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___________________________________________________________________________

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

___________________________________________________________________________


FORM 10-Q

___________________________________________________________________________

 

[X]

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

 

For the quarterly period ended: January 31, 2013

 

 

or

 

 

[  ]

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

 

For the transition period from: _____________ to _____________


Commission File Number: 333-150158

 

B-SCADA INC.

(Exact name of registrant as specified in its charter)

 

Delaware

 

94-3399360

(State or other jurisdiction of

 

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

Incorporation or organization)

 

 

 

 

 

1255 N Vantage Pt. Dr., Suite A

 

 

Crystal River, Florida

 

34429

(Address of principal executive offices)

 

(Zip Code)


Issuer's telephone number (352) 564-9610


N/A

(Former name, former address and former fiscal year, if changed since last report)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  [X] Yes  [  ] No


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


Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

 

Large accelerated filer

[  ]

  

  

Accelerated filer

[  ]

Non-accelerated filer

[  ]

(Do not check if a smaller reporting company)

  

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

 

APPLICABLE ONLY TO CORPORATE ISSUERS

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

 

The number of shares of the issuer’s common equity outstanding as of March 1, 2013 was 24,586,672 shares of common stock, par value $.0001.


 



 

B-SCADA, INC.

 

TABLE OF CONTENTS

 

PART I.  FINANCIAL INFORMATION

2

 

 

ITEM 1.  FINANCIAL STATEMENTS

2

 

 

BALANCE SHEETS

2

AT JANUARY 31, 2013 (UNAUDITED) AND OCTOBER 31, 2012

 

 

 

STATEMENTS OF OPERATIONS (UNAUDITED)

3

FOR THE THREE MONTHS ENDED JANUARY 31, 2013 AND 2012

 

 

 

STATEMENTS OF CASH FLOWS (UNAUDITED)

4

FOR THE THREE  MONTHS ENDED JANUARY 31, 2013 AND 2012

 

 

 

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

5

 

 

ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

11

 

 

ITEM 4.  CONTROLS AND PROCEDURES

15

 

 

PART II.  OTHER INFORMATION

16

 

 

ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES

16

 

 

ITEM 4. MINE SAFETY DISCLOSURES

16

 

 

ITEM 6.  EXHIBITS

16

 

 

SIGNATURES

17












1



PART I.  FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS


B-SCADA, INC.


BALANCE SHEETS



 

 

 

 

 

January 31,

 

October 31,

 

 

2013

 

2012

 

 

(Unaudited)

 

 

Assets

 

 

 

 

 

Current Assets

 

 

 

 

 

 

  Cash and Cash Equivalents

 

$

408,639

 

$

94,831

  Accounts Receivable - Net

 

 

68,067

 

 

104,965

  Accrued Revenue

 

 

13,333

 

 

148,750

  Prepaid Expenses and Other Current Assets

 

 

3,790

 

 

4,770

    Total Current Assets

 

 

493,829

 

 

353,316

 

 

 

 

 

 

 

Property and Equipment – Net

 

 

11,597

 

 

9,029

 

 

 

 

 

 

 

Other Assets

 

 

 

 

 

 

  Security Deposits

 

 

3,650

 

 

3,650

 

 

 

 

 

 

 

    Total Assets

 

$

509,076

 

$

365,995

 

 

 

 

 

 

 

Liabilities and Stockholders’ Deficiency

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

  Convertible Notes Payable

 

$

50,000

 

$

50,000

  Notes Payable - Related Party

 

 

164,173

 

 

164,173

  Accounts Payable and Accrued Liabilities

 

 

191,240

 

 

163,777

  Deferred Revenue

 

 

132,637

 

 

58,590

    Total Current Liabilities

 

 

538,050

 

 

436,540

 

 

 

 

 

 

 

Commitments and Contingencies

 

 

--

 

 

--

 

 

 

 

 

 

 

Stockholders’ Deficiency

 

 

 

 

 

 

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

 

 

 

 

 

 

    Authorized and Unissued

 

 

--

 

 

--

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

 

 

 

 

 

 

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

 

 

 

 

 

 

    at January 31, 2013 and October 31, 2012

 

 

2,459

 

 

2,459

  Additional Paid in Capital

 

 

7,100,728

 

 

7,100,728

  Accumulated Deficit

 

 

(7,132,161)

 

 

(7,173,732)

    Total Stockholders’ Deficiency

 

 

(28,974)

 

 

(70,545)

 

 

 

 

 

 

 

    Total Liabilities and Stockholders’ Deficiency

 

$

509,076

 

$

365,995



See the accompanying notes to financial statements.



