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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A-1
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For fiscal year ended March 31, 2012
Commission File Number 333-174443
ISOFT INTERNATIONAL INC.
(Exact name of registrant as specified in its Charter)
NEVADA 45-4798356
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1 Ahmed Kamal St., Sidi Gaber Alexandria, Egypt 21311
(Address of principal executive offices) (Zip Code)
011 20 (10) 920-4278
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address, and former fiscal year,
if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $0.001
(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 [ ] No [X]
Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No [X]
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark whether the registrant has submitted electronically and
posted on its corporate Web site, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T (ss. 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). Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check
one):
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] Smaller reporting company [X]
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [X] No [ ]
At September 30, 2011, the last business day of the Registrant's most recently
completed second fiscal quarter, the aggregate market value of the voting common
stock held by non-affiliates of the Registrant (without admitting that any
person whose shares are not included in such calculation is an affiliate) was
$NIL. At March 31, 2012, the end of the Registrant's most recently completed
fiscal year, there were 6,000,000 shares of the Registrant's common stock, par
value $0.001 per share, outstanding.
ISOFT INTERNATIONAL INC. - TABLE OF CONTENTS
PART I
ITEM 1. Business 5
ITEM 1A. Risk Factors 13
ITEM 1B. Unresolved Staff Comments 13
ITEM 2. Properties 14
ITEM 3. Legal Proceedings 14
ITEM 4. Mine Safety Disclosures 14
PART II
ITEM 5. Market for Registrant's Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity Securities 14
ITEM 6. Selected Financial Data 15
ITEM 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations 15
ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk 20
ITEM 8. Financial Statements and Supplementary Data 21
ITEM 9. Changes In and Disagreements with Accountants on Accounting
and Financial Disclosure 31
ITEM 9A. Controls and Procedures 31
ITEM 9B. Other Information 32
PART III
ITEM 10. Directors, Executive Officers, and Corporate Governance 32
ITEM 11. Executive Compensation 34
ITEM 12. Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters 36
ITEM 13. Certain Relationships and Related Transactions, and Director
Independence 37
ITEM 14. Principal Accounting Fees and Services 37
PART IV
ITEM 15. Exhibits, Financial Statement Schedules 38
Signatures 39
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EXPLANATORY NOTE
This Amendment No. 1 to Form 10-K amends Isoft' International Inc.'s Annual
Report on Form 10-K for the year ended March 31, 2012, which was filed with the
Securities and Exchange Commission on June 20, 2012 ("Original Filing"). We are
filing this Amendment in response to two oral comments which we recently
received from the SEC, specifically related ITEM 9A. Controls and Procedures,
and for which we have amended disclosure to disclose the control framework used
by Isoft, and secondly, to disclose whether the internal controls were effective
or ineffective.
Except as described above, no other changes have been made to the Original 10-K.
This amended 10-K continues to speak as of the date of the Original Filing, and
Isoft has not updated the disclosures contained therein to reflect any events
which occurred subsequent to the filing of the Original 10-K,or to modify the
disclosure contained in the Original 10-K other than to reflect the changes
described above.
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K of Isoft International Inc., a Nevada
corporation (the "Company"), contains "forward-looking statements," as defined
in the United States Private Securities Litigation Reform Act of 1995. In some
cases, you can identify forward-looking statements by terminology such as "may",
"will", "should", "could", "expects", "plans", "intends", "anticipates",
"believes", "estimates", "predicts", "potential" or "continue" or the negative
of such terms and other comparable terminology. These forward-looking statements
include, without limitation, statements about our market opportunity, our
strategies, competition, expected activities and expenditures as we pursue our
business plan, and the adequacy of our available cash resources. Although we
believe that the expectations reflected in the forward-looking statements are
reasonable, we cannot guarantee future results, levels of activity, performance
or achievements. Actual results may differ materially from the predictions
discussed in these forward-looking statements. The economic environment within
which we operate could materially affect our actual results. Additional factors
that could materially affect these forward-looking statements and/or predictions
include, among other things: the Company's need for and ability to obtain
additional financing, the volatility of real estate prices, and the exercise of
the control by Mohamed Ayad, the Company's sole officer and director, other
factors over which we have little or no control; and other factors discussed in
the Company's filings with the Securities and Exchange Commission ("SEC").
Our management has included projections and estimates in this Form 10-K, which
are based primarily on management's experience in the industry, assessments of
our results of operations, discussions and negotiations with third parties and a
review of information filed by our competitors with the SEC or otherwise
publicly available. We caution readers not to place undue reliance on any such
forward-looking statements, which speak only as of the date made. We disclaim
any obligation subsequently to revise any forward-looking statements to reflect
events or circumstances after the date of such statements or to reflect the
occurrence of anticipated or unanticipated events.
INTRODUCTION
Unless otherwise specified or required by context, as used in this Annual
Report, the terms "we," "our," "us" and the "Company" refer collectively to
Isoft International Inc. The term "fiscal year" refers to our fiscal year ending
March 31. Unless otherwise indicated, the term "common stock" refers to shares
of our common stock.
Our financial statements are stated in United States Dollars (US$) and are
prepared in accordance with United States generally accepted accounting
principles (U.S. GAAP).
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PART I
ITEM 1. BUSINESS
We were incorporated on March 9, 2011 in the State of Nevada. We have never
declared bankruptcy, have never been in receivership, and have never been
involved in any legal action or proceedings. Since incorporation, we have not
made any significant purchase or sale of assets. We are not a blank check
registrant as that term is defined in Rule 419(a)(2) of Regulation C of the
Securities Act of 1933, since we have a specific business plan or purpose. We
have not had preliminary contact or discussions with, nor do we have any present
plans, proposals, arrangements or understandings with any representatives of the
owners of any business or company regarding the possibility of an acquisition or
merger.
PRINCIPAL PRODUCTS AND SERVICES
Our company's business is focused on the development and sale of social media,
internet based, interactive entertainment games for use by the general public.
We are in the early stages of developing our first game that we have named Curse
of the Pharaohs ("COTP"). We currently have no revenues and no user
subscriptions for our game.
We just completed our first public offering of 1,000,000 shares of our common
stock in late February, and raised a gross amount of $50,000 for our operations.
We must complete 2 major milestones prior to having our game available for
future commercial use and revenue generation. First, we are planning to complete
a DVD based video trailer with the funds we receive from our offering. We have
recently contracted with a third party with gaming and video presentation
expertise to develop the DVD. We plan to complete the trailer within the next
6-8 months (Please also refer to our "Plan of Operations" herein). The trailer
objective is to provide a visually engaging and dynamic representation through
motion graphics and special effects to illustrate the key components and
processes of the COTP game. The trailer will contain summary representations of
our proposed game, characters and stage or realm development that we can use for
presentations to the industry and financial community to raise the additional
financing we require to complete our second milestone, develop and successfully
launch COTP. It will also serve to give us valuable feedback on our concept from
our own website viewers.
We anticipate that we will not have a commercial product for at least 14-24
months from the date hereof, and currently estimate that we will require in
approximately $250-400,000 to complete development and $200,000 to successfully
launch our game with an adequate marketing and promotional campaign.
To date, we have only developed the overall storyline along the logo for our
brand. Our website www.isoftinternational.com is functional and will ultimately
serve as the primary method to promote our company, our current and planned
products, and gain feedback on our commercial product offerings.
COTP is planned to provide an engaging online game experience, to be played on
social media websites such as Facebook. We are also designing our game to
capitalize on the interactive and social elements of gaming, appealing to
players of all ages and genders. Each player will primarily play against his or
her own programming directions or decisions, but will have the ability to draw
on assistance provided by their own social media "friends". It is being designed
as a fantasy quest in an engaging and intense environment, in which the player
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will play a young and ambitious archeologist on a mission to discover the hidden
tombs and buried treasures of the Egyptian Pharaohs in the Valley of the Kings.
Using a combination of credits provided either by the game or cash purchase, the
player will assemble a crew of workers to assist in making discoveries. The
player will be responsible for the well being of the workers and will be
required to "pay" them for their services either by credits or proceeds earned
from discoveries. Discoveries of artifacts and tombs will provide currency that
can be traded for game money that may be used to purchase new exploration
licenses, new and more advanced tools or additional manpower. As the player
discovers more and more hidden treasures, they will continue to advance through
the game and receive new missions. All players will ultimately face the "Curse
of the Pharaohs" that requires special preparation.
We are also planning to add new characters, environments, story-line twists and
secrets on a regular basis to keep the game fresh for the players, and
interactive social chat rooms to avoid the downfalls of many previous on-line
games, which typically become redundant and stale for the users over time.
