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EX-32 - CERTIFICATION - B-Scada, Inc.mobs_ex32.htm


UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

________________


FORM 10-K

________________


Mark One

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended October 31, 2011


OR


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

For the transition period from ____________ to ____________


Commission File Number: 000-51717


MOBIFORM SOFTWARE, INC.

(Exact name of registrant as specified in its charter)

 

DELAWARE

1255 N. Vantage Pt. Dr., Suite A

Crystal River, Florida 34429

94-3399360

(State or other jurisdiction of incorporation or organization)

(Address of principal executive offices) (Zip Code)

(I.R.S. Employer Identification No.)


Registrant’s telephone number, including area code (352) 564-9610


Securities registered under Section 12(b) of the Exchange Act: None


Securities registered under Section 12(g) of the Exchange Act:


Common Stock, $0.0001 Par Value

(Title of class)


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


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      [X] No


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.      [X] Yes      [  ] No




 





Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    [X] Yes      [  ] No

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) 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 the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:

 

[  ] Large accelerated filer

[  ]Accelerated filer

[  ] Non-accelerated filer

[X] Smaller reporting company

 

 

(Do not check if a small reporting company)

 


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

 

The aggregate market value of the common stock held by non-affiliates of the registrant, computed based upon prices at which it was last sold, as of the last business day of the registrant’s second fiscal quarter, April 30, 2011, was approximately $2,080,595.

 

According to the records of the registrant's registrar and transfer agent, the number of shares of the registrant's common stock outstanding as of January 20, 2012 was 24,586,672.















2




Table of Contents


Part I

5

 

 

  Item 1. Business

5

 

 

  Item 2. Properties

9

 

 

  Item 3. Legal Proceedings

9

 

 

  Item 4. Reserved

9

 

 

Part II

9

 

 

  Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

9

 

 

  Item 7. Management’s Discussion And Analysis Of Financial Condition And Results Of Operations

11

 

 

  Item 7A. Quantitative and Qualitative Disclosures About Market Risk

20

 

 

  Item 8. Financial Statements and Supplementary Data

20

 

 

  Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure

20

 

 

  Item 9A. Controls and Procedures

21

 

 

  Item 9B. Other Information

21

 

 

Part III

22

 

 

  Item 10. Directors, Executive Officers and Corporate Governance

22

 

 

  Item 11. Executive Compensation

23

 

 

  Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

23

 

 

  Item 13. Certain Relationships and Related Transactions, and Director Independence

24

 

 

  Item 14. Principal Accountant Fees and Services

24

 

 

Part IV

26

 

 

  Item 15. Exhibits, Financial Statement Schedules

26




3





NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This report and the documents incorporated in it by reference contain forward-looking statements that involve known and unknown risks and uncertainties. Examples of forward-looking statements include: projections of capital expenditures, competitive pressures, revenues, growth prospects, product development, financial resources and other financial matters. You can identify these and other forward-looking statements by the use of words such as “may,” “will,” “should,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “intends,” “potential” or the negative of such terms, or other comparable terminology.

 

Our ability to predict the results of our operations or the effects of various events on our operating results is inherently uncertain. Therefore, we caution you to consider carefully the matters described in this report, the documents incorporated by reference in this report, and other publicly available sources. These factors and many other factors beyond the control of our management could cause our actual results, performance or achievements to be materially different from any future results, performance or achievements that may be expressed or implied by the forward-looking statements.













4




Part I


Item 1.


Description of Business


Mobiform Software, Inc (“we,’’ “Mobiform,” “us,” “our”) is in the business of developing software products for the visualization and monitoring of real time data in heavy industry. Our HMI (Human Machine Interface) software and SCADA (Supervisory Control and Data Acquisition) products are utilized in the petro chemical, electricity distribution, transportation, facilities management and manufacturing industries.  The technology that Mobiform has developed has been licensed to 10 other firms including four Fortune 500 companies. These licensing arrangements provide long term, recurring, royalty based revenue for Mobiform. The products developed by companies using Mobiform’s technology include industrial automation solutions, medical applications for use in hospitals, and line of business applications. Our products are marketed and sold globally and offered both directly and through a sales channel of system integrators and resellers.


Mobiform has developed its own industrial control and monitoring solutions. ‘Status’ is a powerful SCADA capable of connecting to real time industrial data and displaying the information in real time to operators, maintenance personnel and supervisors.


HMI and SCADA systems are used for monitoring the HVAC (Heating Ventilation and Air Conditioning) systems in large commercial complexes. They are used in waste water treatment plants, with oil wells, hydro-electric plants, subway systems, pharmaceuticals and almost every manufacturing facility.

 

During the fiscal year ended October 31, 2010, after our five year development phase, we began to commercialize our products.  We focused on presenting and demonstrating the industrial applications of our software, resulting in our entry into two significant multi-year licenses.  We initiated and pursued numerous additional potential major licensing opportunities and expanded our retail distribution network of resellers throughout the world.


In the fiscal year ending October 31, 2011, we licensed our product to a global manufacturer of mining equipment, as well as to two Fortune 500 companies.

 

History


We were originally formed under the name Firefly Learning, Inc. on May 31, 2001. In October, 2005, pursuant to an exchange agreement we acquired all of the issued and outstanding shares of capital stock of Mobiform Software, Ltd., a Canadian corporation, (“Mobiform Canada”) in exchange for shares of our Common Stock.  After the Acquisition, Mobiform Canada became a wholly-owned subsidiary of Mobiform.  Mobiform and Mobiform Canada are collectively referred to herein as “Mobiform.” Effective September 14, 2010, Mobiform Canada was dissolved.

 

Our technology team is comprised of seasoned veterans of software design and development who have extensive experience in designing, building and delivering world-class software solutions. We have licensed or provided training and/or consulting services for such major companies as General Electric, Microsoft Corporation, Intel Corporation, and Siemens AG.

 



5




Product Description


We develop and sell software designed for use by system integrators, industrial engineers, graphic designers and computer programmers. Our primary line of HMI software and SCADA products is a set of programs that allows users to generate “user interfaces.”  User interfaces include internet web sites and computer applications of all kinds, including computer models of simple and complex systems (for example, a functioning power plant, the flow of inventory of a large business, the genetic code of a species or individual, or a simple lever). Given the great and increasing pervasiveness of user interfaces in the world economy, the demand for products that allow for the simple and flexible creation of user interfaces is enormous.

 

Our products can be utilized by many vertical markets. We have already entered into agreements with companies to use our technology in the fields of industrial automation, medical software and energy monitoring.

 

Revenue Streams

 

Mobiform’s revenue is generated from two sources, (i) retail sales of our HMI and SCADA software products and (ii) licensing of our technology to other companies. Development, design, consulting services and support are part of all product sales.


Retail

 

Mobiform ‘Status’ allows designers to create a representation of their manufacturing processes. Once the graphic display is created, Status has web services that connect to data on the factory floor and provide information to the various meters, gauges and graphics on screen. Data flows two ways with Status, it can monitor data, and it allows the click of a button onscreen to start or stop a piece of equipment on the factory floor.


Mobiform has attracted a number of resellers and system integrators that are now promoting and using ‘Status’ in commercial settings. During the year ended October 31, 2011 we have materially increased our international reseller network.  We believe that this will result in greater sales and distribution of our software through retail outlets and to original equipment manufacturers (“OEM”s). We are also targeting potential customers to offer customized applications to meet their industry requirements.   Status is now being used to monitor the 4th largest subway system in the world in Seoul, South Korea. It is monitoring HVAC performance in pharmaceutical manufacturing facilities in China, and is used in various monitoring applications in numerous verticals in the United States.


Development of SCADA systems typically requires millions of dollars in development capital over several years. Larger firms cannot develop their own systems with the efficiency of smaller companies; a larger firm trying to develop such a system in house could easily spend $15 million or more.

 

Technology Licensing

 

In addition to selling our own software products, we also license the technology we have developed to other software companies. Long-term licenses to multinational automation software companies are a major part of our business.  The lead time for our engineers to work with theirs in developing successful integration of our software with their future products is fairly long-from nine months to two years - but the result is a multiyear high revenue license which provides substantial revenue to us for years to come.  We have a number of agreements in place and are currently in discussions with additional companies in the oil and gas, oil service, electric power generation and mining industries.



6





The products developed using Mobiform technology includes industrial automation solutions, medical applications for use in hospitals, smart grid, HVAC and line of business applications. The relationships established through licensing are very strategic and may lead to acquisitions to prevent competitive companies from having the same strategic benefits.


Development Services and Support

 

Mobiform has been recognized as a leading edge software development firm. We are often asked to provide software development services, graphics design and consulting as part of the technology licensing agreements we sign with our customers.

 

Although we are a small early stage business, we have very high goals, which may or may not ever be achieved.


Our go-to-market strategy is simple: For Stage 1, following in the footsteps of Corel, Adobe and Macromedia, our goal is to put in place a set of core technologies that we can leverage to create a variety of software applications for different vertical markets. We have made some of these components available to other software companies as either retail software development components or as toolkits that can be used to embed our technology into their solutions. We have offered free downloads of our components and toolkits to prospective customers. With thousands of downloads of our products globally, we believe Mobiform is well on its way to achieving brand-name recognition.  We will continue in our efforts to generate incremental revenue by working with global industry leaders in selling consulting services and licensing our technology.

 

Now that we are equipped with the technology infrastructure developed during Stage 1, we find that developing highly interactive and powerful software is simplified.  In Stage 2 we are moving our business focus from technology development to product development.  During this stage, we are beginning to develop software products for industry verticals in sectors such as industrial automation, digital signage, healthcare and geographic information systems.  We are in discussions with major companies engaged in offshore drilling platforms, mining, electric power generation and heavy industry automation, among others.  With a powerful set of software components in our tool belt, we believe we are able to build software products more rapidly and at a lower total cost of ownership to the consumer.  Products are created through two different scenarios, (i) in-house creation of our own consumer products; and (ii) integration into third party products.  Both scenarios should result in additional income producing licenses to or sales of, our technologies and products.

 

The third part of our strategy is a feedback loop. By providing a limited amount of consulting services, Mobiform is able to identify potential software products and components that are needed by industry, and produce those products for market. These components will feed our technology base and the relationships developed from the consulting will provide potential sales channels and additional licensing and OEM agreements to us.


Market Information


Our immediate industry focus relates to the following verticals:

 



7




Industrial Automation and Control Systems


Our team had experience with Rockwell Automation and as such we have chosen Industrial and Process control as the first vertical we have targeted. We released the new product in this vertical in January 2009 and have already licensed some of our technology to companies in this space.

 

Digital Signage


Our graphics design and real time data connectivity makes our products suitable for digital signage solutions.

 

We believe that our HMI and SCADA software will also find applications in other markets, such as advertising, education, e-learning, engineering, exploration, financial, gaming, healthcare, media, mobility, oil and pharmaceutical.

