 109 income taxes are recognized for the following: a) amount of tax payable for the current year, and b) deferred tax liabilities and assets for future tax consequences of events that have been recognized differently in the financial statements than for tax purposes. The Company's current income taxes are as follows: Six Months Six Months Ended Ended June 30, June 30, 2006 2005 ---------- ---------- Expected Income tax recovery at statutory tax rate of 34% $ (133,159) $ (69,649) Australian income taxes -- 4,478 Valuation allowance 133,159 69,649 ---------- ---------- Current income taxes $ -- $ 4,478 ========== ========== The Company has deferred income tax assets as follows: June 30, June 30, 2006 2005 ---------- ---------- Deferred income tax assets $ 579,615 $ 186,320 Valuation allowance (579,615) (186,320) ---------- ---------- $ -- $ -- ========== ========== 18 MAXIMUM AWARDS, INC.AND SUBSIDIARIES Notes to Interim Consolidated Financial Statements June 30, 2006 Unaudited 11. Income Taxes (cont'd) As of June 30, 2006, the Company had a net operating loss carry forwards for income tax reporting purposes of approximately $1,704,000 that may be offset against future taxable income indefinitely. Current tax laws limit the amount of loss available to be offset against future taxable income when a substantial change in ownership occurs or a change in the nature of the business. Therefore, the amount available to offset future taxable income may be limited. No tax benefit has been reported in the financial statements, because the Company believes there is a 50% or greater chance the carry forwards will expire unused. Accordingly, the potential tax benefits of the loss carry forwards are offset by a valuation allowance of the same amount. 12. Commitments and Contingencies The Company is committed to a lease obligation expiring in December 2006. Future minimum payments (exclusive of taxes, insurance and maintenance costs) under these leases are $14,502. 13. Supplemental Disclosure of Cash Flow Information Six Months Six months Ended Ended June 30 June, 30 2006 2005 ---------- ---------- Cash paid during the period for: Interest paid $ -- $ -- Income taxes paid -- -- 14. Comparative Information Certain of the prior year balances have been reclassified to conform with the current year's financial statement presentation. 19 ITEM 2. MANAGAMENT DISCUSSION AND ANALYSIS The company was incorporated on March 7, 1995 under the name Rising Fortune Incorporated. On December 9, 2003, the company acquired 100% of the outstanding shares of Maximum Awards Pty Ltd., an Australian company engaged in the business of operating a consumer rewards program known as Maximum Awards. Under the Maximum Awards program, consumers earn points by purchasing products and services offered by the company and its program partners. Accumulated points then can be redeemed in order to acquire additional desired products or services from the same list of such items offered by the company. The company operates its program in Australia and has done so since October 2002. In anticipation of this transaction the company's articles of incorporation were amended on November 19, 2003 to change the name of the company to Maximum Awards, Inc. The acquisition of Maximum Awards Pty Ltd resulted in a change of control of the company and was accounted for as a recapitalization of Maximum Awards Pty Limited. The business of Maximum Awards Pty Ltd is now the business of the company. On June 1, 2004, the company acquired 100% of the issued and outstanding shares of Travel Easy Holidays Pty Ltd ("Travel Easy") and Global Business Group Pty Ltd ("Global Business"). These corporations are involved in the travel industry and mail order industries and were acquired to add to the company's rewards program operations by providing an in-house travel agency and a consumer products retailer. Travel Easy is an Australian proprietary limited corporation. Travel Easy was organized under the law of the Province of Queensland, Australia on July 19, 2002. Travel Easy is engaged in the business of providing travel agent services and its operations are located in the company's offices in Brisbane, Queensland, Australia. Prior June 1, 2004, Travel Easy was owned by Maxwell Thomas, the company's chief executive officer, and Michael Sullivan, a director of the company. Mr. Thomas owned 60% of Travel Easy and Mr. Sullivan owned 40%. Under terms of the acquisition agreement between the company and Mr. Thomas, the company acquired Travel Easy for $1.00 Australian. Travel Easy now is a wholly-owned subsidiary of the company. Global Business also is an Australian proprietary limited corporation. Global Business was organized under the law of the Province of Queensland, Australia in June 2003. Global Business does business under the name Easy Shopper Direct and is engaged in the business of selling consumer goods on-line and through published catalogs and its operations are located in the company's offices in Brisbane, Queensland, Australia. Prior to June 1, 2004, Global Business was owned by Maxwell Thomas, the company's chief executive officer, and Michael Sullivan, a director of the company. Mr. Thomas owned 60% of Global Business and Mr. Sullivan owned 40%. Under terms of the acquisition agreement between the company and Mr. Thomas, the company acquired Global Business for $1.00 Australian. Global Business now is a wholly-owned subsidiary of the company. Because both Travel Easy and Global Business were acquisitions under common control, the financial statements have been prepared by including the accounts of both Travel Easy and Global Business and have been accounted as a business combination with the net assets of Maximum Awards (Pty) Ltd. and the Company brought forward at their historical basis. . The financial statements, including the comparatives, reflect the accounts of Maximum Awards, Travel Easy and Global Business. 