We are focusing on online internet based gaming because users can use their own
PC's with any form of internet connection, without the need for additional
hardware requirements such as a Play Station or Xbox. The internet is also
better suited to play social media based role playing games because gamers can
connect online with multiple people from multiple geographic regions in the
world either for assistance or camaraderie.
Our planned distribution and revenue models may undergo significant revisions,
as we get closer to launching our commercial game. At this stage in our
development, there can be no assurance that we will be successful in generating
revenues from our game, or that users will be receptive to playing COTP.
THE MARKET
We consider our proposed business to be part of the overall entertainment
industry. At the most fundamental level, our proposed product when completed,
will compete with many other forms of entertainment for the leisure time and
discretionary spending of consumers.
Since the initial introduction in the early 1980's, video/electronic games have
increasingly become mainstream entertainment choice for both children and
adults. New generations of console game systems, improved graphics and expanded
artificial intelligence capabilities of the new platforms have significantly
enhanced game play and enabled rapid significant industry growth. With
continuing growth in Internet subscribers, together with better networking
technology and multimedia encoding techniques, it is becoming increasingly
feasible to provide the same if not better quality entertainment through the
Internet than was previously seen, heard and/or felt only through other more
conventional distribution mediums such as game consoles.
Electronic video games are played by a large percentage of computer and game
console users throughout the world. Despite general conceptions that game
players are generally children and teens, the Entertainment Software Association
(www.theesa.com) disclosed that 2011 user demographics for the USA, which
directly apply to our proposed business, reveal that (1):
Seventy two percent of American households play computer and video games.
The average game PLAYER is 37 years old and has been playing games for 12 years.
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Sixty eight percent of parents believe that game play provides mental
stimulation or education and eighty one percent feel that playing games has
brought their families closer together.
(1) http://www.theesa.com/facts/pdfs/ESA_EF_2011.pdf
On January 12, 2012 the NPD Group, a global market research company, announced
that estimated US sales of game software and content (including console games,
full game downloads, downloadable game content and social media games) exceeded
$16 billion in 2011 (2). Social media based games are the newest industry
entrant. Their success has been commensurate with the huge success of social
media websites such as Facebook. As of March 31, 2012, Facebook enjoyed more
than 900 million active users globally, of which over 58% logged on in any given
day (3). At a game event in late 2010, Facebook CEO Mark Zuckerberg revealed
that games are one of the primary reasons some people visit Facebook. At the
time, he confirmed that 40% of its userbase is using the site for social gaming
(4).
(2) https://www.npd.com/wps/portal/npd/us/news/pressreleases/pr_120116
(3) http://newsroom.fb.com/content/default.aspx?NewsAreaId=22
(4) http://techcrunch.com/2010/09/21/200-million-people-are-playing-
facebook-games/
We believe social media based games will continue to experience significant
growth and represent the next standard in electronic games for the following
reasons:
* The games offer regular content updates with changing story lines
through flexible architecture, keeping the game dynamic and fresh for
players
* The games extend the realism of game play, by offering cutting edge
technology, which makes the player feel they are actually part of the
environment
* The games create new opportunities to foster competition and mutual
aid, by engaging mutual friends or players in a team or support
situation
* The games present a compelling new social environment, and an
opportunity to meet new friends and share similar mind frames,
existence, and game survival techniques.
* The games offer an attractive new and recurring revenue source for
game companies, as evidenced by the top performers who attain many
subscribers in their compelling games (see "Competition and
Competitive Strategy" below)
COMPETITION AND COMPETITIVE STRATEGY
We do not yet have a commercial product available for sale. When complete, COTP
will be competing in the entertainment industry for the leisure time and
discretionary spending of consumers with all other forms of entertainment media.
Our competitors vary in size and cost structure from very small companies with
limited resources to very large, diversified corporations with greater financial
and marketing resources than ours. We are considered the smallest as we do not
currently have a commercial product yet available for sale or use. We will be
competing with well funded start-ups, traditional independent video game
publishers, hardware and software manufacturers, casual entertainment websites,
social networking websites, mobile games developers, foreign games developers
and large publicly held media companies. We face additional competition from the
entry of new companies into our market, including large diversified
entertainment companies that have begun to develop games based upon their own
highly recognizable brands, (such as Disney Interactive Studios) and, as a
result, stand to become more direct competitors.
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Our competitors have significantly greater resources and are able to spend more
time and money on concept and focus testing, game development, product testing
and marketing. Our business is driven by hit titles, which will require us to
invest significantly in production and in marketing. It is also characterized by
the continuous introduction of innovative new titles and the development of new
technologies. Competition is also based on product quality and features, timing
of product releases, brand-name recognition, quality of in-game content, access
to distribution channels, effectiveness of marketing and price. In addition,
regardless of our competitor's financial resources or size, our success depends
on our ability to successfully execute our competitive strategies.
SOCIAL MEDIA ONLINE GAMES
Our direct competition in the social media based online games market segment is
also highly competitive and characterized by frequent product introductions, new
business models and new platforms. The barriers to entry are significantly less
onerous, due to the lack of the requirement for a specific hardware platform.
The game player's personal computer and an internet connection serve as the
platform. As the proportion of households with a broadband connection increases,
we expect new competitors to enter the market and existing competitors to
allocate more resources toward developing online games. As a result, we expect
competition in the online games market segment to intensify.
We believe Facebook is the major social media platform for our proposed game and
that it is used by all of our potential competitors for their offerings. As of
April 10, 2012, the top 3 specialists are currently enjoying the largest user
base on Facebook are Zynga, Mensing and Woobox. As with more traditional video
game offerings, hits have captured a significant percentage of overall users and
this trend is expected to continue. Zynga currently enjoys the largest monthly
average user base which is in excess of 287 million monthly users. Mensing is
second with approximately 67 million and Woobox is third with 64 million.
Microsoft is currently fifth with 49 million monthly average users (5).
(5) http://statistics.allfacebook.com/applications
KEY SUCCESS FACTORS
In order for our company and our game to be successful we must play close
attention to all of our direct and indirect competitors. We plan on carefully
investigating the competition and their respective games on a regular basis, and
carefully analyze the positive and negative elements of their games and possible
threats to us. If we fail to do so, our business will likely fail.
For game development to be successful, we must either build our own or contract
with a development team that is comprised of a creative, experienced group of
game designers and programmers that can set COTP apart from its potential
competition, with expertise in state of the art design and implementation
skills. Our research to-date suggests that COTP's fantasy environment represents
a desirable genre. In order for our game to be a success, it also must offer:
Differentiated & Dynamic Quality Content - COTP is planned to offer a visual
experience like no other. Attention to detail will be essential to ensure that
the characters and environment look on par if not superior to other games of its
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caliber. At the same time, the game must continue to develop a story that is
extremely interesting to its players. The content will be dynamic with twists in
the story and game that will keep players engaged. This will become more
important as additional competitors enter the market with similar games.
Empowering - The target audience must feel that they have a `say' in what
happens to the characters in the game, giving the player the illusion and
pleasure of taking action without having to deal with the responsibility and
repercussions of such actions. We plan on setting up chat rooms on the COTP web
site that will encourage the audience to talk about their experiences and share
thoughts on the game, thus capturing their loyalty and making the site a part of
their daily lives so the characters become "real" to them.
Entertaining - The target audience needs to be drawn to the experience, and made
to forget about the reality around them while they focus on the new cyber-world
that COTP presents to them. The experience needs to be commanding so that it
becomes a topic of conversation among the consumers' friends and colleagues.
Customer Focused - We plan to provide content updates to COTP to provide an
ongoing captive experience for the user and ensure that they leave the game
happy, keen to relate their entertainment experience to all their friends and
anxious to log-on to enjoy the next competition, hopefully bringing friends to
share the experience. Customer complaints or suggestions will be dealt with to
the best of our ability to ensure customer satisfaction, thus encouraging
positive word of mouth recommendations of our product.
In order for the game and company to be successful, we will first need to alert
our target market about COTP among the vast selection of other titles in the
market. We believe this will require significant advertising and promotion. Our
initial plans are to use the Facebook platform and create a Twitter presence to
target interested game enthusiasts. We have already created both vehicles for
our proposed future launch at http://www.facebook.com/pages/Curse-of-the-
Pharaohs/205821226104970 and http://www.twitter.com/COTP_Game. We believe our
marketing and promotion strategy will be subject to major revisions are we get
closer to actually launching COTP.