 

Raw Materials and Suppliers


Since our products are principally intellectual property, raw material sources and availability are not significant to us.  We will, however, be in competition with all other technology firms in attracting and retaining software engineering talent for Microsoft Windows developers, particularly those involved in .NET development. These resources are in extremely high demand and competition for these resources is significant.

 

Limited Customer Base


We currently have only a few customers and limited revenue. In fiscal 2011 three customers generated 87% of our revenues and in fiscal 2010 two customers generated 84% of our revenues.  We endeavor to retain the customers we have while we seek to broaden our customer base.  The loss of these customers would have a material effect on our business, financial condition and results of operations. There is no assurance that we will succeed.

 

Protection of Intellectual Property


We have applied for trademarks for our logos and product names. We will consider patent applications as they are warranted and our resources allow. Our future success and our ability to compete may greatly depend on our proprietary technology. We therefore rely on trade secret laws, together with non-disclosure agreements and licensing agreements to establish and protect whatever proprietary rights that we may have. We also used Microsoft’s technology to build our Aurora XAML Designer. This, combined with Microsoft’s redistribution of shared information through marketing and authoring, may put us at risk.

 

Government Approval and Regulation


Our products and services do not require government approval and are not regulated by the government.


Cost and Effects of Compliance with Environmental Laws

 

We do not have any material costs or involvement with compliance with environmental laws.




8




Employees


We have nine full-time, and no part time employees, which includes four programmer product developers, two graphic designers, one sales and marketing representative, one general manager and our Chief Executive Officer. We are planning to expand, especially in sales and marketing, both through additional personnel and developing external distribution channels. We are discussing the possibility that one or more of our customers may become a distribution channel for our products.


Reports to Security Holders


Since the effectiveness of the S-1 registration statement in June 2008  we have been filing reports under the Securities Exchange Act of 1934 and plan to continue to file such reports. The public may read and copy any materials we file with or furnish to the Securities and Exchange Commission (the “SEC”) at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The address of that site is http://www.sec.gov. Although it is not part of this report, you may find additional information about us at our website, http://www.Mobiform.com and http://www.StatusVision.com , where our products are discussed in more detail.  


Item 2. Properties


Description of Properties

 

Our executive offices and research and development facilities are located in Crystal River, Florida. We rent a 2,000 square foot office and research facility at a variable monthly rent capped at $4,000. We occupy the facility based upon a month-to-month verbal lease.  This facility is sufficient for our current needs, but we may require bigger facilities as we carry out our business strategy.


Item 3. Legal Proceedings


The Company is not a party to, and its property is not the subject of, any pending legal proceedings.


Item 4. [Reserved]


Not applicable.

 

Part II


Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities


Market Information


Currently our Common Stock is quoted on the Over the Counter Bulletin Board (OTCBB) under the symbol MOBS. The reported high and low sales prices for the common stock as reported on the OTCBB are shown below for the periods indicated. The quotations reflect inter-dealer prices, without retail mark-up, markdown or commission, and may not represent actual transactions.




9






 

 

High

 

Low

2010

 

 

 

 

First quarter ended January 31, 2010

 

0.22

 

0.09

Second quarter ended April 30, 2010

 

0.20

 

0.09

Third quarter ended July 31, 2010

 

0.12

 

0.05

Fourth quarter ended October 31, 2010

 

0.05

 

0.04

2011

 

 

 

 

First quarter ended January 31, 2011

 

0.05

 

0.04

Second quarter ended April 30, 2011

 

0.19

 

0.06

Third quarter ended July 31, 2011

 

0.15

 

0.06

Fourth quarter ended October 31, 2011

 

0.09

 

0.04


As of October 31, 2011, there were 161 holders of record owners of our common stock.


Dividends and Dividend Policy

 

We have never paid dividends on our Common Stock and our present policy is to retain anticipated future earnings for use in our business.


Purchases of Equity Securities by the Issuer and Affiliated Purchasers

 

None.

 

Securities Authorized for Issuance under Equity Compensation Plans

 

The following table sets forth securities authorized for issuance as of October 31, 2011 under any equity compensation plans, none of which has been approved by our stockholders.


Equity Compensation Plan Information

 

Plan category

 

Number of securities to

be issued upon exercise

of outstanding options,

warrants and rights

 

Weighted-average

exercise price of

of outstanding options,

warrants and rights

 

Number of securities remaining

available for future issuance

under equity compensation plans

(excluding securities reflected in column (a))

  

 

(a)

 

(b)

 

(c)

Equity compensation plans not approved by security holders

 

104,000

 

$

0.75

 

*

 

*There is no formal equity compensation plan, so there is no specific number of shares available for future issuance. Our authorized, but unissued and unreserved shares of Common Stock total 69,480,244 shares.


Recent Sales of Unregistered Securities


N/A




10




Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations


The following discussion of our results of operations should be read together with our financial statements and the related notes, included elsewhere in this report. The following discussion contains forward-looking statements that reflect our current plans, estimates and beliefs and involve risks and uncertainties. Our actual results may differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to such differences include those discussed below and elsewhere in this prospectus.


Executive Summary


Since 2003, our experience in Microsoft.NET graphics technology has given us a unique perspective and insight into new data visualization possibilities with emerging technologies.


We specialize in the compelling visualization of real-time data. Mobiform has produced exceptional data visualization solutions for manufacturing, power and utilities, automation, and other fields of business making use of HMI (Human Machine Interface) and SCADA (Supervisory Control and Data Acquisition) software products. Recognizing that data visualization can be used in multiple vertical markets, we will be leveraging our technology to expand into other lines of business like digital signage, financial, healthcare and touch-screen solutions.


Our in-house expertise and experience has provided us the opportunity to partner with companies from various vertical markets, and assist them to develop custom solutions that meet their specific needs. Our goal is to help our clients transfer their real-time production and operational data into actionable information through graphically-compelling, functional, and intuitive user interfaces.


Products and Services


Our technology team has more than 20 years of experience in software design and development and has designed, built and delivered, over the years, world-class software solutions. In addition to software development, we also derive income from consulting services and contract development.


Overall Strategic Goals


Our intent since inception has been to use this model as a foundation for growing our business. Our plans include developing a ‘Technology Toolbox’ of software development components and design technology that can be used repeatedly as we deliver a variety of software products for consumers and industry in a wide range of verticals. If you can take a piece of technology, hardware, or any manufactured item, and reuse it over and over in different products you can achieve a very high return on investment for your research and development efforts.


This toolbox is a set of software components that can be reused in various software products. The types of software developed in our toolbox include software components for visualizing information, LED displays, gauges, charting and mapping controls. We call these our VantagePoint Controls. Mobiform has created additional technology for graphics design for our Technology Toolbox. Aurora is a Graphics Design Platform that can be used to provide design capabilities inside of software applications built for Microsoft Windows.




11




Product Description


With the Technology Toolbox in place, we can quickly assemble data visualization software products for monitoring real time data. Our initial target market is monitoring and control for heavy industry since this is an area in which our team already has expertise. Over time, we plan to expand into financial, drafting, digital signage and eLearning markets all leveraging the same set of core technologies.


We have assembled our first vertical market application. ‘Status Vision Designer®’ (“Status”) was released in January 2009 as an industrial control and monitoring application for heavy industry and manufacturing.


Status falls into the category of a SCADA (Supervisory Control and Data Acquisition) or HMI (Human Machine Interface) software application.


Status Vision Designer® is a powerful data visualization software package that allows the user to create highly graphical screens and connects the controls on the screens to real-time data. The screens can then be published and viewed by anyone within a company or from the web.


Status has built-in connectivity to real-time OPC (Open Process Control) data and can very easily be extended to bind to other types of data. OPC data is primarily used in the manufacturing and process control industries. The market appeal for Status is its ability to connect to a variety of OPC servers and display real-time data from hundreds of data sources.


Consulting


In addition to sales of pre-designed software products, we generate revenue by consulting with organizations which utilize our expertise in customized solutions and embedding our software into theirs. We also offer WPF (Windows Presentation Foundation) and XAML (Extensible Application Markup Language) training and graphic design services.


We have been involved in WPF and XAML since it was first released in November 2003 at the Microsoft PDC Conference.  We were one of the earliest adopters of WPF, displaying its first public alpha product related to this technology in January of 2004.


We assist consulting clients with their WPF applications.  From initial consulting services and custom development, to embedding our Aurora software into their solution, we have the expertise and personnel to assist.  


Licenses and Joint Ventures

 

We have licensed our technology to other companies for use in their solutions, and we are in discussions with additional companies that may want to license, or engage with us in joint ventures regarding, some of our software applications on an exclusive or nonexclusive basis.  


In November 2009, we entered into a three year licensing agreement with the industrial controls subsidiary of a $170+ billion multinational corporation (“Licensee 1”) to utilize a portion of our proprietary technology. Licensee 1 has agreed to pay us a per unit royalty, with a minimum of $270,000 per year for the duration of the agreement. In addition we will perform consulting services, on an as needed basis, for which we will be compensated separately based upon services provided.




12




On August 2, 2011 we signed an amendment to this licensing agreement that cancelled the third year payment of $270,000 due in November 2011. As part of the amendment, we entered into an additional software licensing agreement with Licensee 1, which grants Licensee 1 an unlimited five year license of that software for payments aggregating $1,122,000 which are payable in seven installments through January 2016, as defined in the agreement. Except as amended by this amendment, all other terms and conditions of the original agreement remain in effect.


In November 2009, we entered into a three year non-exclusive licensing agreement with a Fortune 500 company (“Licensee 2”) to utilize a portion of our proprietary software.  Licensee 2 has agreed to pay us $240,000, $120,000 of which was paid on November 16, 2009 with the balance being paid on April 1, 2010. Licensee 2 has the option to extend the agreement in one year increments upon payment of $120,000 per additional year. In addition the licensing agreement provides for us to perform consulting services, on an as needed basis, for which we will be compensated separately based upon services provided.


In addition to several other executed mutual nondisclosure agreements we entered into an agreement with Capstone Technology for licensing of Aurora and VantagePoint into one of their HMI products and entered into an additional similar agreement with Matrikon Asia Pacific. There is no assurance that any additional licenses or joint ventures will result from our discussions with additional companies.


Revenue Strategy


We are currently generating revenues through licensing of our technology to various software companies, retailing portions of our technology as software development components, and in the near future, retailing our software solutions to specific vertical markets. A smaller portion of our revenue will come from consulting services and custom development.


We are currently selling our products directly over the Internet from our website and through resellers. In the future, we intend to distribute Aurora through retail outlets and OEMs. We will also target potential customers to offer customized applications to meet their industry requirements.