20 Results for the three months ended June 30, 2006. Revenues for the three months ended June 30, 2006 increased by $102,704 from $76,371 for the three months ended June 30, 2005 to $179,075 for the three months ended June 30, 2006. The increase was due to an increase in travel income of $89,997 and an increase in online shopping of $18,577 offset by a decrease in reward program income of $5,870. The increase in travel and online shopping income was a result of an increase in credit card sales under the to HSBC and the Commonwealth Bank of Australia contracts. The decrease in awards income was a result of limited advertising and promotion during the quarter. Cost of sales decreased from 43.6% of sales for the three months ended June 30, 2005 to 30.5% of sales for the three months ended June 30, 2006. Gross profit increased by $81,438 from $43,053 for the three months ended June 30, 2005 to $124,491 for the three months ended June 30, 2006. The improved gross profit was mainly due to an improvement in travel commission income which has limited cost of sales expense, and has resulted in an improved gross margin. Overhead costs for the quarter increased by $151,610 from $141,428 for the quarter June 30, 2005 to $293,038 for the quarter ended June 30, 2006. General and administration costs increased by $45,262 due to the use of contract consultants in Easy travel, legal and professional fees increased by $10,474 due to company filing costs, advertising costs increased by $25,053 due to bank contract advertising, salaries increased by $78,103 due to a new COO and additional directors salaries and premises costs reduced by $5,863 due to rent reduction. Amortisation increased by $581. Interest expense increased by $4006 from $720 for the quarter ended June 2005 to $4,726 for the quarter ended June 2006. The increase was due to an increase in notes payable. We incurred a net loss of $173,273 or $(0.01) per share based on 32,451,900 weighted average shares outstanding for the quarter ended June 30 2006 compared to a loss of $99,095 or $(0.01) per share based on 25,529,400 weighted average shares outstanding for the quarter ended June 30,2005. Results for the six months ended June 30, 2005. Revenues for the six months ended June 30, 2006 increased by $144,513 from $139,779 for the six months ended June 30, 2005 to $284,292 for the six months ended June 30, 2006. The increase was due to a increase in travel income of $105,928, an increase in online shopping income of $43,950 and a decrease in reward program income of $5,365. The increase in travel and online shopper income was a result of the introduction of the HSBC and CBA cardholder contracts, while the reduction in rewards income was a result in reduced promotion activity due to financial limitations. Cost of sales decreased from 39.9% of sales for the six months ended June 30, 2005 to 37.2% of sales for the six months ended June 30, 2006. Gross profit increased by $94,906 from $84,007 for the six months ended June 30, 2005 to $178,913 for the six months ended June 30, 2006. The improved gross margin was due to an increase in travel commissions which has a lower cost of sales component. Overhead costs for the six months increased by $223,303 from $341,409 for the six months ended June 30, 2005 to $564,712 for the six months ended June 30, 2006. General and administration costs increased by $87,606 mainly due to travel expense developing the European market, Legal and professional fees increased by $4,840 due to company filing costs, advertising costs increased by $29,433 due to bank contracts, salaries increased by $111,045 mainly due to a new COO and directors salaries increase, while premises costs reduced by $10,558 due to rent reduction. Depreciation increased by $937 due to fixed assets additions. 