SALES STRATEGY
We are still in the planning and formulation stages with respect to the
development and commercialization of our product. As of the date hereof, we
believe we are at least 14-24 months away from being in a position to generate
revenues from our game. Therefore, our planned revenue model may undergo
significant revisions as we develop and commercialize the game.
Social media based games currently are not sold by subscription or for cash
through direct or retail distribution channels. Additionally advertising
revenues are not a common revenue stream for social media games unlike other
website based commercial activities, because the game is played through the
social media website rather than our own website. Games are provided for free to
all users through the social media website. New games/players are typically
provided a number of credits to use in the game. Additional free credits may be
earned through successful completion of tasks or quests.
In order to be successful and for Isoft to generate sufficient revenues, COTP
must captivate a very wide audience. The game's action and quest design and
function must be such that it will encourage the player to spend hard currency
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on the game, through the purchase of additional credits. Currently, credit
purchases can be completed through direct credit card purchases, paypal, using
facebook credits, or purchase of game cards (distributed by us). When we
introduce COTP, we also plan to roll out our own game store, where players can
purchase credits.
In order to successfully generate sufficient revenues for our business through a
large player base we must give careful consideration to the following:
* Develop our game concept so the player must attend on a regular basis
* The player must be able to upgrade to higher levels or expand the
resources of a certain level through purchase of game credits
* Players can earn more game credits by sharing and inviting their
friends to play the game
* The use of the credit system to expand credits for the player based on
any of the following scenarios:
1. Renewable credit system that the player earns every few minutes,
which entices the player to regularly attend to the game
2. Gifted credits from other players in the game which encourages
the user to invite his friends to play
3. Enable the purchase of credits through all generally accepted
media
4. Collection of credits through completion of tasks and selling
items in the game
5. Build a game store where the players can purchase game credits
using their credit cards or PayPal accounts
In addition to our corporate information and other standard sections contained
on our company website at www.isoftinternational.com, we plan to use our website
and social media pages as a sales tool and a major `hub' for our game storyline,
character development, new character releases, current game trends, new game
capabilities and concepts. In the future when we commercialize the game, we also
plan to include an online `community' aspect, where forums, news rooms and
`chats' will be available for players and prospects to discuss the game, share
stories and playing techniques. By creating a `community' aspect around our
social media pages and www.isoftinternational.com, our sites will become known
as a place to look not only for upcoming events, tours, and promotions/contests,
but also a domain for people to share strategy and techniques and exchange
ideas.
DISTRIBUTION OF PRODUCTS OR SERVICES
When COTP is completed, we plan to distribute it to users over the internet. We
do not anticipate any other form of distribution at this time. Game software
will be kept on our servers, which we will either own or lease, but it will be
hosted to players through the Facebook Platform or other potential social media
websites. For example, Facebook the most popular social media website at present
is, also a development platform that enables companies and engineers to deeply
integrate with the Facebook website and gain access to millions of users.
Currently, Facebook social media games are loaded into a Canvas Page, which is
literally a blank frame within Facebook on which to run our game. To set up our
Canvas Page and Canvas URL we must first register our game with Facebook or
other similar social media site and enter in our basic game information. We then
populate the Canvas Page by providing a CANVAS URL (an internet path leading to
our servers where the game software is hosted) that contains the HTML,
JavaScript and CSS programming and styling languages that define, create and
format the web pages the users see on the internet that make up our game. When a
user requests our game through Facebook, the Facebook website loads the Canvas
URL within an "iframe" (a method to include an external web page such as our
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game as part of another main web page being part of the Facebook website) on
that page. Our game is then displayed and played on Facebook.
Internet based game distribution is rapidly becoming the method of choice for
smaller gaming companies, due to the proliferation of residential internet
access, inexpensive computer software and graphics packages, and the
proliferation of online gamers seeking fresh content. Online, internet based
platforms reduces significant costs associated with setting up and maintaining
conventional distribution channels such as retail sales. Under conventional
channels, revenue streams for the producing game title company are also reduced
by significant margins or markups given to the wholesaler and retail
distributors. Retail distributors generally also insist on implementation of
their own sales programs with little or no input from the producer, particularly
small produces such as our company. Online distribution directly to the game
player also allows for significantly greater flexibility in managing content
changes, sequels and/or second additions, without the permission of wholesale or
retail partners or distribution channel agreements.
SOURCES AND AVAILABILITY OF PRODUCTS AND SUPPLIES
There are no constraints on the sources or availability of outsource software
developers and supplies related to our business. We have recently hired a local
third party contractor to develop our storyline for the DVD based game trailer
and the commercial game platform. The trailer will contain summary
representations of our proposed game, characters and realm development that we
can use for presentations to the industry and financial community. It will also
serve to give us valuable feedback on our concept from our own website viewers.
This trailer will consist of characters, game elements, realm & quest
environments, and the social chat room aspects associated with social media game
cultures. These elements will be edited into the storyline with audio
enhancements.
We selected the firm based on our evaluation of their expertise in developing
products in a specific category such as our planned game, and the contract
specifies milestones, work requirements and cost. We retain all rights to
publish and/or distribute sequels, conversions, enhancements, and add-ons to the
product initially being produced by the third party developer. We estimate the
DVD trailer development will be completed over the next 6-8 months.
The next milestone is development and commercialization of COTP, if we are
successful in raising the additional $450-600,000 in financing required to do
so. In conjunction with these financing activities, our officer and director
plans to commence with several phases of this development (See Plan of
Operation"). The actual development and commercialization of COTP is anticipated
to take an additional 8-16 months following completion of the DVD and the
successful completion of the additional financing.
One of the first phases and the most important initial aspect of COTP game
development is selection of a suitable back-end flash game engine. A
cost-effective and robust flash game engine will be critical to the success of
the game and we must ensure it meets the complexities of our title in-game
graphics, and character/realm/quest complexities associated with our fantasy
game. Game engines are the core software component of all online games, and
provide the underlying technologies to run the COTP game on cross platform
internet browsers. The core functionality typically provided by a game engine
includes a rendering engine ("renderer") for graphics, a physics engine and
collision detection, sound, scripting, animation, artificial intelligence,
networking, streaming, memory management, threading, and a scene graph.
Collision detection involves algorithms for checking for collision, i.e.
intersection, of two given solids. A physics engine is a computer program that
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simulates physics models, using variables such as mass, velocity, friction and
wind resistance. It can simulate and predict effects under different conditions
that would approximate what happens in real life or in a fantasy world. The
scene graph is a structure that arranges the logical and spatial representation
of a graphical scene. Each application is highly important as it relates to the
other, and to the overall game engine itself to ensure realistic player
interaction. The process of game development will be largely determined by the
correct decision in purchasing an exceptional engine for our title. Examples of
a few flash game engines researched to-date include: PushButton, Adobe's Flex, ,
FlashPunk, TheoWorlds.
Successful completion of COTP is highly dependent on the third party we
ultimately choose to develop the game. The developer must include an experienced
group of creative, production, and technical professionals. Our officers and
directors will be responsible for the entire development and production process
including the supervision and coordination of internal and external resources.
The third party development team will assemble the necessary creative elements
to complete our game using, where appropriate, outside programmers, artists,
animators, scriptwriters, musicians and songwriters, sound effects and special
effects experts, and sound and video studios. The software contractors that we
choose must be highly experienced with:
* Internet and website software design and applications
* Facebook platform development, and application creation
* Adobe Flash development and design
* The use of Flash Action Script programming language
* The use of PhP programming languages
* Payment Gateway Integration and online payment processing and
programming.
* Coding, Compilation, Documentation, Integration, Software Testing
enablers.
* The use of MySQL and ER (Entity Relationship) Modelling database
programming language
In conjunction with the evaluation of the game engine, our officer and director
is also planning to formulate manpower needs and qualifications to choose a
suitable third party developer experienced with all of the above noted required
attributes. We are planning to identify the successful party prior to completion
of the financing round so that we can commence with development concurrent with
the closing.
We currently do not anticipate any supply or manpower availability constraints
with respect to identifying and choosing any of the contractors we require. We
also believe we have access to more abundant and cost effective software
development contractors in Egypt than in North America or Asia. Because we are
at least 8 months away from starting the development of the actual game, any
significant change in these circumstances could materially impact our ability to
complete the game, our cash requirements and our operations.
DEPENDENCE ON ONE OR A FEW MAJOR CUSTOMERS
We plan on selling our products and services directly to end use consumers over
the internet. Our intended offering is also priced for mass market play and
revenue generation. Therefore, we do not anticipate dependence on one or a few
major customers.