Critical Accounting Policies and Estimates


Our financial statements are prepared in accordance with U.S. Generally Accepted Accounting Principles (GAAP). The preparation of the financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses, and related disclosures. Though we evaluate our estimates and assumptions on an ongoing basis, our actual results may differ from these estimates.


Certain of our accounting policies that we believe are the most important to the portrayal of our financial condition and results of operations and that require management’s subjective judgments are described below to facilitate a better understanding of our business activities. We base our judgments on our experience and assumptions that we believe are reasonable and applicable under the circumstances.





13




Revenue Recognition - Our revenues are recognized in accordance with FASB ASC Topic 985-605 “Revenue Recognition” for the software industry.  Revenue from the sale of software licenses is recognized when standardized software modules are delivered to and accepted by the customer, the license term has begun, the fee is fixed or determinable and collectibility is probable.  Revenue from software maintenance contracts and Application Service Provider (“ASP”) services are recognized ratably over the lives of the contracts.  Revenue from professional services is recognized when the service is provided.


We enter into revenue arrangements in which a customer may purchase a combination of software, maintenance and support, and professional services (multiple-element arrangements).  When vendor-specific objective evidence (“VSOE”) of fair value exists for all elements, we allocate revenue to each element based on the relative fair value of each of the elements.  VSOE of fair value is established by the price charged when that element is sold separately.  For maintenance and support, VSOE of fair value is established by renewal rates, when they are sold separately.  For arrangements where VSOE of fair value exists only for the undelivered elements, we defer the full fair value of the undelivered elements and recognize the difference between the total arrangement fee and the amount deferred for the undelivered items as revenue, assuming all other criteria for revenue recognition have been met.


Equity-Based Compensation - We account for equity based compensation transactions with employees under the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic No. 718, “Compensation, Stock Compensation” (“Topic No. 718”). Topic No. 718 requires the recognition of the fair value of equity-based compensation in net earnings. The fair value of common stock issued for compensation is measured at the market price on date of grant. The fair value of our equity instruments, other than common stock, is estimated using the Black-Scholes option valuation model. This model requires the input of highly subjective assumptions and elections including expected stock price volatility and the estimated life of each award. In addition, the calculation of equity-based compensation costs requires that we estimate the number of awards that will be forfeited during the vesting period. The fair value of equity-based awards granted to employees is amortized over the vesting period of the award and we elected to use the straight-line method for awards granted after the adoption of Topic No. 718.


We account for equity based transactions with non-employees under the provisions of ASC Topic No. 505-50, “Equity-Based Payments to Non-Employees” (“Topic No. 505-50”). Topic No. 505-50 establishes that equity-based payment transactions with non-employees shall be measured at the fair value of the consideration received or the fair value of the equity instruments issued, which ever is more reliably measurable. When the equity instrument is utilized for measurement the fair value of (i) common stock issued for payments to non-employees is measured at the market price on the date of grant; (ii) equity instruments, other than common stock, is estimated using the Black-Scholes option valuation model. In general, we recognize an asset or expense in the same manner as if it is to receive cash for the goods or services instead of paying with or using the equity instrument.


Results of Operations


The following table sets forth, for the periods indicated, certain items from the statements of operations. A comparative analysis of ratios of costs and expenses to revenues is shown for fiscal 2011 and 2010. Comparative analysis of ratios of costs and expenses to revenues is not shown for fiscal 2010 and 2009 as management believes such ratios to be uninformative due to the insignificant level of revenue in fiscal 2009.




14





 

For the years ended October 31,

 

2011

 

2010

 

(Unaudited)

 

(Unaudited)

 

 

 

% of

 

 

 

% of

 

Amounts

 

Revenues

 

Amounts

 

Revenues

 

 

 

 

 

 

 

 

Revenues

$  980,909

 

100%

 

$  824,508

 

100%

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

   Compensation costs

$  631,552

 

64%

 

$  594,267

 

72%

   Consulting fees

$  41,589

 

4%

 

$  124,656

 

15%

   Advertising

$  32,286

 

3%

 

$  34,436

 

4%

   Professional fees

$  114,561

 

12%

 

$  137,719

 

17%

 

 

 

 

 

 

 

 

Interest and debt costs

$  14,520

 

1%

 

$  12,000

 

1%

 

 

 

 

 

 

 

 

Net Income (Loss)

$  41,676

 

4%

 

$(192,470)

 

(23)%

 

 

 

 

 

 

 

 

Net income (loss) per share -

 

 

 

 

 

 

 

Basic and diluted

$  --

 

 

 

$  ($0.01)

 

 


Comparison of the Fiscal Years Ended October 31, 2011 and 2010


Revenues


Our revenues for the year ended October 31, 2011 amounted to $980,909 compared to the comparative 2010 period of $824,508. Revenues for the year increased by approximately $156,000 (19%), primarily resulting from our signing of an amended licensing agreement with an existing customer.  This increase was offset by slight declines in consulting and developmental services revenues. Service revenues include revenues from fees charged for the implementation of our software products and training of customers in the use of such products. We are currently selling our software over the internet and are marketing our products and services to companies which may want to license or joint venture some of our software applications.


Operating Expenses


Our operating expenses consist primarily of compensation costs, advertising and professional services.


Compensation costs consist of payroll and related expenses. Payroll expenses amounted to $631,552 in the year ended October 31, 2011 compared to $594,267 in the year ended October 31, 2010. Payroll expenses increased $37,285 (6%) as we continue to manage our payroll costs as we implement our strategic plan.


Advertising costs decreased to $32,286 in the year ended October 31, 2011 from $34,436 in the year ended October 31, 2010, a decrease of $2,150 (6%). We reduced our advertising budget temporarily as a means of preserving capital as we implement our plan for revenue growth.




15




Professional fees decreased from $137,719 in the year ended October 31, 2010 to $114,561 in the year ended October 31, 2011, a decrease of $23,158 (17%). We reduced professional fees by internally performing certain functions which had previously been done by our professionals. Consulting fees decreased from $51,456 in the year ended October 31, 2010 to $40,130 in the year ended October 31, 2011 and share based consulting fees decreased from $73,200 in the year ended October 31, 2010 to $1,459 in the year ended October 31, 2011 as certain consulting agreements entered into in fiscal 2010 were not renewed.


Interest and Debt Costs


Interest expense increased from $12,000 ($8,000 related party) in the year ended October 31, 2010 to $14,520 ($10,520 related party) in the year ended October 31, 2011. Interest expense is incurred on the promissory notes totaling $210,000 with our CEO executed in the last quarter of fiscal year 2009, the first quarter of fiscal 2010, the third quarter of fiscal 2011 and the last quarter of fiscal 2011 and $50,000 on outstanding convertible debentures.


Income Taxes


The potential future tax benefits resulting from pre-tax losses have been fully reserved as we are not able to determine if it is more likely than not that we will be able to realize the tax benefits in the future.


Net Income (Loss)


Net income in the year ended October 31, 2011 totaled $41,676 compared to a net loss of $192,470 in the year ended October 31, 2010, an increase of $234,146.


Comparison of the Fiscal Years Ended October 31, 2010 and 2009


Revenues


Our revenues for the year ended October 31, 2010 amounted to $824,508 compared to the comparative 2009 period of $86,510, an increase of 853%. Revenues for the year increased by approximately $738,000 primarily resulting from new licensing agreements entered into in November 2009. Revenues from these agreements amounted to $696,000 of which $292,000 represents licensing fees and $404,000 relates to consulting, maintenance and support. The balance of the increase is primarily related to sales of our software and other service revenues. Service revenues include revenues from fees charged for the implementation of our software products and training of customers in the use of such products. We are currently selling our software over the internet and are marketing our products and services to companies which may want to license or joint venture some of our software applications.


Operating Expenses


Our operating expenses consist primarily of compensation costs, advertising and professional services.





16




Compensation costs consist of payroll and share based compensation, primarily through the issuance of warrants, to employees. Payroll and share based compensation amounted to $594,267 and $0, respectively, in the year ended October 31, 2010 compared to $595,468 and $63,336, respectively, in the year ended October 31, 2009. We continue to manage our payroll costs as we implement our strategic plan. Share based compensation costs decreased $63,336 (100%) as we now issue warrants to employees on a more selective basis, determined by their qualifications and performance.


Advertising costs have decreased to $34,436 in the year ended October 31, 2010 from $41,295 in the year ended October 31, 2009, a decrease of $6,859 (17%). We reduced our advertising budget temporarily as a means of preserving capital as we implement our plan for revenue growth.


Professional fees decreased from $224,585 in the year ended October 31, 2009 to $137,719 in the year ended October 31, 2010. The decrease of $86,866 (39%) is primarily a result of professional fees incurred registering our common shares as a public company in 2009. Consulting fees in fiscal 2010 of $51,456 were comparative to the fiscal 2009 amounts of $57,300. We also incurred $73,200 in share based consulting fees in fiscal 2010, a decrease of $210,974 (74%) from the $284,174 incurred in fiscal 2009. We utilize equity-based payments for consulting fees, when possible, as a means of preserving working capital for other operating costs.


Interest and Debt Costs


Interest expense increased from $4,625 ($164 related party) in the year ended October 31, 2009 to $12,000 ($8,000 related party) in the year ended October 31, 2010 primarily as a result of the two promissory notes of $50,000 each with our CEO executed in the last quarter of fiscal 2009 and the first quarter of fiscal 2010.  The two promissory notes, $100,000 in the aggregate, are outstanding as of October 31, 2010. Additionally, $50,000 in convertible debentures is outstanding as of October 31, 2010.


Other Income (Expenses)


Other income decreased from $374,047 in the year ended October 31, 2009 to an expense of $12,000 in the year ended October 31, 2010 primarily due to $400,000 of gain from the derecognition of common share liability in fiscal 2009. We entered into a consulting agreement on January 31, 2007 that either party could cancel upon 10 days notice. As part of the compensation for services, the consultant was to receive an aggregate of 750,000 shares of the Company’s common stock. The consultant earned and was issued 350,000 shares. The issuance of the remaining 400,000 common shares was contingent upon certain actions by us. Since it was our intent that such actions would be fulfilled, we charged operations in 2007 and 2008 for the value of such common shares and had an accrued common share liability at October 31, 2008 of $400,000 for the fair value of the 400,000 shares. During the first quarter of fiscal 2009 we mutually agreed with the consultant to cancel the obligation to issue the 400,000 common shares. As a result, we reduced the accrued common share liability and recorded a gain from the derecognition of common share liability for $400,000 in the first quarter of fiscal 2009.


Income Taxes


The expected tax benefits resulting from pre-tax losses have been fully reserved as we are not presently able to determine if it is more likely than not that we will be able to realize the tax benefits in the future.




17




Net Loss


Net loss in the year ended October 31, 2010 totaled $192,470 compared to $929,694 in the year ended October 31, 2009, a decrease of $737,224 (79%).