21 Interest expense increased by $4,706 due to an increase in notes payable. We incurred a net loss of $391,645 or $(0.01) per share based on 32,393,107 weighted average shares outstanding for the six months ended June 30, 2006 compared to a loss of $258,542 or $(0.01) per share based on 25,528,150 weighted average shares outstanding for the six months ended June 30,2005. Through the six months ended June 30, 2006 we have relied on advances of approximately $257,255 from our principal note holders, trade payables of approximately $63,336, proceeds of $80,000 from the sale of common stock to support our operations. As of `June 30, 2006, the Company had approximately $40,091 of its own cash and cash equivalents. We plan to seek additional equity or debt financing of up to $3 million which we plan to use to use for working capital and to implement a marketing program to increase awareness of our business and to expand our operations into the US market. LIQUIDITY AND CAPITAL RESERVES The Company has operated its loyalty and rewards program in Australia since October 2002 and intends to expand its program and operate it in Europe in 2006. The company anticipates that this expansion will be funded principally through the issuance of equity or debt securities or by entering into other financial arrangements, including relationships with corporate and other partners, in order to raise additional capital. Depending upon market conditions, the company may not be successful in raising sufficient additional capital for it to achieve its business objectives. In such event, the business, prospects, financial condition, and results of operations could be materially adversely affected. Initial expenses for the company will include acquiring a suitable travel agency, leasing suitable facilities in Europe; purchasing or leasing sufficient operating equipment, primarily computers and phone systems; hiring sufficient staff for the company's European operations; and, producing sufficient promotional materials. There is no guarantee that the company will be successful in expanding its operations to non-Australian markets or that if it does that its marketing and sales endeavors outside Australia will be successful. The company's operation in Brisbane, Queensland, Australia currently employs approximately 9 people. The number of employees in Australia may increase through 2006 if the company is able to increase its operations and expand its customer base. If the company is successful in raising capital, the company plans to spend an additional $200,000 during the next 12 months in expanding its Australian customer base, establishing new merchants and expanding its product base. Specifically, such spending shall include advertising in media, both print and electronic, direct mail marketing and consumer member promotions. If the Company is successful in raising capital, the company plans to enter the European market in 2006, using the same technology and format as that used in Australia. The Company plans to set up an office and call center in the United Kingdom, and plans to duplicate the structure already in place in Australia. Initial expenses for the European operations will include acquiring a travel agency in the United Kingdom,; purchasing or leasing sufficient operating equipment, primarily computers and phone systems; hiring sufficient staff for the Company's European operations; and producing sufficient promotional materials. The Company has budgeted to spend $1.0 million dollars in developing the European market. 22 In order to meet its cash requirements for the next twelve months, the Company plans to raise capital through private placements and through working capital generated from operations. There is no guarantee that the Company will be successful in its attempt to raise capital sufficient to meet its cash requirements for the next twelve months. If the company is not successful in its effort to raise sufficient capital to meet its cash requirements, the business will fail and the company will cease to do business. ITEM 3. CONTROLS AND PROCEDURES. (a) Disclosure controls and procedures . Within 90 days before filing this report, the Company evaluated the effectiveness of the design and operation of its disclosure controls and procedures. The Company's disclosure controls and procedures are the controls and other procedures that it designed to ensure that it records, processes, summarizes and reports in a timely manner the information it must disclose in reports that it files with or submits to the Securities and Exchange Commission. Maxwell Thomas, the Company's Chief Executive Officer and Michael Sullivan, its Chief Financial Officer, supervised and participated in this evaluation. Based on this evaluation, Messrs. Thomas and Sullivan concluded that, as of the date of their evaluation, the Company's disclosure controls and procedures were effective. (b) Internal controls. Since the date of the evaluation described above, there have not been any significant changes in the Company's internal accounting controls or in other factors that could significantly affect those controls. PART II - OTHER INFORMATION ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS None ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits: Exhibits required to be attached by Item 601 of Regulation S-B are listed below: 31.1 Certification of Maxwell Thomas pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1 Certification of Maxwell Thomas pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (b) Reports on Form 8-K: No reports on Form 8-K were filed during the period covered by this Form 10Q-SB. 23 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, this 17th day of August, 2006. Maximum Awards Inc /s/ Maxwell Thomas ------------------------------ Maxwell Thomas Chief Executive Officer and Chief Financial Officer 24