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EX-32.1 - CERTIFICATION - B-Scada, Inc.mobs_ex32.htm
EX-31.1 - CERTIFICATION - B-Scada, Inc.mobs_ex31.htm


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: April 30, 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.  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 (§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 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 [  ]   No [X]

 

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 June 12, 2013 was 24,586,672 shares of common stock, par value $.0001.

 





B-SCADA, INC.

 

TABLE OF CONTENTS

 

PART I.  FINANCIAL INFORMATION

3

 

 

ITEM 1.  FINANCIAL STATEMENTS

3

 

 

BALANCE SHEETS

3

 

 

  AT APRIL 30, 2013 (UNAUDITED) AND OCTOBER 31, 2012

3

 

 

STATEMENTS OF OPERATIONS (UNAUDITED)

4

 

 

  FOR THE THREE AND SIX MONTH PERIODS ENDED APRIL 30, 2013 AND 2012

4

 

 

STATEMENTS OF CASH FLOWS (UNAUDITED)

5

 

 

  FOR THE SIX  MONTHS ENDED APRIL 30, 2013 AND 2012

5

 

 

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

6

 

 

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

11

 

 

ITEM 4.  CONTROLS AND PROCEDURES

16

 

 

PART II.  OTHER INFORMATION

17

 

 

ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES

 

 

 

ITEM 4. MINE SAFETY DISCLOSURES

17

 

 

ITEM 6.  EXHIBITS

17

 

 

SIGNATURES

18










2



 

PART I.  FINANCIAL INFORMATION

 

ITEM 1.     FINANCIAL STATEMENTS

B-SCADA, INC.


BALANCE SHEETS


 

 

 

 

 

April 30,

 

October 31,

 

 

2013

 

2012

 

 

(Unaudited)

 

 

Assets

 

 

 

 

Current Assets

 

 

 

 

  Cash and Cash Equivalents

 

$

560,116

 

$

94,831

  Accounts Receivable - Net

 

 

111,165

 

 

104,965

  Accrued Revenue

 

 

100,000

 

 

148,750

  Prepaid Expenses and Other Current Assets

 

 

2,553

 

 

4,770

    Total Current Assets

 

 

773,834

 

 

353,316

 

 

 

 

 

 

 

Property and Equipment - Net

 

 

13,354

 

 

9,029

 

 

 

 

 

 

 

Other Assets

 

 

 

 

 

 

  Security Deposits

 

 

3,650

 

 

3,650

 

 

 

 

 

 

 

    Total Assets

 

$

790,838

 

$

365,995

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity (Deficiency)

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

  Convertible Notes Payable

 

$

50,000

 

$

50,000

  Notes Payable - Related Party

 

 

90,500

 

 

164,173

  Accounts Payable and Accrued Liabilities

 

 

125,654

 

 

163,777

  Deferred Revenue

 

 

355,902

 

 

58,590

    Total Current Liabilities

 

 

622,056

 

 

436,540

 

 

 

 

 

 

 

Commitments and Contingencies

 

 

--

 

 

--

 

 

 

 

 

 

 

Stockholders’ Equity (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 April 30, 2013 and October 31, 2012

 

 

2,459

 

 

2,459

  Additional Paid in Capital

 

 

7,100,728

 

 

7,100,728

  Accumulated Deficit

 

 

(6,934,405)

 

 

(7,173,732)

    Total Stockholders’ Equity (Deficiency)

 

 

168,782

 

 

(70,545)

 

 

 

 

 

 

 

    Total Liabilities and Stockholders’ Equity (Deficiency)

 

$

790,838

 

$

365,995




See the accompanying notes to financial statements.





3





B-SCADA, INC.