2



B-SCADA, INC.


STATEMENTS OF OPERATIONS [UNAUDITED]


 

For the Three Months Ended

 

January 31,

 

2013

 

2012

 

 

 

 

Revenue

$

274,617

 

$

281,621

 

 

 

 

 

 

Operating Expenses

 

 

 

 

 

  Payroll Expenses

 

168,314

 

 

166,418

  Professional Fees

 

15,041

 

 

15,590

  Advertising

 

11,257

 

 

3,271

  Depreciation and Amortization

 

1,288

 

 

3,276

  Consulting Fees

 

1,350

 

 

650

  Office

 

7,265

 

 

2,349

  Rent

 

7,880

 

 

9,201

  Telephone and Communication

 

2,237

 

 

1,059

  Other

 

14,095

 

 

12,935

    Total Operating Expenses

 

228,727

 

 

214,749

 

 

 

 

 

 

Operating Income

 

45,890

 

 

66,872

 

 

 

 

 

 

Other Income (Expenses)

 

 

 

 

 

  Interest Expense

 

(1,008)

 

 

(1,008)

  Interest Expense - Related Party

 

(3,311)

 

 

(4,235)

    Total Other Income (Expenses)

 

(4,319)

 

 

(5,243)

 

 

 

 

 

 

Income Before Income Taxes

 

41,571

 

 

61,629

 

 

 

 

 

 

Provision for Income Taxes

 

--

 

 

--

 

 

 

 

 

 

Net Income

$

41,571

 

$

61,629

 

 

 

 

 

 

Net Income  Per Common Share – Basic and Diluted

$

--

 

$

--

 

 

 

 

 

 

Weighted-Average Common Shares Outstanding – Basic and Diluted

 

24,586,672

 

 

24,586,672


See the accompanying notes to financial statements.





3






B-SCADA, INC.


STATEMENTS OF CASH FLOWS [UNAUDITED]


 

For the Three Months Ended

 

January 31,

 

2013

 

2012

 

 

 

 

Operating Activities

 

 

 

  Net Income

$

41,571

 

$

61,629

    Adjustments to Reconcile Net Income to Net Cash

 

 

 

 

 

      Provided by Operating Activities:

 

 

 

 

 

        Depreciation and Amortization

 

1,288

 

 

3,276

        Deferred Revenue

 

74,047

 

 

1,357

 

 

 

 

 

 

  Changes in Assets and Liabilities:

 

 

 

 

 

    (Increase) Decrease in:

 

 

 

 

 

      Accounts Receivable

 

36,898

 

 

(54,109)

      Accrued Revenue

 

135,417

 

 

174,350

      Prepaid Expenses and Other Current Assets

 

980

 

 

797

    Increase (Decrease) in:

 

 

 

 

 

      Accounts Payable and Accrued Liabilities

 

27,463

 

 

16,964

        Net Cash Provided by Operating Activities

 

317,664

 

 

204,264

 

 

 

 

 

 

Investing Activities

 

 

 

 

 

  Acquisition of Equipment

 

(3,856)

 

 

--

      Net Cash Used for Investing Activities

 

(3,856)

 

 

--

 

 

 

 

 

 

Financing Activities

 

 

 

 

 

  Payment of  Note Payable - Related Party

 

--

 

 

(35,827)

      Net Cash Used for Financing Activities

 

--

 

 

(35,827)

 

 

 

 

 

 

Change in Cash and Cash Equivalents

 

313,808

 

 

168,437

 

 

 

 

 

 

Cash and Cash Equivalents - Beginning of Period

 

94,831

 

 

13,958

 

 

 

 

 

 

Cash and Cash Equivalents - End of Period

$

408,639

 

$

182,395

 

 

 

 

 

 

Supplemental Disclosures of Cash Flow Information

 

 

 

 

 

  Cash paid during the period for:

 

 

 

 

 

    Interest

$

--

 

$

9,173

    Income Taxes

$

--

 

$

--




See the accompanying notes to financial statements.



4






B-SCADA, INC.