12
PATENT, TRADEMARK, LICENSE & FRANCHISE RESTRICTIONS AND CONTRACTUAL OBLIGATIONS
& CONCESSIONS
We currently do not own any intellectual property have not obtained any
copyrights, patents or trademarks in respect of any intellectual property.
Interactive entertainment software is susceptible to piracy and unauthorized
copying. Our primary protection against unauthorized use, duplication and
distribution of our products is copyright and trademark protection of our game
and any related elements and enforcement to protect these interests. As we get
closer to developing our game, we plan to copyright and trademark the following:
* Trademarks associated with elements of the game, such as the game
logo;
* Trademarks under which the game is marketed;
* the copyrights for the game software, including the game's audiovisual
elements
We do not anticipate copyrighting or trademarking any assets over the next 12
months. We plan to register copyrights and trademarks in countries where we
distribute our game. We may seek other protection over these assets if we have
the cash resources to do so.
We have not entered into any franchise agreements or other contracts that have
given, or could give rise to obligations or concessions.
RESEARCH AND DEVELOPMENT ACTIVITIES AND COSTS
Software development activities over the next 12 months are dependent on the
successful completion of an additional $450-600,000 financing to pay for the
development of the COTP game. Our current plan of operations over the next 12
months is to complete the DVD trailer with funding from our current offering
described herein, raise additional financing for actual COTP development and
commercialization, and prepare for development game development.
EMPLOYEES AND EMPLOYMENT AGREEMENTS
In addition to being our sole officer and director, Mr. Ayad is currently our
only employee. He is currently planning to devote a minimum of 20 hours per week
to company matters, but has indicated that he will devote more time as the board
of directors determines is necessary to manage the affairs of the company. There
is no formal employment agreement between the Company and Mr. Ayad. We do not
anticipate hiring any additional employees for the next 12 months.
ITEM 1A. RISK FACTORS
As a "smaller reporting company," as defined in Rule 12b-2 of the Exchange Act,
we are not required to provide the information called for by this Item.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
13
ITEM 2. PROPERTIES
We do not currently own any real property. Our corporate offices are located at
1 Ahmed Kamal St., Sidi Gaber Alexandria 21311, Egypt. Mr. Ayad is providing us
this office space free of charge. This location will serve as our primary
executive offices for the foreseeable future. Management believes the current
premises arrangements are sufficient for its needs for at least the next 12
months.
We currently have no investment policies as they pertain to real estate, real
estate interests or real estate mortgages.
ITEM 3. LEGAL PROCEEDINGS
We are not currently involved in any legal proceedings and we are not aware of
any pending or potential legal actions.
ITEM 4. MINE SAFETY DISCLOSURES
Not Applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
Effective May 3, 2012, our common shares have been quoted on the OTC Bulletin
Board under the ticker symbol ISNN. As of the date hereof, there have not been
any trades.
HOLDERS
On May 5, 2012 there were 32 holders of record of our common stock.
DIVIDEND POLICY
Historically, we have not paid any dividends to the holders of our common stock
and we do not expect to pay any such dividends in the foreseeable future, as we
expect to retain our future earnings for use in the operation and expansion of
our business.
RECENT SALES OF UNREGISTERED SECURITIES
None.
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
We have not established any compensation plans under which equity securities are
authorized for issuance.
PURCHASES OF EQUITY SECURITIES BY THE REGISTRANT AND AFFILIATED PURCHASERS
We did not purchase any of our shares of common stock or other securities during
the year ended March 31, 2012.
14
ITEM 6. SELECTED FINANCIAL DATA
As a "smaller reporting company," as defined in Rule 12b-2 of the Exchange Act,
we are not required to provide the information called for by this Item.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our financial statements and
related notes included elsewhere in this report.
GOING CONCERN
Our auditor's report expresses an opinion over our March 31, 2012 financial
statements that substantial doubt exists as to whether we can continue as an
ongoing business. We have very limited operations and no revenues. We have
incurred losses from operations since inception. No revenues are anticipated
until we complete and successfully commercialize our planned game. The ability
of our Company to continue as a going concern is dependent on raising capital to
fund our business plan and ultimately to attain profitable operations.
Accordingly, these factors raise substantial doubt as to the Company's ability
to continue as a going concern.
Our activities to date have been financed from the proceeds of share
subscriptions. From our inception to March 31, 2012, we have raised a total of
$65,000 in gross proceeds from the issuance of our common stock. There is no
guarantee that we will be able to raise any additional funds through any other
offerings or methods.
OVERVIEW
Statements in this section and elsewhere in this Form 10-K that are not
statements of historical or current fact constitute "forward-looking"
statements.
Isoft International Inc. (referred to as "Isoft", "us", "we" and "our") was
incorporated in the State of Nevada on March 9, 2011 to engage in the
development and operation of online games for social networking websites. Our
principal executive offices are located at 1 Ahmed Kamal St., Sidi Gaber
Alexandria 21311, Egypt. Our phone number is +20 (10) 920-4278. We are a
development stage company, we only just completed our first fiscal year end on
March 31 and we have no subsidiaries. Since incorporation, we have not made any
significant purchases or sale of assets, nor have we been involved in any
mergers, acquisitions or consolidations. We have never declared bankruptcy, have
never been in receivership, and never been involved in any legal action or
proceedings.
Our company's business is focused on the development and sale of social media,
internet based, interactive entertainment games for use by the general public.
We are in the early stages of developing our first game that we have named Curse
of the Pharaohs ("COTP"). COTP is planned to provide an engaging online game
experience, to be played on social media websites such as Facebook. We are also
designing our game to capitalize on the interactive and social elements of
gaming, appealing to players of all ages and genders. Each player will primarily
play against his or her own programming directions or decisions, but will have
the ability to draw on assistance provided by their own social media "friends".
15
It is being designed as a fantasy quest in an engaging and intense environment,
in which the player will play a young and ambitious archeologist on a mission to
discover the hidden tombs and buried treasures of the Egyptian Pharaohs in the
Valley of the Kings.
We currently have no revenues and no user subscriptions for our game. We
anticipate that we will not have a commercial product for at least 14-24 months
from the date hereof. We currently estimate that we will require additional
financing of approximately $250-400,000 to complete development of the game and
$200,000 to successfully launch it with an adequate marketing and promotional
campaign.
We must complete 2 major milestones prior to having our game available for
future commercial use and revenue generation. First, we are planning to complete
a DVD based video trailer with the funds we received from our common share
offering. We have recently contracted with an experienced local firm to
undertake this task and plan to complete the trailer within 4-8 months. The
trailer objective is to provide a visually engaging and dynamic representation
through motion graphics and special effects to illustrate the key components and
processes of the COTP game. The trailer will contain summary representations of
our proposed game, characters and stage or realm development that we can use for
presentations to the industry and financial community to raise the additional
financing we require to complete our second milestone, develop and successfully
launch COTP. It will also serve to give us valuable feedback on our concept from
our own website viewers.
To date, we have only developed the overall storyline along the logo for our
brand. Our website www.isoftinternational.com is functional and will ultimately
serve as the primary method to promote our company, our current and planned
products, and gain feedback on our commercial product offerings.
12 MONTH PLAN OF OPERATION
Our plan of operations over the 12 month period is to gain support for our
concept and then raise sufficient suitable additional financing to commence with
the development of the COTP social media game. We do not expect to generate any
revenues during this time frame. In order to achieve our plan, we have
established the following goals for this initial 12 month period:
* Create and execute a video trailer which illustrates our game concept
within 4-8 months
* Upload our trailer on our company website after completion
* Secure additional suitable financing to develop our game
* Research & select of most effective game engine for COTP requirements
* Upon selection of game engine, interview programming specialists who
have experience with specific coding languages to develop and support
the game engine
Our anticipated expenditures are as follows:
16
EXPENDITURES
Public Reporting Expenses $11,000
Storyline and storyboard development 4,000
Stage and character development 5,000
DVD trailer production 6,000
Press and investor materials 6,000
Marketing and financing costs 10,000
Office & misc 1,500
-------
$43,500
=======
MILESTONES
Below is a brief description of our planned activities over the next 12 months.
MONTHS 1 TO 6
We are planning the following game development tasks:
* Work with the contractor to complete a detailed storyline based on our
COTP business & game development outline, which has already developed
by our officer and director. We are budgeting $2,000 of this process.
The outcome will encompass a detailed storyline, completed game
elements, our unique game features, stylistic in-game movement
patterns, and game development strategy. It will also detail how the
game player will interact with the game, character feature sets, and
the circumstances of why special character powers are deployed in the
game.
* On completion of the storyline, create a story board identifying each
of the actions to be included in each frame of Storyline. This story
board is a series of sketches showing each shot of the DVD Trailer.