Liquidity and Capital Resources


We continue to fund our operations through private placement offering and financings.


In August 2009, we initiated a private placement offering of equity securities to a limited number of accredited investors.  The offering is through the sale of units, with each unit consisting of a warrant to purchase 60,000 shares of our common stock at $0.25 per share.  The offering price per unit is $4,800 with a total of 100 units ($480,000) being offered. We sold 9 units in September and October 2009 and received proceeds of $43,200.


On October 16, 2009, we executed a promissory note in the amount of $50,000 with our Chief Executive Officer (“CEO”). The note, which is due on demand, accrues interest at 8% per annum. The proceeds are being used for working capital purposes.


On November 10, 2009, we executed a promissory note in the amount of $50,000 payable to our CEO.  The note, which is due on demand, accrues interest at 8% per annum.  The proceeds are being used for working capital purposes.


On May 3, 2011, we executed a promissory note in the amount of $50,000 payable to our CEO.  The note, which is due on demand, accrues interest at 8% per annum.  The proceeds are being used for working capital purposes.


On June 27, 2011, we executed a promissory note in the amount of $30,000 payable to our CEO.  The note, which is due on demand, accrues interest at 8% per annum.  The proceeds are being used for working capital purposes.


On August 1, 2011, we executed a promissory note in the amount of $13,000 payable to our CEO.  The note, which is due on demand, accrues interest at 8% per annum.  The proceeds are being used for working capital purposes.



On August 16, 2011, we executed a promissory note in the amount of $10,000 payable to our CEO.  The note, which is due on demand, accrues interest at 8% per annum.  The proceeds are to be used for working capital purposes.


On September 28, 2011, we executed a promissory note in the amount of $7,000 payable to our CEO.  The note, which is due on demand, accrues interest at 8% per annum.  The proceeds are to be used for working capital purposes.

 


At October 31, 2011 we had cash and cash equivalents of $14,000 compared to $68,000 at October 31, 2010. The decrease of $54,000 is primarily attributable to the increase in operating costs for compensation and the decrease in the cash received from payments on our new licensing agreements.




18




 

Cash Flows


Net cash provided by (used for) operating activities amounted to $(164,022) and $13,573 in the fiscal years ended October 31, 2011 and 2010, respectively. Net cash from operations decreased as a result of lack of cash generated from our licensing agreements while we increased operating costs as discussed above while we implemented our overall strategic business plan.


In fiscal 2011, we generated cash from financing activities of $110,000. This represented our promissory notes with our CEO in the amount of $110,000. We generated cash from financing activities of $50,000 in fiscal 2010. This represented our promissory note with our CEO in the amount of $50,000.


In fiscal 2010, cash used for investing activities related to the acquisition of equipment in the amount of $10,559. There were no cash investing activities in the year ended October 31, 2011.


We do not believe that our cash on hand at October 31, 2011 will be sufficient to fund our operations for at least the next 12 months. We have signed significant licensing agreements and continue to market our products and services in accordance with our strategic business plan. However, there is no assurance that the income generated from these and future agreements will meet our working capital requirements, or that we will be able to sign significant agreements in the future. We may need to raise additional capital through debt and/or equity financings and there is no assurance that we will be able to obtain additional capital in any amount or on terms acceptable to us at the required times.

 

Going Concern Qualification


The Company’s financial statements as of October 31, 2011 and for the year then ended have been prepared assuming the Company will continue as a going concern.  As discussed in Note 2 to the financial statements, since inception the Company has incurred losses, has an accumulated deficit of $7,326,105 at October 31, 2011, has experienced negative cash flows from operations, and there are existing uncertain conditions which the Company faces relative to its obtaining financing and capital in the equity markets.  These conditions raise substantial doubt about the Company’s ability to continue as a going concern.

 

Contractual Obligations


N/A


Off-Balance Sheet Arrangements


As of October 31, 2011, we had no off-balance sheet arrangements as defined in Item 303(a)(4) of Regulation S-K.








19




Recent Accounting Pronouncements


In January 2010, the Financial Accounting Standards Board issued Accounting Standards Update 2010-06 (“ASU 2010-06”), “Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements.” ASU 2010-06 requires reporting entities to make new disclosures about recurring or nonrecurring fair value measurements including significant transfers into and out of Level 1 and Level 2 fair value measurements and information on purchases, sales, issuances, and settlements on gross basis in the reconciliation of Level 3 fair value measurements.  ASU 2010-06 is effective for annual reporting periods beginning after December 15, 2009, except for Level 3 reconciliation disclosures which are effective for annual periods beginning after December 15, 2010.  The adoption of the subsequent provisions of ASU 2010-06 is not expected to have a material impact on the Company’s financial statement disclosures.


On May 12, 2011, the FASB issued ASU 2011-04.  The ASU is the result of joint efforts by the FASB and the International Accounting Standards Board (“IASB”) to develop a single, converged fair value framework.  Thus, there are few differences between the ASU and its international counterpart, IFRS 13.  This ASU is largely consistent with existing fair value measurement principles in U.S. GAAP; however it expands ASC 820’s existing disclosure requirements for fair value measurements and makes other amendments. The ASU is effective for interim and annual periods beginning after December 15, 2011.  The Company does not expect the provisions of ASU 2011-04 to have a material effect on the financial position, results of operations or cash flows of the Company.


On June 16, 2011, the FASB issued ASU 2011-05, which revises the manner in which entities present comprehensive income in their financial statements.  The new guidance removes the presentation options in ASC 220 and requires entities to report components of comprehensive income in either (1) a continuous statement of comprehensive income or (2) two separate but consecutive statements.  The ASU does not change the items that must be reported in other comprehensive income.  The amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011.  The Company does not expect the provisions of ASU 2011-05 to have a material effect on the financial position, results of operations or cash flows of the Company.


Management does not believe that any other recently issued but not yet effective accounting pronouncements, if adopted, would have an effect on the accompanying financial statements.


Item 7A. Quantitative and Qualitative Disclosure about Market Risk


Interest Rate Risk


N/A


Item 8. Financial Statements and Supplementary Data


Our financial statements are contained in the pages beginning F-1, which appear at the end of this annual report.


Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure


N/A



20




Item 9A. Controls and Procedures


(a)  Evaluation of disclosure controls and procedures


The Company’s management, with the participation of the Company’s principal executive officer (“CEO”) and principal financial officer (“CFO”), evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report.  Based on this evaluation, the CEO and CFO concluded that, as of the end of such period, the Company’s disclosure controls and procedures were effective to ensure that information that is required to be disclosed by the Company in the reports it files or submits under the Exchange Act is (i) recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to the Company’s management, including the CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.


(b)   Evaluation of disclosure controls and procedures


Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a15(f) and 15d15(f) under the Exchange Act.  Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Also, projections of any evaluation of effectiveness to future periods are subject to the risk that internal controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.


Management has assessed the effectiveness of our internal control over financial reporting as of October 31, 2011.  In making this assessment, management used the criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).  The objective of this assessment is to determine whether our internal control over financial reporting was effective as of October 31, 2011.  Based on our assessment utilizing the criteria issued by COSO, management has concluded that our internal control over financial reporting was not effective as of October 31, 2011.  Management’s assessment identified the following material weaknesses:


·

As of October 31, 2011, there was a lack of accounting personnel with the requisite knowledge of Generally Accepted Accounting Principles (GAAP) in the U.S. and financial reporting requirements of the Securities and Exchange Commission.

·

As of October 31, 2011, there were insufficient written policies and procedures to insure the correct application of accounting and financial reporting with respect to the current requirements of GAAP and SEC disclosure requirements.

·

As of October 31, 2011, there was a lack of segregation of duties, in that we only had one person performing all accounting-related duties.

·

As of October 31, 2011, there were no independent directors and no independent audit committee.


We continue to evaluate the effectiveness of internal controls and procedures on an on-going basis.  We plan to further address these issues once cash flows from operations improve to a level where we are able to hire additional personnel in financial reporting.


During the most recently completed fiscal quarter, there has been no change in our internal control over financial reporting that has materially affected or is reasonably likely to materially affect, our internal control over financial reporting.

 

Item 9B. Other Information


None.




21




Part III


Item 10. Directors, Executive Officers and Corporate Governance


Management

 

The Company’s management and key employee is the following:

 

Name

 

Age

 

Position with Company

Allen Ronald DeSerranno

 

45

 

CEO, President, CFO, Director

 

The profile of our officer and director is set forth below:

 

Ron DeSerranno

 

Mr. DeSerranno is a founder and CEO of Mobiform Canada, which was organized in March, 2003. Since Mobiform’s October, 2005 acquisition of Mobiform Canada, he has been Chief Executive Officer, President and a Director of Mobiform. His software development career first began at the Space and Atmospheric Research Group, Physics Department, at the University of Western Ontario. He was a Microsoft Certified Trainer and Consultant and taught courses in both New York and Toronto. From August, 1997 to November, 2000, he was a Senior Software Engineer for Rockwell Software, Inc./Dynapro Inc. where he was the development lead and architect for Rockwell’s flagship industrial automation product RSView, an invaluable tool to globally scaled companies like Kraft and General Motors. In 2002 he served as Vice President of Software Development for Motivus Software Ltd. which was acquired by Citrex Corp. Other ventures include the establishment of BoardMaster Software.  Mr. DeSerranno is considered one of the leading authorities on XAML based graphics technologies and has been designing and developing world class software products for many years. Mr. DeSerranno received diplomas in Environmental Technology and Computer Support Technician in 1991 from Fanshawe College of Applied Arts and Technology and a degree in Physical Geography in 1993 from the University of Western Ontario and attended, in 1994, CDI College for Program Analysis. He is not a director of any other reporting company.

 

Our Director and executive officer has not been involved in legal proceedings in the last five years.

 

Indemnification of Directors and Officers

 

Our Certificate of Incorporation provides that the Company shall, to the fullest extent permitted by the law of the State of Delaware, indemnify any and all persons whom it shall have power to indemnify from and against any and all of the expenses, liabilities or other matters referred to in or covered by the applicable provisions of Delaware law, and the indemnification provided for will not be deemed exclusive of any other rights to which those indemnified may be entitled under any By-Law, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in their official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, employee, or agent and shall inure to the benefit of the heirs, executors and administrators of such a person. We are required to indemnify each officer and director to the fullest extent permitted by law and to advance certain expenses incurred by such persons. Our Certificate of Incorporation and



22




Delaware law provide limitations on the directors’ rights to indemnification in certain circumstances.

 

Code of Business Conduct and Ethics

 

We have adopted a Code of Business Conduct and Ethics, which is attached as an exhibit to this report.