NOTES TO FINANCIAL STATEMENTS [UNAUDITED]

JANUARY 31, 2013



(1)  Nature of Business and Basis of Presentation


B-Scada, Inc, (“B-Scada”, the “Company”, “we” or “us”), a Delaware corporation, was originally formed under the name Firefly Learning, Inc. in May 2001. In October, 2005, pursuant to an exchange agreement, we acquired all of the issued and outstanding shares of capital stock of Mobiform Software, Ltd. (“Mobiform Canada”), a Canadian corporation, in exchange for 14,299,593 shares of our common stock and changed our name to Mobiform Software, Inc.  Effective September 14, 2010, Mobiform Canada was dissolved.  On October 19, 2012, we changed our name to B-Scada, Inc.


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


(2)  Alleviation of Going Concern Qualification


We have incurred substantial net operating losses and used substantial amounts of cash in our operating activities since our inception. The expansion and development of our business has been funded primarily through a combination of private equity and debt and notes from our Chief Executive Officer (“CEO”). As of January 31, 2013, we have approximately $409,000 in cash and cash equivalents. We have signed significant licensing and services agreements with Fortune 500 companies and others and as of January 31, 2013 we have generated $318,000 in cash from operations. We believe that, as a result of this, we currently have sufficient cash and revenue commitments to finance our operations over the next twelve month period. There is no assurance that the income generated from these and future agreements will meet our working capital requirements subsequent to the next twelve months, and if not, we will likely require additional capital. We continue to market our products and services in accordance with our strategic business plan.  We are also looking to raise additional capital to meet our future working capital needs. There are no assurances, however, that we will be successful in our efforts to raise capital or generate sufficient revenues through our marketing efforts.







5





B-SCADA, INC.

NOTES TO FINANCIAL STATEMENTS [UNAUDITED]

JANUARY 31, 2013



(3)  Summary of Significant Accounting Policies


Our other accounting policies are set forth in Note 3 to our audited financial statements included in our October 31, 2012 Form 10K


Unaudited Interim Statements - The accompanying unaudited interim financial statements as of January 31, 2013, and for the three months ended January 31, 2013 and 2012 have been prepared in accordance with accounting principles generally accepted for interim financial statement presentation and in accordance with the instructions to Form 10-Q.  Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statement presentation.  In the opinion of management, the financial statements contain all adjustments (consisting only of normal recurring accruals) necessary to present fairly the financial position as of January 31, 2013 and the results of operations and cash flows for the three months ended January 31, 2013 and 2012.  The results of operations for the three months ended January 31, 2013 are not necessarily indicative of the results to be expected for the full year.


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


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


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


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


Subsequent Events - The Company evaluated subsequent events, which are events or transactions that occurred after January 31, 2013 through the date of the issuance of the accompanying financial statements.







6






B-SCADA, INC.

NOTES TO FINANCIAL STATEMENTS [UNAUDITED]

JANUARY 31, 2013



(4)  New Authoritative Accounting Guidance


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


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


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



(5)  Property and Equipment


Property and equipment consists of the following:


 

January 31,

 

October 31,

 

Estimated

 

2013

 

2012

 

Useful Lives

 

[Unaudited]

 

 

 

 

 

 

 

 

 

 

Computer Equipment

$  41,523

 

$  41,523

 

5 years

Office Equipment

24,432

 

24,432

 

5-7 years

Software

25,422

 

21,566

 

3 years

Total

91,377

 

87,521

 

 

Less: Accumulated Depreciation

 

 

 

 

 

  and Amortization

(79,780)

 

(78,492)

 

 

 

$  11,597

 

$  9,029

 

 







7





B-SCADA, INC.

NOTES TO FINANCIAL STATEMENTS [UNAUDITED]

JANUARY 31, 2013



(6)  Stockholders’ Deficiency


We are authorized to issue 100,000,000 shares of common stock, par value $0.0001 per share and 5,000,000 shares of preferred stock, par value $0.0001 per share.  At January 31, 2013 there were 24,586,672 common shares issued and outstanding.  An additional 449,350 common shares were reserved for issuance as of January 31, 2013 for outstanding purchase warrants and convertible debt and related interest payable.  There are no shares of preferred stock issued and outstanding.


The following table summarizes the warrants and options.