This is used to plot the sequence of the DVD. We are budgeting $2,000
for this milestone.
* Identification of suitable COTP realm descriptions with our selected
DVD Trailer Company. We plan to develop two major stage/realm
descriptions, which will include detailed sketches of each realm.
Sketches will include an overall introduction, landscape and terrain
features. The process/outlines of sketch schematics includes:
* Thumbnail Sketches: These are created first to confirm stylistic
direction between our company and the contractor. The COTP realms
will be thumbnail sketched first before moving on to more
detailed sketching phase for all the realms
* COTP Realm Sketches: Once we have reached agreement on stylistic
attributes through creation of the thumbnail sketches, we will
then work with the contractor to develop detailed sketches of all
COTP realms incorporating textures, shapes and overall scale.
This stage does not include character development.
* COTP Realm Illustrations: Full Color schemes will be created and
approved based on the sketches, for all COTP realms,
incorporating both wide angle and close up views. These two
angles will ultimately be showcased on the DVD Trailer.
We are budgeting $2,000 for creation, modifications and approval of all
stage/realm descriptions and sketches.
17
We then plan to focus on character development, which will encompass in-game &
character features. The major milestones include 2 phases:
* Phase 1 character development. Develop 4 character descriptions,
including character introduction, look, strengths, weaknesses, special
effects/abilities. The development firm will then create two stylistic
thumbnail sketch versions for our company.
* Phase 2 will include detailed character sketches, which will
incorporate textures, shapes, scale, and color schemes for the
characters:
We are budgeting $3,000 for the third party costs for the creative development
firm for character sketches and development.
MONTHS 6 TO 12 FOLLOWING COMPLETION OF THIS OFFERING
We plan to produce the DVD Trailer within 4-8 months. The objective is to
provide a visually engaging and dynamic representation through motion graphics
and special effects to illustrate the key components and processes of the COTP
game. We also believe the trailer will give us the equivalent of a beta and
editing analysis of our proposed game, characters and realm development through
critique by industry members, the financial community and our own website
viewers. The process includes:
* apply our character and realm illustrations to a stimulating and
interesting visual presentation
* describe the storyline with voice-overs in conjunction with the
sketched visuals
* describe the technical and organizational aspects of the planned COTP
game through organizational charts, and still images
* sound design and post-production optics with voiceovers. This step
will require the selection of a "voice", preferably someone with radio
or announcement experience. The audio file will then be uploaded into
post-production editing suite, and timed accordingly with the
character and realm movements in order that the audio (voice)
storyline is accurately timed with the visual DVD.
We are budgeting $6,000 for the production and completion of DVD Trailer. This
will include all final renderings, and the upload to our website.
On completion of the DVD trailer, our Officer and Director will focus his
efforts on securing suitable additional financing to complete development and
promote our game. We have engaged a third party to assist us with this process
and recently paid $10,000 as an initial engagement fee. We currently estimate
that we will require an additional $6,000 for completion of this milestone. In
conjunction with this task we plan to:
* Identify and present to financial/investment contacts
* Create a "press package" including our trailer, Director Bio's,
financing requirements and plan and the COTP Overview.
* Upload the DVD trailer to our website and to our Facebook page and
ensure we have sufficient bandwidth to manage streaming video (DVD)
content for potential investors and interested viewers.
18
* Create an "online community" button on our company website and
facebook page for gaming enthusiasts to post their comments, and
insights on our trailer and game concept.
Mr. Ayad is also planning to complete the following preliminary activities
related to game development:
* Develop job specifications for software programmers/concept
developers/graphics specialist, 3D animators, tools designer,
production specialist, artificial intelligence specialist and editors
for game development .
* Begin technical research on software elements within game engine -
including all source codes and rendering parameters to ensure smooth
in-game visuals for Game Title.
* Develop preliminary plan for game modeling, lighting, texturizing, and
interfacing.
* Confirm all realms and characters to be used in the game. Modify
realm/character attributes if required.
* Pre-production game analysis and elements. This includes unique
in-game features, quests, character & player abilities, in-game
socials and virtual chat rooms, virtual merchandising identification.
RESULTS OF OPERATIONS
We incurred a loss of $9,294 for the year ended March 31, 2012. The comparison
to the loss of $440 from March 9, 2011 to March 31, 2011 is not meaningful,
because inception of our company occurred 22 days prior to its first fiscal year
end. Our 2012 loss includes $6,616 for professional fees, $2,353 for general and
administrative costs and $325 for organization related costs.
From inception on March 9, 2011 to March 31, 2012 we have incurred cumulative
losses of $9,734. We believe we will continue to incur losses into the
foreseeable future as we develop our business.
REVENUES
We did not generate any revenues from March 9, 2011 (inception) to March 31,
2012. We will not be in a position to generate revenues for at least 24 months.
Future revenue generation is dependent on the successful development and launch
of our COTP game.
LIQUIDITY AND CAPITAL RESOURCES
Historically, we have financed our cash flow and operations solely from the sale
of common stock. During the year ended March 31, 2012, we were successful in
completing our registered offering. We raised a gross amount of $50,000 through
the sale of 1,000,000 shares at $0.05 per share. We also incurred total costs of
$10,247 related to our public offering, consisting of legal, accounting and
filing fees, which we charged to capital upon the receipt of funding and
issuance of shares.
We started our fiscal year ending March 31, 2012 with $14,720 in cash and
$14,560 in working capital. As previously indicated, we raised a net amount of
$39,753 from the sale of common shares under our registered offering. During the
year ended March 31, 2012, we used $9,644 in cash for our operations. As a
result, our remaining cash balance as of March 31, 2012 was $45,729. We also
19
have outstanding prepaid expenses of $350 and accounts payable of $160.
Therefore, our net working capital balance as of March 31, 2012 was $45,919.
We believe our current cash and net working capital balance is sufficient to
cover our expenses for the next 12 months and will enable us to carry out our
initial plan of operations for this period. If we cannot raise additional
financing prior to the expiry of this timeframe, we will be forced to cease
operations and our business will fail. We are a development stage company and
have generated no revenue to date. Even if we are successful in raising
additional financing, we will still not be in a position to generate revenues or
become profitable. We currently estimate that we will require a minimum of 14-24
months from the date hereof and an additional $450-600,000 to complete the
development of our COTP game and promote it commercially.
These additional funds will have to be raised through equity financing, debt
financing, or other sources, which may result in the dilution in the equity
ownership of our shares. We will also need more funds if the costs of the
development of our concept and actual game are greater than we have budgeted. We
will also require additional financing to sustain our business operations if we
are ultimately not successful in earning revenues. We currently do not have any
arrangements for further financing and we may not be able to obtain financing
when required. Obtaining commercial loans, assuming those loans would be
available, will increase our liabilities and future cash commitments.
There are no assurances that we will be able to obtain further funds required
for our continued operations. Even if additional financing is available, it may
not be available on terms we find favorable. At this time, there are no
anticipated sources of additional funds in place. Failure to secure the needed
additional financing will have an adverse effect on our ability to remain in
business.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
We do not expect the adoption of any recently issued accounting pronouncements
to have a significant impact on our net results of operations, financial
position, or cash flows.
OFF-BALANCE SHEET ARRANGEMENTS
We have no off-balance sheet arrangements.
SUBSEQUENT EVENTS
None.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a "smaller reporting company," as defined in Rule 12b-2 of the Exchange Act,
we are not required to provide the information called for by this Item.
20
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Isoft International Inc.
(A Development Stage Company)
March 31, 2012 and 2011
Report of Independent Registered Public Accounting Firm 22
Balance Sheets as of March 31, 2012 and 2011 23
Statements of Operations for the Years Ended March 31, 2012 and
2011, and from March 9, 2011 (Inception) through March 31, 2012 24
Statement of Stockholders' Equity for the Years Ended March 31, 2012
and 2011, and from March 9, 2011 (Inception) through March 31, 2012 25
Statements of Cash Flows for the Years Ended March 31, 2012 and
2011, and from March 9, 2011 (Inception) through March 31, 2012 26
Notes to the Financial Statements 27
21
Silberstein Ungar, PLLC CPAs and Business Advisors
--------------------------------------------------------------------------------
Phone (248) 203-0080
Fax (248) 281-0940
30600 Telegraph Road, Suite 2175
Bingham Farms, MI 48025-4586
www.sucpas.com
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Boards of Directors
iSoft International, Inc.