Item 11. Executive Compensation


The following table sets forth, for the fiscal years ended October 31, 2010 and October 31, 2011, all compensation paid, distributed or accrued, including salary and bonus amounts, for services rendered to us by our Principal Executive Officer, during the fiscal years ended October 31, 2010 and October 31, 2011. No other executive officer who was serving as an executive officer at October 31, 2011, had total compensation for fiscal 2011 exceeding $100,000:


Year Ended


Name and Principal Position

 

October 31

 

Salary ($)

 

Option Awards

 

Total

Allen Ronald DeSerranno

 

2010

 

 

150,000

 

 

0

 

$

150,000

Chief Executive Officer

 

2011

 

 

150,000

 

 

0

 

$

150,000


Director Compensation

 

We do not compensate our directors for serving on our Board of Directors, other than any compensation which a director may earn as an employee of the Company. We reimburse our directors for any travel related expenses incurred in performing their duties as directors.

 

Employment Agreements with Executive Management and Directors


Mr. DeSerranno had an employment agreement with the Company, which provided for an annual salary of $150,000, which expired on March 31, 2009.  Effective April 1, 2009 Mr. DeSerranno’s salary has continued at the same rate and will remain in effect until a new agreement is executed.


Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters


The following table sets forth the number of shares of Common Stock beneficially owned as of January 20, 2012 by (i) those persons or groups known to us who beneficially own more than 5% of our Common Stock; (ii) each director; (iii) each executive officer whose compensation exceeded $100,000 in the fiscal year ended October 31, 2011; and, (iv) all directors and executive officers as a group. Beneficial ownership is determined in accordance with Rule 13d-3 under the Exchange Act based upon information furnished by persons listed or contained in filings made by them with the SEC and by information provided by such persons directly to us. Except as indicated, the stockholders listed below possess sole voting and investment power with respect to their shares.




23





Name(1)

 

 

Number of

Shares of

Common Stock

Beneficially

Owned(2)

Percentage of

Outstanding

Shares of

Common Stock(3)

Allen Ronald DeSerranno(4)

 

 

9,404,955

38.25%

 

 

 

 

 

Gary Fuhr

 

 

1,311,085

5.33%

All officers and directors as a group

 

 

 

 

(One person)

 

 

9,404,955

38.25%


(1) The address of Mr. DeSerranno is c/o Mobiform Software, Inc., 1255 N Vantage Pt. Dr., Suite A, Crystal River, Florida 34429. Mr. Fuhr, a former employee of the Company, has an address at 7204 Stride Avenue, Burnaby, BC V3N 1T9 Canada.

 

(2) Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Shares of Common Stock relating to options currently exercisable or exercisable within 60 days of the date of this table, are deemed outstanding for computing the percentage of the person holding such securities, but are not deemed outstanding for computing the percentage of any other person. Except as indicated by footnote, and subject to community property laws where applicable, the persons named in the table above have sole voting and investment power with respect to all shares shown as beneficially owned by them.

 

(3) Based upon 24,586,672 shares of Common Stock outstanding plus in each case the shares which the person or group has a right to acquire within 60 days through the exercise of warrants.

 

(4) Includes 1,721,979 held by a corporation wholly-owned by Mr. DeSerranno. Excludes 316,780 shares of Common Stock held by Mr. DeSerranno’s wife, Rita Honurata DeSerranno, as to which he disclaims beneficial ownership.


Change in Control

 

We are unaware of any arrangement or understanding that may, at a subsequent date, result in a change of control of our Company.


Item 13. Certain Relationships and Related Transactions, and Director Independence


Since the beginning of the last fiscal year we have had no reportable transactions with related parties and none is currently proposed.


Item 14. Principal Accountant Fees and Services


Meyler & Company, LLC served as our independent registered public accounting firm for the fiscal years ended October 31, 2011 and 2010.  The following table shows the fees that were billed for the audit and other services provided by such firm for 2011 and 2010.




24





 

 

2011

 

2010

Meyler & Company, LLC:

 

 

 

 

Audit Fees

 

$  55,000

 

$  55,000

Audit-Related Fees

 

0

 

0

Tax Fees

 

0

 

0

All Other Fees

 

0

 

0

Total

 

$  55,000

 

$  55,000


Audit Fees - This category includes the audit of our annual financial statements, review of financial statements included in our Form 10-Q Quarterly Reports and services that are normally provided by the independent auditors in connection with engagements for those fiscal years. This category also includes advice on audit and accounting matters that arose during, or as a result of, the audit or the review of interim financial statements.

 

Audit-Related Fees - This category consists of assurance and related services by the independent auditors that are reasonably related to the performance of the audit or review of our financial statements and are not reported above under “Audit Fees.” The services for the fees disclosed under this category include consultation regarding our correspondence with the SEC and other accounting consulting.

 

Tax Fees - This category consists of professional services rendered by our independent auditors for tax compliance and tax advice. The services for the fees disclosed under this category include tax return preparation and technical tax advice.

 

All Other Fees - This category consists of fees for other miscellaneous items.


Our Board of Directors acting as our Audit Committee preapproved each engagement of our independent registered public accounting firm.

 

 

 

 




25




Part IV


Item 15. Exhibits, Financial Statement Schedules


Number

Description

3.1

Certificate of Incorporation *

3.2

By-laws *

4.1

Form of Specimen Stock Certificate *

10.3

Form of Warrant - $1.50 *

10.3.1

Form of Warrant - $.75 *

10.3.2

Form of Warrant - $.20 *

10.4

Employment Agreement dated April 1, 2006 with Allen Ronald DeSerranno *

10.5

Employment Agreement dated April 1, 2006 with Francis V. Lorenzo *

10.6

Assignment and Amendment of Employment Agreement - Allen Ronald DeSerranno*

10.7

Assignment and Amendment of Employment Agreement - Francis V. Lorenzo*

10.8

Termination Agreement - Francis V. Lorenzo*

10.9

Form of 8% Convertible Note*

10.10

Exchange Agreement dated August 31, 2005*

14.1

Code of Ethics***

16.1

Letter dated September 10, 2008 from Raich Ende Malter & Co. LLP, to the Securities and Exchange Commission**

23.1

Consent of Meyler & Company, LLC, independent registered public accounting firm**

23.2

Consent of Raich Ende Malter & Co. LLP, independent registered public accounting firm**

31.1

Certification by the Principal Executive Officer and Principal Financial Officer of Mobiform Software, Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a) or Rule 15d-14(a))****

32.1

Certification by the Principal Executive Officer and Principal Financial Officer of Mobiform Software, Inc. pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.****


 

*  Incorporated by reference to the correspondingly numbered exhibit to the Company's Registration Statement on Form S-1 filed on April 9, 2008.
**  Incorporated by reference to the correspondingly numbered exhibit to the Company's Report on Form 8-k filed on September 10, 2008.
***  Incorporated by reference to the correspondingly numbered exhibit to the Company's Report on Form 10-K filed on January 29, 2010.
****Filed herewith.



 

26





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.

 

MOBIFORM SOFTWARE, INC.

 

By:

/s/ Allen Ronald DeSerranno

 

Allen Ronald DeSerranno

Title:

Chief Executive Officer and Chief Financial Officer

Date:

January 20, 2012

 

In accordance with Section 13 or 15(d) of the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:

 

By:

/s/ Allen Ronald DeSerranno

 

Allen Ronald DeSerranno

Title:

Chief Executive Officer and Chief Financial Officer

Date:

January 20, 2012




























27





Financial Statements


Index to Financial Statements


Report of Independent Registered Public Accounting Firm

F- 1

  

 

Balance Sheets

F- 2

  

 

Statements of Operations

F- 3

  

 

Statement of Stockholders’ Deficiency

F- 4

  

 

Statements of Cash Flows

F- 5

  

 

Notes to Financial Statements

F- 6













28





Meyler&Company LLC

One Arin Park

Phone: 732-671-2244

Certified Public Accountants

1715 Highway 35

 

& Management Consultants

Middletown, NJ 07748

 



Report of Independent Registered Public Accounting Firm


To the Board of Directors of

  Mobiform Software, Inc.

Crystal River, Florida


We have audited the accompanying balance sheets of Mobiform Software, Inc. as of October 31, 2011 and 2010, and the related statements of operations, stockholders’ deficiency and cash flows for each of the years in the two-year period ended October 31, 2011.  Mobiform Software, Inc.’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits.


We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.  Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.  Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.


In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Mobiform Software, Inc. as of October 31, 2011 and 2010, and the results of its operations and its cash flows for each of the years in the two-year period ended October 31, 2011, in conformity with accounting principles generally accepted in the United States of America.


The accompanying financial statements have been prepared assuming the Company will continue as a going concern.  As discussed in Note 2 to the financial statements, since inception the Company has incurred losses, has an accumulated deficit of $7,326,105 at October 31, 2011, has experienced negative cash flows from operations, and there are existing uncertain conditions which the Company faces relative to its obtaining financing and capital in the equity markets.  These conditions raise substantial doubt about its ability to continue as a going concern.  Management’s plans regarding these matters are also described in Note 2.  The financial statements do not include any adjustments that might result from the outcome of this uncertainty.



January 20, 2012

Middletown, NJ

 




F-1



MOBIFORM SOFTWARE, INC.


BALANCE SHEETS



 

 

October 31,

 

 

2011

 

2010

 

 

 

 

 

Assets

 

 

 

 

Current Assets

 

 

 

 

     Cash and Cash Equivalents

$

13,958

$

67,980

     Accounts Receivable - Net

 

59,674

 

73,290

     Accrued Revenue

 

174,350

 

4,250

     Prepaid Expenses and Other Current Assets

 

1,835

 

3,843

          Total Current Assets

 

249,817

 

149,363

 

 

 

 

 

Property and Equipment - Net

 

15,542

 

29,405

 

 

 

 

 

Other Assets

 

 

 

 

     Security Deposits

 

3,650

 

3,650

 

 

 

 

 

          Total Assets

$

269,009

$

182,418

 

 

 

 

 

Liabilities and Stockholders’ Deficiency

 

 

 

 

Current Liabilities

 

 

 

 

     Convertible Notes Payable

$

50,000

$

50,000

     Notes Payable - Related Party

 

210,000

 

100,000

     Accounts Payable and Accrued Liabilities

 

145,728

 

130,067

     Deferred Revenue

 

86,199

 

168,404

          Total Current Liabilities

 

491,927

 

448,471

 

 

 

 

 

Commitments and Contingencies

 

--

 

--

 

 

 

 

 

Stockholders’ Deficiency

 

 

 

 

     Preferred Stock, $0.0001 Par Value, 5,000,000 Shares

 

 

 

 

          Authorized and Unissued

 

--

 

--

     Common Stock, $0.0001 Par Value; 100,000,000 Shares

 

 

 

 

          Authorized; Shares Issued and Outstanding, 24,586,672 at

 

 

 

 

          October 31, 2011 and 2010

 

2,459

 

2,459

     Additional Paid in Capital

 

7,100,728

 

7,099,269

     Accumulated Deficit

 

(7,326,105)

 

(7,367,781)

          Total Stockholders’ Deficiency

 

(222,918)

 

(266,053)

 

 

 

 

 

          Total Liabilities and Stockholders’ Deficiency

$

269,009

$

182,418




See accompanying notes to financial statements.