 

 

For the Three Months Ended

For the Year Ended

 

 

January 31, 2013

(Unaudited)

October 31, 2012

 

 

Shares

Weighted

Average Exercise

Price

Shares

Weighted

Average Exercise

Price

 

 

 

 

 

 

Outstanding at beginning

 

 

 

 

 

   of period

 

300,000

$0.09

5,793,750

$1.17

   Granted/Sold

 

--

--

--

--

   Expired/Cancelled

 

--

--

(5,493,750)

$1.22

   Forfeited

 

--

--

--

--

   Exercised

 

--

--

--

--

Outstanding at end of period

 

300,000

$0.09

300,000

$0.09


The following table summarizes information about stock warrants outstanding as of January 31, 2013 [Unaudited]:


 

Warrants

 

Outstanding

 

Exercisable

 

 

Weighted-

 

 

 

 

 

 

Average

 

 

 

 

 

 

Remaining

Weighted

 

 

Weighted

 

 

Contractual

Average

 

 

Average

 

Number

Life

Exercise

 

Number

Exercise

Exercise Price

Outstanding

(in Years)

Price

 

Exercisable

Price

$0.09

 300,000

2.00

$0.09

 

 300,000

$0.09


The following table summarizes information about stock warrants outstanding as of October 31, 2012:


 

Warrants

 

Outstanding

 

Exercisable

 

 

Weighted-

 

 

 

 

 

 

Average

 

 

 

 

 

 

Remaining

Weighted

 

 

Weighted

 

 

Contractual

Average

 

 

Average

 

Number

Life

Exercise

 

Number

Exercise

Exercise Price

Outstanding

(in Years)

Price

 

Exercisable

Price

$0.09

 300,000

2.25

$0.09

 

 300,000

$0.09


At January 31, 2013 and October 31, 2012, the weighted-average exercise price of all warrants was $0.09 and $0.09, respectively, and the weighted-average remaining contractual life was 2.00 years and 2.25 years, respectively.





8






B-SCADA, INC.

NOTES TO FINANCIAL STATEMENTS [UNAUDITED]

JANUARY 31, 2013



(7)  Income Taxes


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


 

For the Three Months Ended

 

 

January 31,

 

 

2013

 

2012

 

 

[Unaudited]

 

[Unaudited]

 

 

 

 

 

 

United States Statutory Corporate

 

 

 

 

  Income Tax Rate

34.0%

 

34.0%

 

Change in Valuation Allowance on

 

 

 

 

  Deferred Tax Assets

(34.0)%

 

(34.0)%

 

 

 

 

 

 

  Income Tax Provision

--%

 

--%

 



The components of deferred tax assets (liabilities) at January 31, 2013 and October 31, 2012 are as follows:


 

January 31,

 

   October 31,

 

 

2013

 

2012

 

 

[Unaudited]

 

 

 

 

 

 

 

 

Deferred Tax Assets - Current

 

 

 

 

  Accrued Vacation Pay

$  6,530

 

$  7,873

 

  Valuation Allowance

(6,530)

 

(7,873)

 

 

--

 

--

 

Deferred Tax Assets (Liabilities) - Long Term

 

 

 

 

  Net Operating Losses

$  1,118,367

 

$  1,133,906

 

  Property and Equipment

(624)

 

(1,612)

 

  Equity Instruments

2,000

 

2,000

 

  Valuation Allowance

(1,119,743)

 

(1,134,294)

 

 

 

 

 

 

    Net Deferred Tax Asset

$  --

 

$  --

 



We have established a full valuation allowance on our deferred tax asset because of a lack of sufficient positive evidence to support its realization.  The valuation allowance decreased by approximately $16,000 and $699,000 in the three months ended January 31, 2013 and the year ended October 31, 2012, respectively.





9






B-SCADA, INC.

NOTES TO FINANCIAL STATEMENTS [UNAUDITED]

JANUARY 31, 2013




(8)  Related Party Transactions


As of January 31, 2013 and October 31, 2012, the promissory note balance due our CEO is $164,173, and the related accrued interest is $26,880 and $23,570, respectively.


Interest expense in the amount of $3,311 and $4,235 has been accrued for these notes in the three months ended January 31, 2013 and 2012, respectively.



(9)  Commitments and Contingencies


Leases


We presently lease office space in Crystal River, Florida, on a month to month basis. The terms are a fixed monthly payment of $2,000 plus our share of certain allocated utilities (not to exceed $2,000 per month) as defined in the agreement. Rental expense, including allocated utilities, for the three months ended January 31, 2013 and 2012 amounted to approximately $8,000 and $9,000, respectively.  