We have audited the accompanying balance sheets of iSoft International, Inc., as
of March 31, 2012 and 2011, and the related statements of operations,
stockholders' equity, and cash flows for the periods then ended and the period
from March 9, 2011 (date of inception) to March 31, 2012. These financial
statements are the responsibility of the Company's management. 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 audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. The Company has
determined that it is not required to have, nor were we engaged to perform, an
audit of its internal control over financial reporting. Our audits 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 includes examining on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also includes
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 iSoft International, Inc., as
of March 31, 2012 and 2011 and the results of its operations and cash flows for
the periods then ended and the period from March 9, 2011 (date of inception) to
March 31, 2012, in conformity with accounting principles generally accepted in
the United States of America.
The accompanying financial statements have been prepared assuming that the iSoft
International, Inc. will continue as a going concern. As discussed in Note 3 to
the financial statements, the Company has not received revenue from sales of
products or services, and has incurred losses from operations since inception.
These factors raise substantial doubt about the Company's ability to continue as
a going concern. Management's plans with regard to these matters are described
in Note 3. The accompanying financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
/s/ Silberstein Ungar, PLLC
------------------------------------
Silberstein Ungar, PLLC
Bingham Farms, Michigan
June 11, 2012
22
ISOFT INTERNATIONAL INC.
(A Development Stage Company)
BALANCE SHEETS
March 31, 2012 March 31, 2011
-------------- --------------
ASSETS
Current assets
Cash and bank accounts $ 45,729 $ 14,720
Prepaid expense 350 --
-------- --------
Total current assets 46,079 14,720
-------- --------
Total assets $ 46,079 $ 14,720
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued liabilities $ 160 $ 160
-------- --------
Total current liabilities 160 160
-------- --------
Stockholders' equity (Note 4,5)
Common stock, $0.001 par value, 75,000,000 common shares authorized;
6,000,000 common shares issued and outstanding (2011 - 5,000,000) 6,000 5,000
Additional paid-in capital 49,653 10,000
Deficit accumulated during the development stage (9,734) (440)
-------- --------
Total stockholders' equity 45,919 14,560
-------- --------
Total liabilities and stockholders' equity $ 46,079 $ 14,720
======== ========
The accompanying notes are an integral part of these financial statements.
23
ISOFT INTERNATIONAL INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
From From
March 9, 2011 March 9, 2011
Year ended (Inception) to (Inception) to
March 31, 2012 March 31, 2011 March 31, 2012
-------------- -------------- --------------
REVENUE $ -- $ -- $ --
---------- ---------- ----------
OPERATING EXPENSES
General & administrative 2,353 160 2,513
Organization 325 280 605
Professional fees 6,616 -- 6,616
---------- ---------- ----------
Loss before income taxes (9,294) (440) (9,734)
Provision for income taxes -- -- --
---------- ---------- ----------
Net loss $ (9,294) $ (440) $ (9,734)
========== ========== ==========
Basic and diluted loss per Common share (1) $ (0.00) $ (0.00)
========== ==========
Weighted average number of common shares
outstanding (Note 4) 5,171,339 5,000,000
========== ==========
----------
(1) less than $0.01
The accompanying notes are an integral part of these financial statements.
24
ISOFT INTERNATIONAL INC.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
Deficit
Accumulated
Common Stock Additional During the Total
------------------- Paid in Development Stockholders'
Shares Amount Capital Stage Equity
------ ------ ------- ----- ------
Inception, March 9, 2011 -- $ -- $ -- $ -- $ --
Initial capitalization, sale of
common stock to Director on
March 9, 2011 5,000,000 5,000 10,000 -- 15,000
Net loss for the period -- -- -- (440) (440)
--------- --------- --------- --------- ---------
Balance, March 31, 2011 5,000,000 5,000 10,000 (440) 14,560
Common stock issued for cash,
net of offering costs 1,000,000 1,000 38,753 -- 39,753
Capital contribution -- -- 900 -- 900
Net loss for the year ended
March 31, 2012 -- -- -- (9,294) (9,294)
--------- --------- --------- --------- ---------
Balance, March 31, 2012 6,000,000 $ 6,000 $ 49,653 $ (9,734) $ 45,919
========= ========= ========= ========= =========
The accompanying notes are an integral part of these financial statements.
25
ISOFT INTERNATIONAL INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
From From
March 9, 2011 March 9, 2011
Year ended (Inception) to (Inception) to
March 31, 2012 March 31, 2011 March 31, 2012
-------------- -------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss for the period $ (9,294) $ (440) $ (9,734)
Adjustments To Reconcile Net Loss to Net
Cash Used in Operating Activities
Changes in operating assets and liabilities:
Prepaid expense (350) -- (350)
Accounts payable -- 160 160
-------- -------- --------
Net cash used for operating activities (9,644) (280) (9,924)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Payment of offering costs (10,247) -- (10,247)
Contributed capital 900 -- 900
Proceeds from issuance of common stock 50,000 15,000 65,000
-------- -------- --------
Net cash provided by financing activities 40,653 15,000 55,653
-------- -------- --------
Increase in cash during the period 31,009 14,720 45,729
Cash, beginning of the period 14,720 -- --
-------- -------- --------
Cash, end of the period $ 45,729 $ 14,720 $ 45,729
======== ======== ========
Supplemental disclosure with respect to cash flows:
Cash paid for income taxes $ -- $ -- $ --
======== ======== ========
Cash paid for interest $ -- $ -- $ --
======== ======== ========
The accompanying notes are an integral part of these financial statements.
26
ISOFT INTERNATIONAL INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
March 31, 2012
NOTE 1. GENERAL ORGANIZATION AND BUSINESS
The Company was originally incorporated under the laws of the state of Nevada on
March 9, 2011. The Company is devoting substantially all of its present efforts
to establish a new business. It is considered a development stage company, and
has had no revenues from operations to date.
Initial operations have included organization and capital formation. Management
is planning to develop and then market an internet based, social media online
video game to prospective users.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES
ACCOUNTING BASIS
The accounting and reporting policies of the Company conform to U.S. generally
accepted accounting principles applicable to development stage enterprises. In
the opinion of management, all adjustments considered necessary for fair
presentation have been included in the financial statements. All losses
accumulated since inception has been considered as part of the Company's
development stage activities.
DEVELOPMENT STAGE COMPANY
The accompanying financial statements have been prepared in accordance with
generally accepted accounting principles related to development-stage companies.
A development-stage company is one in which planned principal operations have
not commenced or if its operations have commenced, there has been no significant
revenues there from.
BASIS OF PRESENTATION
The financial statements of the Company have been prepared using the accrual
basis of accounting in accordance with generally accepted accounting principles
in the United States of America and are presented in U.S. dollars. The Company
has adopted a March 31 fiscal year end.
EARNINGS PER SHARE
The basic earnings (loss) per share is calculated by dividing the Company's net
income available to common shareholders by the weighted average number of common
shares during the year. The diluted earnings (loss) per share is calculated by
dividing the Company's net income (loss) available to common shareholders by the
diluted weighted average number of shares outstanding during the year. The
diluted weighted average number of shares outstanding is the basic weighted
number of shares adjusted as of the first of the year for any potentially
dilutive debt or equity.
The Company has not issued any options or warrants or similar securities since
inception.
DIVIDENDS
The Company has not yet adopted any policy regarding payment of dividends. No
dividends have been paid during the periods shown.
CASH AND BANK ACCOUNTS
The Company's cash consists of funds deposited with its lawyer into the law
firm's trust account.
CASH EQUIVALENTS
The Company considers all highly liquid investments with maturity of three
months or less when purchased to be cash equivalents.
27
ISOFT INTERNATIONAL INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
March 31, 2012
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES (continued)
FOREIGN CURRENCY TRANSLATION
The Company has adopted the US dollar as its functional and reporting currency
because most of its transactions are denominated in US currency.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company estimates the fair value of financial instruments using the
available market information and valuation methods. Considerable judgment is
required in estimating fair value. Accordingly, the estimates of fair value may
not be indicative of the amounts the Company could realize in a current market
exchange. As of March 31, 2012, the carrying value of prepaid expenses and
accrued liabilities approximated fair value due to the short-term nature and
maturity of these instruments.
OFFERING COSTS
The Company charges public offering costs consisting of legal, accounting and
filing fees, to stockholders' equity upon the issuance of shares under the
public offering.
INCOME TAXES
A deferred tax asset or liability is recorded for all temporary differences
between financial and tax reporting and net operating loss carryforwards.
Deferred tax expense (benefit) results from the net change during the year of
deferred tax assets and liabilities.