STATEMENTS OF OPERATIONS [UNAUDITED]


 

For the Three Months Ended

 

For the Six Months Ended

 

April 30,

 

April 30,

 

2013

 

2012

 

2013

 

2012

 

 

 

 

 

 

 

 

Revenue

$

440,270

 

$

197,508

 

$

714,887

 

$

479,129

 

 

 

 

 

 

 

 

 

 

 

 

Operating Expenses

 

 

 

 

 

 

 

 

 

 

 

  Payroll Expenses

 

191,186

 

 

164,215

 

 

359,500

 

 

330,633

  Professional Fees

 

14,053

 

 

11,308

 

 

29,094

 

 

26,898

  Advertising

 

12,975

 

 

5,348

 

 

24,232

 

 

8,619

  Depreciation and Amortization

 

1,257

 

 

3,319

 

 

2,545

 

 

6,595

  Consulting Fees

 

1,823

 

 

1,070

 

 

3,173

 

 

1,720

  Office

 

1,827

 

 

1,082

 

 

9,092

 

 

3,431

  Rent

 

8,514

 

 

9,085

 

 

16,394

 

 

18,286

  Telephone and Communication

 

1,943

 

 

2,724

 

 

4,180

 

 

3,783

  Other

 

5,858

 

 

9,723

 

 

19,953

 

 

22,658

    Total Operating Expenses

 

239,436

 

 

207,874

 

 

468,163

 

 

422,623

 

 

 

 

 

 

 

 

 

 

 

 

Operating Income (Loss)

 

200,834

 

 

(10,366)

 

 

246,724

 

 

56,506

 

 

 

 

 

 

 

 

 

 

 

 

Other Expenses

 

 

 

 

 

 

 

 

 

 

 

  Interest Expense

 

(1,008)

 

 

(1,008)

 

 

(2,017)

 

 

(2,017)

  Interest Expense - Related Party

 

(2,070)

 

 

(3,311)

 

 

(5,380)

 

 

(7,545)

    Total Other Expenses

 

(3,078)

 

 

(4,319)

 

 

(7,397)

 

 

(9,562)

 

 

 

 

 

 

 

 

 

 

 

 

Income (Loss) Before Income Taxes

 

197,756

 

 

(14,685)

 

 

239,327

 

 

46,944

 

 

 

 

 

 

 

 

 

 

 

 

Provision for Income Taxes

 

--

 

 

--

 

 

--

 

 

--

 

 

 

 

 

 

 

 

 

 

 

 

    Net Income (Loss)

$

197,756

 

$

(14,685)

 

$

239,327

 

$

46,944

 

 

 

 

 

 

 

 

 

 

 

 

Basic Earnings (Loss) Per Common Share

$

0.01

 

$

--

 

$

0.01

 

$

--

 

 

 

 

 

 

 

 

 

 

 

 

Diluted Earnings (Loss) Per Common Share

$

0.01

 

$

--

 

$

0.01

 

$

--

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-Average Common Shares Outstanding for Basic Earnings (Loss) Per

 

 

 

 

 

 

 

 

 

 

 

  Common Share

 

24,586,672

 

 

24,586,672

 

 

24,586,672

 

 

24,586,672

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-Average Common Shares Outstanding for Diluted Earnings (Loss) Per

 

 

 

 

 

 

 

 

 

 

 

  Common Share

 

24,754,965

 

 

24,586,672

 

 

24,671,865

 

 

24,586,672


See the accompanying notes to financial statements.



4







B-SCADA, INC.


STATEMENTS OF CASH FLOWS [UNAUDITED]


 

For the Six Months Ended

 

April 30,

 

2013

 

2012

 

 

 

 

Operating Activities

 

 

 

  Net Income

$

239,327

 

$

46,944

  Adjustments to Reconcile Net Income to Net Cash

 

 

 

 

 

    Provided by Operating Activities:

 

 

 

 

 

      Depreciation and Amortization

 

2,545

 

 

6,595

      Deferred Revenue

 

297,312

 

 

122,391

 

 

 

 

 

 

  Changes in Assets and Liabilities:

 

 

 

 

 