(10)  Subsequent Events


On February 3, 2013, we paid $45,000 to our CEO for partial payment of promissory notes and accrued interest owed him.  The payment included principal in the amount of $36,173 and accrued interest of $8,827.


On February 25, 2013, we paid $45,000 to our CEO for partial payment of promissory notes and accrued interest owed him.  The payment included principal in the amount of $37,500 and accrued interest of $7,500.









10






ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


The following discussion of our results of operations should be read together with our financial statements and the related notes, included elsewhere in this report. The following discussion contains forward-looking statements that reflect our current plans, estimates and beliefs and involve risks and uncertainties. Our actual results may differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to such differences include those discussed below and elsewhere in this quarterly report on Form 10-Q.


Executive Summary


Since 2003, our experience in building and deploying HMI and SCADA Systems has given us a unique perspective and insight into new data visualization possibilities with emerging technologies.


We specialize in the compelling visualization of real-time data. B-Scada has produced exceptional data visualization solutions for manufacturing, power and utilities, automation, and other fields of business making use of HMI (Human Machine Interface) and SCADA (Supervisory Control and Data Acquisition) software products.


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


Products and Services


Our technology team has more than 50 years of experience in software design and development and has designed, built and delivered, over the years, world-class software solutions. In addition to software development, we also derive income from consulting services and contract development.


Overall Strategic Goals


Our goal is to become a leading supplier of HMI and SCADA systems to industry. Using some of the best talent in the industry, we build our monitoring systems in house and sell them into various vertical markets including building automation, petro chemical, transportation, electricity distribution and EPA emissions monitoring. Smaller firms and Fortune 500 companies have recognized the talent of our technical staff and the unique capabilities of our technology. This has given us the ability to license portions of our technology to other companies to use in their software systems.


Product Description


‘Status Vision Designer(R)’ (“Status Designer”) was released in January 2009 as an industrial control and monitoring application for heavy industry and manufacturing.


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


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


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


We have attracted a number of resellers and system integrators that are now promoting and using ‘Status Designer’ in commercial settings. We believe that this will result in greater sales and distribution of our software through retail outlets and to original equipment manufacturers (“OEM”s). We are also targeting potential customers to offer customized applications to meet their industry requirements.   Status Designer is now being used to monitor one of the largest subway systems in the world in Seoul, South Korea. Status monitors HVAC performance in pharmaceutical manufacturing facilities, electricity distribution, mining equipment and furniture manufacturing. Status is used in various monitoring applications in numerous verticals in the United States and around the world in numerous countries including Germany, Sweden, Taiwan, Kuwait, Malaysia, Chile, Canada, United Kingdom, Italy, Turkey, South Africa, Russia and France.



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Consulting


In addition to sales of Status, we generate revenue by providing consulting services to companies that wish to extend and customize our technology. We also provide development and design services. We also offer training and graphic design services and produce 3D models of equipment and machinery for use in mimics. 


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


Status Designer was designed from the ground up to be extensible. Numerous companies have written custom data sources or asked B-Scada to create custom data sources to provide their real time data into Status Designer.


Technology Licensing  


In addition to selling our own software products, we also license the technology we have developed to other software companies. Long-term licenses to multinational software companies are a major part of our business.  The lead time for our engineers to work with theirs in developing successful integration of our software with their future products is fairly long-from nine months to two years - but the result is a multiyear high revenue license which provides substantial revenue to us for years to come.  We have four such agreements in place with Fortune 500 companies, and numerous agreements with smaller firms


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


Growth Strategy


B-Scada software can collect vital information of what is happening with the system it is monitoring. This data can be very valuable for such activities as scheduling, predictive maintenance and manufacturing execution. Our growth strategy is to grow our software offerings beyond SCADA and provide a more complete and valuable offering to our customers. These additional software products may be developed in house as the company grows, or added through a business acquisition. We would need to raise capital to finance an acquisition, either through debt or equity public or private offerings. There is no assurance that we will be able to raise capital in an amount necessary to finance such acquisition or on acceptable terms.


Revenue Strategy


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


We are currently selling our products directly over the Internet from our website and through resellers to end users and system integrators. We will also target potential customers to offer customized applications to meet their industry requirements.