F-2




MOBIFORM SOFTWARE, INC.


STATEMENTS OF OPERATIONS



 

 

For the Years Ended

 

 

October 31,

 

 

2011

 

2010

 

 

 

 

 

Revenue

$

980,909

$

824,508

 

 

 

 

 

Operating Expenses

 

 

 

 

     Payroll Expenses

 

631,552

 

594,267

     Consulting Fees - Share Based

 

1,459

 

73,200

     Professional Fees

 

114,561

 

137,719

     Advertising

 

32,286

 

34,436

     Depreciation and Amortization

 

13,863

 

13,922

     Consulting Fees

 

40,130

 

51,456

     Office

 

14,405

 

13,244

     Rent

 

38,949

 

38,989

     Telephone and Communication

 

7,415

 

12,279

     Other

 

30,093

 

35,466

          Total Operating Expenses

 

924,713

 

1,004,978

 

 

 

 

 

Operating Income (Loss)

 

56,196

 

(180,470)

 

 

 

 

 

Other Income (Expenses)

 

 

 

 

     Interest Expense

 

(4,000)

 

(4,000)

     Interest Expense-Related Party

 

(10,520)

 

(8,000)

          Total Other Income (Expenses)

 

(14,520)

 

(12,000)

 

 

 

 

 

Income (Loss) Before Income Taxes

 

41,676

 

(192,470)

 

 

 

 

 

Provision for Income Taxes

 

--

 

--

 

 

 

 

 

Net Income (Loss)

$

41,676

$

(192,470)

 

 

 

 

 

Net Income (Loss) Per Common Share - Basic and Diluted

$

--

$

(0.01)

 

 

 

 

 

Weighted-Average Common Shares Outstanding - Basic and Diluted

 

24,586,672

 

24,543,057




See accompanying notes to financial statements.




F-3




MOBIFORM SOFTWARE, INC.


STATEMENT OF STOCKHOLDERS’ DEFICIENCY



 

 

 

 

 

 

 

Additional

 

 

 

 

Paid-in

Accumulated

 

 

Common Stock

Capital

Deficit

Total

 

Shares

Amount

 

 

 

 

 

 

 

 

 

Balance - November 1, 2009

24,410,656

$  2,441

$  7,036,413

$  (7,175,311)

$  (136,457)

 

 

 

 

 

 

Issuance of common stock for services per consulting contracts

150,000

15

58,485

--

58,500

 

 

 

 

 

 

Issuance of common stock from previous private placement offerings

26,016

3

(3)

--

--

 

 

 

 

 

 

Issuance of warrants for consulting services

--

--

4,374

--

4,374

 

 

 

 

 

 

Net loss for the year ended October 31, 2010

--

--

--

(192,470)

(192,470)

 

 

 

 

 

 

Balance - October 31, 2010

24,586,672

2,459

7,099,269

(7,367,781)

(266,053)

 

 

 

 

 

 

Share based compensation for warrants issued for consulting services

--

--

1,459

--

1,459

 

 

 

 

 

 

Net income for the year ended October 31, 2011

--

--

--

41,676

41,676

 

 

 

 

 

 

Balance - October 31, 2011

24,586,672

$  2,459

$  7,100,728

$  (7,326,105)

$  (222,918)




See accompanying notes to financial statements.




F-4




MOBIFORM SOFTWARE, INC.


STATEMENTS OF CASH FLOWS



 

 

For the Years Ended

 

 

October 31,

 

 

2011

 

2010

Operating Activities

 

 

 

 

     Net Income (Loss)

$

41,676

$

(192,470)

     Adjustments to Reconcile Net Income (Loss) to Net Cash

 

 

 

 

           Provided by (Used For) Operating Activities:

 

 

 

 

               Depreciation and Amortization

 

13,863

 

13,922

               Consulting Fees - Share Based

 

1,459

 

73,200

               Deferred Revenue

 

(82,205)

 

162,571

 

 

 

 

 

     Changes in Assets and Liabilities:

 

 

 

 

           (Increase) Decrease in:

 

 

 

 

               Accounts Receivable

 

13,616

 

(63,370)

               Accrued Revenue

 

(170,100)

 

(4,250)

               Prepaid Expenses and Other Current Assets

 

2,008

 

4,381

          Increase (Decrease) in:

 

 

 

 

               Accounts Payable and Accrued Liabilities

 

15,661

 

19,589

                    Net Cash Provided by (Used for) Operating Activities

 

(164,022)

 

13,573

 

 

 

 

 

Investing Activities

 

 

 

 

     Acquisition of Equipment

 

--

 

(10,559)

                    Net Cash Used for Investing Activities

 

--

 

(10,559)

 

 

 

 

 

Financing Activities

 

 

 

 

     Proceeds from notes payable - related party

 

110,000

 

50,000

                    Net Cash Provided by Financing Activities

 

110,000

 

50,000

 

 

 

 

 

Change in Cash and Cash Equivalents

 

(54,022)

 

53,014

 

 

 

 

 

Cash and Cash Equivalents - Beginning of Year

 

67,980

 

14,966

 

 

 

 

 

Cash and Cash Equivalents - End of Year

$

13,958

$

67,980

 

 

 

 

 

Supplemental Disclosures of Cash Flow Information

 

 

 

 

     Cash paid during the year for:

 

 

 

 

          Interest

$

--

$

--

          Income Taxes

$

--

$

--

 

 

 

 

 

Supplemental Disclosures of Non-Cash Investing and Financing Activities:

 

 

 

 

     Common Stock Issued for Prepaid Consulting Expense

$

--

$

58,500



See accompanying notes to financial statements.




F-5




MOBIFORM SOFTWARE, INC.

NOTES TO FINANCIAL STATEMENTS

OCTOBER 31, 2011



(1)  Nature of Business and Basis of Presentation


Mobiform Software, Inc, (“Mobiform”, the “Company”, “we” or “us”), a Delaware corporation, was originally formed under the name Firefly Learning, Inc. in May 2001. In October, 2005, pursuant to an exchange agreement, we acquired all of the issued and outstanding shares of capital stock of Mobiform Software, Ltd. (“Mobiform Canada”), a Canadian corporation, in exchange for 14,299,593 shares of our common stock. Effective September 14, 2010, Mobiform Canada was dissolved.


Mobiform is in the business of developing software products for the visualization and monitoring of data in heavy industry. Our HMI (Human Machine Interface) software and SCADA (Supervisory Control and Data Acquisition) products are utilized in petro chemical, electricity distribution, transportation, facilities management and manufacturing industries. Mobiform also licenses portions of its technology for use in the products of smaller software firms and Fortune 500 companies. Our products are marketed and sold globally and offered through a sales channel of system integrators and resellers.


(2)  Going Concern


The accompanying financial statements have been prepared assuming that we will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.  We have incurred substantial net operating losses and used substantial amounts of cash in our operating activities.  Since our inception, we have incurred losses, have an accumulated deficit of $7,326,105 at October 31, 2011, and have experienced negative cash flows from operations.  The expansion and development of our business will likely require additional capital.  This condition raises substantial doubt about our ability to continue as a going concern.  The accompanying financial statements do not include any adjustments that might be necessary should we be unable to continue as a going concern.


We are presently working to raise additional capital to meet our working capital needs and are restructuring operating costs as we continue to market our products in line with our business plan.  We have signed significant licensing agreements and continue to implement our strategic business plan. There are no assurances, however, that we will be successful in our efforts to raise capital or generate sufficient revenues through our marketing efforts or to reduce operating costs to a level where we will attain profitability.


(3)  Summary of Significant Accounting Policies


Use of Estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.


Cash and Cash Equivalents - We consider all highly liquid investments, with a maturity of three months or less when purchased, to be cash equivalents.




F-6




MOBIFORM SOFTWARE, INC.

NOTES TO FINANCIAL STATEMENTS

OCTOBER 31, 2011



(3)  Summary of Significant Accounting Policies - continued


Revenue Recognition - Our revenues are recognized in accordance with FASB ASC Topic 985-605 “Revenue Recognition” for the software industry.  Revenue from the sale of software licenses is recognized when standardized software modules are delivered to and accepted by the customer, the license term has begun, the fee is fixed or determinable and collectibility is probable.  Revenue from software maintenance contracts and Application Service Provider (“ASP”) services are recognized ratably over the lives of the contracts.  Revenue from professional services is recognized when the service is provided.


We enter into revenue arrangements in which a customer may purchase a combination of software, maintenance and support, and professional services (multiple-element arrangements).  When vendor-specific objective evidence (“VSOE”) of fair value exists for all elements, we allocate revenue to each element based on the relative fair value of each of the elements.  VSOE of fair value is established by the price charged when that element is sold separately.  For maintenance and support, VSOE of fair value is established by renewal rates, when they are sold separately.  For arrangements where VSOE of fair value exists only for the undelivered elements, we defer the full fair value of the undelivered elements and recognize the difference between the total arrangement fee and the amount deferred for the undelivered items as revenue, assuming all other criteria for revenue recognition have been met.


Fair Value of Financial Instruments - FASB ASC Topic 825 “Financial Instruments”  requires the disclosure of fair values for all financial instruments, both on-and off-balance-sheet, for which it is practicable to estimate fair value. We estimate that there are no material variations between fair value and book value of our financial assets and liabilities as of October 31, 2011 and 2010.  We generally do not require collateral related to our financial instruments.


Concentration of Credit Risk - Financial instruments that potentially subject us to significant concentrations of credit risk consist principally of cash, cash equivalents, and accounts receivable.


We maintain our cash and cash equivalents in accounts with a major financial institution in the United States in the form of demand deposits.  Deposits in these banks may exceed the amounts of insurance provided on such deposits.  No such amounts were at risk as of October 31, 2011 and 2010.


Concentrations of credit risk with respect to trade accounts receivable are limited.  We routinely assess the financial strength of customers and, based upon factors concerning credit risk, we establish an allowance for doubtful accounts.  As of October 31, 2011 and 2010, based on this assessment, management has not established an allowance for doubtful accounts. Management believes that accounts receivable credit risk exposure is limited.





F-7




MOBIFORM SOFTWARE, INC.

NOTES TO FINANCIAL STATEMENTS

OCTOBER 31, 2011



(3)  Summary of Significant Accounting Policies - continued


Impairment of Long-Lived Assets - We review our long-lived assets and identifiable intangibles for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.  When such factors and circumstances exist, we compare the projected undiscounted future cash flows associated with the future use and disposal of the related assets or group of assets to their respective carrying amounts.  Impairment, if any, is measured as the excess of the carrying amount over the fair value based on market value (when available) or discounted expected cash flows of those assets, and is recorded in the period in which the determination is made.