    (Increase) Decrease in:

 

 

 

 

 

      Accounts Receivable

 

(6,200)

 

 

(39,155)

      Accrued Revenue

 

48,750

 

 

174,350

      Prepaid Expenses and Other Current Assets

 

2,217

 

 

1,057

    Increase (Decrease) in:

 

 

 

 

 

      Accounts Payable and Accrued Liabilities

 

(38,123)

 

 

(27,388)

        Net Cash Provided by Operating Activities

 

545,828

 

 

284,794

 

 

 

 

 

 

Investing Activities

 

 

 

 

 

  Acquisition of Property and Equipment

 

(6,870)

 

 

(4,421)

     Net Cash Used for Investing Activities

 

(6,870)

 

 

(4,421)

 

 

 

 

 

 

Financing Activities

 

 

 

 

 

  Payment of note payable - related party

 

(73,673)

 

 

(45,827)

     Net Cash Used for Financing Activities

 

(73,673)

 

 

(45,827)

 

 

 

 

 

 

Change in Cash and Cash Equivalents

 

465,285

 

 

234,546

 

 

 

 

 

 

Cash and Cash Equivalents - Beginning of Period

 

94,831

 

 

13,958

 

 

 

 

 

 

Cash and Cash Equivalents - End of Period

$

560,116

 

$

248,504

 

 

 

 

 

 

Supplemental Disclosures of Cash Flow Information

 

 

 

 

 

  Cash paid during the period for:

 

 

 

 

 

    Interest

$

16,327

 

$

9,173

    Income Taxes

$

--

 

$

--


See the accompanying notes to financial statements.





5






B-SCADA, INC.

NOTES TO FINANCIAL STATEMENTS [UNAUDITED]

APRIL 30, 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


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. As of April 30, 2013, we have approximately $560,000 in cash and cash equivalents. We have signed significant licensing and services agreements with Fortune 500 companies and others and for the six month period ended April 30, 2013 we have generated $546,000 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.



(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 April 30, 2013, and for the three and six months ended April 30, 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 April 30, 2013 and the results of operations for the three and six months ended April 30, 2013 and 2012 and the cash flows for the six months ended April 30, 2013 and 2012.  The results of operations for the six months ended April 30, 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.





6







B-SCADA, INC.

NOTES TO FINANCIAL STATEMENTS [UNAUDITED]

APRIL 30, 2013


(3) Summary of Significant Accounting Policies (continued)


Revenue Recognition - Our revenues are recognized in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“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 April 30, 2013 through the issuance of the accompanying financial statements.



(4) New Authoritative Accounting Guidance


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



(5) Property and Equipment


Property and equipment consists of the following:


 

April 30,

2013

 

October 31,

2012

 

Estimated

Useful Lives

 

[Unaudited]

 

 

 

 

Computer Equipment

$ 44,537

 

$ 41,523

 

5 years

Office Equipment

24,432

 

24,432

 

5-7 years

Software

25,422

 

21,566

 

3 years

Total

94,391

 

87,521

 

 

Less: Accumulated Depreciation

 

 

 

 

 

and Amortization

 (81,037)

 

 (78,492)

 

 

 

$ 13,354

 

$ 9,029

 

 



(6) Stockholders’ Equity


We are authorized to issue 100,000,000 shares of common stock, par value $0.0001 per share and 5,000,000 shares of preferred stock, par value $0.0001 per share.  At April 30, 2013 there were 24,586,672 common shares issued and outstanding.  An additional 451,366 common shares were reserved for issuance as of April 30, 2013 for outstanding purchase warrants and convertible debt and related interest payable.  There are no shares of preferred stock issued and outstanding.




7






B-SCADA, INC.

NOTES TO FINANCIAL STATEMENTS [UNAUDITED]

APRIL 30, 2013


(6) Stockholders’ Equity (continued)


The following table summarizes the warrants and options.