Deferred tax assets are reduced by a valuation allowance when, in the opinion of
management, it is more likely than not that some portion, or all of the deferred
tax assets, will not be realized. Deferred tax assets and liabilities are
adjusted for the effects of changes in tax laws and rates on the date of
enactment.
REVENUE RECOGNITION
The Company will recognize revenue when products are fully delivered or services
have been provided and collection is reasonably assured.
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 the 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 revenue and expenses during
the reporting period. Actual results could differ from those estimates.
RECENT ACCOUNTING PRONOUNCEMENTS
The Company does not expect the adoption of recently issued accounting
pronouncements to have a significant impact on the Company's results of
operations, financial position or cash flow.
28
ISOFT INTERNATIONAL INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
March 31, 2012
NOTE 3. GOING CONCERN
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern, which contemplates, among other
things, the realization of assets and satisfaction of liabilities in the normal
course of business. The Company has net losses for the period from inception to
March 31, 2012 of $(9,734). The Company intends to fund its expenditures through
equity financing arrangements, which may be insufficient to fund its proposed
development expenditures, working capital and other cash requirements through
the next fiscal year ending March 31, 2013.
The ability of the Company to emerge from the development stage is dependent
upon the Company's successful efforts to raise sufficient capital for its
business plans and then attaining profitable operations. In response to these
issues, management has planned the following actions:
- The Company has cleared a Registration Statement with the SEC and
raised initial equity funding through a public offering.
- Management is currently formulating plans to develop an internet based
social media online video game to generate future revenues. There can
be no assurances, however, that management's expectations of future
revenues will be realized.
These factors, among others, raise substantial doubt about the Company's ability
to continue as a going concern. These financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
NOTE 4. STOCKHOLDERS' EQUITY
AUTHORIZED
The Company is authorized to issue 75,000,000 shares of $0.001 par value common
stock. All common stock shares have equal voting rights, are non-assessable and
have one vote per share. Voting rights are not cumulative and, therefore, the
holders of more than 50% of the common stock could, if they choose to do so,
elect all of the directors of the Company.
ISSUED AND OUTSTANDING
On March 9, 2011 (inception), the Company issued 5,000,000 common shares to its
President, Secretary Treasurer and Director for cash of $15,000. See Note 5.
During the current fiscal year, the Company accepted subscriptions for 1,000,000
shares of common stock under its registered offering for gross proceeds of
$50,000, or $0.05 per share. Subsequent to offsetting offering costs of $10,247
against capital, net proceeds were $39,753.
29
ISOFT INTERNATIONAL INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
March 31, 2012
NOTE 5. RELATED PARTY TRANSACTIONS
The Company's officer and director provides office space free of charge. The
Company has recorded the estimated value of the office space of $75 per month
(2012 - $900, 2011- $nil) as a contribution to capital.
The Company's officer and director is involved in other business activities and
may, in the future, become involved in other business opportunities. If a
specific business opportunity becomes available, such persons may face a
conflict in selecting between the Company and their other business interests.
The Company has not formulated a policy for the resolution of such conflicts.
On March 9, 2011, the Company issued 5,000,000 shares of its common stock to its
President, Secretary Treasurer and Director for cash of $15,000. See Note 4.
NOTE 6. INCOME TAXES
Net deferred tax assets are $nil. Realization of deferred tax assets is
dependent upon sufficient future taxable income during the period that
deductible temporary differences and carry-forwards are expected to be available
to reduce taxable income. As the achievement of required future taxable income
is uncertain, the Company recorded a 100% valuation allowance. Management
believes it is likely that any deferred tax assets will not be realized.
The Company has a net operating loss carry forward of approximately $440 which
will expire by March 31, 2031 and $9,734 which will expire by March 31, 2032.
NOTE 7. SUBSEQUENT EVENTS
In accordance with ASC 855-10, the Company has analyzed its operations
subsequent to March 31, 2012 to the date these financial statements were issued,
and has determined that it does not have any material subsequent events to
disclose in these financial statements.
30
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
DISCLOSURE CONTROLS AND PROCEDURES
Under the supervision and with the participation of our management, including
our principal executive officer and the principal financial officer, we are
responsible for conducting an evaluation of the effectiveness of the design and
operation of our internal controls and procedures, as defined in Rules 13a-15(e)
and 15d-15(e) under the Securities Exchange Act of 1934, as of the end of the
fiscal year covered by this report. Disclosure controls and procedures means
that the material information required to be included in our Securities and
Exchange Commission ("SEC") reports is recorded, processed, summarized and
reported within the time periods specified in SEC rules and forms relating to
our company, including any consolidating subsidiaries, and was made known to us
by others within those entities, particularly during the period when this report
was being prepared. Based on this evaluation, our principal executive officer
and principal financial officer concluded as of the evaluation date that our
disclosure controls and procedures were effective as of March 31, 2012.
MANAGEMENT'S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
As of March 31, 2012, management assessed the effectiveness of our internal
control over financial reporting. The Company's management is responsible for
establishing and maintaining adequate internal control over financial reporting
for the Company. Internal control over financial reporting is defined in Rule
13a-15(f) or 15d-15(f) promulgated under the Securities Exchange Act of 1934, as
amended, as a process designed by, or under the supervision of, the Company's
President and Chief Executive Officer and effected by the Company's Board of
Directors, management and other personnel, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with GAAP in the United
States of America and includes those policies and procedures that:
* Pertain to the maintenance of records that in reasonable detail accurately
and fairly reflect our transactions and dispositions of our assets;
* Provide reasonable assurance our transactions are recorded as necessary to
permit preparation of our financial statements in accordance with GAAP, and
that receipts and expenditures are being made only in accordance with
authorizations of our management and directors; and
* Provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of our assets that could have
a material effect on the financial statement.
In evaluating the effectiveness of our internal control over financial
reporting, our management used the criteria set forth by the Committee of
Sponsoring Organizations of the Treadway Commission ("COSO") in Internal Control
- Integrated Framework. Based on that evaluation, completed by Mohamed Ayad, our
31
President and Chief Executive Officer, who also serves as our principal
accounting and principal financial officer, Mr. Ayad concluded that, during the
period covered by this report, such internal controls and procedures were not
effective to detect the inappropriate application of US GAAP rules as more fully
described below.
This was due to deficiencies that existed in the design or operation of our
internal controls over financial reporting that adversely affected our internal
controls and that may be considered to be material weaknesses. The matters
involving internal controls and procedures that our management considered to be
material weaknesses under the standards of the Public Company Accounting
Oversight Board were: (i) lack of a functioning audit committee due to a lack of
a majority of independent members and a lack of a majority of outside directors
on our board of directors, resulting in ineffective oversight in the
establishment and monitoring of required internal controls and procedures; (ii)
inadequate segregation of duties consistent with control objectives; and (iii)
ineffective controls over period end financial disclosure and reporting
processes. The aforementioned material weaknesses were identified by our
President and Chief Executive Officer who also serves as our principal financial
and accounting officer, in connection with the review of our financial
statements as of March 31, 2012.
Management believes that the lack of a functioning audit committee and the lack
of a majority of outside directors on our board of directors results in
ineffective oversight in the establishment and monitoring of required internal
controls and procedures, which could result in a material misstatement in our
financial statements in future periods.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
There were no changes in the Company's internal control over financial reporting
that occurred during the fourth quarter of the year ended March 31, 2012 that
have materially affected, or that are reasonably likely to materially affect,
the Company's internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
None.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
All directors of our company hold office until the next annual meeting of the
stockholders or until their successors have been elected and qualified. The
officers of our company are appointed by our board of directors and hold office
until their death, resignation or removal from office. Our directors and
executive officers, their ages, positions held, and duration as such, are as
follows:
Date First Elected
Name Position Held with the Company Age or Appointed
---- ------------------------------ --- ------------
Mohamed Ayad President, CEO Secretary 29 March 9, 2011
Treasurer and Director
32
BUSINESS EXPERIENCE
The following is a brief account of the education and business experience of
each director and executive officer during at least the past five years,
indicating each person's business experience, principal occupation during the
period, and the name and principal business of the organization by which he was
employed.
MR. MOHAMED AYAD, SECRETARY TREASURER AND MEMBER OF THE BOARD OF DIRECTORS
Mr. Ayad has been serving as our President, CEO, Secretary Treasurer and a
Director since March 9, 2011. The term of his office is for one year and is
renewable on an annual basis.
He received his B.Sc in Computer Sciences and Management Information Systems
from the MIS Department of the Egyptian Institute of Alexandria Egypt in 2006.