Equity-Based Compensation - We account for equity based compensation transactions with employees under the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic No. 718, “Compensation, Stock Compensation” (“Topic No. 718”). Topic No. 718 requires the recognition of the fair value of equity-based compensation in net earnings. The fair value of common stock issued for compensation is measured at the market price on date of grant. The fair value of our equity instruments, other than common stock, is estimated using the Black-Scholes option valuation model. This model requires the input of highly subjective assumptions and elections including expected stock price volatility and the estimated life of each award. In addition, the calculation of equity-based compensation costs requires that we estimate the number of awards that will be forfeited during the vesting period. The fair value of equity-based awards granted to employees is amortized over the vesting period of the award and we elected to use the straight-line method for awards granted after the adoption of Topic No. 718.


We account for equity based transactions with non-employees under the provisions of ASC Topic No. 505-50, “Equity-Based Payments to Non-Employees” (“Topic No. 505-50”). Topic No. 505-50 establishes that equity-based payment transactions with non-employees shall be measured at the fair value of the consideration received or the fair value of the equity instruments issued, which ever is more reliably measurable. When the equity instrument is utilized for measurement the fair value of (i) common stock issued for payments to non-employees is measured at the market price on the date of grant; (ii) equity instruments, other than common stock, is estimated using the Black-Scholes option valuation model. In general, we recognize an asset or expense in the same manner as if it is to receive cash for the goods or services instead of paying with or using the equity instrument.


Advertising Expense - We expense advertising costs as incurred.  


Property and Equipment - Property and equipment are carried at cost less accumulated depreciation.  Depreciation and amortization is recorded on the straight-line method over three to seven years, which approximates the estimated useful lives of the assets.  Routine maintenance and repair costs are charged to expense as incurred and renewals and improvements that extend the useful life of the assets are capitalized.  Upon sale or retirement, the cost and related accumulated depreciation and amortization are eliminated from the respective accounts and any resulting gain or loss is reported in the statement of operations.




F-8




MOBIFORM SOFTWARE, INC.

NOTES TO FINANCIAL STATEMENTS

OCTOBER 31, 2011



(3)  Summary of Significant Accounting Policies - continued


Income Taxes - We account for income taxes under the provisions of FASB ASC Topic 740 “Income Taxes” (“Topic 740”) which requires the use of the liability method of accounting for income taxes. The liability method measures deferred income taxes by applying enacted statutory rates in effect at the balance sheet date to the differences between the tax basis of assets and liabilities and their reported amounts on the financial statements. The resulting deferred tax assets or liabilities are adjusted to reflect changes in tax laws as they occur. A valuation allowance is provided when it is more likely than not that a deferred tax asset will not be realized. At October 31, 2011 and 2010, the entire deferred tax asset, which arises primarily from our net operating losses, has been fully reserved because management has determined that it is not more likely than not that the net operating loss carry forwards will be realized in the future.


We do not believe we have any uncertain tax positions deemed material as of October 31, 2011 and 2010. With few exceptions, we believe we are no longer subject to U.S. federal and state income tax examinations by tax authorities for tax periods prior to fiscal 2008. Our practice is to recognize interest and/or penalties related to income tax matters in income tax expense.  As of October 31, 2011 and 2010, we had no accrued interest or penalties.  We  currently have no federal or state tax  examinations  in progress nor have we had  any  federal  or  state  tax  examinations  since our inception.  


Earnings (Loss) Per Share  -  Basic earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the period. Diluted earnings per share reflects the amount of earnings for the period available to each share of common stock outstanding during the reporting period, while giving effect to all dilutive potential common shares that were outstanding during the period, such as common shares that could result from the potential exercise or conversion of securities into common stock.  The assumed exercise of common stock equivalents was not utilized in the years ended October 31, 2011 and 2010 since the effect would be anti-dilutive.  Equity instruments that may dilute earnings per share in the future are listed in Notes 6, 7 and 10.


Research and Development Costs - Research and development costs are expensed as incurred. There were no research and development costs in 2011 and 2010.


Reclassifications - Certain fiscal 2010 balances have been reclassified to conform to fiscal 2011 presentation.


Subsequent Events - The Company evaluated subsequent events, which are events or transactions that occurred after October 31, 2011 through the date of the issuance of the accompanying financial statements.









F-9




MOBIFORM SOFTWARE, INC.

NOTES TO FINANCIAL STATEMENTS

OCTOBER 31, 2011



(4)  New Authoritative Accounting Guidance


In January 2010, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) 2010-06 (“ASU 2010-06”), “Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements.” ASU 2010-06 requires reporting entities to make new disclosures about recurring or nonrecurring fair value measurements including significant transfers into and out of Level 1 and Level 2 fair value measurements and information on purchases, sales, issuances, and settlements on gross basis in the reconciliation of Level 3 fair value measurements.  ASU 2010-06 is effective for annual reporting periods beginning after December 15, 2009, except for Level 3 reconciliation disclosures which are effective for annual periods beginning after December 15, 2010.  The adoption of the subsequent provisions of ASU 2010-06 is not expected to have a material impact on the Company’s financial statement disclosures.


On May 12, 2011, the FASB issued ASU 2011-04.  The ASU is the result of joint efforts by the FASB and the International Accounting Standards Board (“IASB”) to develop a single, converged fair value framework.  Thus, there are few differences between the ASU and its international counterpart, IFRS 13.  This ASU is largely consistent with existing fair value measurement principles in U.S. GAAP; however it expands ASC 820’s existing disclosure requirements for fair value measurements and makes other amendments. The ASU is effective for interim and annual periods beginning after December 15, 2011.  The Company does not expect the provisions of ASU 2011-04 to have a material effect on the financial position, results of operations or cash flows of the Company.


On June 16, 2011, the FASB issued ASU 2011-05, which revises the manner in which entities present comprehensive income in their financial statements.  The new guidance removes the presentation options in ASC 220 and requires entities to report components of comprehensive income in either (1) a continuous statement of comprehensive income or (2) two separate but consecutive statements.  The ASU does not change the items that must be reported in other comprehensive income.  The amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011.  The Company does not expect the provisions of ASU 2011-05 to have a material effect on the financial position, results of operations or cash flows of the Company.


Management does not believe that any other recently issued but not yet effective accounting pronouncements, if adopted, would have an effect on the accompanying financial statements.







F-10




MOBIFORM SOFTWARE, INC.

NOTES TO FINANCIAL STATEMENTS

OCTOBER 31, 2011



(5)  Property and Equipment


Property and equipment consists of the following:


 

October 31,

 

Estimated

 

2011

 

2010

 

Useful Lives

 

 

 

 

 

 

Computer Equipment

$  35,951

 

$  35,951

 

5 years

Office Equipment

24,432

 

24,432

 

5-7 years

Software

21,566

 

21,566

 

3 years

Total

81,949

 

81,949

 

 

Less: Accumulated Depreciation

 

 

 

 

 

     and Amortization

(66,407)

 

(52,544)

 

 

 

$  15,542

 

$  29,405

 

 



(6)  Convertible Debt


At October 31, 2011 and 2010, we have $50,000 of promissory convertible notes outstanding.  The notes are convertible into shares of our common stock at $0.50 per share at any time prior to maturity.  Interest on the notes at 8% per annum is payable at such time the notes are converted and/or at such time the notes are due and payable in cash and/or in shares of our common stock at the option of the noteholder.


Interest expense on convertible debt for the years ended October 31, 2011 and 2010 amounted to $4,000 and $4,000, respectively.


(7)  Stockholders’ Equity


We are authorized to issue 100,000,000 shares of common stock, par value $0.0001 per share and 5,000,000 shares of preferred stock, par value $0.0001 per share.  At October 31, 2011 there were 24,586,672 common shares issued and outstanding.  An additional 5,933,084, common shares were reserved for issuance as of October 31, 2011 for outstanding purchase warrants and convertible debt and related interest payable.  There are no shares of preferred stock issued and outstanding.


At October 31, 2011, we have 104,000 outstanding warrants to employees.  The fair value of all warrants issued for services is charged to operations over the periods the warrants vest.  Amortization of the fair values charged to operations is determined by the Black-Scholes pricing model.  We had no such charges in the years ended October 31, 2011 and 2010. All the warrants have cashless exercise provisions as defined in the warrants.


In June 2009, we issued 100,000 shares of our common stock to a consultant for services to be performed as defined in the consulting agreement.  The shares were valued at $60,000 which was the cash value, as defined in the agreement, if the shares were not issued. The amount was accounted for as a prepaid asset and was expensed over the life of the agreement which term ended June of 2010. In the year ended October 31, 2010, $39,576 has been expensed.



F-11




MOBIFORM SOFTWARE, INC.

NOTES TO FINANCIAL STATEMENTS

OCTOBER 31, 2011



(7)  Stockholders’ Equity - continued


In January 2010, we issued 150,000 shares of our common stock for a share liability of $58,500 incurred for consulting services for the six month period August 1, 2009 through January 31, 2010.  In the year ended October 31, 2010, $29,250 expense related to this agreement was charged to operations as share-based consulting.


Effective February 1, 2010, we issued 26,016 shares of our common stock to two non-related individuals for shares owed them from previous private placement offerings.


We entered into a consulting agreement on February 5, 2010 for financial consulting services (see Note 10).  As part of the compensation for services, the consultant was granted a five-year warrant to purchase 300,000 shares of our common stock at the market price per share on the date of issuance, which was $0.09.  The warrant vests 25% on the date of issuance and every three months thereafter and has cashless exercise provisions as defined in the warrant.  The fair value of the warrant, $5,833, was calculated using the Black-Scholes pricing model with the following assumptions: 0% dividend yield; 0.4% risk free interest rate; 23.81% volatility; 5 year expected life.  Share-based expense based on the fair value of the warrant is being charged to operations over the vesting period.  The expense recorded in the years ended October 31, 2011 and 2010 was $1,459 and $4,374, respectively.


The following table summarizes the warrants and options.


 

 

For the Year Ended

For the Year Ended

 

 

October 31, 2011

October 31, 2010

 

 

Shares

Weighted Average Exercise Price

Shares

Weighted Average Exercise Price

 

 

 

 

 

 

Outstanding at beginning

 

 

 

 

 

   of period

 

11,463,750

$  0.69

11,663,750

$  0.68

   Granted/Sold

 

--

--

300,000

$  0.09

   Expired/Cancelled

 

(5,670,000)

$  0.20

(500,000)

$  0.20

   Forfeited

 

--

--

--

--

   Exercised

 

--

--

--

--

Outstanding at end of period

 

5,793,750

$  1.17

11,463,750

$  0.69






F-12




MOBIFORM SOFTWARE, INC.