 

 

For the Six Months Ended

For the Year Ended

 

 

April 30, 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 April 30, 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

1.75

$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 April 30, 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 1.75 and 2.25 years, respectively.



(7)  Earnings Per Share


The following is a reconciliation of the numerators and denominators of the basic and diluted earnings per share ("EPS") computations for the three and six months ended April 30, 2013 (there were no dilutive securities in the three and six months ended April 30, 2012):




8






B-SCADA, INC.

NOTES TO FINANCIAL STATEMENTS [UNAUDITED]

APRIL 30, 2013


(7)  Earnings Per Share (continued)


 

For the three months ended

April 30, 2013

 

Income

 

Shares

 

Per Share

 

(Numerator)

 

(Denominator)

 

Amount

 

 

 

 

 

 

Basic EPS:

 

 

 

 

 

Income Available to Common Stockholders

$ 197,756

 

24,586,672

 

$ 0.01

Effect of Dilutive Securities:

 

 

 

 

 

Warrants

--

 

168,293

 

 

Diluted EPS:

 

 

 

 

 

Income Available to Common Stockholders

 

 

 

 

 

Plus Assumed Exercises

$ 197,756

 

24,754,965

 

$ 0.01

 

 

 

 

 

 

 

 

 

 

 

 

 

For the six months ended

April 30, 2013

 

Income

 

Shares

 

Per Share

 

(Numerator)

 

(Denominator)

 

Amount

 

 

 

 

 

 

Basic EPS:

 

 

 

 

 

Income Available to Common Stockholders

$ 239,327

 

24,586,672

 

$ 0.01

Effect of Dilutive Securities:

 

 

 

 

 

Warrants

 

 

85,193

 

--

Diluted EPS:

 

 

 

 

 

Income Available to Common Stockholders

 

 

 

 

 

Plus Assumed Exercises

$ 239,327

 

24,671,865

 

$ 0.01



(8) 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 Six Months Ended

 

 

April 30,

 

 

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

--%

 

--%

 









9






B-SCADA, INC.

NOTES TO FINANCIAL STATEMENTS [UNAUDITED]

APRIL 30, 2013


(8) Income Taxes (continued)


The components of deferred tax assets (liabilities) at April 30, 2013 and October 31, 2012 are as follows:


 

April 30, 2013

 

October 31, 2012

 

[Unaudited]

 

 

 

 

 

 

Deferred Tax Assets - Current

 

 

 

Accrued Vacation Pay

$ 10,809

 

$ 7,873

Valuation Allowance

(10,809)

 

(7,873)

 

--

 

--

Deferred Tax Assets (Liabilities) - Long Term

 

 

 

Net Operating Losses

1,046,851

 

1,133,906

Property and Equipment

(624)

 

(1,612)

Equity Instruments

2,000

 

2,000

Valuation Allowance

(1,048,227)

 

(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 $83,000 and $699,000 in the six months ended April 30, 2013 and the year ended October 31, 2012, respectively.



(9) Related Party Transactions


On February 5, 2013, we paid $45,000 to our Chief Executive Officer (“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 Chief Executive Officer (“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.


As of April 30, 2013 and October 31, 2012, the promissory note balance due our CEO is $90,500 and $164,173, respectively, and the related accrued interest is $12,623 and $23,570, respectively.


Interest expense in the amount of $5,380 and $7,545 has been accrued for these notes in the six months ended April 30, 2013 and 2012, respectively.



(10) 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 six months ended April 30, 2013 and 2012 amounted to approximately $16,000 and $18,000, respectively.







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®’ (“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® 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.




11






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.







12






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


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


Results of Operations


The following tables set 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.