Critical Accounting Policies and Estimates


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


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


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



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


Results of Operations


Comparison of the Three Months Ended January 31, 2013 and 2012


The following table sets forth, for the periods indicated, certain items from the statements of operations along with a comparative analysis of ratios of costs and expenses to revenues.


 

For the three months ended January 31,

 

2013

 

2012

 

(Unaudited)

 

(Unaudited)

 

 

 

% of

 

 

 

% of

 

Amounts

 

Revenues

 

Amounts

 

Revenues

 

 

 

 

 

 

 

 

Revenues

$  274,617

 

 100%

 

$  281,621

 

 100%

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

  Compensation costs

$  168,314

 

 61%

 

$  166,418

 

 59%

  Consulting fees

$  1,350

 

 0%

 

$  650

 

 0%

  Advertising

$  11,257

 

 4%

 

$  3,271

 

 1%

  Professional fees

$  15,041

 

 5%

 

$  15,590

 

 6%

 

 

 

 

 

 

 

 

Interest and debt costs

$  4,319

 

 2%

 

$  5,243

 

 2%

 

 

 

 

 

 

 

 

Net Income

$  41,571

 

 15%

 

$  61,629

 

 22%

 

 

 

 

 

 

 

 

Net income per share - basic and

 

 

 

 

 

 

 

  diluted

$  --

 

 

 

$  --

 

 


Revenues


Our revenues for the three months ended January 31, 2013 amounted to $274,617 compared to fiscal 2012 revenues of $281,621. Revenues for the period decreased by approximately $7,000 (2%). During fiscal 2013, we had increases in developmental services and support revenues of $39,000 and $38,000, respectively, which were reduced by decreases in technology licensing revenues of $84,000. We continue to implement our strategic goals to increase revenue from the sales of our products and services. In the first quarter of fiscal 2013, we signed two multi-year license and support fee agreements that in total will be in excess of $2 million dollars over the initial seven year term of the agreements. Service revenues include revenues from fees charged for the implementation of our software products and training of customers in the use of such products. We are currently selling our software over the internet and are marketing our products and services to companies that may want to license or joint venture some of our software applications.


Operating Expenses


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


Compensation costs consist of payroll and related expenses.  Payroll expenses amounted to $168,314 in the three months ended January 31, 2013 compared to $166,418 in the three months ended January 31, 2012. Payroll expenses increased by $1,896 (1%) and 61% of revenues compared to 59% of revenues at January 31, 2012. We continue to manage our payroll costs as we implement our strategic plan.


Advertising costs have increased to $11,257 in the three months ended January 31, 2013 from $3,271 in the three months ended January 31, 2012, an increase of $7,986 primarily from increases in marketing expense. As operations improved we have reinstated our advertising budget since we believe it is necessary to market our products and services in order to accomplish our plan for revenue growth.



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Professional fees of $15,041 in the three months ended January 31, 2013 are comparative with the $15,590 in the three months ended January 31, 2012. Consulting fees of $1,350 in the three months ended January 31, 2013 are comparative with $650 in the three months ended January 31, 2012.


Interest and Debt Costs


Interest expense decreased from $5,243 in the three months ended January 31, 2012 to $4,319 in the three months ended January 31, 2013. Interest expense is incurred on the promissory notes totaling $164,173 with our CEO and $50,000 on outstanding convertible debentures.

 

Income Taxes


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


Net Income


Net income in the three months ended January 31, 2013 totaled $41,571 (15% of revenues) compared to $61,629 (22% of revenues) in the three months ended January 31, 2012, a decrease of $20,058 (33%) as discussed above.


Liquidity and Capital Resources


We fund our operations through sales of our products and services and debt and equity financings.


At January 31, 2013 we had cash and cash equivalents of $409,000 compared to $95,000 at October 31, 2012. The increase of $314,000 is primarily attributable to cash generated from operations.


Cash Flows


Net cash provided by operating activities amounted to $318,000 and $204,000 in the three months ended January 31, 2013 and 2012, respectively. Net cash from operations increased as a result of the additional cash and revenues generated in the first quarter of fiscal 2013 from our licensing agreements and service revenues while we managed to maintain operating costs for compensation, advertising and professional fees as discussed above.