NOTES TO FINANCIAL STATEMENTS

OCTOBER 31, 2011



(7)  Stockholders’ Equity - continued


The following table summarizes information about stock warrants and options outstanding as of October 31, 2011:


 

 

 

Warrants and Options

 

 

 

 

Outstanding

 

 

Exercisable

 

 

 

 

 

 

 

Weighted-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Remaining

 

 

Weighted-

 

 

 

 

 

Weighted

 

 

 

 

 

 

 

Contractual

 

 

Average

 

 

 

 

 

Average

 

 

 

 

Number

 

 

Life

 

 

Exercise

 

 

Number

 

 

Exercise

 

Exercise Price

 

 

Outstanding

 

 

(in Years)

 

 

Price

 

 

Exercisable

 

 

Price

 

$

0.09

 

 

 

300,000

 

 

 

3.25

 

 

$

0.09

 

 

 

300,000

 

 

$

0.09

 

$

0.75

 

 

 

2,022,750

 

 

 

0.38

 

 

$

0.75

 

 

 

2,022,750

 

 

$

0.75

 

$

1.50

 

 

 

3,471,000

 

 

 

0.17

 

 

$

1.50

 

 

 

3,471,000

 

 

$

1.50

 


The following table summarizes information about stock warrants and options outstanding as of October 31, 2010:


 

 

 

Warrants and Options

 

 

 

 

Outstanding

 

 

Exercisable

 

 

 

 

 

 

 

Weighted-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Remaining

 

 

Weighted-

 

 

 

 

 

Weighted

 

 

 

 

 

 

 

Contractual

 

 

Average

 

 

 

 

 

Average

 

 

 

 

Number

 

 

Life

 

 

Exercise

 

 

Number

 

 

Exercise

 

Exercise Price

 

 

Outstanding

 

 

(in Years)

 

 

Price

 

 

Exercisable

 

 

Price

 

$

0.09

 

 

 

300,000

 

 

 

4.25

 

 

$

0.09

 

 

 

225,000

 

 

$

0.09

 

$

0.20

 

 

 

5,130,000

 

 

 

0.56

 

 

$

0.20

 

 

 

5,130,000

 

 

$

0.20

 

$

0.25

 

 

 

540,000

 

 

 

0.83

 

 

$

0.25

 

 

 

540,000

 

 

$

0.25

 

$

0.75

 

 

 

2,022,750

 

 

 

1.60

 

 

$

0.75

 

 

 

2,022,750

 

 

$

0.75

 

$

1.50

 

 

 

3,471,000

 

 

 

1.17

 

 

$

1.50

 

 

 

3,471,000

 

 

$

1.50

 


At October 31, 2011 and 2010, the weighted-average exercise price of all warrants and options was $ $1.17 and $0.69, respectively, and the weighted-average remaining contractual life was 0.40 and 1.04 years, respectively.





F-13




MOBIFORM SOFTWARE, INC.

NOTES TO FINANCIAL STATEMENTS

OCTOBER 31, 2011



(8)  Income Taxes


The income tax expense (benefit) differs from the amount computed by applying the United States statutory corporate income tax rate as follows:


 

For the Years Ended

 

October 31,

 

2011

 

2010

 

 

 

 

United States Statutory Corporate

 

 

 

  Income Tax Rate

34.0%

 

(34.0)%

Permanent Differences

--%

 

--%

Change in Valuation Allowance on

 

 

 

  Deferred Tax Assets

(34.0)%

 

34.0%

 

 

 

 

  Income Tax Provision (Benefit)

--%

 

--%


The components of deferred tax assets (liabilities) at October 31, 2011 and 2010 are as follows:


 

2011

 

2010

 

 

 

 

Deferred Tax Assets - Current

 

 

 

   Accrued Vacation Pay

$  7,599

 

$  6,689

   Valuation Allowance

(7,599)

 

(6,689)

 

--

 

--

Deferred Tax Assets (Liabilities) - Long Term

 

 

 

   Net Operating Losses

$  1,262,414

 

$  1,278,058

   Property and Equipment

(3,694)

 

(3,762)

   Equity Instruments

574,440

 

573,944

   Valuation Allowance

(1,833,160)

 

(1,848,240)

 

 

 

 

      Net Deferred Tax Asset

$  --

 

$  --


We have established a full valuation allowance on our deferred tax asset because of a lack of sufficient positive evidence to support its realization.  The valuation allowance (decreased) increased by approximately ($14,000) and $59,000 in the years ended October 31, 2011 and 2010, respectively.







F-14




MOBIFORM SOFTWARE, INC.

NOTES TO FINANCIAL STATEMENTS

OCTOBER 31, 2011



(9)  Related Party Transactions


On October 16, 2009, we executed a promissory note in the amount of $50,000 with our Chief Executive Officer (“CEO”). The note, which is due on demand, accrues interest at 8% per annum.  The proceeds were used for working capital purposes.


On November 10, 2009, we executed a promissory note in the amount of $50,000 payable to our CEO.  The note, which is due on demand, accrues interest at 8% per annum.  The proceeds were used for working capital purposes.


On May 3, 2011, we executed a promissory note in the amount of $50,000 payable to our CEO.  The note, which is due on demand, accrues interest at 8% per annum.  The proceeds were used for working capital purposes.


On June 27, 2011, we executed a promissory note in the amount of $30,000 payable to our CEO.  The note, which is due on demand, accrues interest at 8% per annum.  The proceeds were used for working capital purposes.


On August 1, 2011, we executed a promissory note in the amount of $13,000 payable to our CEO.  The note, which is due on demand, accrues interest at 8% per annum.  The proceeds were used for working capital purposes.

 

On August 16, 2011, we executed a promissory note in the amount of $10,000 payable to our CEO.  The note, which is due on demand, accrues interest at 8% per annum.  The proceeds were used for working capital purposes.


On September 28, 2011, we executed a promissory note in the amount of $7,000 payable to our CEO.  The note, which is due on demand, accrues interest at 8% per annum.  The proceeds were used for working capital purposes.


Interest expense in the amount of $10,520 and $8,000 has been accrued for these notes in the years ended October 31, 2011 and 2010, respectively.



(10)  Commitments and Contingencies


Employment Agreements


We currently employ our Chief Executive Officer (“CEO”) at an annual salary of $150,000.  Since April 1, 2009, the CEO’s compensation has continued at the same annual salary as per the terms of his two year contract extension dated April 1, 2007 and will remain in effect until a new agreement is executed.




F-15




MOBIFORM SOFTWARE, INC.

NOTES TO FINANCIAL STATEMENTS

OCTOBER 31, 2011



(10)  Commitments and Contingencies - continued


Consultants


In August 2009, we entered into an agreement with a consultant for services through January 2010.  The agreement provides for monthly compensation of $2,000, the issuance of 400,000 shares of our common stock which are deemed earned upon the signing of the agreement (see Note 7), and the issuance of 150,000 shares of our common stock which will vest 25,000 shares per month over the six month term of the agreement. As of October 31, 2009, 75,000 shares of common stock valued at $29,250 were vested under the agreement. The value of such shares has been expensed and an accrued common share liability was recorded as of October 31, 2009. We issued these 75,000 shares and the balance of 75,000 shares earned under the agreement in the first quarter of fiscal 2010 and recorded share-based expense of $29,250 for the value of the 75,000 shares vested in fiscal 2010.


In August 2009, we entered into an agreement with a consultant to perform the services of our Vice President (“VP”). The agreement provided for, among other provisions, a monthly fee of $2,000 and the issuance of 200,000 restricted shares of our common stock. The shares, which have been issued and are valued at $78,000, are defined as a non-refundable retainer per the contract and have been fully expensed as share based consulting expense in the year ended October 31, 2009.   Effective January 2010, the Company and VP mutually agreed to terminate the agreement.


On February 5, 2010, we entered into an agreement for financial consulting services, which could be terminated by either party upon one month’s notice.  The agreement provides compensation of $5,000 per month, accrued until the company has a liquidity event, as described in the agreement.  In addition, the consultant was granted a five-year warrant to purchase 300,000 shares of our common stock at $0.09 per share (see Note 7). Effective July 31, 2010, the Company and the consultant agreed to terminate the Company’s obligation to accrue and pay the consulting fee of $5,000 per month. There is an amount of $30,000 accrued under the agreement through its termination date.  All other terms of the agreement will continue.


Leases


We presently lease office space in Crystal River, FL, on a month to month basis.  The terms are a fixed monthly payment of $2,000 plus our share of certain allocated utilities (not to exceed $2,000 per month) as defined in the agreement.  Rental expense, including utilities, for the years ended October 31, 2011 and 2010 amounted to approximately $39,000.  





F-16




MOBIFORM SOFTWARE, INC.

NOTES TO FINANCIAL STATEMENTS

OCTOBER 31, 2011



(10)  Commitments and Contingencies - continued


Investment Banking Agreement


On April 16, 2010, we entered into an investment banking agreement for advisory services and assistance in securing financing through the offering for sale of convertible debt securities, as defined in the agreement.  The term of the agreement commenced upon its execution and would continue for a period of six months from the closing of the offering.  The fee for advisory services of $20,000 would be payable upon the closing of the sale of the minimum amount of convertible debt securities of $1,000,000. Compensation related to the offering would be based on the successful closing on the sale of convertible debt securities, as defined in the agreement. Effective June 30, 2010, the Company and investment banker mutually agreed to terminate the agreement.


On June 23, 2011, we entered into an investment banking agreement (the “Agreement”) with Hunter Wise Financial Group, LLC (“HW”). HW will provide investment banking services, will structure an offering of the Company’s securities (the “Offering”) and provide other services as defined in the Agreement. The Offering will consist of the sale of three year 7% convertible debentures, convertible into shares of our common stock at $0.20 per share with an automatic conversion if our shares trade at $0.25 per share or more for a period of time, as defined in the Agreement. HW received an investment banking fee of $15,000 as a retainer upon the execution of the Agreement. In addition, HW will receive an 8% commission and a 2% non-accountable expense allowance on all funds raised in the Offering and shares of our common stock, determined by the amount sold, as defined in the Agreement. The Agreement is in effect through the period of one year from the date of the closing of the Offering.  


Significant Customers


In fiscal 2011, three customers generated 47%, 22% and 18% of our revenues.  Two such customers accounted for 47% and 11% of our accounts receivable at October 31, 2011.


In fiscal 2010, two customers generated 52% and 32% of our revenues.  One such customer accounted for 97% of our accounts receivable at October 31, 2010.



(11)  Subsequent Event


On December 12, 2011, we entered in a non-exclusive licensing agreement with Southern Co. for the sale of Status Designers and Status Servers as well as custom development for a total of $77,400.






F-17