Comparison of the Three Months Ended April 30, 2013 and 2012


 

For the three months ended April 30,

 

2013

 

2012

 

(Unaudited)

 

(Unaudited)

 

 

 

% of

 

 

 

% of

 

Amounts

 

Revenues

 

Amounts

 

Revenues

 

 

 

 

 

 

 

 

Revenues

$

440,270

 

 100%

 

$

197,508

 

 100%

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

  Compensation costs

$

191,186

 

 43%

 

$

164,215

 

 83%

  Consulting fees

$

1,823

 

 0%

 

$

1,070

 

 1%

  Advertising

$

12,975

 

 3%

 

$

5,348

 

 3%

  Professional fees

$

14,053

 

 3%

 

$

11,308

 

 6%

 

 

 

 

 

 

 

 

 

 

Interest and debt costs

$

3,078

 

 1%

 

$

4,319

 

 2%

 

 

 

 

 

 

 

 

 

 

Net income (loss)

$

197,756

 

 45%

 

$

(14,685)

 

 (7)%

 

 

 

 

 

 

 

 

 

 

Net income (loss) per share - basic

$

0.01

 

 

 

$

--

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) per share - diluted

$

0.01

 

 

 

$

--

 

 


Revenues


Our revenues for the three months ended April 30, 2013 amounted to $440,270 compared to the comparative 2012 period of $197,508.  Revenues for the period increased by $242,762 (123%) as we continue to expand our customer base. The increase was a result of revenue increases in license and royalty fees ($128,000), maintenance and support fees ($60,000) and developmental services revenues ($55,000).  Developmental services 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 $191,186 in the three months ended April 30, 2013 compared to $164,215 in the three months ended April 30, 2012. Payroll expenses increased $26,971 (16%) as we needed to add employees to service our new business. Payroll expenses, however, decreased as a percentage of revenues from 83% to 43% for the period.



13






Advertising costs increased to $12,975 in the three months ended April 30, 2013 from $5,348 in the three months ended April 30, 2012, an increase of $7,627 (143%), primarily from increases in marketing expense. We believe it is necessary to market our products and services in order to accomplish our plan for revenue growth.  


Professional fees increased to $14,053 in the three months ended April 30, 2013 from $11,308 in the three months ended April 30, 2012, an increase of $2,745 (24%), primarily related to increased accounting costs to prepare our required filings as a public company.  


Consulting fees of $1,823 in the three months ended April 30, 2013 are comparative with $1,070 in the three months ended April 30, 2012.


Interest and Debt Costs


Interest expense decreased to $3,078 in the three months ended April 30, 2013 from $4,319 in the three months ended April 30, 2012 as we paid back $73,673 in promissory notes to our CEO in February 2013. Interest expense is incurred on the promissory notes with our CEO, now totaling $90,500, and on $50,000 in outstanding convertible debentures.

 

Net Income (Loss)


Net income in the three months ended April 30, 2013 totaled $197,756 (45% of revenues) compared to a net loss of ($14,685) (7%) of revenues) in the three months ended April 30, 2012 an increase of $212,441 (1,447%), as discussed in the above components.


Comparison of the Six Months Ended April 30, 2013 and 2012


 

For the six months ended April 30,

 

2013

 

2012

 

(Unaudited)

 

(Unaudited)

 

 

 

% of

 

 

 

% of

 

Amounts

 

Revenues

 

Amounts

 

Revenues

 

 

 

 

 

 

 

 

Revenues

$

714,887

 

 100%

 

$

479,129

 

 100%

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

  Compensation costs

$

359,500

 

 50%

 

$

330,633

 

 69%

  Consulting fees

$

3,173

 

 0%

 

$

1,720

 

 0%

  Advertising

$

24,232

 

 3%

 

$

8,619

 

 2%

  Professional fees

$

29,094

 

 4%

 

$

26,898

 

 6%

 

 

 

 

 

 

 

 

 

 

Interest and debt costs

$

7,397

 

 1%

 

$

9,562

 

 2%

 

 

 

 

 

 

 

 

 

 

Net income

$

239,327

 

 33%

 

$

46,944

 

 10%

 

 

 

 

 

 

 

 

 

 