From June 2008 to the date hereof he is a Technical Support Engineer for the
Egypt Air Holding Company in Alexandria Egypt. He is responsible for the
companies MIS and database systems used in its operations. Subsequent to his
graduation in 2006, he acted as the website systems designer and coordinator for
the Pharaoh Design Group in Alexandria. These experiences, qualifications and
attributes have led to our conclusion that Mr. Ayad should be serving as a
member of our Board of Directors in light of our business and structure.
He is currently devoting approximately 20 hours a week of his time to our
company, and is planning to devote 40 hours per week if necessary during the
next 12 months of operation.
He is not an officer or director of any reporting company that files annual,
quarterly, or periodic reports with the United States Securities and Exchange
Commission.
BOARD COMPOSITION
Our Bylaws provide that the Board of Directors shall consist of no less than 1,
but not more than 8 directors. Each director serves until his successor is
elected and qualified.
COMMITTEES OF THE BOARD OF DIRECTORS
We do not presently have a separately constituted audit committee, compensation
committee, nominating committee, executive committee or any other committees of
our Board of Directors. Nor do we have an audit committee "financial expert." As
such, our entire Board of Directors acts as our audit committee and handles
matters related to compensation and nominations of directors.
SIGNIFICANT EMPLOYEES
We have no significant employees other than the sole executive officer and
director described above.
FAMILY RELATIONSHIPS
There are no familial relationships between our officers and directors.
CERTAIN LEGAL PROCEEDINGS
No director, nominee for director, or executive officer of the Company has
appeared as a party in any legal proceeding material to an evaluation of his
ability or integrity during the past five years.
33
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires our executive
officers and directors, and persons who own more than ten percent of a
registered class of our equity securities, file reports of ownership and changes
in ownership with the SEC. Executive officers, directors and greater-than-ten
percent stockholders are required by SEC regulations to furnish us with all
Section 16(a) forms they file. Based on our review of filings made on the SEC
website, and the fact of us not receiving certain forms or written
representations from certain reporting persons that they have complied with the
relevant filing requirements, we believe that, during the year ended March 31,
2012, all of our executive officers, directors and greater-than-ten percent
stockholders complied with all Section 16(a) filing requirements.
CODE OF ETHICS
The Company has not adopted a code of ethics that applies to its principal
executive officers, principal financial officer, principal accounting officer or
controller, or persons performing similar functions. The Company has not adopted
a code of ethics because it has only commenced operations.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth information with respect to compensation paid by
us to our sole officer for the fiscal periods indicated:
34
SUMMARY COMPENSATION TABLE
Change in
Pension
Value &
Non-Equity Nonqualified
Incentive Deferred All
Name and Plan Compen- Other
Principal Stock Option Compen- sation Compen-
Position Year Salary($) Bonus($) Awards($) Awards($) sation($) Earnings($) sation($) Totals($)
------------ ---- --------- -------- --------- --------- --------- ----------- --------- ---------
Mohamed Ayad 2012 0 0 0 0 0 0 0 0
President, CEO 2011 0 0 0 0 0 0 0 0
Secretary Treasurer
Subsequent to the date our date of incorporation, our executive officer has not
received and are not accruing any compensation. He anticipates this arrangement
will remain in effect for the next 12 months. We have not entered into any
employment or consulting agreements with our sole director and executive
officer.
OUTSTANDING EQUITY AWARDS AT 2012 FISCAL YEAR-END
We do not currently have a stock option plan or any long-term incentive plans
that provide compensation as an incentive for performance. We have not made any
individual stock option grants or other equity incentive awards to our executive
officer and director since our inception.
EMPLOYMENT CONTRACTS
The Company has not entered into an employment agreement with its officer and
director during the year ended March 31, 2012.
DIRECTOR COMPENSATION TABLE
Change in
Pension
Fees Value and
Earned Non-Equity Nonqualified All
or Incentive Deferred Other
Paid in Stock Option Plan Compensation Compen-
Name Cash($) Awards($) Awards($) Compensation($) Earnings($) sation($) Total($)
---- ------- --------- --------- --------------- ----------- --------- --------
Mohamed Ayad 2012 0 0 0 0 0 0 0
2011 0 0 0 0 0 0 0
35
We have no formal plan for compensating our director for his services in his
capacity as director. Our director is entitled to reimbursement for reasonable
travel and other out-of-pocket expenses incurred in connection with attendance
at meetings of our board of directors. The board of directors may award special
remuneration to any director undertaking any special services on behalf of ISoft
other than services ordinarily required of a director. Since inception to the
date hereof, no director received and/or accrued any compensation for his
services as a director, including committee participation and/or special
assignments.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDERS MATTERS
PRINCIPAL SHAREHOLDERS
The following table lists, as of March 31, 2012, the number of shares of common
stock of our Company that are beneficially owned by (i) each person or entity
known to our Company to be the beneficial owner of more than 5% of the
outstanding common stock; (ii) each officer and director of our Company; and
(iii) all officers and directors as a group. Information relating to beneficial
ownership of common stock by our principal shareholders and management is based
upon information furnished by each person using "beneficial ownership" concepts
under the rules of the Securities and Exchange Commission. Under these rules, a
person is deemed to be a beneficial owner of a security if that person has or
shares voting power, which includes the power to vote or direct the voting of
the security, or investment power, which includes the power to vote or direct
the voting of the security. The person is also deemed to be a beneficial owner
of any security of which that person has a right to acquire beneficial ownership
within 60 days. Under the Securities and Exchange Commission rules, more than
one person may be deemed to be a beneficial owner of the same securities, and a
person may be deemed to be a beneficial owner of securities as to which he or
she may not have any pecuniary beneficial interest. Except as noted below, each
person has sole voting and investment power.
Amount and Amount and
Nature of Nature of
Beneficial Beneficial
Ownership Ownership
Title of Name and Address of Prior to Subsequent to Percent of Class
Class Beneficial Owner Offering Offering Prior to Offering (2)
----- ---------------- -------- -------- --------------------
Common Mohamed Ayad 5,000,000 5,000,000 83.33%
1 Ahmed Kamal
St.,Sidi Gaber
Alexandria 21311,
Egypt
Common Directors and
officers as a group (1) 5,000,000 5,000,000 83.33%
----------
1. Represents beneficial ownership
2. Based on the total of 6,000,000 outstanding common shares as of the date
hereof
36
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
INDEPENDENCE
Mr. Ayad purchased 5,000,000 shares of our common stock for $0.003 per share.
All of these shares are restricted securities, and are held by the sole officer
and director of our Company. (See "Principal Shareholders".)
POTENTIAL CONFLICTS OF INTEREST
Since we do not have an audit or compensation committee comprised of independent
directors, the functions that would have been performed by such committees are
performed by our directors. Thus, there is a potential conflict of interest in
that our directors and officers have the authority to determine issues
concerning management compensation and audit issues that may affect management
decisions. Our officers and directors have conflicts of interest in that they
have other time commitments that will prevent them from devoting full-time to
our operations, which may affect our operations. We are not aware of any other
conflicts of interest with any of our executives or directors.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The aggregate fees billed during the fiscal years ended March 31, 2012 and 2011
for professional services rendered by Silberstein Ungar, PLLC, with respect to
the audits of our 2012 and 2011 financial statements, as well as their quarterly
reviews of our interim financial statements and services normally provided by
the independent accountant in connection with statutory and regulatory filings
or engagements for these fiscal periods, were as follows:
Year Ended Inception to
March 31, 2012 March 31, 2011
-------------- --------------
Audit Fees and Audit Related Fees $ 7,250 $ 4,250
Tax Fees -- --
All Other
Fees -- --
-------- --------
TOTAL $ 7,250 $ 4,250
======== ========
PRE APPROVAL POLICIES AND PROCEDURES
We do not have a separately designated Audit Committee. The Board of Directors
pre-approves all services provided by our independent auditors. All of the above
services and fees were reviewed and approved by the Board of Directors either
before or after the respective services were rendered.
37
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
EXHIBIT DESCRIPTION
Number Description
------ -----------
3.1 Articles of Incorporation*
3.2 Bylaws*
31.1 Certification of Principal Executive and Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
32.1 Certification of Principal Executive and Principal Financial Officer
and pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101 Interactive data files pursuant to Rule 405 of Regulation S-T.
----------
* Incorporated by reference to the Registrant's Form S-1 (File No.
333-174443), filed with the Commission on May 24, 2011.
38
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ISOFT INTERNATIONAL INC.
Date: January 8, 2013 By: /s/ Mohamed Ayad
------------------------------------
Mohamed Ayad
President, CEO Secretary, Treasurer,
Principal Executive, Financial and
Accounting Officer
3