In the first quarter of fiscal 2013, cash was used for investing activities for the acquisition of equipment in the amount of $3,856. There were no cash investing activities in the first quarter of fiscal 2012.


In the first quarter of fiscal 2012, cash was used for financing activities by a loan payment to our CEO in the amount of $35,827. There were no cash financing activities in the first quarter of fiscal 2013.


We believe that our cash on hand at January 31, 2013 along with our revenue commitments will be sufficient to fund our operations for at least the next 12 months. We have signed significant licensing agreements and continue to market our products and services in accordance with our strategic business plan. We are also looking to raise additional capital through debt and/or equity financings. There is no assurance that the income generated from these and future agreements will meet our working capital requirements, or that we will be able to sign significant agreements in the future. There is also no assurance that we will be able to obtain additional capital in the amount or on terms acceptable to us.  


Contractual Obligations


Not Applicable


Off-Balance Sheet Arrangements


As of January 31, 2013, we had no off-balance sheet arrangements as defined in Item 303(a)(4) of Regulation S-K.


Quantitative and Qualitative Disclosure about Market Risk


Interest Rate Risk


Not Applicable



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Recent Accounting Pronouncements


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


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


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



ITEM 4.  CONTROLS AND PROCEDURES

 

(a)  Evaluation of disclosure controls and procedures

 

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


(b)  Management’s Assessment of Internal Control over Financial Reporting


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


Furthermore, smaller reporting companies face additional limitations.  Smaller reporting companies employ fewer individuals and may find it difficult to properly segregate duties.  Often, one or two individuals control every aspect of the Company’s operation and are in a position to override any system of internal control.  Additionally, smaller reporting companies tend to utilize general accounting software packages that lack a rigorous set of software controls.


Management has assessed the effectiveness of our internal control over financial reporting as of January 31, 2013.  In making this assessment, management used the criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).  The objective of this assessment is to determine whether our internal control over financial reporting was effective as of January 31, 2013.  Based on our assessment utilizing the criteria issued by COSO, management has concluded that our internal control over financial reporting was not effective as of January 31, 2013.  Management’s assessment identified the following material weaknesses:


·

As of January 31, 2013, there was a lack of accounting personnel with the requisite knowledge of Generally Accepted Accounting Principles (GAAP) in the U.S. and financial reporting requirements of the Securities and Exchange Commission.

·

As of January 31, 2013, there were insufficient written policies and procedures to insure the correct application of accounting and financial reporting with respect to the current requirements of GAAP and SEC disclosure requirements.




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·

As of January 31, 2013, there was a lack of segregation of duties, in that we only had one person performing all accounting-related duties.

·

As of January 31, 2013, there were no independent directors and no independent audit committee.


Notwithstanding the existence of these material weaknesses in our internal control over financial reporting, our management believes that the financial statements included in its reports fairly present in all material respects the Company’s financial condition, results of operations and cash flows for the periods presented.  We continue to evaluate the effectiveness of internal controls and procedures on an on-going basis.  We plan to further address these issues once cash flows from operations improve to a level where we are able to hire additional personnel in financial reporting.


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

 

PART II.  OTHER INFORMATION

 

ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES

 

We did not issue any equity securities during the period covered by this report that were not registered under the Securities Act.


ITEM 4.  MINE SAFETY DISCLOSURES


Not applicable


ITEM 6.  EXHIBITS

 

31.1

 

Certification by the Principal Executive Officer and Principal Financial Officer of B-Scada, Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a)) (furnished herewith).

 

 

  

32.1

 

Certification by the Principal Executive Officer and Principal Financial Officer of B-Scada, Inc. pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).

 

101.INS

 

XBRL Instance Document

 

 

 

101.SCH

 

XBRL Taxonomy Extension Schema Document

 

 

 

101.CAL

 

XBRL Taxonomy Extension Calculation Linkbase Document

 

 

 

101.DEF

 

XBRL Taxonomy Extension Definition Linkbase Document

 

 

 

101.LAB

 

XBRL Taxonomy Extension Label Linkbase Document

 

 

 

101.PRE

 

XBRL Taxonomy Extension Presentation Linkbase Document














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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.

 

 

 

B-SCADA, INC.

 

 

 

Dated: March 6, 2013

By:

/s/   Allen Ronald DeSerranno

 

 

Allen Ronald DeSerranno

Chief Executive Officer and Chief Financial Officer



























 

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