Net income per share - basic

$

0.01

 

 

 

$

--

 

 

 

 

 

 

 

 

 

 

 

 

Net income per share - diluted

$

0.01

 

 

 

$

--

 

 


Revenues


Our revenues for the six months ended April 30, 2013 amounted to $714,887 compared to the comparative 2012 period of $479,129. Revenues for the period increased by $235,758 (49%) as we continue to expand our customer base. The increase was a result of revenue increases in license and royalty fees ($45,000), maintenance and support fees ($98,000) and developmental services revenues ($93,000). Developmental services revenues include revenues from fees charged for the implementation of our software products and training of customers in the use of such products. We are currently selling our software over the internet and are marketing our products and services to companies which may want to license or joint venture some of our software applications.







14






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 $359,500 in the six months ended April 30, 2013 compared to $330,633 in the six months ended April 30, 2012. Payroll expenses increased $28,867 (9%) as we needed to add employees to service our new business. Payroll expenses, however, decreased as a percentage of revenues from 69% to 50% for the period.


Advertising costs have increased to $24,232 in the six months ended April 30, 2013 from $8,619 in the six months ended April 30, 2012, an increase of $15,613 (181%) primarily from increases in marketing expense. We believe it is necessary to market our products and services in order to accomplish our plan for revenue growth.  


Professional fees increased to $29,094 in the six months ended April 30, 2013 from $26,898 in the six months ended April 30, 2012, an increase of $2,196 (8%), primarily related to increased accounting costs to prepare our required filings as a public company.  


Consulting fees increased to $3,173 in the six months ended April 30, 2013 from $1,720 in the six months ended April 30, 2012.


Interest and Debt Costs


Interest expense decreased to $7,397 in the six months ended April 30, 2013 from $9,562 in the six months ended April 30, 2012, as we paid back $73,673 in promissory notes to our CEO in February 2013. Interest expense is incurred on the promissory notes with our CEO, now totaling $90,500, and on $50,000 in outstanding convertible debentures.


Income Taxes


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


Net Income


Net income in the six months ended April 30, 2013 totaled $239,327 (33% of revenues) compared to $46,944 (10% of revenues) in the six months ended April 30, 2012 an increase of $192,383 (410%), as discussed in the above components.


Liquidity and Capital Resources


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

At April 30, 2013 we had cash and cash equivalents of $560,000 compared to $95,000 at October 31, 2012. The increase of $465,000 is primarily attributable to cash generated from operations.


Cash Flows


Net cash provided by operating activities amounted to $546,000 and $285,000 in the six months ended April 30, 2013 and 2012, respectively. Net cash from operations increased as a result of the additional cash generated in the second quarter of fiscal 2013 from our licensing agreements and services revenues while we managed to maintain operating costs as discussed above.


In the six months ended April 30, 2013 and 2012, cash was used for investing activities for the acquisition of property and equipment in the amount of $6,870 and $4,421, respectively.


In the six months ended April 30, 2013 and 2012, cash was used for financing activities for promissory note repayments to our CEO in the amount of $73,673 and $45,827, respectively.


We believe that our cash on hand at April 30, 2013, along with our revenue commitments,  will be sufficient to fund our operations for at least the next 12 months. We have signed significant long-term 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.  





15






Contractual Obligations


Not Applicable


Off-Balance Sheet Arrangements


As of April 30, 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



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 April 30, 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 April 30, 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 April 30, 2013.  Management’s assessment identified the following material weaknesses:


·

As of April 30, 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 April 30, 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.

·

As of April 30, 2013, there was a lack of segregation of duties, in that we only had one person performing all accounting-related duties.

·

As of April 30, 2013, there were no independent directors and no independent audit committee.




16






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


















17





 

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: June 13, 2013

By:

/s/   Allen Ronald DeSerranno

  

  

Allen Ronald DeSerranno

Chief Executive Officer and Chief Financial Officer






































18